Accounting in Actions

Which of the following is not a step in the accounting

process?

• Identification

• Economic entity

• Recording.

• Communication

Which of the following statements about users of

accounting information is incorrect?

• Management is an internal user

• Taxing authorities are external users

• Present creditors are external users

• Regulatory authorities are internal users

The historical cost principle states that:

• assets should be initially recorded at cost and

  adjusted when the fair value changes

• activities of an entity are to be kept separate and

  distinct from its owner

• assets should be recorded at their cost

• only transaction data capable of being expressed

  in terms of money be included in the accounting

  records

Which of the following statements about basic assumptions

is correct?

• Basic assumptions are the same as accounting

  principles

• The economic entity assumption states that there

  should be a particular unit of accountability

• The monetary unit assumption enables accounting

  to measure employee morale

• Partnerships are not economic entities

The three types of business entities are:

• proprietorships, small businesses, and partnerships

• proprietorships, partnerships, and corporations

• proprietorships, partnerships, and large businesses

• financial, manufacturing, and service companies

Net income will result during a time period when

• assets exceed liabilities

• assets exceed revenues

• expenses exceed revenues

• revenues exceed expenses

As of December 31, 2017, Stoneland AG has assets of

€3,500 and equity of €2,000. What are the liabilities

for Stoneland AG as of December 31, 2017?

• €1,500

• €1,000

• €2,500

• €2,000

Performing services on account will have the following

effects on the components of the basic accounting

equation:

• increase assets and decrease equity

• increase assets and increase equity

• increase assets and increase liabilities

• increase liabilities and increase equity

Which of the following events is not recorded in the

accounting records?

• Equipment is purchased on account

• An employee is terminated

• A cash investment is made into the business

• The company pays a cash dividend

During 2017, Gibson Company’s assets decreased

$50,000 and its liabilities decreased $90,000. Its equity

therefore:

• increased $40,000

• decreased $140,000

• decreased $40,000

• increased $140,000