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WorksheetsChapter 1 - Accounting and the Business Environment
Total questions: 30
Worksheet time: 17mins
What field of accounting provides information for external decision makers?
Financial accounting
Managerial accounting
Nonmonetary accounting
Cost accounting
Which of these is NOT an external user of accounting information?
Creditors (bankers)
Investors
Company manager
The IRS
Who are professional accountants that serve the general public, not just one single company?
Controllers
Certified Public Accountants
Certified Management Accountants
Audit accountants
Who creates and governs accounting standards in the United States?
Securities and Exchange Commission (SEC)
American Institute of Certified Public Accountants (AICPA)
Institute of Management Accountants (IMA)
Financial Accounting Standards Board (FASB)
What is a major reason why many US companies are corporations?
Life of corporation is limited by death of owner
Stockholders have limited liability for corporate debts
Corporation is usually managed by the owners
Most corporations are small- or medium-sized
What is true of a sole proprietorship?
Two or more people are joined as co-owners
Sole proprietor is personally liable for business debts
The business must pay business income taxes
Business is taxed separately from the owner
"Acquired assets should be recorded at the amount actually paid, not estimated market value" is
The cost principle
The economic entity concept
The monetary unit assumption
The going concern assumption
"The entity will remain in operation for the foreseeable future" is:
The cost principle
The economic entity concept
The monetary unit assumption
The going concern assumption
We record transactions in US dollars and ignore change in value of the dollar over time. We're following:
The cost principle
The economic entity concept
The monetary unit assumption
The going concern assumption
A dentist buys a yacht and pays with a check from his business. He has violated what?
The cost principle
The economic entity concept
The monetary unit assumption
The going concern assumption
Lorna Smith starts a business. Her business buys a building for $35,000 cash that her real estate agent says is worth $50,000. The business records the building as a $50,000 asset, because Lorna believes that's the real value of the building. What has she violated?
Monetary unit assumption
Economic entity assumption
Cost principle
Nothing
What is the accounting equation?
Assets + Revenue = Equity
Assets = Liabilities + Equity
Assets + Liabilities = Equity
Assets + Revenues = Liabilities + Expenses
The economic resources of a business like furniture, buildings, and land are:
Revenues
Assets
Dividends
Liabilities
A debt that a business owes is:
Revenue
An asset
A liability
Owner's equity
John's Plumbing earns $500 by completing a job. The $500 earned by John's Plumbing is its:
Gain
Debt
Equity
Revenue
The owners' claims to the assets of the business are called:
Equity
Debt
Return on assets
Expenses
Smith Company pays $300 cash to an employee for this week's wages. The $300 paid by Smith is a(n):
Revenue
Owner's draw
Expense
Liability
Vista started the year with $130,000 of assets and $45,000 of liabilities. During the year, they had $110,000 of revenues and $80,000 of expenses. The owner made no additional contributions but took $55,000 of withdrawals. How much was owner's equity at the end of the year?
$80,000
$110,000
$55,000
$60,000
ACME receives money from the owner, Mr. R. Runner. The two accounts involved are:
Cash and Runner, Capital
Runner, Capital and Accounts Payable
Runner, Capital and Accounts Receivable
Accounts Payable and Cash
We earn $100 mowing a lawn. The customer promises to pay later. Which of these accounts increases?
Accounts Payable
Supplies
Accounts Receivable
Cash
The owner makes a withdrawal from her company. How is the accounting equation affected?
Assets increase, liabilities decrease
Assets, liabilities, and equity all stay the same
Assets decrease, equity increases
Assets decrease, equity decreases
We receive $100 from the customer whose lawn we mowed last month. What is the effect?
Cash increases and Accounts Receivable decreases
Accounts Receivable increases and Service Revenue decreases
Cash increases and Service Revenue increases
Cash increases and Accounts Payable decreases
We received $100 from a customer that was owed from last month. The effect is:
Assets increase $100, equity increases $100
One asset increases $100, another asset decreases $100 (no net change to assets)
Assets increase $100, liabilities decrease $100
Assets increase $100, liabilities increase $100
We have $70,000 of liabilities and $40,000 of equity. How much are our total assets?
$180,000
$110,000
$80,000
$30,000
How much is net income if, during the month:
$4,000 is earned on account
$4,000 collected from a customer for last month's services
$500 paid for repair expense
$300 paid for rent owned last month
$7,500
$4,000
$3,500
$500
What financial statement tells us if the company is profitable?
Income Statement
Balance Sheet
Statement of Owner's Equity
Statement of Cash Flows
What financial statement tells the economic position (resources owned, debt owed) of company?
Income Statement
Balance Sheet
Statement of Owner's Equity
Statement of Cash Flows
The date of "Month Ended January 31, 2020" should NOT appear on which financial statement?
Income Statement
Balance Sheet
Statement of Owner's Equity
Statement of Cash Flows
What is return on assets if:
$12,000 net income earned during August
$40,000 total assets on August 1
$60,000 total assets on August 31
4.17%
20%
24%
60%
If we have net income, our income statement shows what? (Hint: There are two correct statements; select both.)
Revenue > Expenses
Expenses > Revenue
Revenue > Liabilities
(Revenue - Expenses) > 0
