Strayer ACC557 (Strayer) Week 2 Chapter 1 Quiz

ACC 557 (Strayer) WK 2 Chapter 1 QuizTRUE-FALSE STATEMENTS 1. Owners of business firms are the only people who need accounting information. 2. Transactions that can be measured in dollars and cents are recorded in the financial information system. 3. The hiring of a new company president is an economic event recorded by the financial information system. 4. Management of a business enterprise is the major external user of information. 5. Accounting communicates financial information about a business enterprise to both internal and external users. 6. Accounting information is used only by external users with a financial interest in a business enterprise. 7. Financial statements are the major means of communicating accounting information to interested parties. 8. Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process. 9. The origins of accounting are attributed to Luca Pacioli, a famous mathematician. 10. The study of accounting will be useful only if a student is interested in working for a profit-oriented business firm. 11. Private accountants are accountants who are not employees of business enterprises. 12. The study of accounting is not useful for a business career unless your career objective is to become an accountant. 13. A working knowledge of accounting is not relevant to a lawyer or an architect. 14. Expressing an opinion as to the fairness of the information presented in financial statements is a service performed by CPAs. 15. Accountants rely on a fundamental business concept—ethical behavior—in reporting financial information. 16. The primary accounting standard-setting body in the United States is the International Accounting Standards Board. 17. The Financial Accounting Standards Board is a part of the Securities and Exchange Commission. 18. The Securities and Exchange Commission oversees U.S. financial markets and accounting standard-setting bodies. 19. The cost and fair value of an asset are the same at the time of acquisition and in all subsequent periods. 20. Even though a partnership is not a separate legal entity, for accounting purposes the partnership affairs should be kept separate from the personal activities of the owners. 21. A partnership must have more than one owner. 22. The economic entity assumption requires that the activities of an entity be kept separate and distinct from the activities of its owner and all other economic entities. 23. The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records. 24. In order to possess future service potential, an asset must have physical substance. 25. Owners’ claims to total business assets take precedence over the claims of creditors because owners invest assets in the business and are liable for losses. 26. The basic accounting equation states that Assets = Liabilities. 27. Accountants record both internal and external transactions. 28. Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company. 29. The purchase of store equipment for cash reduces stockholders’ equity by an equal amount. 30. The purchase of office equipment on credit increases total assets and total liabilities. 31. The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company during a period. 32. Net income for the period is determined by subtracting total expenses and drawings from total revenues. 33. The income statement is sometimes referred to as the statement of operations. 34. A balance sheet reports the assets and liabilities of a company for a specific period of time. 35. The ending retained earnings balance is reported on both the retained earnings statement and the balance sheet. 36. Identifying is the process of keeping a chronological diary of events measured in dollars and cents. 37. Management consulting includes examining the financial statements of companies and expressing an opinion as to the fairness of their presentation. 38. Accountants do not have to worry about issues of ethics. 39. At the time an asset is acquired, cost and fair value should be the same. 40. The monetary unit assumption requires that all dollar amounts be rounded to the nearest dollar. 41. The basic accounting equation is in balance when the creditor and ownership claims against the business equal the assets. 42. External transactions involve economic events between the company and some other enterprise or party. 43. In the retained earnings statement, revenues are listed first, followed by expenses, and net income (or net loss).MULTIPLE CHOICE QUESTIONS 44. Accountants refer to an economic event as aa. purchase.b. sale.c. transaction.d. change in ownership. 45. The process of recording transactions has become more efficient becausea. fewer events can be quantified in financial terms.b. computers are used in processing business events.c. more people have been hired to record business transactions.d. business events are recorded only at the end of the year. 46. Communication of economic events is the part of the accounting process that involvesa. identifying economic events.b. quantifying transactions into dollars and cents.c. preparing accounting reports.d. recording and classifying information. 47. Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?a. The appointment of a new CPA firm to perform an audit.b. The purchase of a new computer.c. The sale of store equipment.d. Payment of income taxes. 48. The use of computers in recording business eventsa. has made the recording process more efficient.b. does not use the same principles as manual accounting systems.c. has greatly impacted the identification stage of the accounting process.d. is economical only for large businesses. 49. The accounting process involves all of the following excepta. identifying economic transactions that are relevant to the business.b. communicating financial information to users by preparing financial reports.c. recording nonquantifiable economic events.d. analyzing and interpreting financial reports. 50. The accounting process is correctly sequenced asa. identification, communication, recording.b. recording, communication, identificationMore Questions are Included…