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Test Bank for Accounting, 29th Edition by Carl Warren
Chap 01 29e
Answers Included ✅
Indicate whether the statement is true or false.
1. An account receivable is a claim against a customer resulting from a sale on account.
a. True
b. False
2. An example of an external user of accounting information is the federal government.
a. True
b. False
3. A corporation is a business that is legally separate and distinct from its owners.
a. True
b. False
4. The role of accounting is to provide many different users with financial information to make economic decisions.
a. True
b. False
5. The main objective for all businesses is to maximize unrealized profits.
a. True
b. False
6. Financial accounting provides information to all users, while the main focus for managerial accounting is to
provide information to management.
a. True
b. False
7. Assets that are used up during the process of earning revenue are called expenses.
a. True
b. False
8. Withdrawals paid to owners decrease assets and increase equity.
a. True
b. False
9. An example of a general-purpose financial statement would be a report about projected price increases related
to transportation costs.
a. True
b. False
10. No significant differences exist between the accounting standards issued by the FASB and the IASB.
a. True
b. False
Page 1
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Name: Class: Date:
Chap 01 29e
11. The rights or claims to the assets of a business may be subdivided into rights of creditors and rights of owners.
a. True
b. False
12. The accounting equation can be expressed as Assets – Liabilities = Owner's Equity.
a. True
b. False
13. The primary financial statements of a proprietorship are the income statement, the statement of owners’ equity,
the cash budget, and the balance sheet.
a. True
b. False
14. Investing activities are those activities by which the company obtains funds to start and operate the business.
a. True
b. False
15. Paying an account payable increases liabilities and decreases assets.
a. True
b. False
16. Purchasing supplies on account increases liabilities and decreases equity.
a. True
b. False
17. Senior executives cannot be criminally prosecuted for the wrongdoings they commit on behalf of the companies
where they work.
a. True
b. False
18. An income statement is a summary of the revenues and expenses of a business as of a specific date.
a. True
b. False
19. Managerial accounting information is used by external and internal users equally.
a. True
b. False
20. The Sarbanes-Oxley Act established standards for corporate responsibility and disclosure.
a. True
b. False
21. The financial statements of a proprietorship should include the owner's personal assets and liabilities.
a. True
b. False
Page 2
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Name: Class: Date:
Chap 01 29e
22. Some major fraudulent acts committed by senior executives started as what they considered to be small ethical
lapses that grew out of control.
a. True
b. False
23. The basic difference between manufacturing and retail companies is the completion level of the products they
purchase for resale to customers.
a. True
b. False
24. The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for
developing accounting principles.
a. True
b. False
25. The owner’s rights to the assets rank ahead of the creditors' rights to the assets.
a. True
b. False
26. The excess of revenue over the expenses incurred in earning the revenue is called capital.
a. True
b. False
27. Any 12-month accounting period adopted by a company is known as its fiscal year.
a. True
b. False
28. Proper ethical conduct implies that you only consider what's in your best interest.
a. True
b. False
29. If net income for a company was $50,000, $20,000 in owner withdrawals were made, and the owners invested
an additional $10,000 in cash, the owners' equity increased by $40,000.
a. True
b. False
30. If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during the
same period, the period's change in total owner's equity was a $200,000 increase.
a. True
b. False
31. Proprietorships have one owner and provide only services to their customers.
a. True
b. False
Page 3
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Name: Class: Date:
Chap 01 29e
32. The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing
entities.
a. True
b. False
33. Operating activities are those activities by which a company generates revenues from customers.
a. True
b. False
34. A business is an organization in which basic resources or inputs, like materials and labor, are assembled and
processed to provide outputs in the form of goods or services to customers.
a. True
b. False
35. A statement of owners’ equity reports the changes in owner's equity for a period of time.
a. True
b. False
36. Receiving payments on an account receivable increases both equity and assets.
a. True
b. False
37. An account receivable is typically classified as a revenue.
a. True
b. False
38. Receiving a bill or otherwise being notified that an amount is owed is not recorded until the amount is paid.
a. True
b. False
39. The balance sheet represents the accounting equation.
a. True
b. False
40. The monetary unit assumption requires that economic data be recorded in dollars for companies in the United
States.
a. True
b. False
41. Net income and net profit do not mean the same thing.
a. True
b. False
42. Revenue is earned only when money is received.
a. True
b. False
Page 4
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Test Bank for Accounting, 29th Edition by Carl Warren
Chap 01 29e
Answers Included ✅
Indicate whether the statement is true or false.
1. An account receivable is a claim against a customer resulting from a sale on account.
a. True
b. False
2. An example of an external user of accounting information is the federal government.
a. True
b. False
3. A corporation is a business that is legally separate and distinct from its owners.
a. True
b. False
4. The role of accounting is to provide many different users with financial information to make economic decisions.
a. True
b. False
5. The main objective for all businesses is to maximize unrealized profits.
a. True
b. False
6. Financial accounting provides information to all users, while the main focus for managerial accounting is to
provide information to management.
a. True
b. False
7. Assets that are used up during the process of earning revenue are called expenses.
a. True
b. False
8. Withdrawals paid to owners decrease assets and increase equity.
a. True
b. False
9. An example of a general-purpose financial statement would be a report about projected price increases related
to transportation costs.
a. True
b. False
10. No significant differences exist between the accounting standards issued by the FASB and the IASB.
a. True
b. False
Page 1
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,https://www.stuvia.com/user/gabrielucky https://www.stuvia.com/user/gabrielucky https://www.stuvia.com/user/gabrielucky
Name: Class: Date:
Chap 01 29e
11. The rights or claims to the assets of a business may be subdivided into rights of creditors and rights of owners.
a. True
b. False
12. The accounting equation can be expressed as Assets – Liabilities = Owner's Equity.
a. True
b. False
13. The primary financial statements of a proprietorship are the income statement, the statement of owners’ equity,
the cash budget, and the balance sheet.
a. True
b. False
14. Investing activities are those activities by which the company obtains funds to start and operate the business.
a. True
b. False
15. Paying an account payable increases liabilities and decreases assets.
a. True
b. False
16. Purchasing supplies on account increases liabilities and decreases equity.
a. True
b. False
17. Senior executives cannot be criminally prosecuted for the wrongdoings they commit on behalf of the companies
where they work.
a. True
b. False
18. An income statement is a summary of the revenues and expenses of a business as of a specific date.
a. True
b. False
19. Managerial accounting information is used by external and internal users equally.
a. True
b. False
20. The Sarbanes-Oxley Act established standards for corporate responsibility and disclosure.
a. True
b. False
21. The financial statements of a proprietorship should include the owner's personal assets and liabilities.
a. True
b. False
Page 2
https://www.stuvia.com/user/gabrielucky https://www.stuvia.com/user/gabrielucky https://www.stuvia.com/user/gabrielucky
,https://www.stuvia.com/user/gabrielucky https://www.stuvia.com/user/gabrielucky https://www.stuvia.com/user/gabrielucky
Name: Class: Date:
Chap 01 29e
22. Some major fraudulent acts committed by senior executives started as what they considered to be small ethical
lapses that grew out of control.
a. True
b. False
23. The basic difference between manufacturing and retail companies is the completion level of the products they
purchase for resale to customers.
a. True
b. False
24. The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for
developing accounting principles.
a. True
b. False
25. The owner’s rights to the assets rank ahead of the creditors' rights to the assets.
a. True
b. False
26. The excess of revenue over the expenses incurred in earning the revenue is called capital.
a. True
b. False
27. Any 12-month accounting period adopted by a company is known as its fiscal year.
a. True
b. False
28. Proper ethical conduct implies that you only consider what's in your best interest.
a. True
b. False
29. If net income for a company was $50,000, $20,000 in owner withdrawals were made, and the owners invested
an additional $10,000 in cash, the owners' equity increased by $40,000.
a. True
b. False
30. If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during the
same period, the period's change in total owner's equity was a $200,000 increase.
a. True
b. False
31. Proprietorships have one owner and provide only services to their customers.
a. True
b. False
Page 3
https://www.stuvia.com/user/gabrielucky https://www.stuvia.com/user/gabrielucky https://www.stuvia.com/user/gabrielucky
, https://www.stuvia.com/user/gabrielucky https://www.stuvia.com/user/gabrielucky https://www.stuvia.com/user/gabrielucky
Name: Class: Date:
Chap 01 29e
32. The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing
entities.
a. True
b. False
33. Operating activities are those activities by which a company generates revenues from customers.
a. True
b. False
34. A business is an organization in which basic resources or inputs, like materials and labor, are assembled and
processed to provide outputs in the form of goods or services to customers.
a. True
b. False
35. A statement of owners’ equity reports the changes in owner's equity for a period of time.
a. True
b. False
36. Receiving payments on an account receivable increases both equity and assets.
a. True
b. False
37. An account receivable is typically classified as a revenue.
a. True
b. False
38. Receiving a bill or otherwise being notified that an amount is owed is not recorded until the amount is paid.
a. True
b. False
39. The balance sheet represents the accounting equation.
a. True
b. False
40. The monetary unit assumption requires that economic data be recorded in dollars for companies in the United
States.
a. True
b. False
41. Net income and net profit do not mean the same thing.
a. True
b. False
42. Revenue is earned only when money is received.
a. True
b. False
Page 4
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