55 Test Bank for Principles of Accounting 1st Edition n by Libby Multiple Choice Questions - Page Which of the four basic financial statements provides a snapshot of the business on a particular day? A Balance sheet B Income statement C Statement of cash Flows D Statement of owner's equity The rules of accounting are known as: A Security and Exchange Commission (SEC) B Financial Accounting Standards Board (FASB) C American Institute of CPAs (AICPA) D Generally Accepted Accounting Principles (GAAP) Which financial statement links together the Income Statement and the Balance Sheet? A Statement of cash flows B Statement of owner's equity C Statement of operations D Statement of financial position Unearned revenue is an example of a(n): A Liability B Revenue C Asset D Expense Which of the following is not one of the four basic financial statements? A Income statement B Statement of cash flows C Accounting equation D Balance sheet The primary responsibility for setting the rules of accounting rests with the: A Financial Accounting Standards Board (FASB) B Generally Accepted Accounting Principles (GAAP) C Security and Exchange Commission (SEC) D American Institute of CPAs (AICPA) Which of the following is considered an internal user of accounting information? A Production manager B Supplier C Investor D Customer The _ outlines how the profits (or losses) are shared A Stock certificate B Partnership agreement C Corporate charter D Financial statements Which of the following is considered an external user of accounting information? A Production manager B CEO C IRS D Controller An example of a claim to resources of a business is: A Cash B Land C Accounts payable D Accounts receivable All of the following include activities of external users of accounting information except: A Evaluating the risk of lending money to a business B Determining the amount of supplies on hand C Deciding whether to buy, sell or hold stock in a company D Assessing whether the company has paid the correct amount of taxes Land is an example of a(n): A Liability B Asset C Revenue D Expense Which of the following would not be considered an external user of accounting information? A Bank B Supplier C Manager D Investor Which of the following is not a characteristic of an asset? A It is a resource controlled by the business B It has measurable value C It is incurred to generate revenue D It is expected to provide future benefits The Sarbanes-Oxley Act of 2002 requires that top managers maintain an audited system of: A Accounting B Reporting C Internal control D Financing A bank is most likely a(n) _ user of accounting information A external B internal C governmental D managerial Financial information that is ensures that it is unbiased and verifiable A relevant B comparable C reliable D consistent An example of an asset is: A Wages expense B Revenue C Supplies D Accounts payable Which financial statement should be prepared first? A Balance sheet B Statement of cash flows C Income statement D Statement of owner's equity Which financial statement includes only those activities that result in cash changing hands during the period? A Income statement B Balance sheet C Statement of cash flows D Statement of owner's equity Which of the following represents the fundamental accounting equation? A A + L = OE B A - L = OE C OE + A = L D L - OE = A Claims a business owes are called owners' equity when they are held by: A Creditors B Suppliers C Employees D Investors The governmental agency that supervises the work of the Financial Accounting Standards Board (FASB) is known as the: A Generally Accepted Accounting Principles (GAA) B Securities and Exchange Commission (SEC) C Public Company Accounting Oversight Board (PCAOB) D American Institute of CPAs (AICPA) Resources a business owns are called: A Liabilities B Owner's equity C Revenues D Assets Inventory is an example of a(n): A Liability B Revenue C Expense D Asset In a business, who has the primary responsibility for following GAAP and preparing fair financial statements? A Management B The accountants C The CPA D The SEC Which of the following is not one of the types of business activities included on the statement of cash flows? A Investing B Operating C Financing D Reporting 55 Free Test Bank for Principles of Accounting 1st Edition by Libby Multiple Choice Questions - Page Technology and the low cost of computers have resulted in: A Increased complexity in accounting systems B Higher fees charged by public accountants C Small businesses handling their own bookkeeping D An abundance of accounting reports Which of the following is not a required element of the title on a financial statement? A The company's name B The reporting date or period C The name of the financial statement D The preparer's name The following information is reported for Manco Company for the month of March Determine net income A $(21,500) B $144,500 C $21,500 D $73,000 The area of accounting which primarily serves the decision making needs of internal users is: A Financial accounting B Bookkeeping C Auditing D Managerial Accounting Accounting is an information system designed to: A Provide information to external users only B Provide information to internal users only C Capture a business's activities and communicate results to all decision makers D Handle the record keeping of a business but other functions must be performed by a CPA When a company distributes profits to its owners the result is a(n): A Decrease in profits B Decrease in assets and owner's equity C Increase in owner's equity D Increase in assets A company pays $3,400 for the current month utilities What is the effect on the accounting equation? A Assets increase $3,400; no effect on liabilities; equity increases $3,400 B Assets decrease $3,400; liabilities decrease $3,400; no effect on equity C Assets decrease $3,400; no effect on liabilities; equity decreases $3,400 4 D Assets increase $3,400; liabilities increase $3,400; no effect on equity A company purchases equipment for $45,000 cash What is the effect on the accounting equation? A Assets increase $45,000; no effect on liabilities; equity increases $45,000 B Assets decrease $45,000; liabilities decrease $45,000; no effect on equity C No effect on the accounting equation because assets increase and decrease by the same amount D Assets increase $45,000; liabilities increase $45,000; no effect on equity What business type has two or more owners and unlimited liability? A Corporation B Sole proprietorship C Partnership D Retailer A company reported revenue of $100,000 and a net loss of $12,000 What amount was reported as expenses? A $112,000 B $12,000 C $88,000 D $100,000 Accountants who are employed by a single business or nonprofit organization work in: A Public accounting B Private accounting C A CPA firm D Governmental accounting only Assets should originally be recorded at: A Market value B Replacement cost C Historical cost D Amount owed on the asset If owners contribute $50,000 to start a new business what is the effect on the accounting equation? A Assets increase $50,000; no effect on liabilities; equity increases $50,000 B Assets decrease $50,000; liabilities decrease $50,000; no effect on equity C Assets decrease $50,000; no effect on liabilities; equity decreases $50,000 D Assets increase $50,000; liabilities increase $50,000; no effect on equity Which of the following is not one of the three major ways that a business can be organized? A Partnership B Sole Proprietorship C Corporation D Wholesaler What is the effect on the accounting equation if a company earns revenues of $23,000 on account? A Assets increase $23,000; no effect on liabilities; equity increases $23,000 B Assets decrease $23,000; liabilities decrease $23,000; no effect on equity C Assets decrease $23,000; no effect on liabilities; equity decreases $23,000 D Assets increase $23,000; liabilities increase $23,000; no effect on equity Which of the following would not be an objective of an external user analyzing a company's financial statements? A Assessing the company's ability to pay its debts B Predicting the future profitability of the company C Determining whether the company should drop an unprofitable product line D Understanding the financial position of the company Which of the following is an example of a service company? A Wal-Mart B Home Depot C American Airlines D Ford Motor Company The income statement reports: A Revenues, assets and expenses B Net income or loss for the period C Only sales amounts paid in cash D The financial position on a particular date Boeing would be an example of what business type? A Service company B Merchandiser C Manufacturer D Retailer How would the accounting equation be affected if a company obtains a loan for $100,000 from a bank? A Assets increase $100,000; no effect on liabilities; equity increases $100,000 B Assets decrease $100,000; liabilities decrease $100,000; no effect on equity C Assets decrease $100,000; no effect on liabilities; equity decreases $100,000 D Assets increase $100,000; liabilities increase $100,000; no effect on equity Which of the following is not a merchandiser? A Target B Best Western C Staples D Macy's A company reported assets of $12,000 and liabilities of $2,500, what amount would be reported for owner's equity? A $14.500 B $9,500 C $12,000 D $2,000 On December 31 of the current year, a company reported the following items on its balance sheet: Cash $10,500; Accounts receivable $5,200; Inventory $2,300; Equipment $102,400; Accounts payable $12,000; Notes payable $56,000 What amount should be reported as owner's equity? A $108,400 B $52,400 C $120,400 D $188,400 One advantage of the corporate form of business over the other forms of business is: A Limited liability B Ease of formation C Separate taxation D Lower legal fees _ are the standards of conduct for judging right from wrong A Ethics B Rules C Internal controls D Conducts Companies which make products from raw inputs are known as: A Service Companies B Wholesalers C Retailers D Manufacturers A company reported total equity of $82,000 on its December 31, 2009 balance sheet The following information is available for the year ended December 31, 2010: What are the total assets of the company as of December 31, 2010? A $167,000 B $202,000 C $85,000 D $132,000 If a company purchases supplies on account for $5,000, what is the effect on the accounting equation? A Assets increase $5,000; no effect on liabilities; equity increases $5,000 B Assets decrease $5,000; liabilities decrease $5,000; no effect on equity C Assets decrease $5,000; no effect on liabilities; equity increases $5,000 D Assets increase $5,000; liabilities increase $5,000; no effect on equity  ... business activities included on the statement of cash flows? A Investing B Operating C Financing D Reporting 55 Free Test Bank for Principles of Accounting 1st Edition by Libby Multiple Choice Questions... advantage of the corporate form of business over the other forms of business is: A Limited liability B Ease of formation C Separate taxation D Lower legal fees _ are the standards of conduct for. .. Sarbanes-Oxley Act of 2002 requires that top managers maintain an audited system of: A Accounting B Reporting C Internal control D Financing A bank is most likely a(n) _ user of accounting information