TEST BANK FOR COLLEGE
ACCOUNTING A PRACTICAL
APPROACH 14TH CANADIAN
EDITION JEFFREY SLATER, DEBRA
GOO
College Accounting, 14Ce (Slater/Good)
Chapter 1 Accounting Concepts and Procedures: An Introduction
Page 1
1. Which of the following professional accounting designations has been replaced by "CPA"?
A) CA
B) CMA
C) CGA
D) All of the above
Answer: D
Rationale: In Canada, the CA, CMA, and CGA designations were unified under the CPA
(Chartered Professional Accountant) designation. All three legacy designations were replaced by
CPA.
2. The type of business organization that can continue indefinitely is known as a
A) sole proprietorship.
B) partnership.
C) corporation.
D) None of the above.
Answer: C
Rationale: A corporation is a separate legal entity with unlimited life; it can continue indefinitely
regardless of changes in ownership.
3. This type of business organization is subject to income tax.
A) sole proprietorship.
B) partnership.
C) corporation.
D) All of the above.
Answer: C
Rationale: A corporation is a separate tax-paying entity. Sole proprietorships and partnerships
are not taxed as entities; their income is taxed in the hands of the owners.
, 4. Putting the information into the accounting system would be called
A) analyzing.
B) recording.
C) classifying.
D) summarizing.
Answer: B
Rationale: Recording is the process of entering transaction data into the accounting system
(journalizing).
Page 2
5. The purpose of the accounting process is to provide financial information about
A) sole proprietorships.
B) small businesses.
C) large corporations.
D) All of these answers are correct.
Answer: D
Rationale: Accounting provides financial information for all types of business organizations,
regardless of size or structure.
6. The advantages of a corporation do NOT include
A) limited personal risk.
B) can continue indefinitely.
C) business decisions made by career administrators.
D) easy to set up.
Answer: D
Rationale: Corporations are more complex and expensive to set up than sole proprietorships or
partnerships. Limited risk, indefinite life, and professional management are advantages.
7. Accounting reports are least helpful in answering which of the following questions?
A) How much cash was available at the end of the last year?
B) How well were the employees treated by management?
C) Did the company make a profit for the previous year?
D) Can the company pay its debts on time?
Answer: B
Rationale: Accounting reports focus on financial data. Employee treatment is a qualitative, non-
financial matter not captured in financial statements.
8. Accounting provides information to
A) managers.
B) government.
C) investors.
D) All of these answers are correct.
, Answer: D
Rationale: Accounting information serves internal users (managers) and external users
(government, investors, creditors, etc.).
9. Which of the following is a characteristic of a sole proprietorship?
A) Business owned by more than one person
B) Easy to form
C) Each shareholder acts as an owner of the company
D) Can continue indefinitely
Answer: B
Rationale: A sole proprietorship is easy and inexpensive to form. It is owned by one person, has
no shareholders, and ends with the owner's death.
Page 3
10. A partnership is a business which is
A) easy to form.
B) ends with the death of a partner.
C) owned by more than one person.
D) All of these answers are correct.
Answer: D
Rationale: A partnership is easy to form, owned by more than one person, and typically ends
with the death or withdrawal of a partner.
11. Which is an advantage of a sole proprietorship form of business?
A) There is limited personal risk.
B) The business can continue indefinitely.
C) The owner makes all the decisions.
D) All of these answers are correct.
Answer: C
Rationale: The sole proprietor has complete decision-making authority. Limited risk and
indefinite life are advantages of corporations, not sole proprietorships.
12. Which of the following is NOT a type of business organization?
A) Corporation
B) Partnership
C) Sole proprietorship
D) Operation
Answer: D
Rationale: The three main types of business organization are sole proprietorship, partnership,
and corporation. "Operation" is not a type.
13. A corporation
A) can continue indefinitely.
, B) is owned by shareholders.
C) has limited risk to shareholders.
D) all of the above.
Answer: D
Rationale: Corporations have unlimited life, are owned by shareholders, and provide limited
liability to shareholders.
14. The Sarbanes-Oxley Act in the United States and National Policies in Canada were passed to
A) prevent fraud at public companies.
B) replace all of the old accounting procedures with new ones.
C) improve the accuracy of the company's financial reporting.
D) Both A and C are correct.
Answer: D
Rationale: Sarbanes-Oxley and similar Canadian policies were enacted to prevent corporate
fraud and improve the accuracy and reliability of financial reporting.
Page 4
15. A legal firm would be considered a
A) merchandise company.
B) manufacturer.
C) service company.
D) None of the above are correct.
Answer: C
Rationale: A legal firm provides services rather than selling merchandise or manufacturing
goods.
16. Not-for-profit organizations
A) aim to improve society in some way.
B) seek to maximize profits.
C) usually obtain funding from donations and government grants.
D) Both A and C are correct.
Answer: D
Rationale: Not-for-profits aim to improve society and typically rely on donations and grants.
They do not seek to maximize profits.
17. Generally Accepted Accounting Principles are the underlying concepts that make up acceptable
accounting practices.
Answer: TRUE
Rationale: GAAP is the set of underlying concepts and standards that guide acceptable
accounting practices.
ACCOUNTING A PRACTICAL
APPROACH 14TH CANADIAN
EDITION JEFFREY SLATER, DEBRA
GOO
College Accounting, 14Ce (Slater/Good)
Chapter 1 Accounting Concepts and Procedures: An Introduction
Page 1
1. Which of the following professional accounting designations has been replaced by "CPA"?
A) CA
B) CMA
C) CGA
D) All of the above
Answer: D
Rationale: In Canada, the CA, CMA, and CGA designations were unified under the CPA
(Chartered Professional Accountant) designation. All three legacy designations were replaced by
CPA.
2. The type of business organization that can continue indefinitely is known as a
A) sole proprietorship.
B) partnership.
C) corporation.
D) None of the above.
Answer: C
Rationale: A corporation is a separate legal entity with unlimited life; it can continue indefinitely
regardless of changes in ownership.
3. This type of business organization is subject to income tax.
A) sole proprietorship.
B) partnership.
C) corporation.
D) All of the above.
Answer: C
Rationale: A corporation is a separate tax-paying entity. Sole proprietorships and partnerships
are not taxed as entities; their income is taxed in the hands of the owners.
, 4. Putting the information into the accounting system would be called
A) analyzing.
B) recording.
C) classifying.
D) summarizing.
Answer: B
Rationale: Recording is the process of entering transaction data into the accounting system
(journalizing).
Page 2
5. The purpose of the accounting process is to provide financial information about
A) sole proprietorships.
B) small businesses.
C) large corporations.
D) All of these answers are correct.
Answer: D
Rationale: Accounting provides financial information for all types of business organizations,
regardless of size or structure.
6. The advantages of a corporation do NOT include
A) limited personal risk.
B) can continue indefinitely.
C) business decisions made by career administrators.
D) easy to set up.
Answer: D
Rationale: Corporations are more complex and expensive to set up than sole proprietorships or
partnerships. Limited risk, indefinite life, and professional management are advantages.
7. Accounting reports are least helpful in answering which of the following questions?
A) How much cash was available at the end of the last year?
B) How well were the employees treated by management?
C) Did the company make a profit for the previous year?
D) Can the company pay its debts on time?
Answer: B
Rationale: Accounting reports focus on financial data. Employee treatment is a qualitative, non-
financial matter not captured in financial statements.
8. Accounting provides information to
A) managers.
B) government.
C) investors.
D) All of these answers are correct.
, Answer: D
Rationale: Accounting information serves internal users (managers) and external users
(government, investors, creditors, etc.).
9. Which of the following is a characteristic of a sole proprietorship?
A) Business owned by more than one person
B) Easy to form
C) Each shareholder acts as an owner of the company
D) Can continue indefinitely
Answer: B
Rationale: A sole proprietorship is easy and inexpensive to form. It is owned by one person, has
no shareholders, and ends with the owner's death.
Page 3
10. A partnership is a business which is
A) easy to form.
B) ends with the death of a partner.
C) owned by more than one person.
D) All of these answers are correct.
Answer: D
Rationale: A partnership is easy to form, owned by more than one person, and typically ends
with the death or withdrawal of a partner.
11. Which is an advantage of a sole proprietorship form of business?
A) There is limited personal risk.
B) The business can continue indefinitely.
C) The owner makes all the decisions.
D) All of these answers are correct.
Answer: C
Rationale: The sole proprietor has complete decision-making authority. Limited risk and
indefinite life are advantages of corporations, not sole proprietorships.
12. Which of the following is NOT a type of business organization?
A) Corporation
B) Partnership
C) Sole proprietorship
D) Operation
Answer: D
Rationale: The three main types of business organization are sole proprietorship, partnership,
and corporation. "Operation" is not a type.
13. A corporation
A) can continue indefinitely.
, B) is owned by shareholders.
C) has limited risk to shareholders.
D) all of the above.
Answer: D
Rationale: Corporations have unlimited life, are owned by shareholders, and provide limited
liability to shareholders.
14. The Sarbanes-Oxley Act in the United States and National Policies in Canada were passed to
A) prevent fraud at public companies.
B) replace all of the old accounting procedures with new ones.
C) improve the accuracy of the company's financial reporting.
D) Both A and C are correct.
Answer: D
Rationale: Sarbanes-Oxley and similar Canadian policies were enacted to prevent corporate
fraud and improve the accuracy and reliability of financial reporting.
Page 4
15. A legal firm would be considered a
A) merchandise company.
B) manufacturer.
C) service company.
D) None of the above are correct.
Answer: C
Rationale: A legal firm provides services rather than selling merchandise or manufacturing
goods.
16. Not-for-profit organizations
A) aim to improve society in some way.
B) seek to maximize profits.
C) usually obtain funding from donations and government grants.
D) Both A and C are correct.
Answer: D
Rationale: Not-for-profits aim to improve society and typically rely on donations and grants.
They do not seek to maximize profits.
17. Generally Accepted Accounting Principles are the underlying concepts that make up acceptable
accounting practices.
Answer: TRUE
Rationale: GAAP is the set of underlying concepts and standards that guide acceptable
accounting practices.
