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Planning involves defining an organization's ideas, goals, and actions.

A) True
B) False

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A partnership is a business owned by two or more people.

A) True
B) False

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The term ___________ refers to a liability that promises a future outflow of resources.

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Owner financing refers to resources contributed by creditors or lenders.

A) True
B) False

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If Houston Company billed a client for $10,000 of consulting work completed, the accounts receivable asset increases by $10,000 and:


A) Accounts payable decreases $10,000.
B) Accounts payable increases $10,000.
C) Cash increases $10,000.
D) Revenue increases $10,000.
E) Revenue decreases $10,000

F) D) and E)
G) B) and D)

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The area of accounting aimed at serving the decision making needs of internal users is:


A) Financial accounting.
B) Managerial accounting.
C) External auditing.
D) SEC reporting.
E) Bookkeeping.

F) B) and D)
G) B) and E)

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The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the:


A) Balance sheet.
B) Statement of retained earnings.
C) Statement of cash flows.
D) Income statement.
E) Statement of financial position.

F) C) and E)
G) B) and C)

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If a company receives $12,000 from the stockholders to establish a corporation, the effect on the accounting equation would be:


A) Assets decrease $12,000 and equity decreases $12,000.
B) Assets increase $12,000 and liabilities decrease $12,000.
C) Assets increase $12,000 and liabilities increase $12,000.
D) Liabilities increase $12,000 and equity decreases $12,000.
E) Assets increase $12,000 and equity increases $12,000.

F) All of the above
G) None of the above

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A company acquires equipment for $75,000 cash. This represents a(n) :


A) Operating activity.
B) Investing activity.
C) Financing activity.
D) Revenue activity.
E) Expense activity.

F) A) and B)
G) B) and C)

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Zippy had cash inflows from operations $60,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was:


A) $38,500 increase.
B) $38,500 decrease.
C) $132,500 decrease.
D) $132,000 increase.
E) $11,500 decrease.

F) A) and D)
G) C) and D)

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Match the following terms with the appropriate definition.

Premises
A model that asserts the factors that must exist for a person to commit fraud.
An information and measurement system that identifies, records and communicates relevant reliable and comparable information about an organization's business activities.
The part of accounting that involves recording transactions and events, either electronically or manually.
Persons using accounting information who are directly involved in managing and operating the organization.
The area of accounting aimed at serving external users by providing them with general-purpose financial statements.
Beliefs that distinguish right from wrong, considered accepted standards of good and bad behavior.
Persons using accounting information who are not directly involved in running the organization.
Accounting specialists that have met educational and experience requirements, passed an examination and exhibit ethical characteristics to achieve a professional certification.
The area of accounting that serves the decision-making needs of internal users.
Responses
Recordkeeping
Certified Public Accountant (CPA)
Internal users
External users
Ethics
Managerial accounting
Financial accounting
Accounting
Fraud triangle

Correct Answer

A model that asserts the factors that must exist for a person to commit fraud.
An information and measurement system that identifies, records and communicates relevant reliable and comparable information about an organization's business activities.
The part of accounting that involves recording transactions and events, either electronically or manually.
Persons using accounting information who are directly involved in managing and operating the organization.
The area of accounting aimed at serving external users by providing them with general-purpose financial statements.
Beliefs that distinguish right from wrong, considered accepted standards of good and bad behavior.
Persons using accounting information who are not directly involved in running the organization.
Accounting specialists that have met educational and experience requirements, passed an examination and exhibit ethical characteristics to achieve a professional certification.
The area of accounting that serves the decision-making needs of internal users.

The International Accounting Standards board (IASB) has the authority to impose its standards on companies around the world.

A) True
B) False

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If assets are $300,000 and liabilities are $192,000, then equity equals:


A) $108,000.
B) $192,000.
C) $300,000.
D) $492,000.
E) $792,000.

F) A) and B)
G) A) and C)

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The question of when revenue should be recognized on the income statement according to GAAP is addressed by the:


A) Revenue recognition principle.
B) Going-concern assumption.
C) Objectivity principle.
D) Business entity assumption.
E) Cost principle.

F) A) and B)
G) C) and D)

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Use the following information as of December 31 to determine equity. Cash…………………… 57,000 Buildings........................ 175,000 Equipment…………….. 206,000 Liabilities……………… $141,000


A) $57,000.
B) $141,000.
C) $297,000.
D) $438,000.
E) $579,000.

F) B) and D)
G) A) and E)

Correct Answer

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Which of the following purposes would financial statements serve for external users?


A) To find information about projected costs and revenues of proposed products.
B) To assess employee performance and compensation.
C) To assist in monitoring consumer needs and price concerns.
D) To fulfill regulatory requirements for companies whose stock is sold to the public.
E) To determine purchasing needs.

F) A) and D)
G) A) and E)

Correct Answer

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The monetary unit assumption means that all companies doing business in the United States must express transactions and events in US dollars.

A) True
B) False

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Objectivity means that financial information is supported by independent, unbiased evidence.

A) True
B) False

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The difference between a company's assets and its liabilities, or net assets is:


A) Net income.
B) Expense.
C) Equity.
D) Revenue.
E) Net loss.

F) C) and E)
G) B) and D)

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Use the following information for Meeker Corp to determine the amount of equity to report. Cash…………………… 70,000 Buildings........................ 125,000 Land………………….. 205,000 Liabilities……………… $130,000


A) $390,000.
B) $140,000.
C) $20,000.
D) $530,000.
E) $270,000.

F) B) and E)
G) B) and D)

Correct Answer

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