Chapter 01: Introduction to Accounting and Business

Chapter 01: Introduction to Accounting and Business

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• A corporation is a business that is legally separate and distinct from its owners.
• True
• False

ANSWER: True

• The role of accounting is to provide many different users with financial information to make economic decisions.
• True
• False

ANSWER: True

• Investing activities are those activities by which the company obtains funds to start and operate the business.
• True
• False

ANSWER: False

• Managerial accounting information is used by external and internal users equally.
• True
• False

ANSWER: False

• Senior executives cannot be criminally prosecuted for the wrong doings they commit on behalf of the companies where

they work.

• True
• False

ANSWER: False

• Financial accounting provides information to all users, while the main focus for managerial accounting is to provide

information to the management.

• True
• False

ANSWER: True

• Proper ethical conduct implies that you only consider what's in your best interest.
• True
• False

ANSWER: False

• Some of the major fraudulent acts by senior executives started as what they considered to be small ethical lapses that

grew out of control.

• True
• False

ANSWER: True

• A business is an organization in which basic resources or inputs, like materials and labor, are assembled and processed

to provide outputs in the form of goods or services to customers.(Corporate Financial Accounting, 16e Carl Warren, Jeff Jones) (Test Bank all Chapters) 1 / 4

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Class:

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Chapter 01: Introduction to Accounting and Business

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• True
• False

ANSWER: True

• Operating activities are those activities by which a company generates revenues from customers.
• True
• False

ANSWER: True

• An example of a general-purpose financial statement would be a report about projected price increases related to

transportation costs.

• True
• False

ANSWER: False

• The Sarbanes-Oxley Act established standards for corporate responsibility and disclosure.
• True
• False

ANSWER: True

• The main objective for all businesses is to maximize unrealized profits.
• True
• False

ANSWER: False

• The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing

entities.

• True
• False

ANSWER: False

• The basic difference between manufacturing and retail companies is the completion level of the products they

purchase for resale to customers.

• True
• False

ANSWER: True

• Proprietorships are owned by one owner and provide only services to their customers.
• True
• False

ANSWER: False

• About 90% of the businesses in the United States are organized as corporations.
• True
• False 2 / 4

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Chapter 01: Introduction to Accounting and Business

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ANSWER: False

• An example of an external user of accounting information is the federal government.
• True
• False

ANSWER: True

• The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for

developing accounting principles.

• True
• False

ANSWER: True

• The cost principle is the basis for entering the purchase price into the accounting records.
• True
• False

ANSWER: True

• The monetary unit assumption requires that economic data be recorded in dollars for companies in the United States.
• True
• False

ANSWER: True

• If a building is appraised for $85,000, offered for sale at $90,000, and the buyer pays $80,000 cash for it, the buyer

would record the building at $85,000.

• True
• False

ANSWER: False

• The financial statements of a proprietorship should include the owner's personal assets and liabilities.
• True
• False

ANSWER: False

• No significant differences exist between the accounting standards issued by the FASB and the IASB.
• True
• False

ANSWER: False

• Generally accepted accounting principles regulate how and what financial information is reported by businesses.
• True
• False

ANSWER: True

• The accounting equation can be expressed as Assets – Liabilities = Stockholders' Equity. 3 / 4

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Chapter 01: Introduction to Accounting and Business

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• True
• False

ANSWER: True

• The rights or claims to the assets of a business may be subdivided into rights of creditors and rights of stockholders.
• True
• False

ANSWER: True

• The stockholders' rights to the assets rank ahead of the creditors' rights to the assets.
• True
• False

ANSWER: False

• If the liabilities owed by a business total $300,000 and stockholders' equity is equal to $300,000, then the assets also

total $300,000.

• True
• False

ANSWER: False

• If total assets decreased by $30,000 during a specific period and stockholders' equity decreased by $35,000 during the

same period, the period's change in total liabilities was a $65,000 increase.

• True
• False

ANSWER: False

• If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during the same

period, the period's change in total stockholders' equity was a $200,000 increase.

• True
• False

ANSWER: True

• If net income for a company was $50,000, $20,000 in cash dividends were paid, and the shareholders invested $10,000

in cash, the stockholders' equity increased by $40,000.

• True
• False

ANSWER: True

• An account receivable is typically classified as a revenue.
• True
• False

ANSWER: False

• An account receivable is a claim against a customer resulting from a sale on account.
• True
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