Quiz about Accounting Basics Quiz

Question 1

What are liabilities of a company?

Accepted Answer

Existing debts and obligations

Answer

Future economic benefits

Answer

Possess service potential

Answer

Things of value used by the business in its operation

Question 2

The cost principle requires that when assets are acquired, they be recorded at

Accepted Answer

exchange price paid

Answer

appraisal value

Answer

selling price

Answer

list price

Question 3

How may the basic accounting equation be expressed?

Accepted Answer

Assets = Liabilities + Owner's Equity

Answer

Assets = Equities

Answer

Assets - Liabilities = Owner's Equity

Answer

All of these

Question 4

Owner's equity can be described as

Accepted Answer

Ownership claim on total assets

Answer

Creditorship claim on total assets

Answer

Benefactor's claim on total assets

Answer

Debtor claim on total assets

Question 5

A private accountant can perform many activities in a business organization but would not work in

Accepted Answer

external auditing

Answer

budgeting

Answer

accounting information systems

Answer

tax accounting

Question 6

Accountants refer to an economic event as a

Accepted Answer

transaction

Answer

purchase

Answer

sale

Answer

change in ownership

Question 7

All of the following are services offered by public accountants except

Accepted Answer

budgeting

Answer

auditing

Answer

tax planning

Answer

consulting

Question 8

Which of the following techniques are not used by accountants to interpret and report financial information?

Accepted Answer

Special memos for each class of external users

Answer

Graphs

Answer

Charts

Answer

Ratios

Question 9

Communication of economic events is the part of the accounting process that involves

Accepted Answer

preparing accounting reports

Answer

identifying economic events

Answer

quantifying transactions into dollars and cents

Answer

recording and classifying information

Question 10

Liabilities are future economic benefits.

Accepted Answer

False

Answer

True

Question 11

The body of theory underlying accounting is not based on

Accepted Answer

physical laws of nature

Answer

concepts

Answer

principles

Answer

definitions

Question 12

What is an advantage of the corporate form of business organization?

Accepted Answer

Limited liability of stockholders

Answer

Transferability of ownership

Answer

Unlimited personal liability for stockholders

Answer

Unlimited life

Question 13

The basic accounting equation cannot be restated as

Accepted Answer

Assets - Liabilities = Owner's Equity

Answer

Assets - Owner's Equity = Liabilities

Answer

Owner's Equity + Liabilities = Assets

Answer

Assets + Liabilities = Owner's Equity

Question 14

Which of the following is not a characteristic of the cost principle?

Accepted Answer

Subjectivity

Answer

Reliability

Answer

Objectivity

Answer

Verifiability

Question 15

What does GAAP stand for?

Accepted Answer

Generally Accepted Accounting Principles

Answer

Generally Accepted Auditing Procedures

Answer

Generally Accepted Auditing Principles

Answer

Generally Accepted Accounting Procedures

Question 16

Capital is

Accepted Answer

An owner's permanent investment in the business

Answer

Equal to liabilities minus owner's equity

Answer

Equal to assets minus owner's equity

Answer

Equal to liabilities plus drawings

Question 17

When an owner withdraws cash or other assets from a business for personal use, these withdrawals are termed

Accepted Answer

Drawings

Answer

Depletions

Answer

Consumptions

Answer

A credit line

Question 18

Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process?

Accepted Answer

Recording

Answer

Identification

Answer

Communication

Answer

Analysis

Question 19

A net loss will result during a time period when

Accepted Answer

Expenses exceed revenues

Answer

Liabilities exceed assets

Answer

Drawings exceed investments

Answer

Revenues exceed expenses

Question 20

Sources of increases to owner's equity are

Accepted Answer

Additional investments by owners

Answer

Purchases of merchandise

Answer

Withdrawals by the owner

Answer

Expenses

Question 21

Generally accepted accounting principles are

Accepted Answer

standards that indicate how to report economic events

Answer

income tax regulations of the Internal Revenue Service

Answer

theories that are based on physical laws of the universe

Answer

principles that have been proven correct by academic researchers

Question 22

The origins of accounting are generally attributed to the work of

Accepted Answer

Luca Pacioli

Answer

Christopher Columbus

Answer

Abner Doubleday

Answer

Leonardo da Vinci

Question 23

The ACE Company has five plants nationwide that cost $100 million. The current market value of the plants is $500 million. How will the plants be recorded and reported as assets?

Accepted Answer

$500 million

Answer

$100 million

Answer

$600 million

Answer

$400 million

Question 24

Preparing tax returns and engaging in tax planning is performed by

Accepted Answer

both public and private accountants

Answer

public accountants only

Answer

private accountants only

Answer

IRS accountants only

Question 25

Which of the following would not be considered an internal user of accounting data for the XYZ Company?

Accepted Answer

President of the employees' labor union

Answer

President of the company

Answer

Production manager

Answer

Merchandise inventory clerk

Question 26

Financial accounting provides economic and financial information for all of the following except

Accepted Answer

creditors

Accepted Answer

investors

Accepted Answer

other external users

Answer

managers

Question 27

The accounting process is correctly sequenced as

Accepted Answer

identification, recording, communication

Answer

identification, communication, recording

Answer

recording, communication, identification

Answer

communication, recording, identification

Question 28

The first step in solving an ethical dilemma is to

Accepted Answer

recognize an ethical situation and the ethical issues involved

Answer

identify and analyze the principal elements in the situation

Answer

identify the alternatives

Answer

weigh the impact of each alternative on various stakeholders

Question 29

Revenues would not result from

Accepted Answer

Initial investment of cash by owner

Answer

Sale of merchandise

Answer

Performance of services

Answer

Rental of property

Question 30

The process of recording transactions has become more efficient because

Accepted Answer

computers are used in processing business events

Answer

fewer events can be quantified in financial terms

Answer

more people have been hired to record business transactions

Answer

business events are recorded only at the end of the year

Question 31

Liabilities of a company would not include

Accepted Answer

Cash

Answer

Notes Payable

Answer

Accounts Payable

Answer

Wages Payable

Question 32

Owner's equity is decreased by all of the following except

Accepted Answer

Owner's withdrawals

Answer

Owner's investments

Answer

Expenses

Answer

Owner's drawings

Question 33

Ethics are the standards of conduct by which one's actions are judged as

Accepted Answer

right or wrong

Accepted Answer

honest or dishonest

Accepted Answer

fair or unfair

Accepted Answer

all of these

Question 34

Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?

Accepted Answer

The appointment of a new CPA firm to perform an audit

Answer

The purchase of a new computer

Answer

The sale of store equipment

Answer

Payment of income taxes

Question 35

Owner's equity is often referred to as

Accepted Answer

Residual equity

Answer

Leftovers

Answer

Spoils

Answer

Second equity

Question 36

The accounting process involves all of the following except

Accepted Answer

recording nonquantifiable economic events

Answer

identifying economic transactions that are relevant to the business

Answer

communicating financial information to users by preparing financial reports

Answer

analyzing and interpreting financial reports

Question 37

If total liabilities increased by $15,000 and owner's equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

$20,000 increase

Answer

$20,000 decrease

Answer

$25,000 increase

Answer

$30,000 increase

Question 38

What guides Deb's behavior in not recording an entry for a car purchased for personal use?

Accepted Answer

Economic entity assumption

Answer

Pay back concept

Answer

Cash basis concept

Answer

Monetary unit assumption

Question 39

Which list below best describes the major services performed by public accountants?

Accepted Answer

Auditing, taxation, management consulting

Answer

Bookkeeping, mergers, budgets

Answer

Employee training, auditing, bookkeeping

Answer

Cost accounting, production scheduling, recruiting

Question 40

Which of the following would not be considered internal users of accounting data for a company?

Accepted Answer

Creditors of a company

Answer

The president of a company

Answer

The controller of a company

Answer

Salesmen of the company

Question 41

Which of the following is an external user of accounting information?

Accepted Answer

Labor unions

Answer

Finance directors

Answer

Company officers

Answer

Managers

Question 42

Which of the following would not be considered an external user of accounting data for the XYZ Company?

Accepted Answer

Internal Revenue Service Agent

Answer

Management

Answer

Creditors

Answer

Customers

Question 43

If total liabilities decreased by $15,000 and owner's equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

$10,000 increase

Answer

$20,000 increase

Answer

$10,000 decrease

Answer

$15,000 decrease

Question 44

Which organization involved in developing accounting principles is the Feasible Accounting Standards Body?

Accepted Answer

Financial Accounting Standards Board

Answer

Feasible Accounting Standards Body

Answer

Financial Accounting Studies Board

Answer

Financial Auditors' Standards Body

Question 45

If total liabilities decreased by $15,000 and owner's equity decreased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

$20,000 decrease

Answer

$20,000 increase

Answer

$10,000 increase

Answer

$10,000 decrease

Question 46

Revenues are

Accepted Answer

Gross increases in owner's equity resulting from business activities

Answer

The cost of assets consumed during the period

Answer

The cost of services used during the period

Answer

Actual or expected cash outflows

Question 47

What is the common characteristic possessed by all assets?

Accepted Answer

Future economic benefit

Answer

Long life

Answer

Great monetary value

Answer

Tangible nature

Question 48

If total liabilities decreased by $25,000 and owner's equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

$20,000 decrease

Answer

$20,000 increase

Answer

$25,000 increase

Answer

$30,000 increase

Question 49

If total liabilities increased by $14,000 during a period of time and owner's equity decreased by $6,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is

Accepted Answer

$8,000 increase

Answer

$14,000 increase

Answer

$20,000 increase

Answer

$8,000 decrease

Question 50

If an individual asset is increased, then

Accepted Answer

There must be an equal decrease in another asset

Answer

There must be an equal decrease in a specific liability

Answer

There must be an equal decrease in owner's equity

Answer

None of these is possible

Question 51

Owner's equity is increased by

Accepted Answer

Revenues

Answer

Drawings

Answer

Expenses

Answer

Liabilities

Question 52

Net income results when

Accepted Answer

Revenues > Expenses.

Answer

Assets > Liabilities.

Answer

Revenues = Expenses.

Answer

Revenues < Expenses.

Question 53

The final step in solving an ethical dilemma is to

Accepted Answer

identify the alternatives and weigh the impact of each alternative on stakeholders

Answer

identify and analyze the principal elements in the situation

Answer

recognize an ethical situation

Answer

recognize the ethical issues involved

Question 54

Owner's equity is decreased by

Accepted Answer

Expenses

Answer

Assets

Answer

Revenues

Answer

Liabilities

Question 55

If total liabilities increased by $4,000, then

Accepted Answer

Owner's equity must have increased by $4,000

Answer

Assets must have decreased by $4,000

Answer

Assets must have increased by $4,000, or owner's equity must have decreased by $4,000

Answer

Assets and owner's equity each increased by $2,000

Question 56

If expenses are paid in cash, then

Accepted Answer

Assets will decrease

Answer

Assets will increase

Answer

Liabilities will decrease

Answer

Owner's equity will increase

Question 57

What is a proprietorship?

Accepted Answer

Owned by one person

Answer

Owned by two or more persons

Answer

Organized as a separate legal entity under state corporation law

Answer

Owned by a governmental agency

Question 58

Jimmy's Capital balance at the end of the year was

Accepted Answer

$240,000

Answer

$225,000

Answer

$285,000

Answer

$195,000

Question 59

What is the systematic, chronological diary of events measured in dollars and cents called?

Accepted Answer

Recording

Answer

Communicating

Answer

Identifying

Answer

Processing

Question 60

If supplies that have been purchased are used in the course of business, then

Accepted Answer

Owner's equity will decrease

Answer

A liability will increase

Answer

An asset will increase

Answer

Owner's equity will increase

Question 61

What was the owner's equity at the end of the year for Jenkins Catering if they started with $20,000 in assets, $5,000 in liabilities, recorded $16,000 in revenues, $8,000 in expenses, made an additional investment of $3,000, and withdrew $5,000?

Accepted Answer

$21,000

Answer

$18,000

Answer

$8,000

Answer

$2,000

Question 62

What is the first part of the accounting process?

Accepted Answer

Identifying

Answer

Communicating

Answer

Processing

Answer

Recording

Question 63

How much did the owner's equity change from the beginning to the end of the year for Jenkins Catering?

Accepted Answer

$6,000

Answer

$15,000

Answer

$14,000

Answer

$3,000

Question 64

As of June 30, 2008, Houston Company has assets of $100,000 and owner's equity of $5,000. What are the liabilities for Houston Company as of June 30, 2008?

Accepted Answer

$95,000

Answer

$85,000

Answer

$90,000

Answer

$100,000

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