Question 1

The total of amount of assets that a business possesses, may or may not equal the total of liabilities and equity of the business.

Accepted Answer

A) True 
 B)False

Question 2

Liabilities represent creditors' claims on the business's assets.

Accepted Answer

A) True 
 B)False

Question 3

30 years ago, Star Grocer Corporation had purchased a building for its grocery store by paying $30,000. Based on inflation estimates, the amount of the building has been adjusted in the accounting records. The building is now reported at $75,000 in the financial statements of Star Grocer. Which of the following concepts or principles of accounting is being violated?

Accepted Answer

A) going concern assumption 
B) monetary unit assumption 
C) economic entity assumption 
D) cost principle 
A) going concern assumption 
B) monetary unit assumption 
C) economic entity assumption 
D) cost principle

Question 4

Financial statements are business documents that are used to communicate information needed to make business decisions.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is shown on the balance sheet as well as the statement of cash flows?

Accepted Answer

A) Owner's equity (ending balance) 
B) Net income 
C) Total assets 
D) Cash (ending balance) 
A) Owner's equity (ending balance) 
B) Net income 
C) Total assets 
D) Cash (ending balance)

Question 6

The field of accounting that focuses on providing information for external decision makers is:

Accepted Answer

A) managerial accounting. 
B) financial accounting. 
C) cost accounting. 
D) nonmonetary accounting. 
A) managerial accounting. 
B) financial accounting. 
C) cost accounting. 
D) nonmonetary accounting.

Question 7

Which of the following is the correct order of preparation of financial statements?

Accepted Answer

A) income statement → statement of owner's equity → balance sheet → statement of cash flows 
B) statement of owner's equity → balance sheet → income statement → statement of cash flows 
C) balance sheet → statement of owner's equity → income statement → statement of cash flows 
D) balance sheet → income statement → statement of owner's equity → statement of cash flows 
A) income statement → statement of owner's equity → balance sheet → statement of cash flows 
B) statement of owner's equity → balance sheet → income statement → statement of cash flows 
C) balance sheet → statement of owner's equity → income statement → statement of cash flows 
D) balance sheet → income statement → statement of owner's equity → statement of cash flows

Question 8

Business owners use accounting information to set goals, evaluate progress toward those goals, and make adjustments when needed.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements helps analyze the business performance in terms of profitability?

Accepted Answer

A) income statement 
B) balance sheet 
C) statement of cash flows 
D) statement of owner's equity 
A) income statement 
B) balance sheet 
C) statement of cash flows 
D) statement of owner's equity

Question 10

Hamilton Lawn Service incurred $500 as labor expense and promised to pay the labor agency within 30 days. Which of the following accounts would increase as a result of this transaction?

Accepted Answer

A) Accounts Receivable 
B) Cash 
C) Accounts Payable 
D) Owner's Capital 
A) Accounts Receivable 
B) Cash 
C) Accounts Payable 
D) Owner's Capital

Question 11

Equity increases when revenues are earned.

Accepted Answer

A) True 
 B)False

Question 12

________ represents the right to receive cash in the future from customers for goods sold or for services performed.

Accepted Answer

A) Accounts receivable 
B) Accounts payable 
C) Equity 
D) Expenses 
A) Accounts receivable 
B) Accounts payable 
C) Equity 
D) Expenses

Question 13

The field of accounting that focuses on providing information for internal decision makers is:

Accepted Answer

A) managerial accounting. 
B) financial accounting. 
C) nonmonetary accounting. 
D) governmental accounting. 
A) managerial accounting. 
B) financial accounting. 
C) nonmonetary accounting. 
D) governmental accounting.

Question 14

Managerial accounting focuses on information for external decision makers.

Accepted Answer

A) True 
 B)False

Question 15

Land is purchased by a business for $100,000. The company pays for the land by a cash payment of $20,000 and promised to pay the remaining amount at a later period. What is net effect of this transaction on the business's accounting equation?

Accepted Answer

A) Assets increase by $100,000; liabilities decrease by $20,000. 
B) Assets increase by $100,000; liabilities decrease by $80,000. 
C) Assets increase by $80,000; equity increases by $80,000. 
D) Assets increase by $80,000; liabilities increase by $80,000. 
A) Assets increase by $100,000; liabilities decrease by $20,000. 
B) Assets increase by $100,000; liabilities decrease by $80,000. 
C) Assets increase by $80,000; equity increases by $80,000. 
D) Assets increase by $80,000; liabilities increase by $80,000.

Question 16

Stockholders primarily use managerial accounting information for decision-making purposes.

Accepted Answer

A) True 
 B)False

Question 17

Viva Inc. produces and sells coffee beans. This month it earned $500 by selling coffee beans to Jeffery Inc. The $500 received by Viva is its:

Accepted Answer

A) revenue. 
B) equity. 
C) gain. 
D) debt. 
A) revenue. 
B) equity. 
C) gain. 
D) debt.

Question 18

Which of the following financial statements is used to analyze the economic resources, debt, and overall financial position of a company?

Accepted Answer

A) income statement 
B) balance sheet 
C) statement of cash flows 
D) statement of owner's equity 
A) income statement 
B) balance sheet 
C) statement of cash flows 
D) statement of owner's equity

Question 19

Equity decreases with expenses and revenues.

Accepted Answer

A) True 
 B)False

Question 20

The heading of a balance sheet will show the date as a specific date, not a period of time.

Accepted Answer

A) True 
 B)False

Exam 1: Accounting and the Business Environment

The total of amount of assets that a business possesses, may or may not equal the total of liabilities and equity of the business.

Liabilities represent creditors' claims on the business's assets.

Financial statements are business documents that are used to communicate information needed to make business decisions.

Which of the following is shown on the balance sheet as well as the statement of cash flows?

The field of accounting that focuses on providing information for external decision makers is:

Which of the following is the correct order of preparation of financial statements?

Business owners use accounting information to set goals, evaluate progress toward those goals, and make adjustments when needed.

Which of the following statements helps analyze the business performance in terms of profitability?

Hamilton Lawn Service incurred $500 as labor expense and promised to pay the labor agency within 30 days. Which of the following accounts would increase as a result of this transaction?

Equity increases when revenues are earned.

________ represents the right to receive cash in the future from customers for goods sold or for services performed.

The field of accounting that focuses on providing information for internal decision makers is:

Managerial accounting focuses on information for external decision makers.

Land is purchased by a business for $100,000. The company pays for the land by a cash payment of $20,000 and promised to pay the remaining amount at a later period. What is net effect of this transaction on the business's accounting equation?

Stockholders primarily use managerial accounting information for decision-making purposes.

Viva Inc. produces and sells coffee beans. This month it earned $500 by selling coffee beans to Jeffery Inc. The $500 received by Viva is its:

Which of the following financial statements is used to analyze the economic resources, debt, and overall financial position of a company?

Equity decreases with expenses and revenues.

The heading of a balance sheet will show the date as a specific date, not a period of time.

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters