Test Bank For
Financial Accounting Fundamentals, 8th Edition By John Wild
Chapter 1-13 Answers are at the End of Each Chapter
Chapter 01:
Student name:__________
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) Accounting is an information and measurement system that identifies, records, and
communicates an organization's business activities.
⊚ true
⊚ false
2) Accounting includes the analysis and interpretation of information.
⊚ true
⊚ false
3) Financial accounting focuses on the needs of external users, who get accounting information
from general-purpose financial statements.
⊚ true
⊚ false
4) Internal users of accounting information do not directly manage the organization and have
limited access to its accounting information.
⊚ true
⊚ false
5) Auditors verify the effectiveness of internal controls.
⊚ true
⊚ false
6) External auditors examine financial statements to verify that they are prepared according to
generally accepted accounting principles.
⊚ true
⊚ false
7) External users include lenders, shareholders, customers, and regulators.
⊚ true
⊚ false
,8) Internal users include lenders, shareholders, brokers and nonexecutive employees.
⊚ true
⊚ false
9) Opportunities in accounting include auditing, consulting, market research, and tax planning.
⊚ true
⊚ false
10) The fraud triangle shows that three factors that push a person to commit fraud are
opportunity, pressure, and rationalization.
⊚ true
⊚ false
11) Internal controls are procedures to protect assets, ensure reliable accounting, promote
efficiency, and uphold company policies.
⊚ true
⊚ false
12) A partnership is a business owned by two or more people.
⊚ true
⊚ false
13) Owners of a corporation are called shareholders or stockholders.
⊚ true
⊚ false
14) In a partnership, the owners are called stockholders.
⊚ true
⊚ false
15) The balance sheet shows a company's net income or loss over a period of time.
⊚ true
⊚ false
16) The Financial Accounting Standards Board (FASB) is given the task of setting generally
accepted accounting principles (GAAP) from the Securities and Exchange Commission.
⊚ true
⊚ false
,17) The business entity assumption means that accounting information presumes that the
business will continue operating instead of being closed or sold.
⊚ true
⊚ false
18) GAAP wants information to have relevance and faithful representation.
⊚ true
⊚ false
19) The business entity assumption means that a business is accounted for separately from other
business entities and its owner(s).
⊚ true
⊚ false
20) Revenues should not be recognized in the accounting records when earned, but rather when
cash is received.
⊚ true
⊚ false
21) Specific accounting principles are basic assumptions, concepts, and guidelines for preparing
financial statements and arise out of long-used accounting practice.
⊚ true
⊚ false
22) A sole proprietorship is a business with multiple owners.
⊚ true
⊚ false
23) Unlimited liability and separate taxation of the business are advantages of a sole
proprietorship.
⊚ true
⊚ false
24) Objectives, qualitative characteristics, elements, and recognition and measurement are
components of the FASB conceptual framework.
⊚ true
⊚ false
, 25) Objectivity means that information is supported by independent, unbiased evidence.
⊚ true
⊚ false
26) The going-concern assumption presumes that a business will continue operating instead of
being closed or sold.
⊚ true
⊚ false
27) The measurement principle prescribes that accounting information is based on subjective
opinion rather than cost.
⊚ true
⊚ false
28) The monetary unit assumption means that companies should express transactions and events
in terms such as “a lot” or “very little”.
⊚ true
⊚ false
29) The International Accounting Standards Board (IASB) issues International Financial
Reporting Standards (IFRS) that identify preferred accounting practices.
⊚ true
⊚ false
30) A limited liability company (LLC) offers the limited liability of a partnership or
proprietorship and the tax treatment of a corporation.
⊚ true
⊚ false
31) A limited liability company (LLC) offers the limited liability of a corporation and the tax
treatment of a partnership or proprietorship.
⊚ true
⊚ false
32) The Securities and Exchange Commission (SEC) is a U.S. government agency that oversees
proper use of GAAP by companies that sell stock and debt to the public.
⊚ true
⊚ false
Financial Accounting Fundamentals, 8th Edition By John Wild
Chapter 1-13 Answers are at the End of Each Chapter
Chapter 01:
Student name:__________
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) Accounting is an information and measurement system that identifies, records, and
communicates an organization's business activities.
⊚ true
⊚ false
2) Accounting includes the analysis and interpretation of information.
⊚ true
⊚ false
3) Financial accounting focuses on the needs of external users, who get accounting information
from general-purpose financial statements.
⊚ true
⊚ false
4) Internal users of accounting information do not directly manage the organization and have
limited access to its accounting information.
⊚ true
⊚ false
5) Auditors verify the effectiveness of internal controls.
⊚ true
⊚ false
6) External auditors examine financial statements to verify that they are prepared according to
generally accepted accounting principles.
⊚ true
⊚ false
7) External users include lenders, shareholders, customers, and regulators.
⊚ true
⊚ false
,8) Internal users include lenders, shareholders, brokers and nonexecutive employees.
⊚ true
⊚ false
9) Opportunities in accounting include auditing, consulting, market research, and tax planning.
⊚ true
⊚ false
10) The fraud triangle shows that three factors that push a person to commit fraud are
opportunity, pressure, and rationalization.
⊚ true
⊚ false
11) Internal controls are procedures to protect assets, ensure reliable accounting, promote
efficiency, and uphold company policies.
⊚ true
⊚ false
12) A partnership is a business owned by two or more people.
⊚ true
⊚ false
13) Owners of a corporation are called shareholders or stockholders.
⊚ true
⊚ false
14) In a partnership, the owners are called stockholders.
⊚ true
⊚ false
15) The balance sheet shows a company's net income or loss over a period of time.
⊚ true
⊚ false
16) The Financial Accounting Standards Board (FASB) is given the task of setting generally
accepted accounting principles (GAAP) from the Securities and Exchange Commission.
⊚ true
⊚ false
,17) The business entity assumption means that accounting information presumes that the
business will continue operating instead of being closed or sold.
⊚ true
⊚ false
18) GAAP wants information to have relevance and faithful representation.
⊚ true
⊚ false
19) The business entity assumption means that a business is accounted for separately from other
business entities and its owner(s).
⊚ true
⊚ false
20) Revenues should not be recognized in the accounting records when earned, but rather when
cash is received.
⊚ true
⊚ false
21) Specific accounting principles are basic assumptions, concepts, and guidelines for preparing
financial statements and arise out of long-used accounting practice.
⊚ true
⊚ false
22) A sole proprietorship is a business with multiple owners.
⊚ true
⊚ false
23) Unlimited liability and separate taxation of the business are advantages of a sole
proprietorship.
⊚ true
⊚ false
24) Objectives, qualitative characteristics, elements, and recognition and measurement are
components of the FASB conceptual framework.
⊚ true
⊚ false
, 25) Objectivity means that information is supported by independent, unbiased evidence.
⊚ true
⊚ false
26) The going-concern assumption presumes that a business will continue operating instead of
being closed or sold.
⊚ true
⊚ false
27) The measurement principle prescribes that accounting information is based on subjective
opinion rather than cost.
⊚ true
⊚ false
28) The monetary unit assumption means that companies should express transactions and events
in terms such as “a lot” or “very little”.
⊚ true
⊚ false
29) The International Accounting Standards Board (IASB) issues International Financial
Reporting Standards (IFRS) that identify preferred accounting practices.
⊚ true
⊚ false
30) A limited liability company (LLC) offers the limited liability of a partnership or
proprietorship and the tax treatment of a corporation.
⊚ true
⊚ false
31) A limited liability company (LLC) offers the limited liability of a corporation and the tax
treatment of a partnership or proprietorship.
⊚ true
⊚ false
32) The Securities and Exchange Commission (SEC) is a U.S. government agency that oversees
proper use of GAAP by companies that sell stock and debt to the public.
⊚ true
⊚ false
