1) Accounting is an information and measurement system that identifies, records, and communicates an organization's business activities.
Answer: TRUE
Difficulty: 1 Easy
Topic: Importance of Accounting
Learning Objective: 01-C1 Explain the purpose and importance of accounting.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Critical Thinking; FN Decision Making
2) Recordkeeping, or bookkeeping, is the recording of transactions and events, either manually or electronically. This is just one part of accounting.
Answer: TRUE
Difficulty: 1 Easy
Topic: Importance of Accounting
Learning Objective: 01-C1 Explain the purpose and importance of accounting.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Critical Thinking; FN Decision Making
3) An accounting system captures relevant data about transactions and then classifies, records, and reports data.
Answer: TRUE
Difficulty: 1 Easy
Topic: Importance of Accounting
Learning Objective: 01-C1 Explain the purpose and importance of accounting.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Critical Thinking; FN Decision Making
4) Financial accounting is the area of accounting aimed at serving external users by providing them with general-purpose financial statements.
Answer: TRUE
Difficulty: 1 Easy
Topic: Users of Accounting Information
Learning Objective: 01-C2 Identify users and uses of, and opportunities in, accounting.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Critical Thinking; FN Decision Making
5) Internal users of accounting information do not directly run the organization and have limited access to its accounting information.
Answer: FALSE
Difficulty: 1 Easy
Topic: Users of Accounting Information
Learning Objective: 01-C2 Identify users and uses of, and opportunities in, accounting.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Critical Thinking; FN Decision Making
6) Auditors verify the effectiveness of internal controls.
Answer: TRUE
Difficulty: 1 Easy
Topic: Users of Accounting Information
Learning Objective: 01-C2 Identify users and uses of, and opportunities in, accounting.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Critical Thinking; FN Decision Making
7) External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.
Answer: TRUE
Difficulty: 1 Easy
Topic: Users of Accounting Information
Learning Objective: 01-C2 Identify users and uses of, and opportunities in, accounting.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Critical Thinking; FN Decision Making
8) External users include lenders, shareholders, customers, and regulators.
Answer: TRUE
Difficulty: 2 Medium
Topic: Users of Accounting Information
Learning Objective: 01-C2 Identify users and uses of, and opportunities in, accounting.
Bloom's: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Critical Thinking; FN Decision Making
9) Regulators often have legal authority over certain activities of organizations.
Answer: TRUE
Difficulty: 1 Easy
Topic: Users of Accounting Information
Learning Objective: 01-C2 Identify users and uses of, and opportunities in, accounting.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Decision Making
10) Internal users include lenders, shareholders, brokers and nonexecutive employees.
Answer: FALSE
Difficulty: 2 Medium
Topic: Users of Accounting Information
Learning Objective: 01-C2 Identify users and uses of, and opportunities in, accounting.
Bloom's: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making
11) Opportunities in accounting include auditing, consulting, market research, and tax planning.
Answer: TRUE
Difficulty: 2 Medium
Topic: Users of Accounting Information
Learning Objective: 01-C2 Identify users and uses of, and opportunities in, accounting.
Bloom's: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making
12) Ethics is defined as maximizing personal wealth, regardless the cost.
Answer: FALSE
Difficulty: 2 Medium
Topic: Ethics
Learning Objective: 01-C3 Explain why ethics are crucial to accounting.
Bloom's: Understand
AACSB/Accessibility: Ethics / Keyboard Navigation
AICPA: BB Industry; FN Decision Making
13) The Sarbanes-Oxley Act (SOX) requires documentation and verification of internal controls. It also emphasizes effective internal controls.
Answer: TRUE
Difficulty: 1 Easy
Topic: Ethics
Learning Objective: 01-C3 Explain why ethics are crucial to accounting.
Bloom's: Remember
AACSB/Accessibility: Ethics / Keyboard Navigation
AICPA: BB Legal; FN Reporting
14) The fraud triangle asserts that the three factors that must exist for a person to commit fraud are opportunity, pressure, and rationalization.
Answer: TRUE
Difficulty: 2 Medium
Topic: Ethics
Learning Objective: 01-C3 Explain why ethics are crucial to accounting.
Bloom's: Understand
AACSB/Accessibility: Ethics / Keyboard Navigation
AICPA: BB Industry; BB Legal; FN Decision Making
15) Management is not responsible for implementing internal controls and does not need to issue a report on internal controls.
Answer: FALSE
Difficulty: 2 Medium
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Understand
AACSB/Accessibility: Ethics / Keyboard Navigation
AICPA: BB Legal; FN Reporting
16) A partnership is a business owned by two or more people.
Answer: TRUE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Decision Making
17) Owners of a corporation are called shareholders or stockholders.
Answer: TRUE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Decision Making
18) In the partnership form of business, the owners are called stockholders.
Answer: FALSE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Decision Making
19) The balance sheet shows a company's net income or loss over a period of time.
Answer: FALSE
Difficulty: 2 Medium
Topic: Financial Statements
Learning Objective: 01-P2 Identify and prepare basic financial statements and explain how they interrelate.
Bloom's: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Reporting
20) The Financial Accounting Standards Board (FASB) is a group tasked with setting generally accepted account principles (GAAP).
Answer: TRUE
Difficulty: 2 Medium
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Reporting
21) The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.
Answer: FALSE
Difficulty: 2 Medium
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making
22) GAAP aims to make information relevant, reliable, and comparable.
Answer: TRUE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making
23) The business entity assumption means that a business is accounted for separately from other business entities, including its owner or owners.
Answer: TRUE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Measurement
24) As a general rule, revenues should not be recognized in the accounting records when earned, but rather when cash is received.
Answer: FALSE
Difficulty: 2 Medium
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Measurement
25) Specific accounting principles are basic assumptions, concepts, and guidelines for preparing financial statements and arise out of long-used accounting practice.
Answer: FALSE
Difficulty: 2 Medium
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Measurement
26) Limited liability and indefinite business life are characteristics of a corporation.
Answer: TRUE
Difficulty: 2 Medium
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Decision Making
27) A sole proprietorship is a business with multiple owners.
Answer: FALSE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Decision Making
28) Unlimited liability and separate taxation of the business are advantages of a sole proprietorship.
Answer: FALSE
Difficulty: 2 Medium
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Decision Making
29) A partnership must pay an additional business income tax.
Answer: FALSE
Difficulty: 2 Medium
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Decision Making
30) Objectives, qualitative characteristics, elements, and recognition and measurement are components of the FASB conceptual framework.
Answer: TRUE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Measurement
31) Objectivity means that financial information is supported by independent, unbiased evidence; it demands more than a person's opinion.
Answer: TRUE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Measurement
32) The going-concern assumption presumes that a business will continue operating instead of being closed or sold.
Answer: TRUE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Measurement
33) The measurement principle prescribes that accounting information is based on subjective opinion rather than cost.
Answer: FALSE
Difficulty: 2 Medium
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Measurement
34) The monetary unit assumption means that companies should express transactions in terms such as "a lot" or "very little".
Answer: FALSE
Difficulty: 2 Medium
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; BB Global; FN Measurement
35) The International Accounting Standards Board (IASB) issues International Financial Reporting Standards (IFRS) that identify preferred accounting practices.
Answer: TRUE
Difficulty: 2 Medium
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; BB Global; FN Measurement
36) A limited liability company offers the limited liability of a partnership or proprietorship and the tax treatment of a corporation.
Answer: FALSE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Decision Making
37) A limited liability company offers the limited liability of a corporation and the tax treatment of a partnership or proprietorship.
Answer: TRUE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Decision Making
38) The Securities and Exchange Commission (SEC) is a U.S. government agency that oversees proper use of GAAP by companies that sell stock and debt to the public.
Answer: TRUE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Reporting
39) The four common forms of business ownership include sole proprietorship, partnership, corporation, and non-profit.
Answer: FALSE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Decision Making
40) The four common forms of business ownership include sole proprietorship, partnership, limited liability company (LLC), and corporation.
Answer: TRUE
Difficulty: 1 Easy
Topic: Generally Accepted Accounting Principles
Learning Objective: 01-C4 Explain generally accepted accounting principles and define and apply several accounting principles.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Legal; FN Decision Making
41) The three major types of business activities are operating, financing, and investing.
Answer: TRUE
Difficulty: 1 Easy
Topic: Business Activities and the Accounting Equation
Learning Objective: 01-C5 Appendix 1B-Identify and describe the three major activities of organizations.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making
42) Planning is a part of each business activity (operating, investing, and financing), and gives each activity meaning and focus.
Answer: TRUE
Difficulty: 1 Easy
Topic: Business Activities and the Accounting Equation
Learning Objective: 01-C5 Appendix 1B-Identify and describe the three major activities of organizations.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; BB Critical Thinking; FN Decision Making
43) Financing activities provide the resources organizations use to pay for resources such as land, buildings, and equipment.
Answer: TRUE
Difficulty: 1 Easy
Topic: Business Activities and the Accounting Equation
Learning Objective: 01-C5 Appendix 1B-Identify and describe the three major activities of organizations.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; BB Critical Thinking; FN Decision Making
44) Investing activities include long-term borrowing and repaying of cash from lenders.
Answer: FALSE
Difficulty: 1 Easy
Topic: Business Activities and the Accounting Equation
Learning Objective: 01-C5 Appendix 1B-Identify and describe the three major activities of organizations.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making
45) Investing activities are the acquiring and disposing of resources that an organization uses to acquire and sell its products or services.
Answer: TRUE
Difficulty: 1 Easy
Topic: Business Activities and the Accounting Equation
Learning Objective: 01-C5 Appendix 1B-Identify and describe the three major activities of organizations.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making
46) Owner financing refers to resources contributed by creditors or lenders.
Answer: FALSE
Difficulty: 1 Easy
Topic: Business Activities and the Accounting Equation
Learning Objective: 01-C5 Appendix 1B-Identify and describe the three major activities of organizations.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making
47) Revenues are increases in equity (via net income) from a company's sales of products and services to customers.
Answer: TRUE
Difficulty: 1 Easy
Topic: The Accounting Equation
Learning Objective: 01-A1 Define and interpret the accounting equation and each of its components.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Measurement
48) A net loss occurs when revenues exceed expenses.
Answer: FALSE
Difficulty: 2 Medium
Topic: The Accounting Equation
Learning Objective: 01-A1 Define and interpret the accounting equation and each of its components.
Bloom's: Understand
AACSB/Accessibility: Analytical Thinking / Keyboard Navigation
AICPA: BB Critical Thinking; FN Measurement; FN Reporting
49) Net income occurs when revenues exceed expenses.
Answer: TRUE
Difficulty: 2 Medium
Topic: The Accounting Equation
Learning Objective: 01-A1 Define and interpret the accounting equation and each of its components.
Bloom's: Understand
AACSB/Accessibility: Analytical Thinking / Keyboard Navigation
AICPA: BB Critical Thinking; FN Measurement; FN Reporting
50) Liabilities are the owner's claim on assets.
Answer: FALSE
Difficulty: 1 Easy
Topic: The Accounting Equation
Learning Objective: 01-A1 Define and interpret the accounting equation and each of its components.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Measurement
51) Assets are the resources a company owns or controls that are expected to yield future benefits.
Answer: TRUE
Difficulty: 1 Easy
Topic: The Accounting Equation
Learning Objective: 01-A1 Define and interpret the accounting equation and each of its components.
Bloom's: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Measurement
52) Owner withdrawals are subtracted as expenses in the calculation of net income.
Answer: FALSE
Difficulty: 2 Medium
Topic: The Accounting Equation
Learning Objective: 01-A1 Define and interpret the accounting equation and each of its components.
