College Accounting, A Contemporary Approach, 6th Edition, Haddock, Price, Farina, Test Bank - All Chapters Covered

TEST BANK

COLLEGE ACCOUNTING
A CONTEMPORARY APPROACH
6TH EDITION

CHAPTER NO. 01: ACCOUNTING: THE LANGUAGE OF BUSINESS

TRUE / FALSE


1) The purpose of accounting is to provide financial information about a business.
⊚ true
⊚ false



2) A firm’s financial affairs are summarized in periodic reports called general ledgers.
⊚ true
⊚ false



3) In a sole proprietorship, the owner is NOT responsible for the debts of the business if the company is
unable to pay.
⊚ true
⊚ false



4) Currently, generally accepted accounting principles are developed by the American Institute of
Certified Public Accountants (AICPA).
⊚ true
⊚ false



5) The Securities and Exchange Commission (SEC) requires that publicly owned corporations submit
financial statements to it at least one time each year.
⊚ true
⊚ false

,6) Anyone can invest in a closely held corporation.
⊚ true
⊚ false



7) Managerial Accounting is any activity associated with the preparation of tax returns and the audit of
those returns.
⊚ true
⊚ false



8) When developing GAAP, one step undertaken by the FASB includes holding public hearings where
interested parties can express their opinions.
⊚ true
⊚ false



9) Public accountants work on the staff of federal, state, or local governmental units.
⊚ true
⊚ false



10) The SEC uses financial information to determine a company's tax base.
⊚ true
⊚ false



11) When a partner leaves the company, the partnership is dissolved and a new partnership may be
formed with the remaining partners.
⊚ true
⊚ false



12) Accounting is used to communicate financial information and therefore is called the “language of
data”.
⊚ true
⊚ false

,13) Some users of the financial information of a business are employed by the business while others are
independent, outside parties.
⊚ true
⊚ false



14) The certified bookkeeper designation indicates that an individual possesses the level of knowledge
and skills needed to carry out all key accounting functions through the adjusted trial balance,
including payroll.
⊚ true
⊚ false



15) Accountants provide financial information to various parties so they can make business decisions.
⊚ true
⊚ false



16) When a business is organized as a sole proprietorship, the owner should combine his/her personal
financial information with the business financial information.
⊚ true
⊚ false



Answer Key for True / False

1) TRUE
2) FALSE
3) FALSE
4) FALSE
5) TRUE
6) FALSE
7) FALSE
8) TRUE
9) FALSE
10) FALSE
11) TRUE
12) FALSE
13) TRUE
14) TRUE
15) TRUE

, 16) FALSE




17) Which of the following government agencies has the authority to suspend trading of a company’s
shares on stock exchanges?
A) Internal Revenue Service
B) Federal Trade Commission
C) Financial Accounting Standards Board
D) Securities and Exchange Commission



18) Which of the following is not one of the major types of services provided by public accounting firms?
A) auditing
B) bookkeeping
C) tax accounting
D) management advisory services



19) Which of the following is not a requirement for becoming a Certified Bookkeeper?
A) pass a national exam
B) obtain a certain number of college credits in accounting courses
C) sign a code of ethics
D) submit evidence satisfying an experience requirement



20) The separate entity assumption applies to which of the following corporate forms?
A) sole proprietorship
B) partnership
C) corporation
D) all of these answers are correct



21) A sole proprietorship has how many owners?
A) 1
B) 2
C) 3
D) 4