Chapter 1 - Accounting and the Business Environment

What field of accounting provides information for external decision makers?

• Financial accounting

• Managerial accounting

• Nonmonetary accounting

• Cost accounting

Which of these is NOT an external user of accounting information?

• Creditors (bankers)

• Investors

• Company manager

• The IRS

Who are professional accountants that serve the general public, not just one single company?

• Controllers

• Certified Public Accountants

• Certified Management Accountants

• Audit accountants

Who creates and governs accounting standards in the United States?

• Securities and Exchange Commission (SEC)

• American Institute of Certified Public Accountants (AICPA)

• Institute of Management Accountants (IMA)

• Financial Accounting Standards Board (FASB)

What is a major reason why many US companies are corporations?

• Life of corporation is limited by death of owner

• Stockholders have limited liability for corporate debts

• Corporation is usually managed by the owners

• Most corporations are small- or medium-sized

What is true of a sole proprietorship?

• Two or more people are joined as co-owners

• Sole proprietor is personally liable for business debts

• The business must pay business income taxes

• Business is taxed separately from the owner

"Acquired assets should be recorded at the amount actually paid, not estimated market value" is

• The cost principle

• The economic entity concept

• The monetary unit assumption

• The going concern assumption

"The entity will remain in operation for the foreseeable future" is:

• The cost principle

• The economic entity concept

• The monetary unit assumption

• The going concern assumption

We record transactions in US dollars and ignore change in value of the dollar over time. We're following:

• The cost principle

• The economic entity concept

• The monetary unit assumption

• The going concern assumption

A dentist buys a yacht and pays with a check from his business. He has violated what?

• The cost principle

• The economic entity concept

• The monetary unit assumption

• The going concern assumption