Deck 1: The Role of Accounting in Business

Question 1

The ownership of a proprietorship is divided into shares of stock owned by its stockholders.

Answer 1

False

Question 2

Companies using a low-cost emphasis provide products and services that compete on features other than price.

Answer 2

False

Question 3

The branch of accounting related to the management's financial decisions is known as financial accounting.

Answer 3

False

Question 4

Manufacturing businesses change basic inputs into products that are sold to individual customers.

Question 5

A corporation is a business that is legally separate and distinct from its owners.

Question 6

Accounting is thought to be the "language of business" because business information is communicated to stakeholders.

Question 7

The basic type of stock issued to owners is called common stock.

Question 8

Creditors have preference to assets behind stockholders if a business fails.

Question 9

Assets are acquired through investing activities when resources are purchased.

Question 10

Stockholders of a corporation are its internal stakeholders.

Question 11

A limited liability company combines attributes of a partnership and a corporation.

Question 12

The popularity of the sole proprietorship is due to the ease and low cost of organizing.

Question 13

A primary disadvantage of corporations is that the financial resources available to them are limited.

Question 14

John Deere is a leading manufacturer of agricultural machinery in the world producing products that serve unique market needs. Therefore, John Deere is an example of a company that uses a premium-price emphasis to attract customers.

Question 15

A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing agreement.

Question 16

Merchandising businesses produce products rather than provide services to customers.

Question 17

The objective of most businesses is to maximize profits.

Question 18

All merchandising businesses are organized as corporations.

Question 19

A partnership is owned by two or more individuals.

Question 20

A business stakeholder has an interest in the economic performance of a business.

Question 21

Governments have an interest in the economic performance of business because of:

A) tax collections.
B) community involvement from the business.
C) business incentives.
D) all of these.

Question 22

Which of the following types of business is popular for its ease and low cost of organizing?

A) Not-for-profit
B) Corporation
C) Partnership
D) Proprietorship

Question 23

A low-cost emphasis strives to provide:

A) no-frills, standardized products and services.
B) products and services that provide unique market needs.
C) products and services that provide prestige and image for customers.
D) products and services that compete on features other than price.

Question 24

Who has the first preference to assets in case a business fails?

A) Stockholders
B) Long-term creditors
C) Customers
D) Employees

Question 25

________ is an example of internal stakeholders.

A) Managers
B) Creditors
C) Stockholders
D) Suppliers

Question 26

Which of the following is true in regards to a limited liability company?

A) It is organized as a corporation.
B) It can elect to be taxed as a partnership.
C) It provides tax and liability advantages to the owners.
D) All are correct.

Question 27

The balance sheet represents the accounting equation.

Question 28

Which of the following would not be an example of a merchandising business?

A) The Walt Disney Company
B) JCPenney
C) Amazon.com
D) Wal-Mart

Question 29

An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a:

A) proprietorship.
B) corporation.
C) partnership.
D) governmental unit.

Question 30

Which of the following is not an example of a capital market stakeholder?

A) Banks
B) Owners
C) Suppliers
D) Stockholders

Question 31

Under a premium-price emphasis, a business designs products that possess _____ for which customers are willing to pay a premium price.

A) unique attributes
B) high costs
C) high demand
D) longer warranties

Question 32

The stockholders' equity of a company should equal the sum of its total assets and total liabilities.

Question 33

Which of the following are business stakeholders?

A) Stockholders
B) Suppliers
C) Customers
D) All of these

Question 34

Which of the items below is nota business organization form?

A) Venture entrepreneurship
B) Proprietorship
C) Partnership
D) Corporation

Question 35

Capital market stakeholders have an interest in the company because:

A) they provide incentives for the company to market their products.
B) they are part of the Marketing Department that is responsible for promoting the products or services to increase the business profits.
C) they help market their products to customers or find vendors to supply needed inputs.
D) they provide major financing for the business.

Question 36

Motel 6, a company that helps customers find budget motels across the nation, is an example of a business using which of the following?

A) Low-cost emphasis
B) Outreach emphasis
C) Customer emphasis
D) Premium-price emphasis

Question 37

Which of the following businesses use a premium-price emphasis?

A) Value City Furniture selling furniture at affordable prices
B) Tommy Hilfiger selling products that have a unique image
C) Wal-Mart reselling standardized products
D) Southwest Airlines providing standardized services

Question 38

Managers are evaluated primarily on the business's:

A) tax collections.
B) growth.
C) economic performance.
D) all of these.

Question 39

What is the primary objective of most businesses?

A) To maximize profits
B) To pay dividends to stockholders
C) To provide a benefit to society
D) To manufacture a quality product

Question 40

Which of the following isnot a characteristic of a corporation?

A) Corporations are organized as a separate legal taxable entity.
B) Ownership is divided into shares of stock.
C) Corporations experience an ease in obtaining large amounts of resources by issuing stock.
D) A corporation can elect to be taxed as a partnership.

Question 41

The purchase of factory equipment would be an example of which type of business activity?

A) Financing
B) Investing
C) Operating
D) All of these

Question 42

Which of the following is an appropriate representation of the accounting equation?

A) Assets + Liabilities = Stockholders' equity
B) Assets = Liabilities + Stockholders' equity
C) Assets = Liabilities
D) Assets = Liabilities + Retained earnings

Question 43

Financing activities involve obtaining _____ to operate a business.

A) products
B) customers
C) business incentives
D) funds

Question 44

The resources a business owns are called:

A) assets.
B) liabilities.
C) earnings.
D) stockholders' equity.

Question 45

When a business borrows money, it incurs a(n):

A) tax.
B) liability.
C) receivable.
D) additional equity.

Question 46

Which of the following is considered an asset until consumed?

A) Accounts payable
B) Prepaid expense
C) Accounts receivable
D) Stockholders' equity

Question 47

Cash collected from sales during the normal course of business would be an example of which type of business activity?

A) Operating
B) Investing
C) Financing
D) None of these

Question 48

Shares of ownership are evidenced by issuing:

A) shares payable.
B) commercial paper.
C) shares of stock.
D) notes payable.

Question 49

Debts owed by a business are referred to as:

A) accounts receivable.
B) equities.
C) stockholders' equity.
D) liabilities.

Question 50

The role of accounting in business is best defined as:

A) an information system that provides reports to stakeholders about the economic activities and condition of a business.
B) a method of forecasting the future profitability of a company.
C) the policies, procedures, and strategies used in a business.
D) transaction analysis.

Question 51

When a product is sold, the cost of the product sold is often called:

A) cost of goods sold.
B) selling cost.
C) period cost.
D) retained cost.

Question 52

Given the following list of accounts, calculate Total Assets: $\begin{array}{ll}5,000 & \text { Accounts Receivable } \\20,000 & \text { Cqpital Stock } \\19,300 & \text { Cash } \\15,400 & \text { Equipment } \\44,400 & \text { Fees Earned } \\18,200 & \text { Miscellaneous Expense } \\4,150 & \text { Rent Expense } \\6,550 & \text { RetainedEarnings } \\13,900 & \text { Wages Expense }\end{array}$

A) $84,100
B) $59,700
C) $46,250
D) $39,700

Question 53

Cash investments made by the stockholders of the business are reported on the statement of cash flows in the:

A) financing activities section.
B) investing activities section.
C) operating activities section.
D) supplemental statement.

Question 54

Which of the following is an intangible asset?

A) Patent
B) Cash
C) Land
D) Equipment

Question 55

A note payable requires payment of the amount borrowed plus:

A) interest.
B) tax.
C) overhead.
D) dividend.

Question 56

Reporting the financial condition of a business at a point in time and the changes in the financial condition of a business over a period of time are the two major objectives of:

A) tax accounting.
B) union contracts.
C) managerial accounting.
D) financial accounting.

Question 57

_____ is the increase in assets from selling products and services.

A) Revenue
B) Liabilities
C) Products
D) Stockholders' Equity

Question 58

A list of assets, liabilities, and owners' equity as of a specific date is a(n):

A) income statement.
B) balance sheet.
C) statement of cash flows.
D) retained earnings statement.

Question 59

Rights to payments from customers are:

A) liabilities.
B) prepaid expenses.
C) accounts receivable.
D) accounts payable.

Question 60

Costs incurred in operating a business are also known as:

A) revenues.
B) expenses.
C) liabilities.
D) dividends.

Question 61

If there was no beginning retained earnings, net income of $20,000, and ending retained earnings of $6,000, how much were dividends?

A) $10,000
B) $4,000
C) $6,000
D) $14,000

Question 62

Recording revenue when a sale is made most directly relates to which concept?

A) Going concern concept
B) Periodicity concept
C) Matching concept
D) Adequate disclosure concept

Question 63

A summary of the cash receipts and cash payments for a specific period of time is a(n):

A) income statement.
B) balance sheet.
C) statement of cash flows.
D) retained earnings statement.

Question 64

The "rules" of accounting are called:

A) income tax regulations.
B) SEC regulations.
C) Internet rules.
D) Generally Accepted Accounting Principles.

Question 65

Expressing financial data as if a business will continue operating for an indefinite period time refers to which concept?

A) Business entity concept
B) Going concern concept
C) Objectivity concept
D) Adequate disclosure concept

Question 66

Use the following information to determine Total Stockholders' Equity: $$\begin{array} { l l } \text { \$ 50,000 } & \text { Tatal Ansetu } \\15,000 & \text { Total Liabilities } \\\text { x } & \text { Tatal Stachholders Ecruity } \\13,000 & \text { Total Retained Earrings }\end{array}$$

A) $52,000
B) $50,000
C) $35,000
D) $22,000

Question 67

A summary of revenue and expenses for a specific period of time is a(n):

A) income statement.
B) balance sheet.
C) statement of cash flows.
D) retained earnings statement.

Question 68

Which statement is normally prepared first?

A) Income statement
B) Balance sheet
C) Statement of cash flows
D) Retained earnings statement

Question 69

The debt created by a business when it makes a purchase on account is referred to as an:

A) account payable.
B) account receivable.
C) asset.
D) expense payable.

Question 70

Name the three different types of businesses that operate for profit and their respective characteristics.

Question 71

Due to various fraudulent business practices and accounting coverups in the early 2000s, Congress enacted the Sarbanes-Oxley Act of 2002. The act was responsible for establishing a new oversight board for public accountants called the:

A) Generally Accepted Accounting Practices for Public Accountants Board.
B) Public Company Accounting Oversight Board.
C) Congressional Accounting Oversight Board.
D) Financial Accounting Standards Board.

Question 72

Including all relevant data a reader needs to understand the financial condition and performance of a business refers to which concept?

A) Adequate disclosure concept
B) Going concern concept
C) Objectivity concept
D) Business entity concept

Question 73

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or an year, is called a(n):

A) prior period statement.
B) statement of retained earnings.
C) income statement.
D) balance sheet.

Question 74

During 2012, Smith Corporation had an increase in total assets of $70,000 and an increase in total liabilities of $90,000. Assuming that capital stock increased by $5,000 and no dividends were paid, calculate Smith's net income or net loss for 2012.

A) Net loss of $15,000
B) Net loss of $20,000
C) Net loss of $25,000
D) Net income of $15,000

Question 75

Gilbert, Inc. had the following account balances at September 30, 2010. What is Gilbert's net income for the month of September? $\begin{array}{ll}5,000 & \text { Accounts Payable } \\10,000 & \text { Capital Stock } \\14,300 & \text { Cash } \\15,400 & \text { Equipment } \\54,400 & \text { Fees Earned } \\18,200 & \text { Miscellaneous Expense } \\4,150 & \text { Rent Expense } \\6,550 & \text { Retained Earnings } \\13,900 & \text { Wages Expense }\end{array}$

A) $32,450
B) $27,450
C) $6,550
D) $18,150

Question 76

The portion of a corporation's net income retained in the business is called:

A) interest earnings.
B) dividends.
C) tax expense.
D) retained earnings.

Question 77

Browning, Inc. had revenues of $234,000, expenses of $175,000, and dividends of $30,000 during 2012. Which of the following statements is correct?

A) Net income for 2012 totaled $29,000.
B) Net income for 2012 totaled $59,000.
C) Total retained earnings increased by $59,000 during 2012.
D) Total retained earnings decreased by $30,000 during 2012.

Question 78

Which principle determines the amount initially entered into the records for purchases?

A) Cost principle
B) Going concern concept
C) Business entity concept
D) Objectivity concept

Question 79

Heedy Company had the following account balances in 2011 and 2012, respectively. Assuming dividends of $20,000 were paid in 2012, how much was net income? $\begin{array}{|l|l|l|}\hline 2011 & 2012 & \\\hline \$ 40,000 & \$ 42,000 & \text { Capital Stock } \\\hline 210,000 & x & \text { Retained Earnings } \\\hline \$ 250,000 & \$ 314,000 & \text { Total Stockholders' 'Equity } \\\hline & & \\\hline\end{array}$

A) $62,000
B) $82,000
C) $272,000
D) $252,000

Question 80

A summary of changes in the earnings retained by the corporation for a specific period of time is known as a(n):

A) income statement.
B) balance sheet.
C) statement of cash flows.
D) retained earnings statement.