Chapter 1 ACCT 101 Lecture 2

Accounting is an information and measurement system that does all of the following except:

• 
  
  Identifies business activities.
  
  

• Records business activities.
  
  

• Does not use technology to improve accuracy in reporting.

• Helps people make better decisions.

External users of accounting information include all of the following except: 

• Shareholders.
  
  

• Customers.
  
  

• Government regulators.
  
  

• Purchasing managers.
  
  

The private group that currently has the authority to establish generally accepted accounting principles in the United States is the: 

• FASB.

• AAA.
  
  

• AICPA.
  
  

• APB.
  
  

The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the:

• Going-concern assumption.

•   Realization principle.

• Cost principle.

• Business entity assumption

The accounting assumption that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the: 

• Revenue recognition principle.

• Going-concern assumption.
  
  

• Time-period assumption.
  
  

• Business entity assumption.

The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services, is called the: 

• Going-concern assumption.

• Cost principle.
  
  

• Revenue recognition principle.
  
  

• Business entity assumption

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

• Managerial accounting

• Financial accounting

• External auditing

• Bookkeeping

A partnership is a business owned by two or more people

• True

• False

The three types of business entities are

• proprietorships, small businesses, and partnerships

• proprietorships, partnerships, and large businesses

• financial, manufacturing, and service companies

• proprietorships, partnerships, and corporations

The business entity principle means that a business will continue operating for an indefinite period of time

• True

• False