The unit of measurement concept requires that economic data be recorded in a common unit of measurement.

True

False

The principal financial statements for a corporation are the income statement, the retained earnings statement, the balance sheet, and the budget.

True

False

Financial accounting provides information to all users, while the main focus for managerial accounting is to provide information to the management.

True

False

Managerial accounting information is used by external and internal users equally.

True

False

About 90% of the businesses in the United States are organized as corporations.

True

False

The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing entities.

True

False

The statement of cash flows consists of three sections: cash flows from operating activities, cash flows from income activities, and cash flows from equity activities.

True

False

The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for

developing accounting principles.

True

False

Denzel Jones is the major stockholder of Crystal Cleaning Company. Recently, Denzel received $10,000 of

dividends from Crystal Cleaning. After receiving the dividends, he contributed $6,000, in his name, to Habitat for Humanity.

The contribution of $6,000 should be recorded on the accounting records of which of the following entities?

A. Denzel Jones’ personal records and Crystal Cleaning

B. Crystal Cleaning and Habitat for Humanity

C. Denzel Jones' personal records and Habitat for Humanity

D. Denzel Jones’ personal records, Crystal Cleaning, and Habitat for Humanity

The initials GAAP stand for

A. General Accounting Procedures

B. Generally Accepted Accounting Practices

C. Generally Accepted Plans

D. Generally Accepted Accounting Principles

Countries outside the United States use financial accounting standards issued by the

A. IASB

B. GAAP

C. LLC

D. SEC

The year-end balance of the retained earnings account appears in

A. both the retained earnings statement and the statement of cash flows

B. both the retained earnings statement and the balance sheet

C. only the retained earnings statement

D. both the retained earnings statement and the income statement

Most businesses in the United States are

A. limited liability companies

B. corporations

C. proprietorships

D. partnerships

Which of the following is not an asset?

A. inventory

B. stockholder’s equity

C. investment

D. cash

Assets are

A. equal to liabilities less stockholders’ equity

B. the same as expenses because they are acquired with cash

C. financed by owners and/or creditors

D. always lower than liabilities

Debts owed by a business are referred to as

A. assets

B. stockholder’s equity

C. liabilities 

D. accounts receivables

Given the following data:

                                      Dec. 31,2014      Dec. 31,2013

Total liabilities                    $128,250          $120,000

Total stockholders’ equity     95,000              80,000

Compute the ratio of liabilities to stockholders’ equity for each year. Round to two decimal places.

A. 1.50 and 1.07, respectively

B. 1.19 and 1.35, respectively

C. 1.07 and 1.19, respectively

D. 1.35 and 1.50, respectively

D. 1.35 and 1.50, respectively

128,250 / 95,000 = 1.35

120,000 / 80,000 = 1.50

*Side Note:

Total Liabilities / Total Stockholders' Equity

Which of the following is not a role of accounting in business?

A. to provide reports to users about the economic activities and conditions of a business

B. to personally guarantee loans of the business

C. to assess the various informational needs of users and design its accounting system to meet those needs

D. to provide information to other users to determine the economic performance and condition of the business

Transactions affecting stockholders’ equity include

A. dividends declared and paid to stockholders, revenues, expenses, and purchases of supplies on account

B. shares of capital stock issued to stockholders and payment of liabilities

C. shares of capital stock issued to stockholders, revenues, expenses, and collection of accounts receivable

D. shares of capital stock issued to stockholders, dividends declared and paid to stockholders, revenues, and expenses

D. shares of capital stock issued to stockholders, dividends declared and paid to stockholders, revenues, and expenses

Gomez Service Company paid its first installment on a note payable for an amount of $2,000. How will this transaction affect the accounting equation?

A. Decrease Assets (Cash) and decrease Assets (Notes Receivable)

B. Decrease Assets (Cash) and decrease Stockholders’ Equity (Note Payable Expense)

C. Increase Liabilities (Notes Payable) and decrease Assets (Cash)

D. Decrease Assets (Cash) and decrease Liabilities (Notes Payable)

Ramos Repair Company paid $750 in dividends to its stockholders. How does this transaction affect Ramos Repair Company’s accounting equation?

A. Decrease Assets (Cash) and decrease Liabilities (Accounts Payable)

B. Increase Assets (Accounts Receivable) and decrease Assets (Cash)

C. Decrease Assets (Cash) and decrease Stockholders’ Equity (Dividends)

D. Increase Assets (Cash) and decrease Stockholders’ Equity (Dividends)

Which of the following is not true of accounting principles?

A. A new accounting principle can be adopted with stockholders approval.

B. Following GAAP allows accounting information users to compare one company to another.

C. Financial accountants follow generally accepted accounting principles (GAAP).

D. The Financial Accounting Standards Board (FASB) has primary responsibility for developing accounting principles.

Receiving payments on an account receivable increases both equity and assets.

True

False

An example of a general-purpose financial statement would be a report about projected price increases related to transportation costs.

True

False

Receiving a bill or otherwise being notified that an amount is owed is not recorded until the amount is paid.

True

False

Cash dividends paid to stockholders decrease assets and increase equity.

True

False

Total Liabilities / Total Stockholders' Equity

The statement of cash flows is a summary of the cash receipts and cash payments for a specific period of time, such as a month or a year. It consists of three sections.

What are those three sections?

1. operating activities

2. investing activities

3. financing activities

General-purpose financial statement

(Definition)

General-purpose financial statements are one type of financial accounting report that is distributed to external users. The term general-purpose refers to the wide range of decision-making needs that these reports are designed to serve.