Question 1

Preparing tax returns and engaging in tax planning is performed by
A) public accountants only.
B) private accountants only.
C) both public and private accountants.
D) IRS accountants only.

Accepted Answer

Both public and private accountants can prepare tax returns and engage in tax planning. Public accountants work for accounting firms and provide services to individuals and businesses, while private accountants work in-house for a specific company or organization. The IRS also has accountants who process tax returns, but they do not engage in tax planning for individuals or businesses.

Question 2

Which of the following is not part of the accounting process?
A) Recording
B) Identifying
C) Financial decision making
D) Communicating

Accepted Answer

The accounting process involves identifying, recording, and communicating financial information. However, financial decision making is a separate process that utilizes the financial information provided through accounting.

Question 3

The Roy's Downtown Diner received a bill of $400 from the Emeril Advertising Agency. The owner, Roy James, is postponing payment of the bill until a later date. The effect on specific items in the basic accounting equation is
A) a decrease in Cash and an increase in Accounts Payable.
B) a decrease in Cash and an increase in Retained Earnings.
C) an increase in Accounts Payable and a decrease in Retained Earnings.
D) a decrease in Accounts Payable and an increase in Retained Earnings.

Accepted Answer

Postponing payment increases Accounts Payable (liability) and decreases Retained Earnings (equity) as it reflects an obligation without immediate cash outflow.

Question 4

Retained earnings at December 31, 2014 is
A) £30,000.
B) £44,000.
C) £54,000.
D) £110,000.

Accepted Answer

Retained earnings at December 31, 2014 can be calculated by adding the net income for the year with the beginning balance of retained earnings and subtracting any dividends paid. 
Beginning retained earnings: £20,000 
Net income for the year: £34,000 
Dividends paid: £-2,000 
£20,000 + £34,000 - £2,000 = £52,000 
Therefore, the closest answer choice is C) £54,000.

Question 5

Most companies in the United States follow standards issued by the
A) Financial Accounting Standards Board.
B) International Accounting Standards Board.
C) Internal Revenue Service.
D) Securities and Exchange Commission.

Accepted Answer

The Financial Accounting Standards Board (FASB) is the primary organization in the United States responsible for developing and issuing generally accepted accounting principles (GAAP) for public and private companies. The International Accounting Standards Board (IASB) develops international financial reporting standards (IFRS) which are used in many countries around the world, but are not mandatory in the United States. The Internal Revenue Service (IRS) is responsible for enforcing tax laws and regulations, but does not regulate accounting standards. The Securities and Exchange Commission (SEC) has regulatory authority over public companies, including oversight of financial reporting, but primarily relies on the FASB to set accounting standards.

Question 6

All of the following are services offered by public accountants except
A) budgeting.
B) auditing.
C) tax planning.
D) consulting.

Accepted Answer

Public accountants commonly offer services such as auditing, tax planning, and consulting; however, they typically do not offer budgeting services. Budgeting is often provided by financial planners, financial analysts, or management accountants.

Question 7

The statement of financial position at December 31, 2014 reports equity of
A) €420,000.
B) €330,000.
C) €180,000.
D) €162,000.

Accepted Answer

Equity can be calculated as Assets - Liabilities. From the statement of financial position, Assets = €780,000 and Liabilities = €450,000. Therefore, Equity = €780,000 - €450,000 = €330,000.

Question 8

Net income (loss) reported on the income statement for the month of December is
A) €252,000.
B) €180,000.
C) €162,000.
D) €96,000.

Accepted Answer

Net income = Sales revenue - Cost of goods sold - Operating expenses - Interest expense + Interest income = €432,000 - €252,000 - €28,000 - €12,000 + €60,000 = €180,000

Question 9

The statement of financial position at December 31, 2014 reports total assets of
A) €320,000.
B) €404,000.
C) €456,000.
D) €486,000.

Accepted Answer

The statement of financial position lists the following assets: 
- Property, plant, and equipment: €250,000 
- Intangible assets: €45,000 
- Inventories: €75,000 
- Trade and other receivables: €50,000 
- Cash and cash equivalents: €66,000 
Total assets = €250,000 + €45,000 + €75,000 + €50,000 + €66,000 = €486,000. Therefore, the correct answer is D.

Question 10

Fontaine Fox Company buys a $12,000 van on credit. This transaction will affect the
A) income statement only.
B) statement of financial position only.
C) income statement and retained earnings statement only.
D) income statement, retained earnings statement, and statement of financial position.

Accepted Answer

The purchase of a van on credit affects the statement of financial position (balance sheet) by increasing assets (the van) and liabilities (the credit). It does not affect the income statement or retained earnings statement directly.

Question 11

Which list below best describes the major services performed by public accountants?
A) Bookkeeping, mergers, budgets.
B) Employee training, auditing, bookkeeping.
C) Auditing, taxation, management consulting.
D) Cost accounting, production scheduling, recruiting.

Accepted Answer

Public accountants primarily provide services in auditing financial statements, assisting with taxation matters, and advising on management consulting issues. The other options provided (bookkeeping, employee training, cost accounting, etc.) may be services that could be provided by an accountant, but they are not the primary focus of public accounting.

Question 12

Internal users of accounting information include all of the following except
A) company officers.
B) investors.
C) marketing managers.
D) production supervisors.

Accepted Answer

Internal users of accounting information typically include individuals within the organization who use the information for planning, controlling, and decision-making purposes. This includes company officers, marketing managers, and production supervisors. Investors, however, are considered external users because they are not part of the company's day-to-day operations and use the information for investment decisions.

Question 13

Keeping a systematic, chronological diary of events that are measured in dollars and cents is called
A) communicating.
B) identifying.
C) processing.
D) recording.

Accepted Answer

Keeping a systematic and chronological diary of events that are measured in dollars and cents is called recording. This involves the tracking and documentation of financial transactions using appropriate accounting methods and tools.

Question 14

A proprietorship is a business
A) owned by one person.
B) owned by two or more persons.
C) organized as a separate legal entity under state corporation law.
D) owned by a governmental agency.

Accepted Answer

A proprietorship is a business owned by one person.

Question 15

The first part of the accounting process is
A) communicating.
B) identifying.
C) processing.
D) recording.

Accepted Answer

The first part of the accounting process is identifying economic events relevant to the business.

Question 16

Equity at December 31, 2014, is
A) £296,000.
B) £242,000.
C) £186,000.
D) £110,000.

Accepted Answer

The answer of Equity at December 31, 2014, is
A) £296,000.
B)...

Question 17

Ryder Company purchases $600 of equipment from Montez Inc. for cash. The effect of this transaction on the components of the basic accounting equation of Ryder Company is
A) an increase in assets and liabilities.
B) a decrease in assets and liabilities.
C) no change in total assets.
D) an increase in assets and a decrease in liabilities.

Accepted Answer

The purchase of equipment for cash results in an increase in one asset (equipment) and a decrease in another asset (cash), leading to no change in total assets.

Question 18

Retained earnings reported on the statement of financial position at December 31, 2014 is
A) €330,000.
B) €252,000.
C) €168,000.
D) €162,000.

Accepted Answer

The answer of Retained earnings reported on the statement of...

Question 19

The statement of financial position at December 31, 2014 reports total liabilities of
A) €60,000.
B) €120,000.
C) €156,000.
D) €238,000.

Accepted Answer

The statement of financial position reports total liabilities of €156,000. This can be verified by adding up all the liabilities listed on the statement of financial position. The liabilities are: trade payables (€48,000), bank overdraft (€22,000), loans payable (€56,000), and tax payable (€30,000), which total €156,000.

Question 20

A private accountant can perform many activities in a business organization but would not work in
A) budgeting.
B) accounting information systems.
C) external auditing.
D) tax accounting.

Accepted Answer

External auditing is typically performed by a third-party auditor, not a private accountant who is an employee of the business. Private accountants can perform budgeting, accounting information systems, and tax accounting within a business organization.

Quiz 1: Accounting in Action

Preparing tax returns and engaging in tax planning is performed by

Which of the following is not part of the accounting process?

The Roy's Downtown Diner received a bill of $400 from the Emeril Advertising Agency. The owner, Roy James, is postponing payment of the bill until a later date. The effect on specific items in the basic accounting equation is

Retained earnings at December 31, 2014 is

Most companies in the United States follow standards issued by the

All of the following are services offered by public accountants except

The statement of financial position at December 31, 2014 reports equity of

Net income (loss) reported on the income statement for the month of December is

The statement of financial position at December 31, 2014 reports total assets of

Fontaine Fox Company buys a $12,000 van on credit. This transaction will affect the

Which list below best describes the major services performed by public accountants?

Internal users of accounting information include all of the following except

Keeping a systematic, chronological diary of events that are measured in dollars and cents is called

A proprietorship is a business

The first part of the accounting process is

Equity at December 31, 2014, is

Ryder Company purchases $600 of equipment from Montez Inc. for cash. The effect of this transaction on the components of the basic accounting equation of Ryder Company is

Retained earnings reported on the statement of financial position at December 31, 2014 is

The statement of financial position at December 31, 2014 reports total liabilities of

A private accountant can perform many activities in a business organization but would not work in