Question 1

Revenue is properly recognized:
A) When the customer's order is received.
B) Only if the transaction creates an account receivable.
C) At the end of the accounting period.
D) Upon completion of the sale or when services have been performed and the business obtains the right to collect the sale price.
E) When cash from a sale is received.

Accepted Answer

Revenue should be recognized when the sale or service is completed and the business obtains the right to collect payment. This is based on the realization principle in accounting, which requires that revenue be recognized when it is earned and the future collection of payment is reasonably assured. The other options do not reflect this principle and could lead to overstatement or understatement of revenue.

Question 2

A limited partnership:
A) Includes a general partner with unlimited liability.
B) Is subject to double taxation.
C) Has owners called stockholders.
D) Is the same as a corporation.
E) Must only have two partners.

Accepted Answer

A limited partnership includes a general partner with unlimited liability. This means that one partner must take on unlimited liability for the business while the other partners have limited liability.

Question 3

Net income:
A) Decreases equity.
B) Represents the amount of assets owners put into a business.
C) Equals assets minus liabilities.
D) Is the excess of revenues over expenses.
E) Represents the owners' claims against assets.

Accepted Answer

Net income is the amount by which revenues exceed expenses, and represents the profit earned by a business during a specific period of time. It is added to equity and increases it. Therefore, the correct answer is D.

Question 4

Increases in retained earnings from a company's earnings activities are:
A) Assets
B) Revenues
C) Liabilities
D) Stockholder's equity
E) Expenses

Accepted Answer

The answer of Increases in retained earnings from a company's...

Question 5

The difference between a company's assets and its liabilities is:
A) Net income
B) Expense
C) Equity
D) Revenue
E) Net loss

Accepted Answer

The difference between a company's assets and its liabilities is its equity, which represents the value of the company that belongs to its shareholders. Net income, revenue, and net loss are all related to a company's profitability, while expenses are costs incurred by the company.

Question 6

An example of an operating activity is:
A) Paying wages.
B) Purchasing office equipment.
C) Borrowing money from a bank.
D) Selling stock.
E) Paying off a loan.

Accepted Answer

Paying wages is an operating activity because it is related to the day-to-day operations of the business.

Question 7

The owners of a partnership:
A) Have created an entity that can also be called a sole proprietorship.
B) Have unlimited liability.
C) Have to have a written agreement in order to be legal.
D) Have created a legal organization separate from its owners.
E) Are called shareholders.

Accepted Answer

Partners in a partnership have unlimited liability, meaning they are personally responsible for the financial obligations of the business.

Question 8

Planning activities:
A) Are the means organizations must use to pay for resources.
B) Involve the acquiring and disposing of resources that an organization uses to acquire and sell its products or services.
C) Involve defining the ideas, goals, and actions of an organization.
D) Are the carrying out of an organization's plans.
E) Involve using resources to research, develop, purchase, produce, and market products and services.

Accepted Answer

Planning activities involve defining the ideas, goals, and actions of an organization. The other choices describe other aspects of organizational management such as financing (A), acquisition and disposal of resources (B), implementation (D), and use of resources (E).

Question 9

Resources owned or controlled by a company that are expected to yield benefits are:
A) Assets
B) Revenues
C) Liabilities
D) Stockholder's equity
E) Expenses

Accepted Answer

Assets are resources that a company owns or controls and are expected to yield future economic benefits. This includes physical assets such as inventory and property, as well as intangible assets such as patents and trademarks.

Question 10

An example of a financing activity is:
A) Buying office supplies.
B) Obtaining a long-term loan.
C) Buying office equipment.
D) Selling inventory.
E) Buying land.

Accepted Answer

Obtaining a long-term loan is a financing activity as it involves raising funds from external sources to finance the long-term needs of the business.

Question 11

An example of an investing activity is:
A) Paying wages of employees.
B) Paying dividends.
C) Purchasing land.
D) Selling inventory.
E) Contribution from owner.

Accepted Answer

Purchasing land is an investing activity because it involves acquiring a long-term asset that is expected to generate income or appreciate in value over time. This is different from paying wages, which is an operating activity, paying dividends, which is a financing activity, and selling inventory, which could be either an operating or financing activity depending on the nature of the business. Contribution from owner does not specifically relate to any activity but is considered part of financing.

Question 12

Congress passed the Sarbanes-Oxley Act to
A) Provide jobs to U.S. accountants and limit the number of jobs sent outside the country.
B) Impose penalties on CEO's and CFO's who knowingly sign off on bogus accounting reports, although at this time the penalties are token amounts.
C) Help curb financial abuses at companies that issue their stock to the public.
D) Force auditors to attest to the absolute accuracy of the financial statements.
E) Require that all companies publicly disclose their internal control plans.

Accepted Answer

The Sarbanes-Oxley Act was primarily passed to help prevent financial abuses at publicly traded companies by imposing stricter regulations and penalties for fraudulent activities. It aims to increase transparency and accountability through various provisions, such as requiring certification of financial statements by CEO's and CFO's and establishing the Public Company Accounting Oversight Board (PCAOB) to oversee the auditing profession. While the Act does have some impacts on accounting jobs and disclosure requirements, its main focus is on improving corporate governance and preventing financial fraud.

Question 13

According to generally accepted accounting principles,a company's balance sheet should show the company's assets at:
A) The cash equivalent value of what was given up.
B) The current market value of the assets at the balance sheet date.
C) The cash paid to acquire them, even if something other than cash was given in the exchange.
D) The best estimate from a certified internal auditor.
E) The objective value to external users.

Accepted Answer

The answer of According to generally accepted accounting principles,a company's...

Question 14

Operating activities:
A) Are the means organizations must use to pay for resources like land, buildings, and equipment.
B) Involve using resources to research, develop, purchase, produce, distribute, and market products and services.
C) Involve acquiring and disposing of resources that a business uses to acquire and sell its products or services.
D) Are also called asset management.
E) Are also called strategic management.

Accepted Answer

Operating activities are those activities that involve using resources to research, develop, purchase, produce, distribute, and market products and services. They are the day-to-day activities necessary for a business to operate and generate revenue. option A is incorrect because it describes financing activities. Option C describes investing activities. Option D is incorrect because asset management refers to the management of assets already owned by the business. Option E is incorrect because strategic management involves the long-term planning and direction of the business, rather than day-to-day operations.

Question 15

On December 15,2013,Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in 2014.Which accounting principle would require Myers Legal Services to record the legal fees revenue in 2014 and not 2013?
A) Monetary unit principle
B) Going-concern principle
C) Cost principle
D) Business entity principle
E) Revenue recognition principle

Accepted Answer

The revenue recognition principle states that revenue should be recognized when it is earned, regardless of when payment is received. In this case, Myers Legal Services has not yet provided the legal services in 2013, so the revenue cannot be recognized until they perform the services in 2014. Therefore, the legal fees revenue should be recorded in 2014 according to the revenue recognition principle.

Question 16

Net income is:
A) Assets minus liabilities.
B) The excess of revenues over expenses.
C) An asset.
D) The same as revenue.
E) The excess of expenses over retained earnings.

Accepted Answer

Net income is calculated by subtracting all expenses from total revenue. It represents the profit that a company has earned during a particular period of time. Therefore, the correct option is B, which states that net income is the excess of revenues over expenses.

Question 17

Marian Mosely is the owner of Mosely Accounting Services.Which accounting assumption requires Marian to keep her personal financial information separate from the financial information of Mosely Accounting Services?
A) Monetary unit assumption
B) Going-concern assumption
C) Cost assumption
D) Business entity assumption
E) Full disclosure assumption

Accepted Answer

The business entity assumption requires that the financial information of the owner be kept separate from the financial information of the business. Therefore, Marian must keep her personal financial information separate from Mosely Accounting Services.

Question 18

Which of the following accounting principles would prescribe that all goods and services purchased are recorded at cost?
A) Going-concern principle
B) Continuing-concern principle
C) Cost principle
D) Business entity principle
E) Consideration principle

Accepted Answer

The cost principle requires that all assets, goods, and services are recorded at their original cost upon acquisition. This principle ensures that financial statements accurately reflect the company's financial position and performance.

Question 19

The major activities of a business include:
A) Operating, investing, making a profit
B) Investing, making a profit, operating
C) Making a profit, operating, borrowing
D) Operating, investing, financing
E) Investing, making a profit, financing

Accepted Answer

The major activities of a business are operating (producing and distributing goods or services), investing (acquiring and disposing of long-term assets), and financing (raising and repaying capital). Making a profit is the goal of these activities, but it is not an activity in and of itself. Borrowing and making a profit are secondary to the primary activities of operating, investing, and financing.

Question 20

If equity is $300,000 and liabilities are $192,000,then assets equal:
A) $108,000
B) $192,000
C) $300,000
D) $492,000
E) $792,000

Accepted Answer

Assets = Liabilities + Equity
= $192,000 + $300,000
= $492,000

Quiz 1: Introducing Accounting in Business

Revenue is properly recognized:

A limited partnership:

Net income:

Increases in retained earnings from a company's earnings activities are:

The difference between a company's assets and its liabilities is:

An example of an operating activity is:

The owners of a partnership:

Planning activities:

Resources owned or controlled by a company that are expected to yield benefits are:

An example of a financing activity is:

An example of an investing activity is:

Congress passed the Sarbanes-Oxley Act to

According to generally accepted accounting principles,a company's balance sheet should show the company's assets at:

Operating activities:

On December 15,2013,Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in 2014.Which accounting principle would require Myers Legal Services to record the legal fees revenue in 2014 and not 2013?

Net income is:

Marian Mosely is the owner of Mosely Accounting Services.Which accounting assumption requires Marian to keep her personal financial information separate from the financial information of Mosely Accounting Services?

Which of the following accounting principles would prescribe that all goods and services purchased are recorded at cost?

The major activities of a business include:

If equity is $300,000 and liabilities are $192,000,then assets equal: