MULTIPLE CHOICE QUESTIONS

1 Copyright © McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 Accounting: The Language of Business

MULTIPLE CHOICE QUESTIONS

1)The purpose of accounting is to provide financial information about an economic or social entity.A)True B)False

Answer: A

Explanation:

Diff: 1

Topic: What is Accounting

Learning Objective: 01-01 Define accounting.

Bloom's: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making 2)An accounting system is designed to accumulate and classify data about a company's financial activities and summarize them in the general journal.A)True B)False

Answer: B

Explanation:

Diff: 1

Topic: What is Accounting; Defining Accounting Terms

Learning Objective: 01-01 Define accounting.; 01-06 Define the accounting terms new to this chapter.

Bloom's: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

3)In a sole proprietorship, the owner is NOT responsible for the debts of the business if the company is unable to pay.A)True B)False

Answer: B

Explanation:

Diff: 1

Topic: Business and Accounting; Defining Accounting Terms

Learning Objective: 01-06 Define the accounting terms new to this chapter.; 01-04 Compare and contrast the three types of business entities.

Bloom's: Remember

AACSB: Analytical Thinking

AICPA: FN Decision Making; BB Legal

College Accounting A Contemporary Approach, 4e David Haddock, John Ellis Price, Michael Farina (Test Bank All Chapters, 100% Original Verified, A+ Grade) 1 / 4

2 Copyright © McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.4)Laws passed by Congress in 1933 and 1934 gave the Securities and Exchange Commission (SEC) final say on matters of financial reporting by publicly owned corporations.A)True B)False

Answer: A

Explanation:

Diff: 2

Topic: What is Accounting

Learning Objective: 01-03 Identify the users of financial information.

Bloom's: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making; BB Legal

5)Currently, generally accepted accounting principles are developed by the American Institute of Certified Public Accountants (AICPA).A)True B)False

Answer: B

Explanation:

Diff: 1

Topic: Business and Accounting

Learning Objective: 01-05 Describe the process used to develop generally accepted accounting principles.

Bloom's: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making; BB Legal

6)The Securities and Exchange Commission (SEC) requires that publicly owned corporations submit financial statements to it at least one time each year.A)True B)False

Answer: A

Explanation:

Diff: 1

Topic: Business and Accounting

Learning Objective: 01-05 Describe the process used to develop generally accepted accounting principles.

Bloom's: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making; BB Legal 2 / 4

3 Copyright © McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

7) Public accounting firms provide three major types of services: auditing, tax accounting, and management advisory services.

• True
• False

Answer: A

Explanation:

Diff: 1

Topic: What is Accounting

Learning Objective: 01-02 Identify and discuss career opportunities in accounting.

Bloom's: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

8) The financial statements and the auditor's report must be made available to stockholders of publicly owned corporations.

• True
• False

Answer: A

Explanation:

Diff: 2

Topic: Business and Accounting

Learning Objective: 01-05 Describe the process used to develop generally accepted accounting principles.

Bloom's: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; BB Legal; FN Reporting

9) Anyone can invest in a closely held corporation.

• True
• False

Answer: B

Explanation:

Diff: 2

Topic: Business and Accounting

Learning Objective: 01-04 Compare and contrast the three types of business entities.

Bloom's: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making; BB Legal 3 / 4

4 Copyright © McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

10) Managerial Accounting is any activity associated with the preparation of tax returns and the audit of those returns.

• True
• False

Answer: B

Explanation:

Diff: 2

Topic: What is Accounting

Learning Objective: 01-02 Identify and discuss career opportunities in accounting.

Bloom's: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

11) The separate entity assumption applies only to the corporate form of business.

• True
• False

Answer: B

Explanation:

Diff: 1

Topic: Business and Accounting; Defining Accounting Terms

Learning Objective: 01-06 Define the accounting terms new to this chapter.; 01-04 Compare and contrast the three types of business entities.

Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

12) As the first step in the development of generally accepted accounting principles, the FASB writes a discussion memorandum, which explains the topic being considered.

• True
• False

Answer: A

Explanation:

Diff: 2

Topic: Business and Accounting

Learning Objective: 01-05 Describe the process used to develop generally accepted accounting principles.

Bloom's: Remember

AACSB: Analytical Thinking

AICPA: FN Decision Making; BB Legal

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