Question 1

A partnership is a business owned by two or more people.

Accepted Answer

A partnership is a form of business organization where two or more people come together to carry on a trade or business. They share the profits and losses of the business and each partner has unlimited personal liability for the debts and obligations of the partnership.

Question 2

In the partnership form of business, the owners are called stockholders.

Accepted Answer

In the partnership form of business, the owners are called partners, not stockholders. Stockholders are the owners of a corporation.

Question 3

The primary objective of managerial accounting is to provide general purpose financial statements to help external users analyze and interpret an organization's activities.

Accepted Answer

The primary objective of managerial accounting is to provide internal users with information to make decisions and manage the organization's activities, while financial accounting provides general purpose financial statements for external users to analyze and interpret an organization's activities.

Question 4

The Financial Accounting Standards Board is the governmental agency that sets both broad and specific accounting principles.

Accepted Answer

The answer of The Financial Accounting Standards Board is the...

Question 5

Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization's business activities.

Accepted Answer

Accounting is indeed an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization's business activities.

Question 6

An accounting information system communicates data to help users make better decisions.

Accepted Answer

An accounting information system (AIS) gathers financial data and communicates it to business decision-makers, allowing them to analyze and make informed decisions for the organization. Thus, AIS helps users make better decisions by providing them with relevant, reliable, and timely information.

Question 7

Bookkeeping is the recording of transactions and events and is only part of accounting.

Accepted Answer

Bookkeeping is the process of recording financial transactions and events, while accounting includes the interpretation, analysis, and reporting of financial data.

Question 8

Regulators often have legal authority over certain activities of organizations.

Accepted Answer

Regulators, such as government agencies, have the legal authority to enforce rules and regulations on certain activities of organizations in order to protect the public interest, ensure fair competition, and maintain safety standards.

Question 9

The Sarbanes-Oxley Act (SOX) requires each issuer of securities to disclose whether it has adopted a code of ethics for its senior financial officers and the contents of that code.

Accepted Answer

This statement is true according to section 406 of the Sarbanes-Oxley Act, which requires public companies to disclose whether they have adopted a code of ethics for their senior financial officers and to provide the contents of that code in their annual reports.

Question 10

Opportunities in accounting include auditing, consulting, market research, and tax planning.

Accepted Answer

Accounting is a diverse field and offers various opportunities, including auditing, consulting, market research, and tax planning.

Question 11

Financial accounting is the area of accounting that provides internal reports to assist the decision making needs of internal users.

Accepted Answer

Financial accounting is the area of accounting that provides external financial statements to assist the decision making needs of external users such as investors, creditors, and regulatory agencies. The area of accounting that provides internal reports for internal users is called management accounting.

Question 12

The fraud triangle asserts that the three factors that must exist for a person to commit fraud are opportunity, pressure, and rationalization.

Accepted Answer

The fraud triangle theory states that for fraud to occur, three elements must be present: opportunity, pressure, and rationalization. Therefore, the statement that the three factors that must exist for a person to commit fraud are opportunity, pressure, and rationalization is true.

Question 13

External users include lenders, shareholders, customers, and regulators.

Accepted Answer

This is true, as these are all examples of individuals or entities outside of the organization who have an interest in its financial information.

Question 14

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

Accepted Answer

External auditors are responsible for examining financial statements to ensure that they are accurate and comply with generally accepted accounting principles.

Question 15

The Sarbanes-Oxley Act (SOX) does not require public companies to apply both accounting oversight and stringent internal controls.

Accepted Answer

The Sarbanes-Oxley Act (SOX) does require public companies to apply both accounting oversight and stringent internal controls.

Question 16

Internal users include lenders, shareholders, brokers and managers.

Accepted Answer

Internal users are individuals or groups within a specific organization who use financial information to make decisions, such as managers and employees, not external parties like lenders, shareholders, or brokers.

Question 17

Owners of a corporation are called shareholders or stockholders.

Accepted Answer

The owners of a corporation are called shareholders, also known as stockholders.

Question 18

The balance sheet shows a company's net income or loss due to earnings activities over a period of time.

Accepted Answer

The income statement shows a company's net income or loss due to earnings activities over a period of time. The balance sheet shows a company's assets, liabilities, and equity at a specific point in time.

Question 19

Identifying the proper ethical path is usually easy.

Accepted Answer

Identifying the proper ethical path is often difficult and subjective due to varying cultural and personal beliefs, values, and circumstances. It requires careful consideration and critical thinking.

Question 20

Internal operating activities include research and development, distribution, and human resources.

Accepted Answer

Internal operating activities are the activities that a company carries out within its own organization. Research and development, distribution, and human resources are all examples of internal operating activities.

Quiz 1: Accounting in Business