LO 1-1 Identify ways accounting benefits society

Question 1

Businesses earn profits by converting financial, physical, and labor resources into goods and services that satisfy consumer demands. This statement is

Answer 1

True

Question 2

Resource owners want to provide resources to businesses with high profit potential because those businesses will pay higher taxes. This statement is

Answer 2

False

business must pay taxes, there is less profit available to share with the resource owners. Thus, resource owners want to avoid the consequences of taxation. The reason resource owners are willing to provide resources to companies with high profits is because those businesses have more profits to share with owners, are able to pay more interest to creditors, and are in a better position to pay higher prices for physical resources and wages. Ask yourself, would you want to work for a company that paid low wages because it had to pay high taxes.

Question 3

Accounting provides a service to society by gathering and reporting information about a company’s profit potential. This statement is

Answer 3

True

Question 4

Generally Accepted Accounting Principles (GAAP) are designed to provide guidance for

a. financial accounting.
b. managerial accounting.
c. tax accounting.
d. auditing service accounting.

Answer 4

financial accounting

Question 5

Hector Lopez owns Hector Company. If Hector has 100% ownership interest in the company, the Company’s accountant will prepare only one set of statements that reflects the combined assets of Hector and his company. This statement is

Answer 5

False

Question 6

Ellen Elder and her brother, Buster started Elder Company when they each invested $600 in the company. After the investments there will be

a. one reporting entity.
b. two reporting entities.
c. three reporting entities.
d. four reporting entities.

Answer 6

c. three reporting entities.

Question 7

Paul Savage purchased a restaurant named Burger Haven from Larry Jones. The purchase would cause the number of reporting entities to

a. increase.
b. decrease.
c. remain constant.
d. the answer cannot be determined from the information provided.

Answer 7

c. remain constant.

These same entities existed before and after the purchase of the restaurant.

Question 8

resource owners provide

Answer 8

resources to businesses

Question 9

businesses take resources and convert them to

Answer 9

goods and services

Question 10

goods and services are sold to _______ and for ____ than it cost them.

Answer 10

consumers

more

Question 11

For Profit

Answer 11

sells good or services to earn profits

Question 12

retained profits to

Answer 12

make more goods or services or dividends to investors as compensation

Question 13

accountants

Answer 13

report on acquiring resources, offering services, how much profit was earned, and how much compensation went to investors

Question 14

two types of accounting

Answer 14

managerial and financial

Question 15

managerial accounting

Answer 15

used internally by managers for decision making

Question 16

financial accounting

Answer 16

externally used by manager to report back to investors or owners

to know what to invest in - in a standardized manner by GAAP

Question 17

GAAP

Answer 17

Generally Accepted Accounting Principles who make the standardized guidelines

“how to prepare info”

Question 18

GAAP determine rules for

Answer 18

external users - financial accounting

Question 19

accountants report

Answer 19

internally and externally

Question 20

FASB

Answer 20

Financial Accounting Standards Board- they make the GAAP

Question 21

accounting information and also provides

Answer 21

lots of jobs in accounting
jobs in private businesses
public accountants
provide audits for investors

Question 22

this model is also applicable to

Answer 22

government and nonprofits

Question 23

government model

Answer 23

government acquire resources from tax revenues and convert into public goods

Question 24

non profits

Answer 24

obtain donations and help a cause

Question 25

The primary purpose of managerial accounting is to prepare financial statements in accordance with a reporting framework (e.g. GAAP). This statement is

Answer 25

False- managers report to themselves however they want. Financial accounts report externally and must follow GAAP so the info is standardized

Question 26

Accounting provides a service to society by gathering and reporting information about a company’s profit potential. This statement is

Answer 26

True

Question 27

Generally Accepted Accounting Principles (GAAP) are designed to provide guidance for

Answer 27

financial accounting

Question 28

Which of the following types of businesses require financial information to operate effectively?

Answer 28

For profit, non-profit, and government entities

Question 29

Public accountants perform which of the following functions to ensure that financial information provided by a Company to investors is in accordance with G.A.A.P.?

Answer 29

conduct an audit -One of the jobs of a public accountant is to conduct an audit of a Company’s financial information. An audit ensures that financial information provided by the Company is in compliance with G.A.A.P. Investors rely on an audit to ensure the accuracy of financial information in order to make informed financial decisions.