AE 13 CHAPTER 1 PRE-LECTURE QUIZ

GAAP stands for

• Generally Accepted Auditing Procedures.

• Generally Accepted Accounting Principles.

• Generally Accepted Auditing Principles.

• Generally Accepted Accounting Procedures.

Owner's equity is best depicted by the following:

• Assets = Liabilities.

• Liabilities + Assets.

• Residual equity + Assets.

• Assets – Liabilities.

Liabilities

• are future economic benefits.

• are existing debts and obligations.

• possess service potential.

• are things of value used by the business in its operation.

Liabilities of a company are owed to

• debtors.

• benefactors.

• creditors.

• shareholders.

The basic accounting equation cannot be restated as

• Assets – Liabilities = Owner's Equity.

• Assets – Owner's Equity = Liabilities.

• Owner's Equity + Liabilities = Assets.

• Assets + Liabilities = Owner's Equity

Which of the following statements is incorrect?

• Accounting communicates financial information about a business enterprise to both

  internal and external users.

• Financial statements are the major means of communicating accounting information to

  interested parties.

• The purchase of office equipment on credit increases total assets and total liabilities.

• The normal balance of Assets is credit.

A net loss will result during a time period when

• liabilities exceed assets.

• drawings exceed investments.

• expenses exceed revenues.

• revenues exceed expenses.

If expenses are paid in cash, then

• assets will increase.

• liabilities will decrease.

• owner's equity will increase.

• assets will decrease.

Net income results when

• Assets > Liabilities.

• Revenues = Expenses.

• Revenues > Expenses.

• Revenues < Expenses.

Which of the following statement is true?

• Owners of business firms are the only people who need accounting information.

• The origins of accounting are attributed to Luca Pacioli, a famous mathematician.

• The basic accounting equation states that Assets = Liabilities

• Net income for the period is determined by subtracting total expenses and drawings from

  total revenues.