Complete Test Bank for Financial Accounting – Canadian Edition (1st Ed.) by Kemp, Waybright, Chen & Daga | ISBN: 9780137366880

TEST BANK

FINANCIAL ACCOUNTING
1ST CANADIAN EDITION

CHAPTER NO. 01: BUSINESS, ACCOUNTING AND YOU

1.1 Understand the nature of business and the role of accounting in business
1) By taking accounting classes, the student is learning the "language of business."
Answer: TRUE
Diff: 1 Type: TF
Question Type: Concept

2) To manage a business effectively, an owner or manager would benefit greatly from having some
knowledge of accounting.
Answer: TRUE
Diff: 1 Type: TF
Question Type: Application

3) Businesses primarily exist to generate sales.
Answer: FALSE
Diff: 1 Type: TF
Question Type: Concept

4) The value of an item is determined by taking the revenue from a sale and deducting the cost of the sale.
Answer: FALSE
Diff: 1 Type: TF
Question Type: Concept

5) Society is considered to be a stakeholder in a business.
Answer: TRUE
Diff: 2 Type: TF
Question Type: Concept

6) The grocery checker at the corner store is considered a stakeholder of the company.
Answer: TRUE
Diff: 2 Type: TF
Question Type: Concept

7) Accounting information is used to help managers and decision makers understand risk.
Answer: TRUE
Diff: 1 Type: TF
Question Type: Concept

8) Risk increases value for a business.
Answer: FALSE
Diff: 1 Type: TF
Question Type: Concept

,9) What do we call the result obtained when revenue is less than cost?
A) Loss
B) Profit
C) Value
D) Risk
Answer: A
Diff: 1 Type: MC
Question Type: Concept

10) Which of the following is NOT part of the accounting process as it relates to information?
A) Measuring
B) Recognizing
C) Understanding
D) Reporting
Answer: C
Diff: 1 Type: MC
Question Type: Concept

11) According to the textbook, in order for an organization to be called a business it must:
A) exchange a product with a customer.
B) make money.
C) be a corporation.
D) provide a service.
Answer: A
Diff: 1 Type: MC
Question Type: Concept

12) Which of the following describes the price someone is willing to pay for an item?
A) Cost
B) Salvage Value
C) Revenue
D) Value
Answer: D
Diff: 1 Type: MC
Question Type: Concept

13) When revenue exceeds cost, it is referred to as:
A) loss.
B) profit.
C) value.
D) risk.
Answer: B
Diff: 1 Type: MC
Question Type: Concept

,14) Tasha's Tutoring serves students in grades K-12. All of following would be considered a stakeholder
in this business EXCEPT:
A) students who receive tutoring.
B) the publisher who sells workbooks to Tasha's.
C) the tutors who work for Tasha.
D) Tasha's competitor Tim's Tutoring.
Answer: D
Diff: 2 Type: MC
Question Type: Concept

15) All of the following would be considered a stakeholder in a business EXCEPT:
A) customers.
B) lenders.
C) competitors.
D) society.
Answer: C
Diff: 2 Type: MC
Question Type: Concept

16) The primary goal of any business is to:
A) generate revenue.
B) sell products for a profit.
C) create value for its owners.
D) avoid too much debt.
Answer: C
Diff: 2 Type: MC
Question Type: Concept

1.2 Know how a business operates

1) Amounts owed to the business' owners as a result of an initial investment are called liabilities.
Answer: FALSE
Diff: 1 Type: TF
Question Type: Concept

2) Net earnings and profit are the same thing.
Answer: TRUE
Diff: 1 Type: TF
Question Type: Concept

3) The only way for business to get money is to borrow it.
Answer: FALSE
Diff: 1 Type: TF
Question Type: Concept

, 4) Business owners expect to be compensated for both time and risk.
Answer: TRUE
Diff: 1 Type: TF
Question Type: Concept

5) Business owners are paid interest on the money they have invested in the business.
Answer: FALSE
Diff: 1 Type: TF
Question Type: Concept

6) Employees are economic resources owned by the company and used to operate the business.
Answer: FALSE
Diff: 1 Type: TF
Question Type: Concept

7) The cost of money is a function of owner risk.
Answer: TRUE
Diff: 1 Type: TF
Question Type: Concept

8) Liabilities are defined as:
A) earnings retained in the business.
B) amounts owed to lenders or creditors.
C) shareholders' claims to assets.
D) future economic benefits of a company.
Answer: B
Diff: 1 Type: MC
Question Type: Concept

9) Assets are defined as:
A) earnings retained in the business.
B) amounts owed to others.
C) shareholders' claims to assets.
D) economic resources of a company.
Answer: D
Diff: 1 Type: MC
Question Type: Concept

10) Which of the following does NOT describe Shareholders' Equity?
A) Profits retained in the business
B) Money lent to a business
C) The owners' claim on the assets of a company
D) Money invested in a business by its owners
Answer: B
Diff: 1 Type: MC
Question Type: Concept