Question 1

Revenues are:

Accepted Answer

Revenues are the value of assets exchanged for goods or services provided to the customer, representing the income generated from normal business operations.

Question 2

The accounting principle that requires financial statement information to be based on costs incurred in business transactions,and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange,is the:

Accepted Answer

The cost principle requires financial statement information to be based on costs incurred in business transactions and assets and services to be recorded at their initial cash or cash-equivalent value. This principle ensures that financial statements provide a consistent and reliable representation of a company's financial position.

Question 3

Payments of cash by a corporation to its shareholders are called:

Accepted Answer

Cash payments made by a corporation to its shareholders are called dividends. This is a way for companies to distribute profits to their shareholders. Cheques are a method of payment, not the actual payment itself. Shareholders equity refers to the portion of a company's assets that belong to the shareholders. Withdrawals are typically made by owners of sole proprietorships or partnerships, not corporations. Expenses refer to the costs incurred by a company in order to generate revenue.

Question 4

If a parcel of land is offered for sale at $45,000,is assessed for tax purposes at $20,000,is considered by its purchasers to be worth $36,000,and is purchased for $34,000,the land should be recorded in the purchaser's books at:

Accepted Answer

The land should be recorded at its actual cost, which is the purchase price of $34,000. The assessed value and the perceived value are not relevant for accounting purposes, and the asking price is not necessarily indicative of the actual value of the asset. Therefore, the most appropriate choice is B.

Question 5

If financial information is relevant,this means that:

Accepted Answer

Relevant financial information can influence the decisions of users by providing insights that are pertinent to their decision-making process.

Question 6

The accounting principle that states that revenue is recorded at the time that it is earned regardless of whether cash or another asset has been exchanged is the:

Accepted Answer

The revenue recognition principle states that revenue should be recorded at the time it is earned, regardless of when the payment is received. This ensures that financial statements accurately reflect the company's revenues and expenses for a given period. It is an important principle for ensuring transparency and fairness in financial reporting.

Question 7

The accounting principle that requires that transactions are expressed using units of money as the common denominator is the:

Accepted Answer

The principle that transactions must be expressed in monetary units is known as the monetary unit principle. This principle assumes that the value of money remains stable over time, which is not always the case. However, it allows for easier comparison and analysis of financial information.

Question 8

The rules adopted by the accounting profession as guides in measuring,recording,and reporting the financial affairs and activities of a business are:

Accepted Answer

All of the answers given are correct. The rules adopted by the accounting profession are both broad and specific principles known as generally accepted accounting principles (GAAP). These rules are intended to make information in financial statements relevant and faithfully represented.

Question 9

To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the:

Accepted Answer

The Business entity principle requires that the personal assets and transactions of the owner are separate from those of the business. This means that they should not be included in the records and reports of the business.

Question 10

A payment from a proprietorship or partnership to its owner or owners is called a(n):

Accepted Answer

A withdrawal is a payment made by a proprietorship or partnership to its owner or owners. Dividends are payments made to shareholders of a corporation, not to owners of a proprietorship or partnership. Expenses are costs incurred by a business, not payments made to owners. Equity refers to the value of a business after liabilities are subtracted from assets, not a payment made to owners. Cheque is a payment instrument, not a type of payment made by a business to its owner or owners.

Question 11

Financial information that is verifiable means that:

Accepted Answer

Verifiability means that knowledgeable users can agree that the financial information is faithfully represented. It is not simply about being clear and concise or useful to users, although those can be important factors in financial reporting. Comparability is also important, but only if the companies are using similar accounting practices. Financial information that is not prepared according to GAAP is not considered verifiable.

Question 12

Which of the following is not reported on the income statement?

Accepted Answer

Revenues earned by a business, expenses incurred by a business, and net income are all reported on the income statement. Withdrawals, however, are reported on the statement of owner's equity.

Question 13

Which of the following statements is true about assets?

Accepted Answer

All of the options listed are true statements about assets. A) refers to the physical and non-physical resources a business owns, B) highlights the potential for these resources to generate future benefits, C) acknowledges that some assets may not have a physical form, such as patents or copyrights, and D) recognizes that both creditors and owners may have a financial stake in the business's assets.

Question 14

A primary operating objective of a business is to increase the equity of its owner or owners by:

Accepted Answer

The primary operating objective of a business is to earn a profit, which in turn increases the equity of its owner or owners.

Question 15

The business entity principle:

Accepted Answer

The business entity principle states that business records should be kept separate from the owner's personal records. This means that a business owner should maintain separate accounts and financial statements for the business, even if they are a sole proprietor. This helps to improve financial transparency, accuracy, and accountability, and can also help to protect personal assets in the case of legal or financial issues for the business.

Question 16

A statement of profit and loss is another name for:

Accepted Answer

A statement of profit and loss refers to the income statement, which shows a company's revenues, expenses, and net income or loss during a specific period. The balance sheet shows a company's assets, liabilities, and equity at a specific point in time. The statement of cash flows shows the inflow and outflow of cash within a company during a specific period. The statement of changes in equity shows the changes in a company's equity over a specific period. The accounting equation refers to the basic equation of accounting, Assets = Liabilities + Equity.

Question 17

Salaries paid with cash appear on which of the following statement(s)?

Accepted Answer

Salaries paid with cash are recorded as an expense on the income statement and also appear on the statement of cash flows under operating activities, as they represent cash outflows.

Question 18

The accounting principle that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold,unless evidence shows that it will not continue,is the:

Accepted Answer

The going concern principle dictates that financial statements should be prepared with the assumption that the business will continue to operate for the foreseeable future. This principle is important in presenting an accurate picture of the financial health of the business and is based on the belief that most businesses will continue to operate indefinitely unless there is compelling evidence to the contrary.

Question 19

Profit is another name for:

Accepted Answer

Profit is a term used to describe the net income earned by a business, which is the amount of revenue left over after deducting all expenses. It is not the same as equity, assets, or a specific business transaction, although it is typically reported on the income statement.

Question 20

Fees earned by a business in exchange for services provided by the business appear on which of the following statements?

Accepted Answer

Fees earned by a business in exchange for services provided by the business are considered revenue and appear on the income statement. The balance sheet shows the financial position of the business at a specific point in time, the statement of changes in equity shows changes in equity during a period, the statement of cash flows shows the inflows and outflows of cash during a period, and the statement of financial position is another name for the balance sheet.

Quiz 1: Accounting in Business