Accounting Ch. 1-4 Test Bank
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T or F,
Owners of business firms are the only people who need accounting information - (correct Answer) - F
T or F
Transactions that can be measured in dollars and cents are recorded in the financial information system -
(correct Answer) - T
T or F
The hiring of a new company president is an economic event recorded by the financial information system -
(correct Answer) - F
T or F
Management of a business enterprise is the major external user of information - (correct Answer) - F
T or F
Accounting communicates financial information about a business enterprise to both internal and external users
- (correct Answer) - T
T or F
Accounting information is used only by external users with a financial interest in a business enterprise - (correct
Answer) - F
T or F
Financial statements are the major means of communicating accounting information to interested parties -
(correct Answer) - T
T or F
Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting
process - (correct Answer) - F
,T or F
The origins of accounting are attributed to Luca Pacioli, a famous mathematician - (correct Answer) - T
T or F
The State Administration of Taxation in the People's Republic of China is an example of an internal user of
accounting informa - (correct Answer) - F
T or F
The German Confederation of Trade Union is an example of an external user of accounting information -
(correct Answer) - T
T or F
Accountants rely on a fundamental business concept - ethical behaviour - in reporting financial information -
(correct Answer) - T
T or F
The process of reducing the differences between GAAP and IFRS is known as convergence - (correct Answer) - T
T or F
Even though a partnership is not a separate legal entity, for accounting purposes the partnership affairs should
be kept separate from the personal activities of the owner - (correct Answer) - T
T or F
The economic entity assumption requires that the activities of an entity be kept separate and distinct from the
activities of its owner and all other economic entities - (correct Answer) - T
T or F
The monetary unit assumption states that transactions that can be measured in terms of money should be
recorded in the accounting records - (correct Answer) - T
T or F
In order to possess future service potential, an asset must have physical substance - (correct Answer) - F
T or F
Owners' claims to total business assets take precedence over the claims of credits because owners invest
assets in the business and are liable for losses. - (correct Answer) - F
T or F
The basic accounting equation states that Assets = Liabilities - (correct Answer) - F
, T or F
Share capital is the total amount paid in by shareholders for shares purchased - (correct Answer) - T
T or F
The principal source of equity is amounts paid in by shareholders - (correct Answer) - F
T or F
Expenses are increases in equity that result from operating the business - (correct Answer) - F
T or F
The two components of equity are retained earnings and share capital - (correct Answer) - T
T or F
The purchase of an asset on account increases assets and decreases equity - (correct Answer) - F
T or F
Providing services for cash increases assets and equity - (correct Answer) - T
T or F
Accountants record both internal and external transactions - (correct Answer) - T
T or F
Internal transactions do not affect the basic accounting equations because they are economic events that occur
entirely within one company - (correct Answer) - F
T or F
The purchase of store equipment for cash reduces the equity by an equal amount - (correct Answer) - F
T or F
The purchase of office equipment on credit increases total assets and total liabilities - (correct Answer) - T
T or F
The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash
payments of a company during a period - (correct Answer) - T
T or F
Net income for the period is determined by subtracting total expenses and dividends from total revenues -
(correct Answer) - F
T or F
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T or F,
Owners of business firms are the only people who need accounting information - (correct Answer) - F
T or F
Transactions that can be measured in dollars and cents are recorded in the financial information system -
(correct Answer) - T
T or F
The hiring of a new company president is an economic event recorded by the financial information system -
(correct Answer) - F
T or F
Management of a business enterprise is the major external user of information - (correct Answer) - F
T or F
Accounting communicates financial information about a business enterprise to both internal and external users
- (correct Answer) - T
T or F
Accounting information is used only by external users with a financial interest in a business enterprise - (correct
Answer) - F
T or F
Financial statements are the major means of communicating accounting information to interested parties -
(correct Answer) - T
T or F
Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting
process - (correct Answer) - F
,T or F
The origins of accounting are attributed to Luca Pacioli, a famous mathematician - (correct Answer) - T
T or F
The State Administration of Taxation in the People's Republic of China is an example of an internal user of
accounting informa - (correct Answer) - F
T or F
The German Confederation of Trade Union is an example of an external user of accounting information -
(correct Answer) - T
T or F
Accountants rely on a fundamental business concept - ethical behaviour - in reporting financial information -
(correct Answer) - T
T or F
The process of reducing the differences between GAAP and IFRS is known as convergence - (correct Answer) - T
T or F
Even though a partnership is not a separate legal entity, for accounting purposes the partnership affairs should
be kept separate from the personal activities of the owner - (correct Answer) - T
T or F
The economic entity assumption requires that the activities of an entity be kept separate and distinct from the
activities of its owner and all other economic entities - (correct Answer) - T
T or F
The monetary unit assumption states that transactions that can be measured in terms of money should be
recorded in the accounting records - (correct Answer) - T
T or F
In order to possess future service potential, an asset must have physical substance - (correct Answer) - F
T or F
Owners' claims to total business assets take precedence over the claims of credits because owners invest
assets in the business and are liable for losses. - (correct Answer) - F
T or F
The basic accounting equation states that Assets = Liabilities - (correct Answer) - F
, T or F
Share capital is the total amount paid in by shareholders for shares purchased - (correct Answer) - T
T or F
The principal source of equity is amounts paid in by shareholders - (correct Answer) - F
T or F
Expenses are increases in equity that result from operating the business - (correct Answer) - F
T or F
The two components of equity are retained earnings and share capital - (correct Answer) - T
T or F
The purchase of an asset on account increases assets and decreases equity - (correct Answer) - F
T or F
Providing services for cash increases assets and equity - (correct Answer) - T
T or F
Accountants record both internal and external transactions - (correct Answer) - T
T or F
Internal transactions do not affect the basic accounting equations because they are economic events that occur
entirely within one company - (correct Answer) - F
T or F
The purchase of store equipment for cash reduces the equity by an equal amount - (correct Answer) - F
T or F
The purchase of office equipment on credit increases total assets and total liabilities - (correct Answer) - T
T or F
The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash
payments of a company during a period - (correct Answer) - T
T or F
Net income for the period is determined by subtracting total expenses and dividends from total revenues -
(correct Answer) - F
T or F
