Test Bank
,Name: Class: Date:
Chapter 01: Introduction to Accounting and Business
1. A corporation is a business that is legally separate and distinct from its owners.
a. True
b. False
ANSWER: True
2. The role of accounting is to provide many different users with financial information to make economic decisions.
a. True
b. False
ANSWER: True
3. Investing activities are those activities by which the company obtains funds to start and operate the business.
a. True
b. False
ANSWER: False
4. Managerial accounting information is used by external and internal users equally.
a. True
b. False
ANSWER: False
5. Senior executives cannot be criminally prosecuted for the wrong doings they commit on behalf of the companies where
they work.
a. True
b. False
ANSWER: False
6. Financial accounting provides information to all users, while the main focus for managerial accounting is to provide
information to the management.
a. True
b. False
ANSWER: True
7. Proper ethical conduct implies that you only consider what's in your best interest.
a. True
b. False
ANSWER: False
8. Some of the major fraudulent acts by senior executives started as what they considered to be small ethical lapses that
grew out of control.
a. True
b. False
ANSWER: True
9. 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.
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,Name: Class: Date:
Chapter 01: Introduction to Accounting and Business
a. True
b. False ANSWER: True
10. Operating activities are those activities by which a company generates revenues from customers.
a. True
b. False ANSWER: True
11. An example of a general-purpose financial statement would be a report about projected price increases related
to transportation costs.
a. True
b. False ANSWER: False
12. The Sarbanes-Oxley Act established standards for corporate responsibility and disclosure.
a. True
b. False ANSWER: True
13. The main objective for all businesses is to maximize unrealized profits.
a. True
b. False ANSWER: False
14. The primary role of accounting is to determine the amount of taxes a business will be required to pay to
taxing entities.
a. True
b. False ANSWER: False
15. 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 ANSWER: True
16. Proprietorships are owned by one owner and provide only services to their customers.
a. True
b. False ANSWER: False
17. About 90% of the businesses in the United States are organized as corporations.
a. True
b. False
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, Name: Class: Date:
Chapter 01: Introduction to Accounting and Business
ANSWER: False
18. An example of an external user of accounting information is the federal government.
a. True
b. False
ANSWER: True
19. The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for
developing accounting principles.
a. True
b. False
ANSWER: True
20. The cost principle is the basis for entering the purchase price into the accounting records.
a. True
b. False
ANSWER: True
21. The monetary unit assumption requires that economic data be recorded in dollars for companies in the United States.
a. True
b. False
ANSWER: True
22. If a building is appraised for $85,000, 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. True
b. False
ANSWER: False
23. The financial statements of a proprietorship should include the owner's personal assets and liabilities.
a. True
b. False
ANSWER: False
24. No significant differences exist between the accounting standards issued by the FASB and the IASB.
a. True
b. False
ANSWER: False
25. Generally accepted accounting principles regulate how and what financial information is reported by businesses.
a. True
b. False
ANSWER: True
26. The accounting equation can be expressed as Assets – Liabilities = Stockholders' Equity.
Page 3
,Name: Class: Date:
Chapter 01: Introduction to Accounting and Business
1. A corporation is a business that is legally separate and distinct from its owners.
a. True
b. False
ANSWER: True
2. The role of accounting is to provide many different users with financial information to make economic decisions.
a. True
b. False
ANSWER: True
3. Investing activities are those activities by which the company obtains funds to start and operate the business.
a. True
b. False
ANSWER: False
4. Managerial accounting information is used by external and internal users equally.
a. True
b. False
ANSWER: False
5. Senior executives cannot be criminally prosecuted for the wrong doings they commit on behalf of the companies where
they work.
a. True
b. False
ANSWER: False
6. Financial accounting provides information to all users, while the main focus for managerial accounting is to provide
information to the management.
a. True
b. False
ANSWER: True
7. Proper ethical conduct implies that you only consider what's in your best interest.
a. True
b. False
ANSWER: False
8. Some of the major fraudulent acts by senior executives started as what they considered to be small ethical lapses that
grew out of control.
a. True
b. False
ANSWER: True
9. 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.
Page 1
,Name: Class: Date:
Chapter 01: Introduction to Accounting and Business
a. True
b. False ANSWER: True
10. Operating activities are those activities by which a company generates revenues from customers.
a. True
b. False ANSWER: True
11. An example of a general-purpose financial statement would be a report about projected price increases related
to transportation costs.
a. True
b. False ANSWER: False
12. The Sarbanes-Oxley Act established standards for corporate responsibility and disclosure.
a. True
b. False ANSWER: True
13. The main objective for all businesses is to maximize unrealized profits.
a. True
b. False ANSWER: False
14. The primary role of accounting is to determine the amount of taxes a business will be required to pay to
taxing entities.
a. True
b. False ANSWER: False
15. 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 ANSWER: True
16. Proprietorships are owned by one owner and provide only services to their customers.
a. True
b. False ANSWER: False
17. About 90% of the businesses in the United States are organized as corporations.
a. True
b. False
Page 2
, Name: Class: Date:
Chapter 01: Introduction to Accounting and Business
ANSWER: False
18. An example of an external user of accounting information is the federal government.
a. True
b. False
ANSWER: True
19. The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for
developing accounting principles.
a. True
b. False
ANSWER: True
20. The cost principle is the basis for entering the purchase price into the accounting records.
a. True
b. False
ANSWER: True
21. The monetary unit assumption requires that economic data be recorded in dollars for companies in the United States.
a. True
b. False
ANSWER: True
22. If a building is appraised for $85,000, 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. True
b. False
ANSWER: False
23. The financial statements of a proprietorship should include the owner's personal assets and liabilities.
a. True
b. False
ANSWER: False
24. No significant differences exist between the accounting standards issued by the FASB and the IASB.
a. True
b. False
ANSWER: False
25. Generally accepted accounting principles regulate how and what financial information is reported by businesses.
a. True
b. False
ANSWER: True
26. The accounting equation can be expressed as Assets – Liabilities = Stockholders' Equity.
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