Test Bank for Accounting 29th Edition by Warren, Jones & Tayler | ISBN 9780357899649 | Chapter 1

Test Bank for Accounting, 29th Edition by Carl Warren


Chap 01 29e
Answers Included ✅
Indicate whether the statement is true or false.
1. An account receivable is a claim against a customer resulting from a sale on
account. a. True
b. False

2. An example of an external user of accounting information is the federal government.
a. True
b. False
3. A corporation is a business that is legally separate and distinct from its
owners.
a. True
b. False
4. The role of accounting is to provide many different users with financial information to make economic
decisions.
a. True
b. False
5. The main objective for all businesses is to maximize unrealized
profits.
a. True
b. False
6. Financial accounting provides information to all users, while the main focus for managerial accounting
is to provide information to management.
a. True
b. False
7. Assets that are used up during the process of earning revenue are called expenses.
a. True
b. False
8. Withdrawals paid to owners decrease assets and increase equity.
a. True
b. False
9. An example of a general-purpose financial statement would be a report about projected price increases
related to transportation costs.
a. True
b. False
10. No significant differences exist between the accounting standards issued by the FASB and the
IASB.
a. True
b. False

,Name: Class: Date:

Chap 01 29e

11. The rights or claims to the assets of a business may be subdivided into rights of creditors and rights of
owners.
a. True
b. False
12. The accounting equation can be expressed as Assets – Liabilities = Owner's
Equity.
a. True
b. False
13. The primary financial statements of a proprietorship are the income statement, the statement of owners’
equity, the cash budget, and the balance sheet.
a. True
b. False
14. Investing activities are those activities by which the company obtains funds to start and operate the
business.
a. True
b. False
15. Paying an account payable increases liabilities and decreases assets.
a. True
b. False
16. Purchasing supplies on account increases liabilities and decreases
equity.
a. True
b. False
17. Senior executives cannot be criminally prosecuted for the wrongdoings they commit on behalf of the
companies where they work.
a. True
b. False
18. An income statement is a summary of the revenues and expenses of a business as of a specific
date.
a. True
b. False
19. Managerial accounting information is used by external and internal users
equally.
a. True
b. False
20. The Sarbanes-Oxley Act established standards for corporate responsibility and
disclosure.
a. True
b. False

,21. The financial statements of a proprietorship should include the owner's personal assets and
liabilities.
a. True
b. False


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, Name: Class: Date:

Chap 01 29e

22. Some major fraudulent acts committed by senior executives started as what they considered to be small
ethical lapses that grew out of control.
a. True
b. False
23. The basic difference between manufacturing and retail companies is the completion level of the products
they purchase for resale to customers.
a. True
b. False
24. The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility
for developing accounting principles.
a. True
b. False
25. The owner’s rights to the assets rank ahead of the creditors' rights to the assets.
a. True
b. False
26. The excess of revenue over the expenses incurred in earning the revenue is called
capital.
a. True
b. False
27. Any 12-month accounting period adopted by a company is known as its fiscal
year.
a. True
b. False
28. Proper ethical conduct implies that you only consider what's in your best
interest.
a. True
b. False
29. If net income for a company was $50,000, $20,000 in owner withdrawals were made, and the owners
invested an additional $10,000 in cash, the owners' equity increased by $40,000.
a. True
b. False
30. If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during
the same period, the period's change in total owner's equity was a $200,000 increase.
a. True
b. False
31. Proprietorships have one owner and provide only services to their
customers.
a. True
b. False