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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 1: Role of Accounting in Society
Principles of Accounting, Volume 1: Financial Accounting
Chapter 1: Role of Accounting in Society
Multiple Choice
1. LO 1.1 Accounting is sometimes called the “language of _____.”
A. Wall Street
B. business
C. Main Street
D. financial statements
Solution
B
2. LO 1.2 Financial accounting information ________.
A. should be incomplete in order to confuse competitors
B. should be prepared differently by each company
C. provides investors guarantees about the future
D. summarizes what has already occurred
Solution
D
3. LO 1.2 External users of financial accounting information include all of the following except
________.
A. lenders such as bankers
B. governmental agencies such as the IRS
C. employees of a business
D. potential investors
Solution
C
4. LO 1.2 Which of the following groups would have access to managerial accounting
information?
A. bankers
B. investors
C. competitors of the business
D. managers
Solution
D
5. LO 1.2 All of the following are examples of managerial accounting activities except
________.
A. preparing external financial statements in compliance with GAAP
B. deciding whether or not to use automation
C. making equipment repair or replacement decisions
D. measuring costs of production for each product produced
Solution
A
6. LO 1.3 Which of the following is not true?
A. Organizations share a common purpose or mission.
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 1: Role of Accounting in Society
B. Organizations have inflows and outflows of resources.
C. Organizations add value to society.
D. Organizations need accounting information.
Solution
A
7. LO 1.3 The primary purpose of what type of business is to serve a particular need in the
community?
A. for-profit
B. not-for-profit
C. manufacturing
D. retail
Solution
B
8. LO 1.3 Which of the following is not an example of a retailer?
A. electronics store
B. grocery store
C. car dealership
D. computer manufacturer
E. jewelry store
Solution
D
9. LO 1.3 A governmental agency can best be described by which of the following statements?
A. has a primary purpose of making a profit
B. has a primary purpose of using taxpayer funds to provide services
C. produces goods for sale to the public
D. has regular shareholder meetings
Solution
B
10. LO 1.3 Which of the following is likely not a type of not-for-profit entity?
A. public library
B. community foundation
C. university
D. local movie theater
Solution
D
11. LO 1.4 Which of the following is not considered a stakeholder of an organization?
A. creditors
B. lenders
C. employees
D. community residents
E. a business in another industry
Solution
E
12. LO 1.4 Stockholders can best be defined as which of the following?
A. investors who lend money to a business for a short period of time
B. investors who lend money to a business for a long period of time
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 1: Role of Accounting in Society
C. investors who purchase an ownership in the business
D. analysts who rate the financial performance of the business
Solution
C
13. LO 1.4 Which of the following sell stock on an organized stock exchange such as the New
York Stock Exchange?
A. publicly traded companies
B. not-for-profit businesses
C. governmental agencies
D. privately held companies
E. government-sponsored entities
Solution
A
14. LO 1.4 All of the following are sustainable methods businesses can use to raise capital
(funding) except for ________.
A. borrowing from lenders
B. selling ownership shares
C. profitable operations
D. tax refunds
Solution
D
15. LO 1.4 The accounting information of a privately held company is generally available to all
of the following except for ________.
A. governmental agencies
B. investors
C. creditors and lenders
D. competitors
Solution
D
16. LO 1.5 Which of the following skills/attributes is not a primary skill for accountants to
possess?
A. written communication
B. verbal communication
C. ability to work independently
D. analytical thinking
E. extensive computer programing background
Solution
E
17. LO 1.5 Which of the following is typically required for entry-level positions in the
accounting profession?
A. bachelor’s degree
B. master’s degree
C. Certified Public Accountant (CPA)
D. Certified Management Accountant (CMA)
E. only a high school diploma
Solution
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 1: Role of Accounting in Society
A
18. LO 1.5 Typical accounting tasks include all of the following tasks except ________.
A. auditing
B. recording and tracking costs
C. tax compliance and planning
D. consulting
E. purchasing direct materials
Solution
E
19. LO 1.5 What type of organization primarily offers tax compliance, auditing, and consulting
services?
A. corporations
B. public accounting firms
C. governmental entities
D. universities
Solution
B
20. LO 1.5 Most states require 150 semester hours of college credit for which professional
certification?
A. Certified Management Accountant (CMA)
B. Certified Internal Auditor (CIA)
C. Certified Public Accountant (CPA)
D. Certified Financial Planner (CFP)
Solution
C
Questions
1. LO 1.2 Research your top five career choices. Identify financial factors that might influence
your career choice. The following websites might be helpful in answering this question.
• Occupational Outlook Handbook: https://www.bls.gov/ooh/
• National Association of Colleges and Employers: http://www.naceweb.org/
• O*Net OnLine: https://www.onetonline.org/find/
Solution
Answers will vary but should include factors such as starting salaries, value of fringe benefits,
cost of living, and other monetary factors.
2. LO 1.2 Using the same top five career choices, identify nonfinancial factors that might
influence your career choice. The following websites might be helpful in answering this
question.
• Occupational Outlook Handbook: https://www.bls.gov/ooh/
• National Association of Colleges and Employers: http://www.naceweb.org/
• O*Net OnLine: https://www.onetonline.org/find/
Solution
Answers will vary. Responses should include factors such as location, access to schools,
characteristics of the commute, entertainment, health care, and other nonfinancial factors.
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 1: Role of Accounting in Society
Principles of Accounting, Volume 1: Financial Accounting
Chapter 1: Role of Accounting in Society
Multiple Choice
1. LO 1.1 Accounting is sometimes called the “language of _____.”
A. Wall Street
B. business
C. Main Street
D. financial statements
Solution
B
2. LO 1.2 Financial accounting information ________.
A. should be incomplete in order to confuse competitors
B. should be prepared differently by each company
C. provides investors guarantees about the future
D. summarizes what has already occurred
Solution
D
3. LO 1.2 External users of financial accounting information include all of the following except
________.
A. lenders such as bankers
B. governmental agencies such as the IRS
C. employees of a business
D. potential investors
Solution
C
4. LO 1.2 Which of the following groups would have access to managerial accounting
information?
A. bankers
B. investors
C. competitors of the business
D. managers
Solution
D
5. LO 1.2 All of the following are examples of managerial accounting activities except
________.
A. preparing external financial statements in compliance with GAAP
B. deciding whether or not to use automation
C. making equipment repair or replacement decisions
D. measuring costs of production for each product produced
Solution
A
6. LO 1.3 Which of the following is not true?
A. Organizations share a common purpose or mission.
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 1: Role of Accounting in Society
B. Organizations have inflows and outflows of resources.
C. Organizations add value to society.
D. Organizations need accounting information.
Solution
A
7. LO 1.3 The primary purpose of what type of business is to serve a particular need in the
community?
A. for-profit
B. not-for-profit
C. manufacturing
D. retail
Solution
B
8. LO 1.3 Which of the following is not an example of a retailer?
A. electronics store
B. grocery store
C. car dealership
D. computer manufacturer
E. jewelry store
Solution
D
9. LO 1.3 A governmental agency can best be described by which of the following statements?
A. has a primary purpose of making a profit
B. has a primary purpose of using taxpayer funds to provide services
C. produces goods for sale to the public
D. has regular shareholder meetings
Solution
B
10. LO 1.3 Which of the following is likely not a type of not-for-profit entity?
A. public library
B. community foundation
C. university
D. local movie theater
Solution
D
11. LO 1.4 Which of the following is not considered a stakeholder of an organization?
A. creditors
B. lenders
C. employees
D. community residents
E. a business in another industry
Solution
E
12. LO 1.4 Stockholders can best be defined as which of the following?
A. investors who lend money to a business for a short period of time
B. investors who lend money to a business for a long period of time
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 1: Role of Accounting in Society
C. investors who purchase an ownership in the business
D. analysts who rate the financial performance of the business
Solution
C
13. LO 1.4 Which of the following sell stock on an organized stock exchange such as the New
York Stock Exchange?
A. publicly traded companies
B. not-for-profit businesses
C. governmental agencies
D. privately held companies
E. government-sponsored entities
Solution
A
14. LO 1.4 All of the following are sustainable methods businesses can use to raise capital
(funding) except for ________.
A. borrowing from lenders
B. selling ownership shares
C. profitable operations
D. tax refunds
Solution
D
15. LO 1.4 The accounting information of a privately held company is generally available to all
of the following except for ________.
A. governmental agencies
B. investors
C. creditors and lenders
D. competitors
Solution
D
16. LO 1.5 Which of the following skills/attributes is not a primary skill for accountants to
possess?
A. written communication
B. verbal communication
C. ability to work independently
D. analytical thinking
E. extensive computer programing background
Solution
E
17. LO 1.5 Which of the following is typically required for entry-level positions in the
accounting profession?
A. bachelor’s degree
B. master’s degree
C. Certified Public Accountant (CPA)
D. Certified Management Accountant (CMA)
E. only a high school diploma
Solution
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OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 1: Role of Accounting in Society
A
18. LO 1.5 Typical accounting tasks include all of the following tasks except ________.
A. auditing
B. recording and tracking costs
C. tax compliance and planning
D. consulting
E. purchasing direct materials
Solution
E
19. LO 1.5 What type of organization primarily offers tax compliance, auditing, and consulting
services?
A. corporations
B. public accounting firms
C. governmental entities
D. universities
Solution
B
20. LO 1.5 Most states require 150 semester hours of college credit for which professional
certification?
A. Certified Management Accountant (CMA)
B. Certified Internal Auditor (CIA)
C. Certified Public Accountant (CPA)
D. Certified Financial Planner (CFP)
Solution
C
Questions
1. LO 1.2 Research your top five career choices. Identify financial factors that might influence
your career choice. The following websites might be helpful in answering this question.
• Occupational Outlook Handbook: https://www.bls.gov/ooh/
• National Association of Colleges and Employers: http://www.naceweb.org/
• O*Net OnLine: https://www.onetonline.org/find/
Solution
Answers will vary but should include factors such as starting salaries, value of fringe benefits,
cost of living, and other monetary factors.
2. LO 1.2 Using the same top five career choices, identify nonfinancial factors that might
influence your career choice. The following websites might be helpful in answering this
question.
• Occupational Outlook Handbook: https://www.bls.gov/ooh/
• National Association of Colleges and Employers: http://www.naceweb.org/
• O*Net OnLine: https://www.onetonline.org/find/
Solution
Answers will vary. Responses should include factors such as location, access to schools,
characteristics of the commute, entertainment, health care, and other nonfinancial factors.
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