CH.1 Financial Accounting

Accounting is the information system that

• measures business activities.

• communicates the results to decision makers.

• processes information into reports.

• All of the above

Which of the following is not an external user of a business’s financial information?

• Taxing authorities

• Customers

• Employees

• Investors

Generally Accepted Accounting Principles (GAAP) are currently formulated by the

• • Financial Accounting Standards Board (FASB).

• Securities and Exchange Commission (SEC).

• Institute of Management Accountants (IMA).

• American Institute of Certified Public Accountants (AICPA).

Which type of business organization is owned by only one owner?

• Corporation

• Partnership

• Sole proprietorship

• All of the above

Which of the following characteristics best describes a corporation?

• A business with a single owner

• Is not taxed

• Stockholders not personally liable for entity’s debts

• Not a separate taxable entity

Which of the following requires accounting information to be complete, neutral, and free from material error?

• Faithful representation concept

• Cost principle

• Economic entity assumption

• Going concern assumption

At the end of a recent year, Global Cleaning Service, a full-service house and office cleaning service, had total assets of $3,630 and equity of $2,280. How much were Global Cleaning Service’s liabilities?

• $5,910

• $3,630

• $1,350

• $2,280

Consider the overall effects on Global Cleaning Service from selling and performing services on account for $6,400 and paying expenses totaling $2,500. What is Global Cleaning Service’s net income or net loss?

• Net income of $3,900

• Net loss of $3,900

• Net income of $6,400

• Net income of $8,900

Assume that Global Cleaning Service performed cleaning services for a department store on account for $180. How would this transaction affect Global Cleaning Service’s accounting equation?

• Increase both assets and liabilities by $180

• Increase both assets and equity by $180

• Increase both liabilities and equity by $180

• Decrease liabilities by $180, and increase equity by $180

The balance sheet reports the

• financial position on a specific date.

• results of operations on a specific date.

• financial position for a specific period.

• results of operations for a specific period.