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| 1 | |
Accounting is the recording of economic transactions and events, either electronically or manually. |
| | A) | True |
| | B) | False |
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| 2 | |
Managerial accounting is the area of accounting aimed at serving external users by providing them with financial statements. |
| | A) | True |
| | B) | False |
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| 3 | |
The majority of accounting opportunities are in public accounting. |
| | A) | True |
| | B) | False |
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| 4 | |
Ethics are beliefs, rather than rules, that distinguish right from wrong. |
| | A) | True |
| | B) | False |
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| 5 | |
GAAP stands for generally acceptable auditing principles. |
| | A) | True |
| | B) | False |
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| 6 | |
The organization responsible for setting accounting rules in the United States is the American Institute of Certified Public Accountants. |
| | A) | True |
| | B) | False |
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| 7 | |
A sole proprietorship is a separate legal entity. |
| | A) | True |
| | B) | False |
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| 8 | |
Under the revenue recognition principle, revenue is recognized only after services have been provided and cash has been received. |
| | A) | True |
| | B) | False |
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| 9 | |
If assets total $21,000 and liabilities total $6,000, equity is $15,000. |
| | A) | True |
| | B) | False |
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| 10 | |
Profit is determined by subtracting sales from the total expenses of the business. |
| | A) | True |
| | B) | False |
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| 11 | |
The accounting equation can be expanded as: Assets = Liabilities + Common Stock – Dividends – Revenues + Expenses. |
| | A) | True |
| | B) | False |
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| 12 | |
An economic event that changes the financial position of an organization, and that often takes the form of an exchange of economic consideration between two parties, is called a business transaction. |
| | A) | True |
| | B) | False |
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| 13 | |
An investment made into a new business by stockholders would increase assets and liabilities. |
| | A) | True |
| | B) | False |
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| 14 | |
The return on investment ratio is a measure of how well the total assets of the business exceed the total liabilities of the business. |
| | A) | True |
| | B) | False |
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| 15 | |
While there is a link between the balance sheet and the statement of retained earnings, there is not link between the income statement and statement of retained earnings. |
| | A) | True |
| | B) | False |
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| 16 | |
What is a benefit of technology in modern business practice? |
| | A) | It makes up for a lack of understanding of accounting. |
| | B) | It increases the time, effort, and cost of recording transactions. |
| | C) | Although it has not changed the way accountants summarize data, it has changed the way they store and process data. |
| | D) | None of the above. |
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| 17 | |
Which of the following users of accounting information are internal users? |
| | A) | Lenders |
| | B) | Shareholders |
| | C) | Production Managers |
| | D) | Governments |
| | E) | Customers |
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| 18 | |
Certified Public Accountants: |
| | A) | Must meet education and experience requirements and pass an examination. |
| | B) | Are required to exhibit ethical character. |
| | C) | Receive a certificate that denotes their professional standing. |
| | D) | A and C above. |
| | E) | All of the Above. |
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| 19 | |
Which of the following is true about ethics in accounting? |
| | A) | For information to be useful, it must be trusted. |
| | B) | Ethics are beliefs that distinguish right from wrong. |
| | C) | Ethics are accepted standards of good and bad behavior. |
| | D) | Identifying the proper ethical path is sometimes difficult. |
| | E) | All of the above. |
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| 20 | |
Which form of ownership provides all owners with the least amount of risk to their personal assets? |
| | A) | Sole proprietorship |
| | B) | Limited partnership |
| | C) | Limited liability partnership |
| | D) | Corporation |
| | E) | None of the above |
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| 21 | |
Which the following does not correctly match the accounting principle with its major focus or assumption? |
| | A) | Going-concern assumption - A business has an indefinite life span. |
| | B) | Business entity assumption - A business is distinct from its owners. |
| | C) | Cost principle - Accounting information is based on actual cost. |
| | D) | Revenue recognition principle - Revenue is recognized (that is, recorded) when cash is received from customers for goods or services provided. |
| | E) | Monetary unit assumption - Transactions and events can be expressed in monetary, or money, units. |
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| 22 | |
The cost principle means that accounting information is based on actual cost because cost is considered to be: |
| | A) | Objective. |
| | B) | Subjective. |
| | C) | Biased. |
| | D) | B and C above. |
| | E) | All of the above. |
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| 23 | |
Which of the following represent creditors' claim on the assets of a company? |
| | A) | Accounts Receivables |
| | B) | Owner's Equity |
| | C) | Retained Earnings |
| | D) | Liabilities |
| | E) | None of the above |
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| 24 | |
If assets increased by $5,000 and equity increased by $1,000 during the accounting period, then how did liabilities change? |
| | A) | Increased by $6,000 |
| | B) | Increased by $4,000 |
| | C) | Decreased by $4,000 |
| | D) | Decreased by $6,000 |
| | E) | Decreased by $1,000 |
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| 25 | |
The owner of a computer services business was able to acquire a new computer, valued at $5,000, by establishing an account with the computer vendor, Com Pewters Unlimited. There was no down payment. How does this transaction impact the accounting equation? |
| | A) | Increase an asset, increase a liability |
| | B) | Decrease an asset, decrease a liability |
| | C) | Increase an asset, increase equity |
| | D) | Decrease an asset, decrease equity |
| | E) | Increase one asset and decrease another asset |
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| 26 | |
Keith Manich deposited $5,000 in a bank account he established for a pet store that he is going to own and operate as KM's Pets, Incorporated. How does this transaction impact the accounting equation? |
| | A) | Increase in an asset and increase a liability |
| | B) | Decrease in an asset and decrease a liability |
| | C) | Increase in an asset and increase equity |
| | D) | Decrease in an asset and decrease equity |
| | E) | Increase in one asset and decrease in another asset |
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| 27 | |
A local fast-food outlet hired a first-year accounting student to work as its cashier (the person who collects cash from customers). The firm pays the student after she works for a week. How does this transaction impact the accounting equation? |
| | A) | Increase an asset, increase a liability |
| | B) | Decrease an asset, decrease a liability |
| | C) | Increase an asset, increase owner's equity |
| | D) | Decrease an asset, decrease owner's equity |
| | E) | Increase one asset and decrease another asset |
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| 28 | |
Cash dividends are declared and paid to the stockholders of the corporation. How does this transaction impact the accounting equation? |
| | A) | Increase an asset, increase a liability |
| | B) | Decrease an asset, decrease a liability |
| | C) | Increase an asset, increase equity |
| | D) | Decrease an asset, decrease equity |
| | E) | Increase one asset and decrease another asset |
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| 29 | |
If the balance of cash is $210,000, the sales revenue totals $500,000, and the net income for the period is $200,000, what is the return on assets (ROA) if the average assets total $800,000? |
| | A) | 15% |
| | B) | 20% |
| | C) | 25% |
| | D) | 40% |
| | E) | None of the above |
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| 30 | |
Which of the following financial statements does not cover a period of time? |
| | A) | Income Statement |
| | B) | Balance sheet |
| | C) | Statement of retained earnings |
| | D) | Statement of cash flows |
| | E) | All of the above |
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