Question 1

Which of the following accounting concepts makes it possible to separate business transactions from personal transactions?

Accepted Answer

The concept of business entity assumes that the business is a separate entity from its owner(s) and therefore distinguishes the transactions of the business from the owner's personal transactions. This helps in maintaining proper accounting records and assessing the financial health of the business.

Question 2

Which of these represent the accounting equation?

Accepted Answer

The accounting equation is Assets = Liabilities + Owners' Equity, which means that the total amount of assets in a company must be equal to the sum of its liabilities and owners' equity. This equation is important because it reflects the financial position of the company at any given time. Option (A) has the right elements but in the wrong order, while option (C) has a minus sign instead of a plus sign, which would result in the equation being incorrect. Option (D) has the same elements as option (B) but in the wrong order.

Question 3

A(n)______ is something you owe someone else.

Accepted Answer

A liability is a debt or obligation owed to another person or organization. Assets are something you own, owners' equity is the residual interest in the assets after deducting liabilities, and cash flow refers to the amount of cash coming in and going out of a business.

Question 4

Which of the following accounting functions allows a business to keep track of what it owes,make timely payments in order to capture prompt pay discounts,and maintain a good credit rating?

Accepted Answer

Accounts payable records allow a business to keep track of what it owes to suppliers, vendors, and creditors. By maintaining these records, a business can make timely payments in order to capture prompt pay discounts and maintain a good credit rating. This is important for managing cash flow and maintaining positive relationships with suppliers and creditors.

Question 5

Which of these is NOT identified as a most basic accounting concept?

Accepted Answer

While buying and selling may be a part of accounting transactions, it is not considered a most basic accounting concept. The three most basic accounting concepts are business entity, going concern, and costs and expenses.

Question 6

_____ is a formal,rule-based set of accounting principles and procedures intended for use by outside owners,investors,banks,and regulators.

Accepted Answer

Financial accounting focuses on providing financial information to external parties, such as investors, creditors, and regulatory agencies. It uses a formal, rule-based set of accounting principles and procedures, such as GAAP (Generally Accepted Accounting Principles) in the United States, to ensure consistency and accuracy in financial reporting. Managerial accounting, on the other hand, is geared towards internal decision-making and focuses on providing financial information to managers within an organization. Tax accounting deals with preparing tax returns and complying with tax laws and regulations. Market accounting is not a commonly used term in accounting.

Question 7

A(n)_____ is simply a record of transactions that are similar in nature.

Accepted Answer

A record of transactions that are similar in nature is called an account. Reports are broader in scope, descriptions are more detailed, and narratives are more anecdotal.

Question 8

The financial state of having more debt than assets means,you are

Accepted Answer

Having more debt than assets is the definition of being bankrupt. This means that a person or organization cannot pay their debts and may need to file for bankruptcy or seek financial assistance. Being rich or profitable means having more assets than debt, while being solvent means having enough assets to pay off all debts.

Question 9

Accurate and timely _____ are essential for making decisions concerning the extension of credit.They also help produce accurate billing of customers,and thus help to maintain good customer relations.

Accepted Answer

Accounts receivable records are essential for decision-making regarding the extension of credit and accurate billing of customers. Payroll records are related to employee salary, leasehold records relate to leased property and accounts payable relate to the amounts that a company owes to its vendors.

Question 10

Which of these is used by managers for planning and controlling?

Accepted Answer

Managerial accounting is specifically used by managers for planning and controlling purposes. Tax accounting is focused on compliance with tax laws, financial accounting is focused on producing financial statements, and market accounting is not a recognized accounting term.

Question 11

An accounting system should accomplish all of the following tasks EXCEPT

Accepted Answer

Avoiding the export of financial data is not a necessary task for an accounting system, as exporting data can sometimes be necessary for various reasons such as reporting, analysis, or sharing with external parties. Therefore, all the other options (A, B, and C) are important tasks that an accounting system should accomplish.

Question 12

The most commonly used small business accounting systems include all of these EXCEPT

Accepted Answer

TaxCut is not an accounting system. It is a tax preparation software for individuals and small business owners, but it does not have the same accounting features as Quickbooks, Peachtree, or Great Plains.

Question 13

Which of these refers to the concept that a business is expected to continue in existence for the foreseeable future?

Accepted Answer

Going concern refers to the assumption that a business will continue to operate indefinitely, unless there is evidence to the contrary. It is widely accepted in accounting and financial reporting as an underlying principle.

Question 14

A regular and systematic reduction in income that transfers asset value to expense over time is called

Accepted Answer

A regular and systematic reduction in income that transfers asset value to expense over time is called depreciation. This is a common accounting method used to spread the cost of an asset over its useful life. It reduces the value of the asset on the balance sheet and increases expenses on the income statement.

Question 15

Going concern is the

Accepted Answer

The going concern concept in accounting assumes that a business will continue to exist and operate in the foreseeable future. This assumption is important for financial reporting purposes as it allows for the preparation of financial statements under the assumption that the business will continue operating, without considering any plans to sell or liquidate the business. Option A refers to a legal obligation, Option C is the definition of net worth or equity, and Option D refers to the economic concept of opportunity cost.

Question 16

Fixed asset accounting

Accepted Answer

Fixed asset accounting is primarily concerned with tracking the purchase, depreciation, and disposal of a business's physical assets, such as equipment or property. As such, it is responsible for automatically calculating and accumulating depreciation, which is a key function of fixed asset accounting. Payroll and employment taxes, recording investments in securities, and recording improvements to leased property or equipment are all separate accounting tasks that are not directly related to fixed asset accounting.

Question 17

"_____" means that the value of the item can be realized,or must be paid as cash within one year,while "_____" means that the asset will still be valuable more than one year in the future,or that the business may take longer than one year to pay the amount owed.

Accepted Answer

"Current" means that the value of the item must be realized or paid within one year, while "long-term" means it will still have value beyond one year or take longer than one year to pay off. Therefore, option B, "current, long-term," matches the definitions provided in the question.

Question 18

What do you call a decrease in owners' equity caused by consuming your product or service?

Accepted Answer

An expense is a decrease in owners' equity caused by consuming your product or service. It represents the total cost of a product or service. Options A and B refer to the cost, which is a broader term and includes all expenditures made to produce a product or service. Option C refers to the total value of the assets minus the total value of liabilities in a business.

Question 19

Accounting is important to a small business for all of these reasons EXCEPT

Accepted Answer

Accounting does not inherently make it difficult for others to acquire your business; it primarily provides financial information and transparency.

Question 20

Formal summaries of the content of an accounting system's records of transactions are called

Accepted Answer

Formal summaries of the content of an accounting system's records of transactions are referred to as financial statements. Financial statements include the income statement, balance sheet, statement of cash flows, and statement of owner's equity.

Quiz 13: Small Business Accounting: Projecting and Evaluating Performance