Test bank for fundamental accounting principles

Internal users of accounting information include: 1.. To provide external reports to help users analyze an organization's activities.. Is an independent review of an organization's acco

Test Bank for Fundamental Accounting Principles Multiple Choice Questions

Social responsibility:

1 A Is a code that helps accountants when dealing with confidential information.

2 B Is a concern for the impact of our actions on society as a whole.

3 C Allows Canada Revenue Agency to regulate businesses.

4 D Requires that all businesses conduct social audits.

5 E Requires analysts to report information favourable to their companies.

Internal controls are procedures set up to:

1 A Protect assets.

2 B Ensure accounting reports are reliable.

3 C Promote efficiency.

4 D Ensure companypolicies are followed.

5 E All of these answers are correct.

A business:

1 A Is one or more individuals selling products or services for profit.

2 B Can only have one legal form of organization.

3 C Can have adequate financial records without a formal accounting system.

4 D Has to issue shares before it opens.

5 E Is one or more individuals selling products or services for profit and has to issue shares before it opens.

A partnership:

1 A Is also called a sole proprietorship.

2 B Has unlimited liability.

3 C Has to have a written agreement in order to be legal.

4 D Is a legal organization separate from its owners.

5 E Is a non-business organization.

Ethical behaviour requires:

1 A Accountants to keep business information confidential.

2 B Auditors to invest in businesses they audit.

3 C Analysts to report information favourable to their companies.

4 D Purchasing agents to favour certain suppliers.

5 E The government to regulate businesses.

The internal functions of a business include:

1 A Research and development.

2 B Purchasing.

3 C Marketing.

4 D Servicing.

5 E All of these answers are correct.

The recording of financial transactions either manually or electronically is called:

1 A Accounting.

2 B Bookkeeping.

3 C Preparing financial statements.

4 D Auditing.

5 E Systems design.

Internal users of accounting information include:

1 A Shareholders.

2 B Managers.

3 C Creditors.

4 D Investors.

5 E Customers.

Career opportunities in accounting include:

1 A Budgeting.

2 B Auditing.

3 C Cost accounting.

4 D Management consulting.

5 E All of these answers are correct.

The primary objective of financial accounting is:

1 A To help organizations keep track of financing activities.

2 B To provide external reports to help users analyze an organization's activities.

3 C To help an organization define its ideas, goals, and actions.

4 D To help an organization to keep track of its buying and selling of resources.

5 E To prepare budgets.

Ethics:

1 A Are beliefs that separate right from wrong.

2 B And law often coincide.

3 C Help to prevent conflicts of interest.

4 D Are very important considerations for accountants.

5 E All of these answers are correct.

An audit:

1 A Is required for every business.

2 B Is an independent review of an organization's accounting systems and records.

3 C Is performed to add credibility to the financial statements.

4 D Is onlyperformed for companies with computerized accounting systems.

5 E Is an independent review of an organization's accounting systems and records and

is performed to add credibility to the financial statements.

A corporation:

1 A Is a legal entity separate and distinct from its owners.

2 B Is regulated by Canada Revenue Agency.

3 C Has shareholders who have unlimited liability for the acts of the corporation.

4 D Can only have two owners.

5 E Is not a legal entity.

The area of accounting aimed at serving the decision-making needs of internal users is:

1 A Financial accounting.

2 B Managerial accounting.

3 C Auditing.

4 D Internal control.

5 E Marketing.

Accounting is an information and measurement system that:

1 A Identifies economic activities.

2 B Records economic activities.

3 C Communicates economic information.

4 D Identifies and records economic activities.

5 E All of these answers are correct.

Businesses can take the following form(s):

1 A Sole proprietorship.

2 B Not-for-profit.

3 C Partnership.

4 D Sole proprietorship and partnership.

5 E All of these answers are correct.

External users of accounting information include:

1 A Shareholders.

2 B Customers.

3 C Creditors.

4 D The press.

5 E All of these answers are correct.

Professional accountants can be:

1 A Chartered Accountants.

2 B Certified General Accountants.

3 C Certified Management Accountants.

4 D Any of the above.

True-False Questions

Ownership of a corporation is divided into units called shares

1 True

2 False

Private accountants work for several employers

1 True

2 False

Internal operating functions include research and development, distribution, and human resources

1 True

2 False

Social responsibility is concern for the impact of our actions on society as a whole

1 True

2 False

The primary objective of financial accounting is to provide internal reports called financial statements to help users analyze an organization's activities

1 True

2 False

The professional designation "CGA" stands for "Chartered General

Accountant."

1 True

2 False

Internal users include creditors, shareholders, internal auditors and

managers

1 True

2 False

Career opportunities in accounting include auditing, forensic accounting, and tax planning

1 True

2 False

External users include creditors, shareholders, employees, and lawyers

1 True

2 False

Ethics and laws often differ

1 True

2 False

The purpose of an audit is to add credibility to the financial statements

1 True

2 False

Accounting is an information and measurement system that communicates economic information to users

1 True

2 False

Ethical practices are not necessary to build trust and long-term relationships with customers

1 True

2 False

Limited liability is a key consideration as to why corporations can raise resources from shareholders

1 True

2 False

Internal controls include procedures to protect assets and prevent fraud

1 True

2 False

The preferred ethical path is to take a course of action that avoids casting doubt on one's decisions

1 True

2 False

In the partnership form of business, the owners of a business are called shareholders

1 True

2 False

Budgeting is the process of developing formal plans for an organization's future activities

1 True

2 False

The primary objective of accounting is to help people make better decisions

1 True

2 False

At the request of the Board of Directors, internal auditors perform the audit function to protect shareholder interests

1 True

2 False

Ethics and social responsibility are incidental to the primary functions of accounting

1 True

2 False

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

1 True

2 False

Non-business organizations often operate educational and religious services for profit

1 True

2 False

Accounting information is only relevant for people in business

1 True

2 False

Sole proprietorships and partnerships are not subject to income tax in

Canada

1 True

2 False

A partnership is a business owned by two or more people

1 True

2 False

Although a proprietorship is not a separate legal entity, a partnership is

1 True

2 False

Managerial accounting is an area of accounting that provides internal reports

to assist the decision-making needs of internal users

1 True

2 False

"Bookkeeping" is another term for "accounting."

1 True

2 False

.Unlimited liability is an advantage for both a proprietorship and a

partnership

1 True

2 False

Free Text Questions

An audit is _ of an organization's accounting systems and records.

Answer Given

A check or review

A(n) is a business owned by one person.

Answer Given

Sole proprietorship

Persons using accounting information who are directly involved in the running of the organization are called .

Answer Given

Internal users

Accounting is an that identifies, records, and

communicates relevant, reliable and comparable information about an organization's economic activities.

Answer Given

Information system

Describe the main user groups, their members, and their uses of accounting information.

Answer Given

There are two types of users of accounting information Internal users are managers, officers, and owners of businesses They require information about business activities

in order to make decisions about planning, monitoring, and control.External users include lenders, shareholders, and employees Lenders need information for

measuring the risk and return of loans Shareholders need information for assessing the risk and return in owning shares Employees need information about employment opportunities.

Explain why ethics and social responsibility are an integral part of accounting.

Answer Given

The purpose of accounting is to provide useful information for decision makers For information to be useful, it must be trustworthy and reliable This requires ethical and socially responsible behaviour by accountants and managers in all phases of

gathering, analyzing, and reporting financial information.

_ are beliefs that separate right from wrong.

Answer Given

Ethics

Identify several opportunities in accounting and its related fields.

Answer Given

The traditional areas of accounting include financial accounting, managerial

accounting, auditing, and taxation Other opportunities include management advising, investigations, and planning Work in related fields includes consulting, underwriting, appraisals and trading.

The primary objective of accounting is .

Answer Given

To help people make better decisions.

When a corporation issues only one class of shares they are called _ shares.

Answer Given

Common

of accounting information are not directly involved in

running the organization.

Answer Given

External users

Explain the difference between the functions of an internal auditor and an external auditor.

Answer Given

An internal auditor is employed within the organization for the purpose of evaluating the efficiency and effectiveness of organizational procedures An external auditor performs an audit of the company's records at the request of the Board of Directors to protect shareholder interests.

is the area of accounting aimed at serving external users.

Answer Given

Financial accounting