QUIZ 1 Flashcards
The role of accounting is to provide different users with financial information to make economic
decisions
TRUE
Some users of the financial information of a business are employed by the business while others
are independent, outside parties
TRUE
Verifiability is having information available to decision makers in time for them to make business
decisions
FALSE
Timeliness
When a business is organized as a sole proprietorship, the owner may combine his personal
financial information with the business financial information given that he is the same person who
owns the business
FALSE
Entity - Should not combine personal financial information with business financial information
Assets are recorded at cost when they are purchased, but the asset accounts are adjusted each
year to reflect changes in market value for valuation purposes
FALSE
As per historical cost basis principle, generally, an asset is recorded and remains in the account at
its original (historical) cost
Going concern assumes that a business will continue to operate until it can sell its assets to pay
its creditors
FALSE
The assumption of going concern is on the premise that the business will continue to operate
normally unless conditions contrary to such premise exists such as filing for bankruptcy or
termination of the business.
Accrual assumes that revenue is reported when it’s earned, regardless of when collection is
actually received while expense is reported when it’s incurred, regardless of when payment is
actually made.
TRUE
Prepaid salaries are cash advances given to employees to be liquidated in the form of service
FALSE
Advances to Employees
The status of a company’s financial strength as of a specific date is known as its financial position
TRUE
The summary of the changes that occurred in the owner’s equity of the entity during a specific
time period is shown in the Statement of Changes in Owner’s Equity
TRUE
Accounting is used to communicate financial information and therefore is sometimes called the
Language of business
Which of the following is NOT one of the major types of services provided by public accounting
firms?:
A. Auditing
B. Bookkeeping
C. Tax accounting
D. Management advisory services
Bookkeeping
How many owners does a partnership have?
Two or more
It refers to the capability of information to make a difference in the decisions made by the user.
Relevance
A company opts to have financial statements prepared at the end of each year to monitor business
activities. This is an adherence with
Time period assumption
“You have to spend money to make money” most closely resembles which accounting principles?
Matching
Which principle requires important facts that would have an effect on an investor’s decisions be
included in the financial statements?
Full disclosure principle
GAAP must be followed by publicly owned companies and are changed and refined in response to
changes in the environment in which businesses operate. What does GAAP stand for?
Generally accepted accounting principles
The form of Statement of Profit or Loss that is normally prepared by a service business
Natural form
When the total revenues of a company exceeds its total expenses, the result will be known as
Net income
The form of the statement which shows the liabilities and owner’s equity below the total assets is called the account form of the Statement of Financial Position.
False
Report Form
According to the Conceptual Framework, the primary users of financial statements are the owner/s and managers.
False
Investors, Lenders and other creditors
Cost-Benefit Test is not difficult to determine as both cost and benefits are easy to measure.
false
Benefits are not easily determinable.
Notes to a company’s financial statements
- Document the source of financial statement facts, like literary footnotes.
- Are irrelevant facts that are immaterial in amount.
- Are an integral part of a company’s financial statements.
- Are relatively unimportant facts that do not belong in the basic financial statement
Are an integral part of a company’s financial statements.
Which of the following is not considered a type of business ownership?
Partnership
One person corporation
Retail
Sole proprietorship
Retail
