Accounting Tools for Business Decisions Making, 8e Paul Kimmel, Jerry t t t t t t t t t
Weygandt, Jill Mitchell (Test Bank All Chapters, 100% Original Verified, A
t t t t t t t t t t t
+ Grade) t
CHAPTER1 t
INTRODUCTION TOFINANCIAL STATEMENTS t t t
CHAPTER LEARNING OBJECTIVES t t
1. Identify the forms of business organization and the uses of accounting information. A sole
t t t t t t t t t t t t t
proprietorship is a business owned by one person. A partnership is a business owned by two or
t t t t t t t t t t t t t t t t t
more people associated as partners. A corporation is a separate legal entity for which evidence of
t t t t t t t t t t t t t t t t
ownership is provided by shares of stock. Internal users are managers who need accounting
t t t t t t t t t t t t t t
information to plan, organize, and run business operations. The primary external users are
t t t t t t t t t t t t t
investors and creditors. Investors (stockholders) use accounting information to decide whether to
t t t t t t t t t t t t
buy, hold, or sell shares of a company‘s stock. Creditors (suppliers and bankers) use accounting
t t t t t t t t t t t t t t t
information to assess the risk of granting credit or loaning money to a business. Other groups
t t t t t t t t t t t t t t t t
who have an indirect interest in a business are taxing authorities, customers, labor unions, and
t t t t t t t t t t t t t t t
regulatory agencies.
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2. Explain the three principal types of business activity. Financing activities involve collecting
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the necessary funds to support the business. Investing activities involve acquiring the resources
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necessary to run the business. Operating activities involve putting the resources of the business
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into action to generate a profit.
t t t t t t
3. Describe the four financial statements and how they are prepared. An income statement
t t t t t t t t t t t t
presents the revenues and expenses of a company for a specific period of time. A retained
t t t t t t t t t t t t t t t t
earnings statement summarizes the changes in retained earnings that have occurred for a
t t t t t t t t t t t t t
specific period of time. A balance sheet reports the assets, liabilities, and stockholders‘ equity of a
t t t t t t t t t t t t t t t t
business at a specific date. A statement of cash flows summarizes information concerning the
t t t t t t t t t t t t t t
cash inflows (receipts) and outflows (payments) for a specific period of time. Assets are resources
t t t t t t t t t t t t t t t
owned by a business. Liabilities are the debts and obligations of the business. Liabilities
t t t t t t t t t t t t t t
represent claims of creditors on the assets of the business. Stockholders‘ equity represents the
t t t t t t t t t t t t t t
claims of owners on the assets of the business. Stockholders‘ equity is subdivided into two parts:
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common stock and retained earnings. The basic accounting equation is Assets = Liabilities +
t t t t t t t t t t t t t t
Stockholders‘ Equity. Within the annual report, the management discussion and analysis
t t t t t t t t t t t
provides management‘s interpretation of the company‘s results and financial position as well as a
t t t t t t t t t t t t t t
discussion of plans for the future. Notes to the financial statements provide additional explanation
t t t t t t t t t t t t t t
or detail to make the financial statements more informative. The auditor‘s report expresses an
t t t t t t t t t t t t t t
opinion as to whether the financial statements present fairly the company‘s results of operations
t t t t t t t t t t t t t t
and financial position.
t t t
*4. Explain the career opportunities in accounting. Accounting offers many different jobs in fields
t t t t t t t t t t t t t
such as public and private accounting, governmental, and forensic accounting. Accounting is a
t t t t t t t t t t t t t
popular major because there are many different types of jobs, with unlimited potential for career
t t t t t t t t t t t t t t t
advancement
t
.
,1-2 Test Bank for Kimmel, Financial Accounting: Tools for Business Decision Making, 10e
t t t t t t t t t t t
Difficulties:
Easy: 143 t
Medium: 101 t
Hard: 12 t
Question List by Section t t t
Business Organization and Accounting Information Uses:
t t t t t
Forms of Business Organization; 47, 48, 202, 246
t t t t t t t t
Sole Proprietorship: 5, 44, 49, 58, 59 t t t t t t
Partnership: 1, 4, 46, 56 t t t t
Corporation: 2, 3, 45, 50, 51, 52, 53, 55, 57, 233, 245 t t t t t t t t t t t
Hybrid Forms of Organization: 60, 61 t t t t t
Users and Uses of Financial Information: 6, 7, 11, 74, 87
t t t t t t t t t t
Internal Users: 62, 63, 64, 75, 77, 82, 234 t t t t t t t t
External Users: 8, 9, 10, 12, 65, 76, 78, 79, 80, 81, 83, 84, 85, 86, 88, 89 t t t t t t t t t t t t t t t t t
Data Analytics: 66, 67, 68, 69, 70, 235, 236
t t t t t t t t
Ethics in Financial Reporting: 71, 72, 73, 237, 255
t t t t t t t t
The Three Types of Business Activity: 97
t t t t t t t
Financing Activities: 13, 15, 18, 90, 91, 93, 94, 95, 96, 97, 102, 109, 117, 118, 119, 238
t t t t t t t t t t t t t t t t t
Investing Activities: 14, 16, 98, 99, 115, 116 t t t t t t t
Operating Activities: 17, 19, 20, 100, 101, 103, 104, 105, 106, 107, 108, 110, 111, 112, 113,
t t t t t t t t t t t t t t t t
114
The Four Financial Statements:
t t t
Income Statement: 21, 22, 23, 24,127, 128, 132, 133, 134, 138, 142, 143
t t t t t t t t t t t t
Retained Earnings Statement: 120, 122, 123, 124, 125, 126, 129, 130, 131, 135, 137, 139, 140,
t t t t t t t t t t t t t t t
141, 144, 145, 146, 147, 148, 149, 150, 154, 164, 169, 178, 181, 252
t t t t t t t t t t t t t
Balance Sheet: 25, 27, 28, 29, 30, 31, 32, 33, 34, 35, 136, 151, 152, 153, 163, 165, 166, 168, t t t t t t t t t t t t t t t t t t t
170, 173, 177, 179, 180, 182, 185, 186, 187, 188, 199, 200, 201, 207, 208, 213, 214, 215, 216,
t t t t t t t t t t t t t t t t t t
217, 218, 219, 220, 221, 222, 225, 229, 239, 240, 241, 253
t t t t t t t t t t t
Statement of Cash Flows: 26, 121, 171, 174, 183, 242, 249 t t t t t t t t t t
Interrelationships of Statements: 155, 156, 157, 158, 159, 160, 161, 162, 167, 175, 176, 184, t t t t t t t t t t t t t t
250, 251, 256 t t
Elements of an Annual Report: 36, 41, 192, 196, 197 t t t t t t t t t
Management Discussion and Analysis: 40, 191 t t t t t
Notes to the Financial Statements: 37, 42, 190, 193, 194, 198, 254
t t t t t t t t t t t
Auditor‘s Report: 38, 39, 195 t t t t
.
, Introduction to Financial Statements t t t 1-3
TRUE-FALSE STATEMENTS t
1. A business organized as a separate legal entity and owned by stockholders
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tis a partnership.
t t
Ans: tF, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tPartnership, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
2. Corporate stockholders have no personal liability for the debts of the corporation.
t t t t t t t t t t t
Ans: tT, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tCorporation, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
3. The liability of corporate stockholders is limited to the amount of their investment.
t t t t t t t t t t t t
Ans: tT, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tCorporation, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
4. The majority of U.S. business is transacted by partnerships.
t t t t t t t t
Ans: tF, tLO: t1, tBloom: tK, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tPartnerships, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
5. Sole proprietorships in the United States generate more revenue than the other two forms of
t t t t t t t t t t t t t t
business enterprise.
t t
Ans: tF, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tSole tProprietorship, tBloom: tK, tDifficulty: tEasy, tMin: t1,
t AACSB: tNone, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
6. Owners of business firms are the only people who need accounting information.
t t t t t t t t t t t
Ans: tF, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tUsers tand tUses tof tFinancial tInformation, tBloom: tK,
t Difficulty: tEasy, t Min: t1, tAACSB: t None, tAICPA tBC: tProcess tand t Resource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC:
t None, t IMA: tReporting
7. Some users of accounting information are internal to the company while others are
t t t t t t t t t t t t
external.
t
Ans: tT, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tUsers tand tUses tof tFinancial tInformation, tBloom: tK,
t Difficulty: tEasy, t Min: t1, tAACSB: t None, tAICPA tBC: tProcess tand t Resource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC:
t None, t IMA: tReporting
8. Management of a business enterprise is the major external user of t t t t t t t t t t
taccounting information. t
Ans: tF, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tExternal tUsers, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
9. External users of accounting information include managers who plan, organize, and run a
t t t t t t t t t t t t
business.
t
Ans: tF, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tExternal tUsers, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
10. The accounting information needs and questions of external users vary considerably.
t t t t t t t t t t
Ans: tT, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tExternal tUsers, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
11. Accounting communicates financial information about a business to both internal and
t t t t t t t t t t
external users.
t t
Ans: tT, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tUsers tand tUses tof tFinancial tInformation, tBloom: tK,
t Difficulty: tEasy, t Min: t1, tAACSB: t None, tAICPA tBC: tProcess tand t Resource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC:
t None, t IMA: tReporting
12. Two primary external users of accounting information are investors and creditors.
t t t t t t t t t t
Ans: tT, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tExternal tUsers, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
.
, 1-4 Test Bank for Kimmel, Financial Accounting: Tools for Business Decision Making, 10e
t t t t t t t t t t t
13. Financing activities for corporations include borrowing money and selling shares of their own
t t t t t t t t t t t t
stock.
t
Ans: tT, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tFinancing tActivities, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
14. Investing activities involve collecting the necessary funds to support the business.
t t t t t t t t t t
Ans: tF, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tInvesting tActivities, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
15. The purchase of equipment is an example of a financing activity.
t t t t t t t t t t
Ans: tF, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tFinancing tActivities, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
16. Assets are resources owned by a business that provide future services or benefits to the
t t t t t t t t t t t t t t
business.
t
Ans: tT, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tInvesting tActivities, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
17. Payments by the business to its owners are operating activities.
t t t t t t t t t
Ans: tF, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tOperating tActivities, t Bloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
18. The economic resources owned by a business are called stockholders‘ equity.
t t t t t t t t t t
Ans: tF, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tFinancing tActivities tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
19. Operating activities involve putting the resources of the business into action to generate a
t t t t t t t t t t t t t
profit.
t
Ans: tT, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tOperating tActivities, t Bloom: tC, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
20. A business is usually involved in only two types of activities—financing and investing.
t t t t t t t t t t t t
Ans: tF, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tOperating tActivities, t Bloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
21. Net income for the period is determined by subtracting expenses and dividends
t t t t t t t t t t t
from revenues.
t t
Ans: tF, tLO: t3, tSection: tThe tFour tFinancial tStatements, tSubsection: tIncome tStatement, tBloom: tK, tDifficulty: tMedium, tMin: t1, tAACSB: tNone, tAICPA tBC:
t Process t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
22. A different set of financial statements is usually prepared for each user.
t t t t t t t t t t t
Ans: t F, t LO: t 3, t Section: t The t Four t Financial t Statements, tSubsection: t Income t Statement, t Bloom: t K, t Difficulty: t Easy, t Min: t 1, t AACSB: t None, t AICPA
t BC: t Process tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
23. The heading for an income statement prepared for the year ending December 31, 2025 will
t t t t t t t t t t t t t t
include the line ―As of December 31, 2025.‖
t t t t t t t t
Ans: t F, t LO: t 3, t Section: t The t Four t Financial t Statements, tSubsection: t Income t Statement, t Bloom: t K, t Difficulty: t Easy, t Min: t 1, t AACSB: t None, t AICPA
t BC: t Process tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
24. Net income is another term for revenue.
t t t t t t
Ans: t F, t LO: t 3, t Section: t The t Four t Financial t Statements, tSubsection: t Income t Statement, t Bloom: t K, t Difficulty: t Easy, t Min: t 1, t AACSB: t None, t AICPA
t BC: t Process tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
25. Cash is another term for stockholders‘ equity.
t t t t t t
Ans: tF, tLO: t3, tSection: tThe tFour tFinancial tStatements, tSubsection: tBalance tSheet, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA tBC: tProcess
t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: t None, t IMA: t Reporting
.
Weygandt, Jill Mitchell (Test Bank All Chapters, 100% Original Verified, A
t t t t t t t t t t t
+ Grade) t
CHAPTER1 t
INTRODUCTION TOFINANCIAL STATEMENTS t t t
CHAPTER LEARNING OBJECTIVES t t
1. Identify the forms of business organization and the uses of accounting information. A sole
t t t t t t t t t t t t t
proprietorship is a business owned by one person. A partnership is a business owned by two or
t t t t t t t t t t t t t t t t t
more people associated as partners. A corporation is a separate legal entity for which evidence of
t t t t t t t t t t t t t t t t
ownership is provided by shares of stock. Internal users are managers who need accounting
t t t t t t t t t t t t t t
information to plan, organize, and run business operations. The primary external users are
t t t t t t t t t t t t t
investors and creditors. Investors (stockholders) use accounting information to decide whether to
t t t t t t t t t t t t
buy, hold, or sell shares of a company‘s stock. Creditors (suppliers and bankers) use accounting
t t t t t t t t t t t t t t t
information to assess the risk of granting credit or loaning money to a business. Other groups
t t t t t t t t t t t t t t t t
who have an indirect interest in a business are taxing authorities, customers, labor unions, and
t t t t t t t t t t t t t t t
regulatory agencies.
t t
2. Explain the three principal types of business activity. Financing activities involve collecting
t t t t t t t t t t t
the necessary funds to support the business. Investing activities involve acquiring the resources
t t t t t t t t t t t t t
necessary to run the business. Operating activities involve putting the resources of the business
t t t t t t t t t t t t t t
into action to generate a profit.
t t t t t t
3. Describe the four financial statements and how they are prepared. An income statement
t t t t t t t t t t t t
presents the revenues and expenses of a company for a specific period of time. A retained
t t t t t t t t t t t t t t t t
earnings statement summarizes the changes in retained earnings that have occurred for a
t t t t t t t t t t t t t
specific period of time. A balance sheet reports the assets, liabilities, and stockholders‘ equity of a
t t t t t t t t t t t t t t t t
business at a specific date. A statement of cash flows summarizes information concerning the
t t t t t t t t t t t t t t
cash inflows (receipts) and outflows (payments) for a specific period of time. Assets are resources
t t t t t t t t t t t t t t t
owned by a business. Liabilities are the debts and obligations of the business. Liabilities
t t t t t t t t t t t t t t
represent claims of creditors on the assets of the business. Stockholders‘ equity represents the
t t t t t t t t t t t t t t
claims of owners on the assets of the business. Stockholders‘ equity is subdivided into two parts:
t t t t t t t t t t t t t t t t
common stock and retained earnings. The basic accounting equation is Assets = Liabilities +
t t t t t t t t t t t t t t
Stockholders‘ Equity. Within the annual report, the management discussion and analysis
t t t t t t t t t t t
provides management‘s interpretation of the company‘s results and financial position as well as a
t t t t t t t t t t t t t t
discussion of plans for the future. Notes to the financial statements provide additional explanation
t t t t t t t t t t t t t t
or detail to make the financial statements more informative. The auditor‘s report expresses an
t t t t t t t t t t t t t t
opinion as to whether the financial statements present fairly the company‘s results of operations
t t t t t t t t t t t t t t
and financial position.
t t t
*4. Explain the career opportunities in accounting. Accounting offers many different jobs in fields
t t t t t t t t t t t t t
such as public and private accounting, governmental, and forensic accounting. Accounting is a
t t t t t t t t t t t t t
popular major because there are many different types of jobs, with unlimited potential for career
t t t t t t t t t t t t t t t
advancement
t
.
,1-2 Test Bank for Kimmel, Financial Accounting: Tools for Business Decision Making, 10e
t t t t t t t t t t t
Difficulties:
Easy: 143 t
Medium: 101 t
Hard: 12 t
Question List by Section t t t
Business Organization and Accounting Information Uses:
t t t t t
Forms of Business Organization; 47, 48, 202, 246
t t t t t t t t
Sole Proprietorship: 5, 44, 49, 58, 59 t t t t t t
Partnership: 1, 4, 46, 56 t t t t
Corporation: 2, 3, 45, 50, 51, 52, 53, 55, 57, 233, 245 t t t t t t t t t t t
Hybrid Forms of Organization: 60, 61 t t t t t
Users and Uses of Financial Information: 6, 7, 11, 74, 87
t t t t t t t t t t
Internal Users: 62, 63, 64, 75, 77, 82, 234 t t t t t t t t
External Users: 8, 9, 10, 12, 65, 76, 78, 79, 80, 81, 83, 84, 85, 86, 88, 89 t t t t t t t t t t t t t t t t t
Data Analytics: 66, 67, 68, 69, 70, 235, 236
t t t t t t t t
Ethics in Financial Reporting: 71, 72, 73, 237, 255
t t t t t t t t
The Three Types of Business Activity: 97
t t t t t t t
Financing Activities: 13, 15, 18, 90, 91, 93, 94, 95, 96, 97, 102, 109, 117, 118, 119, 238
t t t t t t t t t t t t t t t t t
Investing Activities: 14, 16, 98, 99, 115, 116 t t t t t t t
Operating Activities: 17, 19, 20, 100, 101, 103, 104, 105, 106, 107, 108, 110, 111, 112, 113,
t t t t t t t t t t t t t t t t
114
The Four Financial Statements:
t t t
Income Statement: 21, 22, 23, 24,127, 128, 132, 133, 134, 138, 142, 143
t t t t t t t t t t t t
Retained Earnings Statement: 120, 122, 123, 124, 125, 126, 129, 130, 131, 135, 137, 139, 140,
t t t t t t t t t t t t t t t
141, 144, 145, 146, 147, 148, 149, 150, 154, 164, 169, 178, 181, 252
t t t t t t t t t t t t t
Balance Sheet: 25, 27, 28, 29, 30, 31, 32, 33, 34, 35, 136, 151, 152, 153, 163, 165, 166, 168, t t t t t t t t t t t t t t t t t t t
170, 173, 177, 179, 180, 182, 185, 186, 187, 188, 199, 200, 201, 207, 208, 213, 214, 215, 216,
t t t t t t t t t t t t t t t t t t
217, 218, 219, 220, 221, 222, 225, 229, 239, 240, 241, 253
t t t t t t t t t t t
Statement of Cash Flows: 26, 121, 171, 174, 183, 242, 249 t t t t t t t t t t
Interrelationships of Statements: 155, 156, 157, 158, 159, 160, 161, 162, 167, 175, 176, 184, t t t t t t t t t t t t t t
250, 251, 256 t t
Elements of an Annual Report: 36, 41, 192, 196, 197 t t t t t t t t t
Management Discussion and Analysis: 40, 191 t t t t t
Notes to the Financial Statements: 37, 42, 190, 193, 194, 198, 254
t t t t t t t t t t t
Auditor‘s Report: 38, 39, 195 t t t t
.
, Introduction to Financial Statements t t t 1-3
TRUE-FALSE STATEMENTS t
1. A business organized as a separate legal entity and owned by stockholders
t t t t t t t t t t t
tis a partnership.
t t
Ans: tF, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tPartnership, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
2. Corporate stockholders have no personal liability for the debts of the corporation.
t t t t t t t t t t t
Ans: tT, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tCorporation, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
3. The liability of corporate stockholders is limited to the amount of their investment.
t t t t t t t t t t t t
Ans: tT, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tCorporation, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
4. The majority of U.S. business is transacted by partnerships.
t t t t t t t t
Ans: tF, tLO: t1, tBloom: tK, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tPartnerships, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
5. Sole proprietorships in the United States generate more revenue than the other two forms of
t t t t t t t t t t t t t t
business enterprise.
t t
Ans: tF, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tSole tProprietorship, tBloom: tK, tDifficulty: tEasy, tMin: t1,
t AACSB: tNone, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
6. Owners of business firms are the only people who need accounting information.
t t t t t t t t t t t
Ans: tF, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tUsers tand tUses tof tFinancial tInformation, tBloom: tK,
t Difficulty: tEasy, t Min: t1, tAACSB: t None, tAICPA tBC: tProcess tand t Resource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC:
t None, t IMA: tReporting
7. Some users of accounting information are internal to the company while others are
t t t t t t t t t t t t
external.
t
Ans: tT, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tUsers tand tUses tof tFinancial tInformation, tBloom: tK,
t Difficulty: tEasy, t Min: t1, tAACSB: t None, tAICPA tBC: tProcess tand t Resource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC:
t None, t IMA: tReporting
8. Management of a business enterprise is the major external user of t t t t t t t t t t
taccounting information. t
Ans: tF, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tExternal tUsers, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
9. External users of accounting information include managers who plan, organize, and run a
t t t t t t t t t t t t
business.
t
Ans: tF, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tExternal tUsers, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
10. The accounting information needs and questions of external users vary considerably.
t t t t t t t t t t
Ans: tT, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tExternal tUsers, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
11. Accounting communicates financial information about a business to both internal and
t t t t t t t t t t
external users.
t t
Ans: tT, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tUsers tand tUses tof tFinancial tInformation, tBloom: tK,
t Difficulty: tEasy, t Min: t1, tAACSB: t None, tAICPA tBC: tProcess tand t Resource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC:
t None, t IMA: tReporting
12. Two primary external users of accounting information are investors and creditors.
t t t t t t t t t t
Ans: tT, tLO: t1, tSection: tBusiness tOrganization tand tAccounting tInformation tUses, tSubsection: tExternal tUsers, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB:
t None, tAICPA tBC: tProcess tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
.
, 1-4 Test Bank for Kimmel, Financial Accounting: Tools for Business Decision Making, 10e
t t t t t t t t t t t
13. Financing activities for corporations include borrowing money and selling shares of their own
t t t t t t t t t t t t
stock.
t
Ans: tT, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tFinancing tActivities, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
14. Investing activities involve collecting the necessary funds to support the business.
t t t t t t t t t t
Ans: tF, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tInvesting tActivities, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
15. The purchase of equipment is an example of a financing activity.
t t t t t t t t t t
Ans: tF, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tFinancing tActivities, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
16. Assets are resources owned by a business that provide future services or benefits to the
t t t t t t t t t t t t t t
business.
t
Ans: tT, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tInvesting tActivities, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
17. Payments by the business to its owners are operating activities.
t t t t t t t t t
Ans: tF, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tOperating tActivities, t Bloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
18. The economic resources owned by a business are called stockholders‘ equity.
t t t t t t t t t t
Ans: tF, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tFinancing tActivities tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
19. Operating activities involve putting the resources of the business into action to generate a
t t t t t t t t t t t t t
profit.
t
Ans: tT, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tOperating tActivities, t Bloom: tC, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
20. A business is usually involved in only two types of activities—financing and investing.
t t t t t t t t t t t t
Ans: tF, tLO: t2, tSection: tThe tThree tTypes tof tBusiness tActivity, tSubsection: tOperating tActivities, t Bloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA
t BC: tProcess t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
21. Net income for the period is determined by subtracting expenses and dividends
t t t t t t t t t t t
from revenues.
t t
Ans: tF, tLO: t3, tSection: tThe tFour tFinancial tStatements, tSubsection: tIncome tStatement, tBloom: tK, tDifficulty: tMedium, tMin: t1, tAACSB: tNone, tAICPA tBC:
t Process t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
22. A different set of financial statements is usually prepared for each user.
t t t t t t t t t t t
Ans: t F, t LO: t 3, t Section: t The t Four t Financial t Statements, tSubsection: t Income t Statement, t Bloom: t K, t Difficulty: t Easy, t Min: t 1, t AACSB: t None, t AICPA
t BC: t Process tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
23. The heading for an income statement prepared for the year ending December 31, 2025 will
t t t t t t t t t t t t t t
include the line ―As of December 31, 2025.‖
t t t t t t t t
Ans: t F, t LO: t 3, t Section: t The t Four t Financial t Statements, tSubsection: t Income t Statement, t Bloom: t K, t Difficulty: t Easy, t Min: t 1, t AACSB: t None, t AICPA
t BC: t Process tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
24. Net income is another term for revenue.
t t t t t t
Ans: t F, t LO: t 3, t Section: t The t Four t Financial t Statements, tSubsection: t Income t Statement, t Bloom: t K, t Difficulty: t Easy, t Min: t 1, t AACSB: t None, t AICPA
t BC: t Process tand tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: tNone, t IMA: tReporting
25. Cash is another term for stockholders‘ equity.
t t t t t t
Ans: tF, tLO: t3, tSection: tThe tFour tFinancial tStatements, tSubsection: tBalance tSheet, tBloom: tK, tDifficulty: tEasy, tMin: t1, tAACSB: tNone, tAICPA tBC: tProcess
t and tResource t Management tPerspectives, tAICPA tAC: tReporting, tAICPA tPC: t None, t IMA: t Reporting
.
