Test Item File - Financial Accounting, 8e Harrison/Horngren/Thom...

Copyright © 2011 Pearson Education South East Asia 1 Financial Accounting, 8e Harrison/Horngren/Thomas/Suwardy Test Item File

Chapter 1: The Financial Statements

1.1-1 Bookkeeping is a type of accounting used primarily by proprietorships.

Answer: False

LO: 1-1

Difficulty: 1

AACSB: Analytical skills

AICPA Functional Competencies: Measurement

AICPA Business Perspective Competencies: Strategic/Critical Thinking

1.1-2 Bookkeeping is the mechanical part of accounting.

Answer: True

LO: 1-1

Difficulty: 1

AACSB: Analytical skills

AICPA Functional Competencies: Measurement

AICPA Business Perspective Competencies: Strategic/Critical Thinking

1.1-3 The major forms of business organizations are proprietorships, partnerships, and for-profit organizations.

Answer: False

LO: 1-1

Difficulty: 2

AACSB: Analytical skills

AICPA Functional Competencies: Measurement

AICPA Business Perspective Competencies: Industry Sector

1.1-4 Limited Liability Partnerships (LLPs) have at least one general partner with unlimited liability for all partnership debts.

Answer: True

LO: 1-1

Difficulty: 1

AACSB: Analytical Skills

AICPA Functional Competencies: Measurement

AICPA Business Perspective Competencies: Industry Sector, Legal/Regulatory

1.1-5 In an LLP, each partner is liable for partnership debts only to the extent of their investment in the partnership plus their share of the liabilities.

Answer: True

LO: 1-1

Difficulty: 2

AACSB: Analytical Skills

AICPA Functional Competencies: Measurement

AICPA Business Perspective Competencies: Industry Sector, Legal/Regulatory

Financial Accounting 8e (Global Edition) By Harrison Horngren Thomas Suwardy (Test Bank All Chapters, 100% Original Verified, A+ Grade) 1 / 4

Copyright © 2011 Pearson Education South East Asia 2

1.1-6 All business owners are personally liable for the debts of their businesses.

Answer: False

LO: 1-1

Difficulty: 2

AACSB: Analytical Skills

AICPA Functional Competencies: Measurement

AICPA Business Perspective Competencies: Industry Sector, Legal/Regulatory

1.1-7 The business records of a proprietorship should include the proprietor’s personal finances.

Answer: False

LO: 1-1

Difficulty: 1

AACSB: Analytical skills

AICPA Functional Competencies: Measurement

AICPA Business Perspective Competencies: Industry sector, Legal/Regulatory

1.1-8 Mutual agency of a partnership means that each partner may conduct business in the name of the partnership and can legally bind all the partners without limit for the partnership’s debts.

Answer: True

LO: 1-1

Difficulty: 2

AACSB: Analytical skills

AICPA Functional Competencies: Measurement

AICPA Business Perspective Competencies: Industry sector, Legal/Regulatory

1.1-9 Financial accounting provides budgeting information to a company’s managers.

Answer: False

LO: 1-1

Difficulty: 2

AACSB: Analytical skills

AICPA Functional Competencies: Measurement, Reporting

AICPA Business Perspective Competencies: Industry sector

1.1-10 Managerial accounting information is used mainly by external users.

Answer: False

LO: 1-1

Difficulty: 1

AACSB: Analytical skills

AICPA Functional Competencies: Measurement, Reporting

AICPA Business Perspective Competencies: Industry sector

1.1-11 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 2 / 4

Copyright © 2011 Pearson Education South East Asia 3

LO: 1-1

Difficulty: 2

AACSB: Analytical skills

AICPA Functional Competencies: Measurement

AICPA Business Perspective Competencies: Strategic/Critical Thinking

1.1-12 The two types of accounting are:

• profit and nonprofit.
• financial and managerial.
• internal and external.
• bookkeeping and decision-oriented.

Answer: B

LO: 1-1

Difficulty: 2

AACSB: Analytical skills

AICPA Functional Competencies: Measurement, Reporting

AICPA Business Perspective Competencies: Industry sector

1.1-13 Management accounting:

• includes information such as budgets and forecasts.
• is used to make strategic decisions for the entity.
• must be relevant to decision makers within the entity.
• is all of the above.

Answer: D

LO: 1-1

Difficulty: 2

AACSB: Analytical skills

AICPA Functional Competencies: Measurement, Reporting

AICPA Business Perspective Competencies: Industry sector

• / 4

Copyright © 2011 Pearson Education South East Asia 4 1.1-14 What type of accounting provides information for decision makers outside the entity?

• Bookkeeping
• Managerial accounting.
• Internal auditing.
• Financial accounting.

Answer: D

LO: 1-1

Difficulty: 2

AACSB: Analytical skills

AICPA Functional Competencies: Measurement, Reporting

AICPA Business Perspective Competencies: Industry sector

1.1-15 Who ultimately controls a corporation?

• Board of Directors
• The Chief Executive Officer (CEO)
• The shareholders
• The President

Answer: C

LO: 1-1

Difficulty: 2

AACSB: Analytical skills

AICPA Functional Competencies: Measurement

AICPA Business Perspective Competencies: Legal/regulatory

1.1-16 Financial statements are:

• standard documents issued by outside consultants who are hired to analyze key operations of the

business in financial terms.

• the business documents that companies use to report the results of their financial activities to various

user groups.

• reports created by management that states it is responsible for the acts of the corporation.
• the mechanical part of accounting.

Answer: B

LO: 1-1

Difficulty: 1

AACSB: Analytical skills

AICPA Functional Competencies: Measurement

AICPA Business Perspective Competencies: Strategic/Critical Thinking

• / 4