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Chapter 01: Introduction to Accounting and Business

Indicate whether the statement is true or false.

1.The role of accounting is to provide many different users with financial information to assess the economic performance of a business.

• True
• False

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

• True
• False

3.Managerial accounting information is used by external and internal users equally.

• True
• False

4.Senior executives cannot be criminally prosecuted for the wrong-doings they commit on behalf of the companies where they work.

• True
• False

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

• True
• False

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

• True
• False

7.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

8.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.

• True
• False

9.Operating activities are those activities by which a company generates revenues from customers.

• True
• False

10.An example of a general-purpose financial statement would be a report about projected price increases related to transportation costs used only by internal managers of the organization and not by external users.

• True

Corporate Financial Accounting 17e Carl Warren, Jeff Jones, William Tayler (Test Bank All Chapters, 100% Original Verified, A+ Grade) Answers At The End Of Each Chapter 1 / 4

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Chapter 01: Introduction to Accounting and Business

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• False

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

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

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

purchase for resale to customers.

• True
• False

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

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

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

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

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

developing accounting principles.

• True
• False

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

• The monetary unit assumption requires that economic data be recorded in dollars for companies in the United States. 2 / 4

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• True
• False

• 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

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

• No differences exist between the accounting standards issued by the FASB (U.S. GAAP) and the IASB (IFRS).
• True
• False

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

• Any 12-month accounting period adopted by a company is known as its fiscal year.
• True
• False

• A fiscal year that ends when business activities have reached their lowest point is called the natural business year.
• True
• False

• All companies must use a calendar year as their fiscal year.
• True
• False

• The majority of businesses end their fiscal year on December 31.
• True
• False

• The accounting equation can be expressed as Assets – Liabilities = Stockholders' Equity.
• True
• False

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

• The stockholders' rights to the assets rank ahead of the creditors' rights to the assets.
• True 3 / 4

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• 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

• 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

• 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

• 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

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

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

• Paying an account payable increases liabilities and decreases assets.
• True
• False

• Receiving payments on an account receivable increases both equity and assets.
• True
• False

• Cash dividends paid to stockholders decrease assets and increase equity.
• True
• False

• Purchasing supplies on account increases liabilities and decreases equity.
• True
• False

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