Cengage Accounting Exam 1 study guide Questions with Correct Answers Latest Update
2025/2026
A corporation is a business that is legally separate and distinct from its owners. - Answers True
The role of accounting is to provide many different users with financial information to make
economic decisions. - Answers True
Accounting information users need reports about the economic activities and condition of
businesses. - Answers True
Financial accounting provides information to all users, while the main focus for managerial
accounting is to provide information to the management. - Answers True
Proper ethical conduct implies that you only consider what's in your best interest. - Answers
False
A business is an organization in which basic resources or inputs, like materials and labor, are
assembled and processed to provide outputs in the form of goods or services to customers. -
Answers True
All of the following are general-purpose financial statements except - Answers Cash budget
Which of the following is the best description of accounting's role in business? - Answers
Accounting provides information to managers to operate the business and to other users to
make decisions regarding the economic condition of the company.
Which of the following are guidelines for behaving ethically?
I.
Identify the consequences of a decision and its effect on others.
II.
Consider your obligations and responsibilities to those affected by the decision.
III.
Identify your decision based on personal standards of honesty and fairness. - Answers I, II, and
III.
,Which of the items below is not a business entity? - Answers entrepreneurship
An entity that is organized according to state or federal statutes and in which ownership is
divided into shares of stock is a - Answers corporation
On May 20, White Repair Service extended an offer of $108,000 for land that had been priced for
sale at $140,000. On May 30, White Repair Service accepted the seller's counteroffer of
$115,000. On June 20, the land was assessed at a value of $95,000 for property tax purposes.
On July 4, White Repair Service was offered $150,000 for the land by a national retail chain. At
what value should the land be recorded in White Repair Service's records? - Answers $115,000
The initials GAAP stand for:
A) General Accounting Procedures
B) Generally Accepted Plans
C) Generally Accepted Accounting Principles
D) Generally Accepted Accounting Practices - Answers Generally Accepted Accounting
Principles
The business entity concept means that
A) an entity is organized according to state or federal statutes
B) the owner is part of the business entity
C) the entity is an individual economic unit for which data are recorded, analyzed, and reported
D) an entity is organized according to the rules set by the FASB - Answers C) the entity is an
individual economic unit for which data are recorded, analyzed, and reported
For accounting purposes, the business entity should be considered separate from its owners if
the entity is
A) a corporation
B) any of these
C) a partnership
D) a proprietorship - Answers B) any of these
The objectivity concept requires that
A) the Financial Accounting Standards Board be fair and unbiased in its deliberations over new
accounting standards
, B) accounting principles meet the objectives of the Security and Exchange Commission
C) amounts recorded in the financial statements be based on independently verifiable evidence
D) business transactions be consistent with the objectives of the entity - Answers C) amounts
recorded in the financial statements be based on independently verifiable evidence
Which of the following is a business transaction?
A) plan advertising for upcoming sale
B) purchase inventory on account
C) give employees a raise beginning next month
D) submit estimate for construction project - Answers B) purchase inventory on account
Which of the following is not a business transaction? - Answers A) Erin provided services to
customers earning fees of $600.
*B) Erin pays her monthly personal credit card bill.
C) Erin deposits $15,000 in a bank account in the name of Erin's Lawn Service.
D) Erin purchased hedge trimmers for her lawn service agreeing to pay the supplier next month.
Determine the missing amount for each of the following:
Assets Liabilities Owner's equity
$78,500 $37,600 BLANK
BLANK $53,280 $145,000
$49,500 BLANK $34,000 - Answers 1) $40,900
2)$198,280
3)$15,500
Daniels Company is owned and operated by Thomas Daniels. The following selected
transactions were completed by Daniels Company during May:
Received cash from owner as additional investment $55,000.
Paid creditors on account $7,000.
Billed customers for services on account, $2,565.
Received cash from customers on accounts $8,450.
2025/2026
A corporation is a business that is legally separate and distinct from its owners. - Answers True
The role of accounting is to provide many different users with financial information to make
economic decisions. - Answers True
Accounting information users need reports about the economic activities and condition of
businesses. - Answers True
Financial accounting provides information to all users, while the main focus for managerial
accounting is to provide information to the management. - Answers True
Proper ethical conduct implies that you only consider what's in your best interest. - Answers
False
A business is an organization in which basic resources or inputs, like materials and labor, are
assembled and processed to provide outputs in the form of goods or services to customers. -
Answers True
All of the following are general-purpose financial statements except - Answers Cash budget
Which of the following is the best description of accounting's role in business? - Answers
Accounting provides information to managers to operate the business and to other users to
make decisions regarding the economic condition of the company.
Which of the following are guidelines for behaving ethically?
I.
Identify the consequences of a decision and its effect on others.
II.
Consider your obligations and responsibilities to those affected by the decision.
III.
Identify your decision based on personal standards of honesty and fairness. - Answers I, II, and
III.
,Which of the items below is not a business entity? - Answers entrepreneurship
An entity that is organized according to state or federal statutes and in which ownership is
divided into shares of stock is a - Answers corporation
On May 20, White Repair Service extended an offer of $108,000 for land that had been priced for
sale at $140,000. On May 30, White Repair Service accepted the seller's counteroffer of
$115,000. On June 20, the land was assessed at a value of $95,000 for property tax purposes.
On July 4, White Repair Service was offered $150,000 for the land by a national retail chain. At
what value should the land be recorded in White Repair Service's records? - Answers $115,000
The initials GAAP stand for:
A) General Accounting Procedures
B) Generally Accepted Plans
C) Generally Accepted Accounting Principles
D) Generally Accepted Accounting Practices - Answers Generally Accepted Accounting
Principles
The business entity concept means that
A) an entity is organized according to state or federal statutes
B) the owner is part of the business entity
C) the entity is an individual economic unit for which data are recorded, analyzed, and reported
D) an entity is organized according to the rules set by the FASB - Answers C) the entity is an
individual economic unit for which data are recorded, analyzed, and reported
For accounting purposes, the business entity should be considered separate from its owners if
the entity is
A) a corporation
B) any of these
C) a partnership
D) a proprietorship - Answers B) any of these
The objectivity concept requires that
A) the Financial Accounting Standards Board be fair and unbiased in its deliberations over new
accounting standards
, B) accounting principles meet the objectives of the Security and Exchange Commission
C) amounts recorded in the financial statements be based on independently verifiable evidence
D) business transactions be consistent with the objectives of the entity - Answers C) amounts
recorded in the financial statements be based on independently verifiable evidence
Which of the following is a business transaction?
A) plan advertising for upcoming sale
B) purchase inventory on account
C) give employees a raise beginning next month
D) submit estimate for construction project - Answers B) purchase inventory on account
Which of the following is not a business transaction? - Answers A) Erin provided services to
customers earning fees of $600.
*B) Erin pays her monthly personal credit card bill.
C) Erin deposits $15,000 in a bank account in the name of Erin's Lawn Service.
D) Erin purchased hedge trimmers for her lawn service agreeing to pay the supplier next month.
Determine the missing amount for each of the following:
Assets Liabilities Owner's equity
$78,500 $37,600 BLANK
BLANK $53,280 $145,000
$49,500 BLANK $34,000 - Answers 1) $40,900
2)$198,280
3)$15,500
Daniels Company is owned and operated by Thomas Daniels. The following selected
transactions were completed by Daniels Company during May:
Received cash from owner as additional investment $55,000.
Paid creditors on account $7,000.
Billed customers for services on account, $2,565.
Received cash from customers on accounts $8,450.
