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Powered by Cognero Page 1 Chapter 01 - Introduction to Accounting and Business True / False 1.A merchandising business buys products from other businesses to sell to customers.

• True
• False

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

• True
• False

3.Accounting information users need reports about the economic activities and condition of businesses.

• True
• False

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

• True
• False

5.Senior executives cannot be criminally prosecuted for the wrongdoings they commit on behalf of the companies where they work.

• True
• False

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

• True
• False

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

• True
• False

8.Some of the major fraudulent acts committed by senior executives started as what they considered to be small ethical lapses that grew out of control.

• True
• False

9.A business is an organization in which basic resources or inputs, such as materials and labor, are assembled and processed to provide outputs in the form of goods or services to customers.

• True
• False

10.Two factors that typically lead to ethical violations are relevance and timeliness of accounting information.

• True
• False

Accounting, 28e Carl Warren, Christine Jonick, Jennifer Schneider (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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• Financial accounting reports are relevant only to users within the business.
• True
• False

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

• The main objective for all business 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 merchandising 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

• 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 concept is the basis for entering the purchase price into the accounting records.
• True
• False

• The unit of measurement concept requires that economic data be recorded in dollars.
• True
• False
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• If a building is appraised for $85,000, it is 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 significant differences exist between the accounting standards issued by the FASB and the IASB.
• True
• False

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

• The IASB maintains an electronic database, called the Accounting Standards Codification, which contains all of the

accounting standards that make up GAAP.

• True
• False

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

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

• The owner’s rights to the assets rank ahead of the creditors' rights to the assets.
• True
• False

• If the liabilities owed by a business total $300,000 and owner's 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 owner's 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 3 / 4

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

• True
• False

• If net income for a proprietorship was $50,000, the owner withdrew $20,000 in cash, and the owner invested $10,000

in cash, the capital of the owner 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 withdrawals by owners decrease assets and increase equity.
• True
• False

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

• Receiving a bill or otherwise being notified that an amount is owed is not recorded until the amount is paid.
• True
• False

• Revenue is earned only when money is received.
• True
• False

• Assets that are used up during the process of earning revenue are called expenses.
• True
• False

• The excess of revenue over the expenses incurred in earning the revenue is called capital.
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