Copyright 2019 Pearson Education, Inc.

1 Copyright © 2019 Pearson Education, Inc.Financial Accounting, 12e (Thomas/Tietz/Harrison) Chapter 1 The Financial Statements Learning Objective 1-1 1) Accounting is an information system that measures business activities.

Answer: TRUE

Diff: 1

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement

2) Bookkeeping is a mechanical part of accounting.

Answer: TRUE

Diff: 1

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement

3) Accounting is often called the language of business.

Answer: TRUE

Diff: 1

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement

4) Accounting produces financial statements, which report information about a business.

Answer: TRUE

Diff: 1

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement, Reporting

5) The accounting process begins and ends with people making decisions.

Answer: TRUE

Diff: 1

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement

Financial Accounting, 12e William Thomas, Wendy Tietz, Walter Harrison (Test Bank All Chapters, 100% Original Verified, A+ Grade) 1 / 4

2 Copyright © 2019 Pearson Education, Inc.6) Accounting information is used by investors and creditors, but not by regulatory bodies.

Answer: FALSE

Explanation: It is used by individuals, investors, creditors, nonprofits, and regulatory bodies.

Diff: 1

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Industry Sector, Legal/Regulatory

AICPA Functional: Measurement, Reporting

7) Since Habitat for Humanity is not concerned about making a profit, the entity does not need to use accounting information.

Answer: FALSE

Diff: 1

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Industry Sector, Legal/Regulatory

AICPA Functional: Measurement, Reporting

8) The business records of a sole proprietorship should include the proprietor's personal finances.

Answer: FALSE

Diff: 1

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement

9) A partnership is a taxpaying entity.

Answer: FALSE

Diff: 1

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement

10) Stockholders have no personal obligation for the corporation's debts.

Answer: TRUE

Diff: 1

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement

• / 4

3 Copyright © 2019 Pearson Education, Inc.

11) Accounting:

• measures business activities.
• processes data into reports and communicates the data to decision makers.
• is often called the language of business.
• is all of the above.

Answer: D

Diff: 2

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement, Reporting

12) A disadvantage of general partnerships is:

• double taxation of distributed profits.
• the partnership's assets are commingled with each partner's personal assets.
• only individuals can be partners.
• each partner may conduct business in the name of the entity and make agreements that legally

bind all partners.

Answer: D

Diff: 2

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement

13) Which of the following statements is TRUE for a limited liability company?

• Members have unlimited liability for the debts of the business.
• Members have limited liability for debts only up to the extent of their investment in the LLC.
• Only the limited partners have limited liability for the debts of the business.
• Members are not taxed like members of a partnership.

Answer: B

Diff: 2

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement

• / 4

4 Copyright © 2019 Pearson Education, Inc.14) Which of the following statements is TRUE for a limited liability partnership?

• All partners have limited liability for the debts of the partnership.
• All partners have limited liability for the acts of the other partners.
• The general partner has unlimited liability for the debts of the partnership.
• The limited partners have unlimited liability for the debts of the partnership.

Answer: C

Diff: 2

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement

15) Which of the following statements is TRUE for a proprietorship?

• Legally, a proprietorship is separate from the proprietor.
• For accounting purposes, a proprietorship is separate from the proprietor.
• The business records include the proprietor's personal finances.
• All statements are correct.

Answer: B

Diff: 2

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement

16) Federal income taxes are paid by ________ in a limited liability company.

• the company
• limited partners only
• general partners only
• members

Answer: D

Diff: 2

LO: 1-1

AACSB: Reflective Thinking

AICPA Bus Persp: Legal/Regulatory

AICPA Functional: Measurement, Reporting

• / 4