Chapter 01 - Introduction to Accounting and Business
1. A merchandising business buys products from other businesses to sell to customers.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-01
2. The role of accounting is to provide many different users with financial information to make economic
decisions.
a. True
ANS: True
DIF: Moderate; Bloom's: Remembering | REF: 01-01
3. Accounting information users need reports about the economic activities and condition of businesses.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-01
4. Managerial accounting information is used by external and internal users equally.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-01
5. Senior executives cannot be criminally prosecuted for the wrongdoings they commit on behalf of the
companies where they work.
a. False
ANS: False
DIF: Easy; Bloom's: Understanding | REF: 01-01
6. Financial accounting provides information to all users, while the main focus for managerial accounting is to
provide information to the management.
a. True
ANS: True
DIF: Moderate; Bloom's: Remembering | REF: 01-01
,7. Proper ethical conduct implies that you only consider what's in your best interest.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-01
8. Some of the major fraudulent acts committed by senior executives started as what they considered to be small
ethical lapses that grew out of control.
a. True
ANS: True
DIF: Moderate; Bloom's: Remembering | REF: 01-01
9. A business is an organization in which basic resources or inputs, such as materials and labor, are assembled and
processed to provide outputs in the form of goods or services to customers.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-01
10. Two factors that typically lead to ethical violations are relevance and timeliness of accounting information.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-01
11. Financial accounting reports are relevant only to users within the business.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-01
12. The Sarbanes-Oxley Act established standards for corporate responsibility and disclosure.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-01
13. The main objective for all business is to maximize unrealized profits.
a. False
ANS: False
,DIF: Easy; Bloom's: Understanding | REF: 01-01
14. The primary role of accounting is to determine the amount of taxes a business will be required to pay to
taxing entities.
a. False
ANS: False
DIF: Moderate; Bloom's: Understanding | REF: 01-01
15. The basic difference between manufacturing and merchandising companies is the completion level of the
products they purchase for resale to customers.
a. True
ANS: True
DIF: Easy; Bloom's: Understanding | REF: 01-01
16. An example of an external user of accounting information is the federal government.
a. True
ANS: True
DIF: Moderate; Bloom's: Understanding | REF: 01-01
17. Proprietorships are owned by one owner and provide only services to their customers.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-02
18. About 90% of the businesses in the United States are organized as corporations.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-02
19. The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for
developing accounting principles.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-02
20. The cost concept is the basis for entering the purchase price into the accounting records.
, a. True
ANS: True
DIF: Moderate; Bloom's: Remembering | REF: 01-02
21. The unit of measurement concept requires that economic data be recorded in dollars.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-02
22. If a building is appraised for $85,000, it is offered for sale at $90,000, and the buyer pays $80,000 cash for it,
the buyer would record the building at $85,000.
a. False
ANS: False
DIF: Moderate; Bloom's: Applying | REF: 01-02
23. The financial statements of a proprietorship should include the owner's personal assets and liabilities.
a. False
ANS: False
DIF: Moderate; Bloom's: Remembering | REF: 01-02; 01-05
24. No significant differences exist between the accounting standards issued by the FASB and the IASB.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-02
25. Generally accepted accounting principles regulate how and what financial information is reported by
businesses.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-02
26. The IASB maintains an electronic database, called the Accounting Standards Codification, which contains all of
the accounting standards that make up GAAP.
a. False
ANS: False
1. A merchandising business buys products from other businesses to sell to customers.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-01
2. The role of accounting is to provide many different users with financial information to make economic
decisions.
a. True
ANS: True
DIF: Moderate; Bloom's: Remembering | REF: 01-01
3. Accounting information users need reports about the economic activities and condition of businesses.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-01
4. Managerial accounting information is used by external and internal users equally.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-01
5. Senior executives cannot be criminally prosecuted for the wrongdoings they commit on behalf of the
companies where they work.
a. False
ANS: False
DIF: Easy; Bloom's: Understanding | REF: 01-01
6. Financial accounting provides information to all users, while the main focus for managerial accounting is to
provide information to the management.
a. True
ANS: True
DIF: Moderate; Bloom's: Remembering | REF: 01-01
,7. Proper ethical conduct implies that you only consider what's in your best interest.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-01
8. Some of the major fraudulent acts committed by senior executives started as what they considered to be small
ethical lapses that grew out of control.
a. True
ANS: True
DIF: Moderate; Bloom's: Remembering | REF: 01-01
9. A business is an organization in which basic resources or inputs, such as materials and labor, are assembled and
processed to provide outputs in the form of goods or services to customers.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-01
10. Two factors that typically lead to ethical violations are relevance and timeliness of accounting information.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-01
11. Financial accounting reports are relevant only to users within the business.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-01
12. The Sarbanes-Oxley Act established standards for corporate responsibility and disclosure.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-01
13. The main objective for all business is to maximize unrealized profits.
a. False
ANS: False
,DIF: Easy; Bloom's: Understanding | REF: 01-01
14. The primary role of accounting is to determine the amount of taxes a business will be required to pay to
taxing entities.
a. False
ANS: False
DIF: Moderate; Bloom's: Understanding | REF: 01-01
15. The basic difference between manufacturing and merchandising companies is the completion level of the
products they purchase for resale to customers.
a. True
ANS: True
DIF: Easy; Bloom's: Understanding | REF: 01-01
16. An example of an external user of accounting information is the federal government.
a. True
ANS: True
DIF: Moderate; Bloom's: Understanding | REF: 01-01
17. Proprietorships are owned by one owner and provide only services to their customers.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-02
18. About 90% of the businesses in the United States are organized as corporations.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-02
19. The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for
developing accounting principles.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-02
20. The cost concept is the basis for entering the purchase price into the accounting records.
, a. True
ANS: True
DIF: Moderate; Bloom's: Remembering | REF: 01-02
21. The unit of measurement concept requires that economic data be recorded in dollars.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-02
22. If a building is appraised for $85,000, it is offered for sale at $90,000, and the buyer pays $80,000 cash for it,
the buyer would record the building at $85,000.
a. False
ANS: False
DIF: Moderate; Bloom's: Applying | REF: 01-02
23. The financial statements of a proprietorship should include the owner's personal assets and liabilities.
a. False
ANS: False
DIF: Moderate; Bloom's: Remembering | REF: 01-02; 01-05
24. No significant differences exist between the accounting standards issued by the FASB and the IASB.
a. False
ANS: False
DIF: Easy; Bloom's: Remembering | REF: 01-02
25. Generally accepted accounting principles regulate how and what financial information is reported by
businesses.
a. True
ANS: True
DIF: Easy; Bloom's: Remembering | REF: 01-02
26. The IASB maintains an electronic database, called the Accounting Standards Codification, which contains all of
the accounting standards that make up GAAP.
a. False
ANS: False
