Accounting Quiz

(LO2) 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

(LO2) 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

(LO1) Which of the following is not a step in the accounting process?

• Identification

• Recording

• Economic entity

• Communication

(LO2) 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

(LO4) 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

(LO5) The financial statement that reports assets, liabilities, and equity is the:

• Income statement

• Retained earnings statement

• Statement of financial position

• Statement of cash flows

(LO6) Services performed by a public accountant include:

• Auditing, taxation, and management consulting

• Auditing, budgeting, and management consulting

• Auditing, budgeting, and cost accounting

• Internal auditing, budgeting, and management consulting

(LO1) 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

(LO3) Net income will result during a time period when:

• Assets exceed liabilities

• Assets exceed revenues

• Expenses exceed revenues

• Revenues exceed expenses

(LO4) 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