Question Bank in line with Principles of Corporate Financial Accounting, International Edition,Reeve,10e

Chapter 1—Introduction to Accounting and Business




TRUE/FALSE



1. The main objective of a not-for-profit business is not to make a profit.


ANS: F PTS: 1 DIF: Moderate OBJ: 01-01

NAT: AACSB Analytic | AICPA BB-Industry



2. An example of an external user of accounting information is the federal government.


ANS: T PTS: 1 DIF: Moderate OBJ: 01-01

NAT: AACSB Analytic | AICPA BB-Industry



3. A corporation is a business that is legally separate and distinct from its owners.


ANS: T PTS: 1 DIF: Easy OBJ: 01-01

NAT: AACSB Analytic | AICPA BB-Industry



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


ANS: F PTS: 1 DIF: Easy OBJ: 01-02

NAT: AACSB Analytic | AICPA BB-Industry



5. Primary users of accounting information are accountants.


ANS: F PTS: 1 DIF: Moderate OBJ: 01-01

, NAT: AACSB Analytic | AICPA BB-Industry



6. Accounting is thought to be the "language of business" because business information is
communicated to users.


ANS: T PTS: 1 DIF: Easy OBJ: 01-01

NAT: AACSB Analytic | AICPA FN-Measurement



7. The role of accounting is to provide many different users with financial information to make
economic decisions.


ANS: T PTS: 1 DIF: Moderate OBJ: 01-01

NAT: AACSB Analytic | AICPA FN-Measurement



8. Proprietorships are owned by one owner and provide only services to their customers.


ANS: F PTS: 1 DIF: Easy OBJ: 01-02

NAT: AACSB Analytic | AICPA BB-Industry



9. Large corporations such as Wal-Mart, Coca-Cola, and Nike operate as manufacturing
businesses.


ANS: F PTS: 1 DIF: Easy OBJ: 01-02

NAT: AACSB Analytic | AICPA BB-Industry



10. Only large companies such as Wal-Mart, JCP, General Motors, and the Bank of America can
be organized as corporations.


ANS: F PTS: 1 DIF: Moderate OBJ: 01-02

NAT: AACSB Analytic | AICPA BB-Industry

,11. Accounting information users need reports about the economic activities and condition of
businesses.


ANS: T PTS: 1 DIF: Easy OBJ: 01-01

NAT: AACSB Analytic | AICPA BB-Industry



12. Senior executives cannot be criminally prosecuted for the wrong doings they commit on
behalf of the companies where they work.


ANS: F PTS: 1 DIF: Easy OBJ: 01-01

NAT: AACSB Ethics | AICPA BB-Legal



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


ANS: F PTS: 1 DIF: Moderate OBJ: 01-01

NAT: AACSB Analytic | AICPA BB-Industry



14. Stakeholders use only accounting reports as the source of information to base all of their
business decisions.


ANS: F PTS: 1 DIF: Easy OBJ: 01-01

NAT: AACSB Analytic | AICPA FN-Measurement



15. Accounting reports are designed with the information needs of the users in mind.


ANS: T PTS: 1 DIF: Easy OBJ: 01-01

NAT: AACSB Analytic | AICPA FN-Measurement

, 16. Public accountants are normally hired by companies and the Internal Revenue Service.


ANS: F PTS: 1 DIF: Easy OBJ: 01-01

NAT: AACSB Analytic | AICPA BB-Industry



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


ANS: F PTS: 1 DIF: Easy OBJ: 01-01

NAT: AACSB Analytic | AICPA FN-Measurement



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


ANS: T PTS: 1 DIF: Moderate OBJ: 01-01

NAT: AACSB Analytic | AICPA FN-Measurement

19. Proper ethical conduct implies that you only consider what's in your best interest.


ANS: F PTS: 1 DIF: Easy OBJ: 01-01

NAT: AACSB Ethics | AICPA BB-Legal



20. Some of the major fraudulent acts by senior executives started as what they considered to
be small ethical lapses which grew out of control.


ANS: T PTS: 1 DIF: Moderate OBJ: 01-01

NAT: AACSB Ethics | AICPA BB-Legal



21. CMA is an acronym that stands for Certified Manufacturing Accountant.


ANS: F PTS: 1 DIF: Easy OBJ: 01-01