Question 1

Which of the following is a feature that a chosen accounting system should have?
A) It should facilitate the development of a cash budget.
B) It should limit the production of custom reports that meet management needs.
C) It should show the financial position of the business only after elaborate processing.
D) It should have a limited context-independent help function.

Accepted Answer

The chosen accounting system should have a feature that facilitates the development of a cash budget. This is a crucial aspect of financial planning and management for businesses. Option B is incorrect, as the system should be able to produce custom reports to meet the specific needs of management. Option C is incorrect, as the financial position of the business should be easily accessible after processing. Option D is incorrect, as the help function should be comprehensive and context-dependent.

Question 2

Which of the following accounting functions focuses the most on automatically calculating and accumulating depreciation?
A) Credit card sales
B) Fixed asset accounting
C) Payroll records
D) Accounts receivable records

Accepted Answer

Fixed asset accounting is the accounting function that focuses the most on automatically calculating and accumulating depreciation. This is because fixed assets, such as machines and buildings, lose value over time due to wear and tear and need to be depreciated. Other accounting functions, such as credit card sales, payroll records, and accounts receivable records, do not typically involve depreciation calculations.

Question 3

Larry owns a successful business called Super Car-Hire.He plans to sell it to Bob.Bob assumes that he can keep up the high revenues if he can plan and execute the mission of the business well.Which of the following basic accounting concepts is reflected in Bob's assumption?
A) The business entity idea
B) The going concern expectation
C) The accounting equation
D) The revenue and expense premise

Accepted Answer

The going concern expectation is reflected in Bob's assumption that he can continue to generate high revenues if he plans and executes the mission of the business well. This concept assumes that the business will continue to operate indefinitely and generate enough cash inflows to meet its obligations. It is a fundamental accounting concept that affects financial reporting and decision-making.

Question 4

Financial accounting is primarily intended for:
A) bankers,investors,and regulators.
B) calculating and reporting taxes.
C) predicting the results of management decisions.
D) avoiding penalties for noncompliance.

Accepted Answer

Financial accounting is primarily intended for external users, such as bankers, investors, and regulators, who rely on financial statements to make decisions about investments, loans, and regulatory compliance. Tax calculations and compliance, predicting management decisions, and avoiding penalties for noncompliance are all secondary purposes of financial accounting.

Question 5

Which of the following accounting functions ensures that the employment taxes are kept current?
A) Leasehold records
B) Investments records
C) Payroll records
D) Accounts receivable records

Accepted Answer

Payroll records are specifically designed to keep track of employee salaries, wages, bonuses, and taxes. As such, it ensures that employment taxes are paid up to date. Choices A and B are not relevant to employment taxes, and choice D only pertains to money owed to the company by customers.

Question 6

The difference between assets and liabilities of a business is called its:
A) net income.
B) owners' equity.
C) cost of capital.
D) current ratio.

Accepted Answer

Net income represents the profit or loss generated by a business, and is not related to the difference between assets and liabilities. Cost of capital is the cost a business incurs to finance its operations. Current ratio is a measure of a business's liquidity. Owners' equity is the difference between a business's assets and liabilities, representing the amount of funds that belongs to the owners. Therefore, the best answer is B.

Question 7

Which of the following statements is not true of computerized accounting systems?
A) The market for computerized accounting programs for small businesses is in a state of turmoil.
B) All systems have a cost attached with the cheapest system being about $10 per month.
C) Out of 75 different computerized accounting programs,4 programs account for the majority of small business use.
D) All of the systems will produce financial reports that meet legal requirements for content and format.

Accepted Answer

Not all computerized accounting systems have the same cost, and some may require a larger upfront investment or ongoing subscription fees. Therefore, statement B is not true.

Question 8

The "going concern" concept states that:
A) a business has an existence that is separate from its owner.
B) accounting information must be useful to the owners and managers of businesses.
C) the premise of revenue and expense are a part of business.
D) a successful business will stay in business.

Accepted Answer

The "going concern" concept states that a successful business will continue its operations in the foreseeable future. It is an assumption made by accountants while preparing financial statements that the business will continue its operations for the foreseeable future, and, thus, the assets and liabilities should be recorded accordingly. Option A is incorrect because it is a statement about the separate legal existence of a business. Option B is incorrect because accounting information must be useful for various stakeholders, not just owners and managers. Option C is incorrect because revenue and expense recognition are accounting conventions and not the premise of business.

Question 9

The "business entity" concept of accounting indicates that:
A) a successful business will stay in business.
B) assets = liabilities + owners' equity.
C) a business has an existence that is separate from its owner.
D) accounting information must be useful to the owners and managers of businesses.

Accepted Answer

The "business entity" concept of accounting means that the business is considered as a separate legal entity from its owner(s). This concept helps in keeping track of the financial transactions of the business and ensures that the personal transactions of the owner(s) do not mix with the business transactions.

Question 10

_____ is an accounting approach based on specific accounting requirements set by governmental taxing agencies.
A) Tax accounting
B) Managerial accounting
C) Benchmarking
D) Forensic accounting

Accepted Answer

Tax accounting is the accounting approach for complying with specific accounting requirements set by governmental taxing agencies. It involves calculating tax liabilities and preparing tax returns. Managerial accounting focuses on internal decision-making and planning, benchmarking compares a company's performance to industry standards, and forensic accounting involves investigating financial fraud and legal disputes.

Question 11

Which of the following is true of accounting equation?
A) It is used to place records into understandable categories that are useful for managing a business.
B) It assumes that a successful business will stay in business and this enables long-range planning and strategy.
C) It underlies the legal forms of establishing businesses,such as corporations,limited partnerships,and limited liability companies.
D) It ensures that accounting information is useful to the firm's stakeholders.

Accepted Answer

The accounting equation (Assets = Liabilities + Equity) is used to categorize records and provide a clear understanding of a business's financial position.

Answer: B
 The accounting equation assumes that a successful business will continue operating, enabling long-term planning and strategy development.

Answer: C
 The accounting equation is a fundamental concept underlying various legal forms of businesses such as corporations, limited partnerships, and limited liability companies.

Answer: D
 The accounting equation ensures that financial information is reliable and useful for all stakeholders, including investors, creditors, and management.

Question 12

Which of the following is true of managerial accounting?
A) It is used to produce tax returns and schedules.
B) It is a rule-based system intended primarily for absentee owners.
C) It is forward-looking in nature.
D) It is primarily for bankers,investors,and regulators.

Accepted Answer

Managerial accounting is focused on providing information for internal decision making, and as such it is forward-looking in nature. Option A is incorrect because tax returns are prepared using financial accounting principles. Option B is incorrect because managerial accounting applies to all types of owners, not just absentee ones. Option D is incorrect because the primary users of managerial accounting are internal managers, not external stakeholders like bankers or regulators.

Question 13

Regular and systematic reduction in income that transfers asset value to expense over time is called _____.
A) appreciation
B) contribution margin
C) depreciation
D) benchmarking

Accepted Answer

Depreciation is a process of allocating the cost of an asset over its useful life. This is a systematic reduction in the value of an asset that is used for production, operation, or other business activities. It is a common accounting practice that helps to allocate costs to the periods in which the asset is used, rather than in the period in which it was acquired. Appreciation refers to an increase in asset value, contribution margin is a measure of profitability, and benchmarking is a process of comparing performance against industry standards.

Question 14

Juan has an accounting philosophy according to which he keeps the loans borrowed from the business separate from the loans he takes from banks for his own purposes.Which of the following basic accounting concepts is reflected in Juan's accounting philosophy?
A) The business entity idea
B) The going concern expectation
C) The accounting equation
D) The revenue and expense premise

Accepted Answer

Juan's accounting philosophy reflects the basic accounting concept of the business entity idea, which assumes that a business is a separate entity from its owner and should be treated as such in accounting records. By keeping his personal loans separate from the business loans, Juan is recognizing that the business has its own financial transactions and should be reported separately from his personal finances. The other options are not relevant to Juan's philosophy.

Question 15

Which of the following does the accounting equation state?
A) Revenue = Expense
B) Assets = Liabilities + Owners' Equity
C) Liabilities = Owners' Equity
D) Net income = Long-term Liabilities

Accepted Answer

The accounting equation states that Assets are equal to the sum of Liabilities and Owners' Equity. This relationship must always hold true in order to ensure that the financial statements are accurate and reliable. Option A is incorrect as revenue and expense are part of the income statement, not the accounting equation. Option C is incorrect as liabilities and owners' equity are two separate items in the equation. Option D is incorrect as net income and long-term liabilities are two separate items in financial statements.

Question 16

Regardless of your business's size,the one essential element of an accounting system is ________ that is accurate,easy to use,and tracks all checks written and all deposits made.
A) tax accounting
B) financial accounting
C) managerial accounting
D) cash accounting

Accepted Answer

The element of an accounting system that is essential for any business's size is cash accounting. This system tracks all checks written and all deposits made, ensuring that the business's cash flow is accurately monitored. A cash accounting system is also relatively easy to use compared to other accounting systems, making it a practical choice for smaller businesses. Tax accounting, financial accounting, and managerial accounting are crucial elements of larger businesses but may not be necessary for small businesses.

Question 17

Legal obligations to give up things of value in the future are known as _____.
A) assets
B) borrowings
C) liabilities
D) owners' equity

Accepted Answer

Legal obligations to give up things of value in the future are known as liabilities. Assets are properties or resources owned by an individual or business, borrowings are money that is borrowed, and owners' equity is the value of assets minus the liabilities of an owner or shareholder. Therefore, option C is the correct choice.

Question 18

_____ is a formal,rule-based set of accounting principles and procedures intended for use by outside owners,investors,banks,and regulators.
A) Tax accounting
B) Managerial accounting
C) Financial accounting
D) Forensic accounting

Accepted Answer

Financial accounting is a set of formal, rule-based accounting principles and procedures that are intended for use by outside stakeholders such as investors, banks, and regulators. It focuses on the preparation of financial statements, such as income statements, balance sheets, and cash flow statements, which provide information on a company's financial performance and position. Tax accounting, on the other hand, is concerned with preparing tax returns and minimizing a company's tax liabilities, while managerial accounting focuses on providing information and analysis to internal managers to support decision-making. Forensic accounting involves investigating and detecting fraud and financial crimes.

Question 19

An accounting method that is specifically intended to be used for planning,directing,and controlling a business is called:
A) tax accounting.
B) managerial accounting.
C) benchmarking.
D) forensic accounting.

Accepted Answer

Managerial accounting is a method of accounting that focuses on providing financial information that is useful for decision-making, planning, directing, and controlling a business. It is different from tax accounting, which is focused on ensuring compliance with tax laws, benchmarking, which is a process of comparing a business's performance to industry standards, and forensic accounting, which is used for investigating financial crimes.

Question 20

_______ are the accounts of assets,liabilities,and owners' equity,excluding accounts for revenues and expenses.
A) Liquid accounts
B) Stable accounts
C) Permanent accounts
D) Priority accounts

Accepted Answer

Permanent accounts are those which are not closed at the end of the accounting period, unlike temporary accounts which are closed to determine the net income or loss for the period. Permanent accounts include balance sheet accounts such as assets, liabilities, and owners' equity. Therefore, choice C, Permanent accounts, is the best answer.

Quiz 12: Small Business Accounting: Projecting and Evaluating Performance

Which of the following is a feature that a chosen accounting system should have?

Which of the following accounting functions focuses the most on automatically calculating and accumulating depreciation?

Larry owns a successful business called Super Car-Hire.He plans to sell it to Bob.Bob assumes that he can keep up the high revenues if he can plan and execute the mission of the business well.Which of the following basic accounting concepts is reflected in Bob's assumption?

Financial accounting is primarily intended for:

Which of the following accounting functions ensures that the employment taxes are kept current?

The difference between assets and liabilities of a business is called its:

Which of the following statements is not true of computerized accounting systems?

The "going concern" concept states that:

The "business entity" concept of accounting indicates that:

_____ is an accounting approach based on specific accounting requirements set by governmental taxing agencies.

Which of the following is true of accounting equation?

Which of the following is true of managerial accounting?

Regular and systematic reduction in income that transfers asset value to expense over time is called _____.

Juan has an accounting philosophy according to which he keeps the loans borrowed from the business separate from the loans he takes from banks for his own purposes.Which of the following basic accounting concepts is reflected in Juan's accounting philosophy?

Which of the following does the accounting equation state?

Regardless of your business's size,the one essential element of an accounting system is ________ that is accurate,easy to use,and tracks all checks written and all deposits made.

Legal obligations to give up things of value in the future are known as _____.

_____ is a formal,rule-based set of accounting principles and procedures intended for use by outside owners,investors,banks,and regulators.

An accounting method that is specifically intended to be used for planning,directing,and controlling a business is called:

_______ are the accounts of assets,liabilities,and owners' equity,excluding accounts for revenues and expenses.