Question 1

Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements.

Accepted Answer

This statement is true. Generally accepted accounting principles (GAAP) provide a framework for preparing financial statements that are reliable, consistent, and comparable across different organizations.

Question 2

Specific accounting principles are basic assumptions, concepts, and guidelines for preparing financial statements and arise out of long-used accounting practice.

Accepted Answer

The answer of Specific accounting principles are basic assumptions, concepts,...

Question 3

A limited liability company offers the limited liability of a partnership or proprietorship and the tax treatment of a corporation.

Accepted Answer

The answer of A limited liability company offers the limited...

Question 4

The three common forms of business ownership include sole proprietorship, partnership, and non-profit.

Accepted Answer

The three common forms of business ownership include sole proprietorship, partnership, and corporation (not non-profit).

Question 5

The idea that a business will continue to operate instead of being closed or sold underlies the going-concern assumption.

Accepted Answer

The going-concern assumption assumes that a business will continue to operate in the foreseeable future and will not be closed or sold.

Question 6

A sole proprietorship is a business owned by one or more persons.

Accepted Answer

The answer of A sole proprietorship is a business owned...

Question 7

The Securities and Exchange Commission (SEC) is a government agency that has legal authority to establish GAAP.

Accepted Answer

The answer of The Securities and Exchange Commission (SEC) is...

Question 8

The monetary unit assumption means that all companies doing business in the United States must express transactions and events in US dollars.

Accepted Answer

The answer of The monetary unit assumption means that all...

Question 9

According to the cost principle, it is necessary for managers to report an approximation of an asset's market value upon purchase.

Accepted Answer

According to the cost principle, assets should be recorded at their cost (i.e. historical cost) rather than their market value at the time of purchase. However, certain assets such as marketable securities may be reported at their fair market value on the balance sheet.

Question 10

The business entity assumption means that a business is accounted for separately from other business entities, including its owner or owners.

Accepted Answer

The business entity assumption means that a business is considered as a distinct economic unit separate from other business entities and their owners. This principle is a fundamental concept in accounting and is applied to prepare financial statements for a business.

Question 11

Planning involves defining an organization's ideas, goals, and actions.

Accepted Answer

Planning is the process of setting goals, developing strategies, outlining tasks and activities, and allocating resources to achieve objectives. It involves defining the organization's ideas, goals, and actions to ensure that all activities are aligned towards achieving them.

Question 12

The International Accounting Standards Board (IASB) is the government group that establishes reporting requirements for companies that issue stock to the public.

Accepted Answer

The answer of The International Accounting Standards Board (IASB) is...

Question 13

Objectivity means that financial information is supported by independent, unbiased evidence.

Accepted Answer

Objectivity in financial information refers to the use of independent, unbiased evidence to support the information presented. This is important for ensuring the accuracy and reliability of financial reporting.

Question 14

Unlimited liability and separate taxation of the business are advantages of a sole proprietorship.

Accepted Answer

Unlimited liability is a disadvantage of a sole proprietorship because the owner's personal assets are at risk in the event of a lawsuit or bankruptcy. Additionally, sole proprietorships do not have separate taxation, meaning the business income and the owner's personal income are taxed together on the owner's personal tax return.

Question 15

The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

Accepted Answer

The answer of The business entity principle means that accounting...

Question 16

General accounting principles arise from long-used accounting practices.

Accepted Answer

General accounting principles have developed over time and are based on the actual practices of accountants for recording financial transactions.

Question 17

Understanding generally accepted accounting principles is not necessary to effectively use and interpret financial statements.

Accepted Answer

Understanding generally accepted accounting principles (GAAP) is crucial in effectively using and interpreting financial statements. GAAP provides a standardized and consistent approach to accounting, ensuring accuracy and comparability between financial statements. Without understanding GAAP, users of financial statements may misinterpret or misunderstand the information presented.

Question 18

The International Accounting Standards board (IASB) has the authority to impose its standards on companies around the world.

Accepted Answer

The IASB does not have the authority to impose its standards on companies around the world. However, many countries have voluntarily adopted and incorporated these standards into their own financial reporting frameworks.

Question 19

As a general rule, revenues should not be recognized in the accounting records when earned, but rather when cash is received.

Accepted Answer

The statement is false. Revenue recognition principle states that revenues should be recognized when earned, regardless of whether cash has been received or not. This means that revenue should be recorded when the service is provided or when the goods are delivered, even if the payment is not received immediately. The accrual basis of accounting follows this principle. However, cash basis of accounting recognizes revenue only when cash is received.

Question 20

The three major types of business activities are operating, financing, and investing.

Accepted Answer

The three major types of business activities are operating, financing, and investing.

Quiz 1: Accounting in Business

Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements.

Specific accounting principles are basic assumptions, concepts, and guidelines for preparing financial statements and arise out of long-used accounting practice.

A limited liability company offers the limited liability of a partnership or proprietorship and the tax treatment of a corporation.

The three common forms of business ownership include sole proprietorship, partnership, and non-profit.

The idea that a business will continue to operate instead of being closed or sold underlies the going-concern assumption.

A sole proprietorship is a business owned by one or more persons.

The Securities and Exchange Commission (SEC) is a government agency that has legal authority to establish GAAP.

The monetary unit assumption means that all companies doing business in the United States must express transactions and events in US dollars.

According to the cost principle, it is necessary for managers to report an approximation of an asset's market value upon purchase.

The business entity assumption means that a business is accounted for separately from other business entities, including its owner or owners.

Planning involves defining an organization's ideas, goals, and actions.

The International Accounting Standards Board (IASB) is the government group that establishes reporting requirements for companies that issue stock to the public.

Objectivity means that financial information is supported by independent, unbiased evidence.

Unlimited liability and separate taxation of the business are advantages of a sole proprietorship.

The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

General accounting principles arise from long-used accounting practices.

Understanding generally accepted accounting principles is not necessary to effectively use and interpret financial statements.

The International Accounting Standards board (IASB) has the authority to impose its standards on companies around the world.

As a general rule, revenues should not be recognized in the accounting records when earned, but rather when cash is received.

The three major types of business activities are operating, financing, and investing.