Accounting 201Chapter 01 Practice Test

Question 1

True or False?

Investors and creditors of business firms are two groups who need accounting information.

Answer 1

T

Question 2

True or False?

Transactions that can be measured in dollars and cents are recorded in the financial accounting information system.

Answer 2

T

Question 3

True or False?

The purchase of office equipment is an economic event recorded by the financial accounting information system.

Answer 3

T

Question 4

True or False?

Management of a business enterprise is the major external user of information.

Answer 4

F

Question 5

True or False?

Accounting communicates financial information about a business enterprise to both internal and external users.

Answer 5

T

Question 6

True or False?

External users of financial statements include labor unions, management and regulatory agencies.

Answer 6

F

Question 7

True or False?

Financial statements are the major means of communicating accounting information to interested parties.

Answer 7

T

Question 8

True or False?

Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process.

Answer 8

F

Question 9

True or False?

The origins of accounting are attributed to Leonardo DiVinci, a famous mathematician.

Answer 9

F

Question 10

True or False?

The study of accounting will be useful only if a student is interested in working for a corporation.

Answer 10

F

Question 11

Multiple Choice:
Accountants refer to an economic event as a
a. purchase.
b. sale.
c. transaction.
d. change in ownership.

Answer 11

C

Question 12

Multiple Choice:
12.The process of recording transactions has become more efficient because

a. 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.

Answer 12

B

Question 13

Multiple Choice:
Communication of economic events is the part of the accounting process that involves
a. identifying economic events.
b. quantifying transactions into dollars and cents.
c. preparing accounting reports.
d. recording and classifying information.

Answer 13

C

Question 14

Multiple Choice:Which of the following events is not an accounting transaction?

a. Purchasing an office building.
b. Selling a delivery truck.
c. Paying income taxes.
d. Hiring a payroll clerk.

Answer 14

D

Question 15

Multiple Choice:
Which of the following would be considered an internal user of accounting data for the Raintree Company?
a. Staff accountant for the Securities Exchange Commission
b. Production manager
c. Credit analyst for BankOned. President of the employees’ labor union

Answer 15

B

Question 16

Multiple Choice:
Which of the following would be considered an external user of accounting data for the Raintree Company?
a. Internal Revenue Service Agent
b. Vice-president of finance
c. Production supervisor
d. Cost accountant

Answer 16

A

Question 17

Multiple Choice:
Which of the following would not be considered internal users of accounting data for a company?
a. The president of a company
b. The controller of a company
c. Creditors of a company
d. Salesmen of the company

Answer 17

C

Question 18

Multiple Choice:
The private sector organization involved in developing financial accounting principles is the
a. Securities Exchange Commission.
b. Internal Revenue Service.
c. Financial Accounting Standards Board.
d. Accounting Principles Board.

Answer 18

C

Question 19

Multiple Choice:
The SEC and FASB are two organizations that are primarily responsible for establishing generally accepted accounting principles. It is true that
a. they are both governmental agencies.
b. the SEC is a private organization of accountants
c. the SEC often mandates guidelines when no accounting principles exist.
d. the SEC and FASB rarely cooperate in developing accounting standards.

Answer 19

C

Question 20

Multiple Choice:
GAAP stands for
a. Generally Accepted Auditing Procedures.
b. Generally Accepted Accounting Principles.
c. Generally Accepted Auditing Principles.
d. Generally Accepted Accounting Procedures.

Answer 20

B

Question 21

Multiple Choice:
Ample Company has total assets of $100,000 and total liabilities of $60,000. The company’s stockholders’ equity is
a. $40,000.
b. $60,000.
c. $100,000.
d. $160,000.

Answer 21

A

Question 22

Multiple Choice:The basic accounting equation may be expressed as

a. Assets = Equities.
b. Assets – Liabilities = Stockholders’ Equity.
c. Assets = Liabilities + Stockholders’ Equity.
d. all of these.

Answer 22

D

Question 23

Multiple Choice:
Liabilities
a. are future economic benefits.
b. are existing debts and obligations.
c. possess service potential.
d. are things of value used by the business in its operation.

Answer 23

B

Question 24

Multiple Choice:
Best Enterprises reports total assets of $200,000, total liabilities of $125,000 and stockholders’ equity of $75,000. The company’s accounting equation can be stated all of the following ways except:
a. $200,000 = $125,000 + $75,000
b. $200,000 – $75,000 = $125,000.
c. $75,000 + $125,000 = $200,000.
d. $200,000 + $125,000 = $325,000.

Answer 24

D

Question 25

Multiple Choice:
If Carmine Company purchases goods on account for $4,000, then
a. assets and liabilities both decrease by $4,000.
b. stockholders’ equity increases by $4,000.
c. assets increase by $4,000 and liabilities decrease by $4,000.
d. assets and liabilities both increase by $4,000.

Answer 25

D