55 test bank for principles of accounting 1st edition

55 Test Bank for Principles of Accounting 1st Editionn by Libby Multiple Choice Questions - Page 1 Which of the four basic financial statements provides a snapshot of the business on a p

55 Test Bank for Principles of Accounting 1st Edition

n by Libby Multiple Choice Questions - Page 1

Which of the four basic financial statements provides a snapshot of the business on a particular day?

1 A Balance sheet

2 B Income statement

3 C Statement of cash Flows

4 D Statement of owner's equity

The rules of accounting are known as:

1 A Security and Exchange Commission (SEC)

2 B Financial Accounting Standards Board (FASB)

3 C American Institute of CPAs (AICPA)

4 D Generally Accepted Accounting Principles (GAAP)

Which financial statement links together the Income Statement and the Balance Sheet?

1 A Statement of cash flows

2 B Statement of owner's equity

3 C Statement of operations

4 D Statement of financial position

Unearned revenue is an example of a(n):

1 A Liability

2 B Revenue

3 C Asset

4 D Expense

Which of the following is not one of the four basic financial

statements?

1 A Income statement

2 B Statement of cash flows

3 C Accounting equation

4 D Balance sheet

The primary responsibility for setting the rules of accounting rests with the:

1 A Financial Accounting Standards Board (FASB)

2 B Generally Accepted Accounting Principles (GAAP)

3 C Security and Exchange Commission (SEC)

4 D American Institute of CPAs (AICPA)

Which of the following is considered an internal user of accounting information?

1 A Production manager

2 B Supplier

3 C Investor

4 D Customer

The _ outlines how the profits (or losses) are shared

1 A Stock certificate

2 B Partnership agreement

3 C Corporate charter

4 D Financial statements

Which of the following is considered an external user of accounting information?

1 A Production manager

2 B CEO

3 C IRS

4 D Controller

An example of a claim to resources of a business is:

1 A Cash

2 B Land

3 C Accounts payable

4 D Accounts receivable.

All of the following include activities of external users of accounting information except:

1 A Evaluating the risk of lending money to a business

2 B Determining the amount of supplies on hand

3 C Deciding whether to buy, sell or hold stock in a company

4 D Assessing whether the company has paid the correct amount of taxes

Land is an example of a(n):

1 A Liability

2 B Asset

3 C Revenue

4 D Expense

Which of the following would not be considered an external user of accounting information?

1 A Bank

2 B Supplier

3 C Manager

4 D Investor

Which of the following is not a characteristic of an asset?

1 A It is a resource controlled by the business

2 B It has measurable value

3 C It is incurred to generate revenue

4 D It is expected to provide future benefits

The Sarbanes-Oxley Act of 2002 requires that top managers

maintain an audited system of:

1 A Accounting

2 B Reporting

3 C Internal control

4 D Financing

A bank is most likely a(n) _ user of accounting

information

1 A external

2 B internal

3 C governmental

4 D managerial

Financial information that is ensures that it is unbiased and verifiable.

1 A relevant

2 B comparable

3 C reliable

4 D consistent

An example of an asset is:

1 A Wages expense

2 B Revenue

3 C Supplies

4 D Accounts payable

Which financial statement should be prepared first?

1 A Balance sheet

2 B Statement of cash flows

3 C Income statement

4 D Statement of owner's equity

Which financial statement includes only those activities that result in cash changing hands during the period?

1 A Income statement

2 B Balance sheet

3 C Statement of cash flows

4 D Statement of owner's equity

Which of the following represents the fundamental accounting

equation?

1 A A + L = OE

2 B A - L = OE

3 C OE + A = L

4 D L - OE = A

Claims a business owes are called owners' equity when they are held by:

1 A Creditors

2 B Suppliers

3 C Employees

4 D Investors

The governmental agency that supervises the work of the Financial Accounting Standards Board (FASB) is known as the:

1 A Generally Accepted Accounting Principles (GAA)

2 B Securities and Exchange Commission (SEC)

3 C Public Company Accounting Oversight Board (PCAOB)

4 D American Institute of CPAs (AICPA)

Resources a business owns are called:

1 A Liabilities

2 B Owner's equity

3 C Revenues

4 D Assets

Inventory is an example of a(n):

1 A Liability

2 B Revenue

3 C Expense

4 D Asset

In a business, who has the primary responsibility for following GAAP and preparing fair financial statements?

1 A Management

2 B The accountants

3 C The CPA

4 D The SEC

Which of the following is not one of the types of business activities included on the statement of cash flows?

1 A Investing

2 B Operating

3 C Financing

4 D Reporting

55 Free Test Bank for Principles of Accounting 1st

Edition by Libby Multiple Choice Questions - Page 2

Technology and the low cost of computers have resulted in:

1 A Increased complexity in accounting systems

2 B Higher fees charged by public accountants

3 C Small businesses handling their own bookkeeping

4 D An abundance of accounting reports

Which of the following is not a required element of the title on a financial statement?

1 A The company's name

2 B The reporting date or period

3 C The name of the financial statement

4 D The preparer's name

The following information is reported for Manco Company for the month of March Determine net income

1 A $(21,500)

2 B $144,500

3 C $21,500

4 D $73,000

The area of accounting which primarily serves the decision making needs of internal users is:

1 A Financial accounting

2 B Bookkeeping

3 C Auditing

4 D Managerial Accounting

Accounting is an information system designed to:

1 A Provide information to external users only

2 B Provide information to internal users only

3 C Capture a business's activities and communicate results to all decision makers

4 D Handle the record keeping of a business but other functions must be performed by a CPA

When a company distributes profits to its owners the result is a(n):

1 A Decrease in profits

2 B Decrease in assets and owner's equity

3 C Increase in owner's equity

4 D Increase in assets

A company pays $3,400 for the current month utilities What is the effect on the accounting equation?

1 A Assets increase $3,400; no effect on liabilities; equity increases $3,400

2 B Assets decrease $3,400; liabilities decrease $3,400; no effect on equity

3 C Assets decrease $3,400; no effect on liabilities; equity decreases $3,400

4 D Assets increase $3,400; liabilities increase $3,400; no effect on equity

A company purchases equipment for $45,000 cash What is the effect on the accounting equation?

1 A Assets increase $45,000; no effect on liabilities; equity increases $45,000

2 B Assets decrease $45,000; liabilities decrease $45,000; no effect on equity

3 C No effect on the accounting equation because assets increase and

decrease by the same amount

4 D Assets increase $45,000; liabilities increase $45,000; no effect on equity

What business type has two or more owners and unlimited liability?

1 A Corporation

2 B Sole proprietorship

3 C Partnership

4 D Retailer

A company reported revenue of $100,000 and a net loss of

$12,000 What amount was reported as expenses?

1 A $112,000

2 B $12,000

3 C $88,000

4 D $100,000

Accountants who are employed by a single business or nonprofit organization work in:

1 A Public accounting

2 B Private accounting

3 C A CPA firm

4 D Governmental accounting only

Assets should originally be recorded at:

1 A Market value

2 B Replacement cost

3 C Historical cost

4 D Amount owed on the asset

If owners contribute $50,000 to start a new business what is the effect on the accounting equation?

1 A Assets increase $50,000; no effect on liabilities; equity increases $50,000

2 B Assets decrease $50,000; liabilities decrease $50,000; no effect on equity

3 C Assets decrease $50,000; no effect on liabilities; equity decreases

$50,000

4 D Assets increase $50,000; liabilities increase $50,000; no effect on equity

Which of the following is not one of the three major ways that a business can be organized?

1 A Partnership

2 B Sole Proprietorship

3 C Corporation

4 D Wholesaler

What is the effect on the accounting equation if a company earns revenues of $23,000 on account?

1 A Assets increase $23,000; no effect on liabilities; equity increases $23,000

2 B Assets decrease $23,000; liabilities decrease $23,000; no effect on equity

3 C Assets decrease $23,000; no effect on liabilities; equity decreases

$23,000

4 D Assets increase $23,000; liabilities increase $23,000; no effect on equity

Which of the following would not be an objective of an external user analyzing a company's financial statements?

1 A Assessing the company's ability to pay its debts

2 B Predicting the future profitability of the company

3 C Determining whether the company should drop an unprofitable product line

4 D Understanding the financial position of the company

Which of the following is an example of a service company?

1 A Wal-Mart

2 B Home Depot

3 C American Airlines

4 D Ford Motor Company

The income statement reports:

1 A Revenues, assets and expenses

2 B Net income or loss for the period.

3 C Only sales amounts paid in cash

4 D The financial position on a particular date

Boeing would be an example of what business type?

1 A Service company

2 B Merchandiser

3 C Manufacturer

4 D Retailer

How would the accounting equation be affected if a company obtains a loan for $100,000 from a bank?

1 A Assets increase $100,000; no effect on liabilities; equity increases

$100,000

2 B Assets decrease $100,000; liabilities decrease $100,000; no effect on equity

3 C Assets decrease $100,000; no effect on liabilities; equity decreases

$100,000

4 D Assets increase $100,000; liabilities increase $100,000; no effect on equity

Which of the following is not a merchandiser?

1 A Target

2 B Best Western

3 C Staples

4 D Macy's

A company reported assets of $12,000 and liabilities of $2,500, what amount would be reported for owner's equity?

1 A $14.500

2 B $9,500

3 C $12,000

4 D $2,000

On December 31 of the current year, a company reported the following items on its balance sheet: Cash $10,500; Accounts

receivable $5,200; Inventory $2,300; Equipment $102,400;

Accounts payable $12,000; Notes payable $56,000 What amount should be reported as owner's equity?

1 A $108,400

2 B $52,400

3 C $120,400

4 D $188,400

One advantage of the corporate form of business over the other forms of business is:

1 A Limited liability

2 B Ease of formation

3 C Separate taxation

4 D Lower legal fees

_ are the standards of conduct for judging right from wrong

1 A Ethics

2 B Rules

3 C Internal controls

4 D Conducts

Companies which make products from raw inputs are known as:

1 A Service Companies

2 B Wholesalers

3 C Retailers

4 D Manufacturers

A company reported total equity of $82,000 on its December 31,

2009 balance sheet The following information is available for the year ended December 31, 2010: What are the total assets of the company as of December 31, 2010?

1 A $167,000

2 B $202,000

3 C $85,000

4 D $132,000

If a company purchases supplies on account for $5,000, what is the effect on the accounting equation?

1 A Assets increase $5,000; no effect on liabilities; equity increases $5,000

2 B Assets decrease $5,000; liabilities decrease $5,000; no effect on equity

3 C Assets decrease $5,000; no effect on liabilities; equity increases $5,000

4 D Assets increase $5,000; liabilities increase $5,000; no effect on equity