ACCT 2101 Exam 1 (CH 1-4) Questions With
Correct Answers
Sole |Proprietorship |- |CORRECT |ANSWER✔✔-a |business |owned |by |one |person. |The |business |is |
a |separate |entity |for |accounting |purposes. |However, |a |proprietorship |is |not |a |separate |legal |
entity |from |its |owner.
Partnership |- |CORRECT |ANSWER✔✔-a |business |owned |by |two |or |more |people, |called |
partners, |who |are |jointly |liable |for |tax |and |other |obligations. |Like |a |proprietorship, |no |special |
legal |requirements |must |be |met |in |starting |a |partnership. |The |only |requirement |is |an |
agreement |between |partners |to |run |a |business |together. |The |agreement |can |be |either |oral |or |
written |and |usually |indicates |how |income |and |losses |are |to |be |shared. |A |partnership, |like |a |
proprietorship, |is |not |legally |separate |from |its |owners.
Corporation |- |CORRECT |ANSWER✔✔-a |business |legally |separate |from |its |owner |or |owners, |
meaning |it |is |responsible |for |its |own |acts |and |its |own |debts. |Separate |legal |status |means |that |
a |corporation |can |conduct |business |with |the |rights, |duties, |and |responsibilities |of |a |person. |A |
corporation |acts |through |its |managers, |who |are |its |legal |agents. |Separate |legal |status |also |
means |that |its |owners, |who |are |called |shareholders/stockholders |are |not |personally |liable |for |
corporate |acts |and |debts.
Accounting |- |CORRECT |ANSWER✔✔-a |system |that |identifies, |records, |and |communicates |
reliable, |relevant, |and |comparable |information |to |help |users |make |better |decisions
Financial |Accounting |- |CORRECT |ANSWER✔✔-provides |information |primarily |to |External |users |
via |Financial |Statements
aimed |at |serving |external |users |by |providing |them |with |general-purpose |financial |statements
,governed |by |concepts |and |rules |known |as |Generally |Accepted |Accounting |Principles
Generally |Accepted |Accounting |Principles |(GAAP) |- |CORRECT |ANSWER✔✔-aims |to |make |
information |relevant, |comparable, |and |reliable
relevant |- |information |affects |decisions |of |users
comparable |- |information |is |helpful |in |contrasting |organizations
reliable |- |information |is |trusted |by |users
Securities |and |Exchange |Commission |(SEC) |- |CORRECT |ANSWER✔✔-a |government |agency |that
|has |the |legal |authority |to |establish |reporting |requirements |and |set |GAAP |for |companies |that |
issue |stock |to |the |public
oversees |proper |use |of |GAAP |by |companies |that |raise |money |from |the |public |through |
issuance |of |stock |and |debt
Financial |Accounting |Standards |Board |(FASB) |- |CORRECT |ANSWER✔✔-private |group |that |sets |
both |broad |and |specific |accounting |principles
Measurement |Principle |/ |Cost |Principle |- |CORRECT |ANSWER✔✔-accounting |information |
should |be |based |on |actual |cost
cost |is |measured |on |a |cash |or |equal-to |cash |basis
Revenue |Recognition |Principle |- |CORRECT |ANSWER✔✔-provides |guidance |on |when |a |
company |must |recognize |revenue
revenue |is |recognized |when |goods |or |services |are |provided |to |customers
, to |recognize |means |to |record |it. |If |revenue |is |recognized |too |early, |a |company |would |look |
more |profitable |than |it |is. |If |revenue |is |recognized |too |late, |a |company |would |look |less |
profitable |than |it |is.
Matching |Principle |/ |Expense |Recognition |- |CORRECT |ANSWER✔✔-prescribes |that |a |company |
record |the |expenses |it |incurred |to |generate |the |revenue |reported
Full |Disclosure |Principle |- |CORRECT |ANSWER✔✔-requires |a |company |to |include |all |
information |in |financial |statements |that |would |impact |users' |decisions
Accounting |Principles |- |CORRECT |ANSWER✔✔-Measurement |Principle |/ |Cost |Principle
Revenue |Recognition |Principle
Matching |Principle |/ |Expense |Recognition
Full |Disclosure |Principle
Accounting |Assumptions |- |CORRECT |ANSWER✔✔-Going-Concern |Assumption
Monetary |Unit |Assumption
Time |Period |Assumption
Business |Entity |Assumption
Going-Concern |Assumption |- |CORRECT |ANSWER✔✔-accounting |information |reflects |a |
presumption |that |the |business |will |continue |operating |instead |of |being |closed/sold
Monetary |Unit |Assumption |- |CORRECT |ANSWER✔✔-transactions |are |expressed |using |"money"
|as |a |common |denominator
Correct Answers
Sole |Proprietorship |- |CORRECT |ANSWER✔✔-a |business |owned |by |one |person. |The |business |is |
a |separate |entity |for |accounting |purposes. |However, |a |proprietorship |is |not |a |separate |legal |
entity |from |its |owner.
Partnership |- |CORRECT |ANSWER✔✔-a |business |owned |by |two |or |more |people, |called |
partners, |who |are |jointly |liable |for |tax |and |other |obligations. |Like |a |proprietorship, |no |special |
legal |requirements |must |be |met |in |starting |a |partnership. |The |only |requirement |is |an |
agreement |between |partners |to |run |a |business |together. |The |agreement |can |be |either |oral |or |
written |and |usually |indicates |how |income |and |losses |are |to |be |shared. |A |partnership, |like |a |
proprietorship, |is |not |legally |separate |from |its |owners.
Corporation |- |CORRECT |ANSWER✔✔-a |business |legally |separate |from |its |owner |or |owners, |
meaning |it |is |responsible |for |its |own |acts |and |its |own |debts. |Separate |legal |status |means |that |
a |corporation |can |conduct |business |with |the |rights, |duties, |and |responsibilities |of |a |person. |A |
corporation |acts |through |its |managers, |who |are |its |legal |agents. |Separate |legal |status |also |
means |that |its |owners, |who |are |called |shareholders/stockholders |are |not |personally |liable |for |
corporate |acts |and |debts.
Accounting |- |CORRECT |ANSWER✔✔-a |system |that |identifies, |records, |and |communicates |
reliable, |relevant, |and |comparable |information |to |help |users |make |better |decisions
Financial |Accounting |- |CORRECT |ANSWER✔✔-provides |information |primarily |to |External |users |
via |Financial |Statements
aimed |at |serving |external |users |by |providing |them |with |general-purpose |financial |statements
,governed |by |concepts |and |rules |known |as |Generally |Accepted |Accounting |Principles
Generally |Accepted |Accounting |Principles |(GAAP) |- |CORRECT |ANSWER✔✔-aims |to |make |
information |relevant, |comparable, |and |reliable
relevant |- |information |affects |decisions |of |users
comparable |- |information |is |helpful |in |contrasting |organizations
reliable |- |information |is |trusted |by |users
Securities |and |Exchange |Commission |(SEC) |- |CORRECT |ANSWER✔✔-a |government |agency |that
|has |the |legal |authority |to |establish |reporting |requirements |and |set |GAAP |for |companies |that |
issue |stock |to |the |public
oversees |proper |use |of |GAAP |by |companies |that |raise |money |from |the |public |through |
issuance |of |stock |and |debt
Financial |Accounting |Standards |Board |(FASB) |- |CORRECT |ANSWER✔✔-private |group |that |sets |
both |broad |and |specific |accounting |principles
Measurement |Principle |/ |Cost |Principle |- |CORRECT |ANSWER✔✔-accounting |information |
should |be |based |on |actual |cost
cost |is |measured |on |a |cash |or |equal-to |cash |basis
Revenue |Recognition |Principle |- |CORRECT |ANSWER✔✔-provides |guidance |on |when |a |
company |must |recognize |revenue
revenue |is |recognized |when |goods |or |services |are |provided |to |customers
, to |recognize |means |to |record |it. |If |revenue |is |recognized |too |early, |a |company |would |look |
more |profitable |than |it |is. |If |revenue |is |recognized |too |late, |a |company |would |look |less |
profitable |than |it |is.
Matching |Principle |/ |Expense |Recognition |- |CORRECT |ANSWER✔✔-prescribes |that |a |company |
record |the |expenses |it |incurred |to |generate |the |revenue |reported
Full |Disclosure |Principle |- |CORRECT |ANSWER✔✔-requires |a |company |to |include |all |
information |in |financial |statements |that |would |impact |users' |decisions
Accounting |Principles |- |CORRECT |ANSWER✔✔-Measurement |Principle |/ |Cost |Principle
Revenue |Recognition |Principle
Matching |Principle |/ |Expense |Recognition
Full |Disclosure |Principle
Accounting |Assumptions |- |CORRECT |ANSWER✔✔-Going-Concern |Assumption
Monetary |Unit |Assumption
Time |Period |Assumption
Business |Entity |Assumption
Going-Concern |Assumption |- |CORRECT |ANSWER✔✔-accounting |information |reflects |a |
presumption |that |the |business |will |continue |operating |instead |of |being |closed/sold
Monetary |Unit |Assumption |- |CORRECT |ANSWER✔✔-transactions |are |expressed |using |"money"
|as |a |common |denominator
