Chapter 1 Test
1. Managerial accounting information is used by external and internal users equally.
→ False
2. Senior executives cannot be criminally prosecuted for the wrong doings they commit on
behalf of the companies where they work.
→ False
3. Financial accounting provides information to all users, while the main focus for
managerial accounting is to provide information to the management.
→ True
4. Proper ethical conduct implies that you only consider what's in your best interest.
→ False
5. Some of the major fraudulent acts by senior executives started as what they considered to
be small ethical lapses which grew out of control.
→ True
6. 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.
→ True
7. Two factors that typically lead to ethical violations are relevance and timeliness of
accounting information.
→ False
8. An example of a general-purpose financial statement would be a report about projected
price increases related to transportation costs.
→ False
9. The Sarbanes-Oxley Act established standards for corporate responsibility and disclosure.
→ True
10. The main objective for all businesses is to maximize unrealized profits.
→ False
11. On May 20, White Repair Service extended an offer of $108,000 for land that had been
priced for sale at $140,000. On May 30, White Repair Service accepted the seller's
counter offer of $115,000. On June 20, the land was assessed at a value of $95,000 for
property tax purposes. On July 4, White Repair Service was offered $150,000 for the land
by a national retail chain. At what value should the land be recorded in White Repair
Service's records?
→ $115,000
12. Select the type of business that is most likely to obtain large amounts of resources by
issuing stock.
→ Corporation
,13. Which of the following is not a characteristic of a corporation?
a. Corporations experience an ease in obtaining large amounts of resources by
issuing stock.
b. Corporations are organized as a separate legal taxable entity.
c. Ownership is divided into shares of stock.
d. A corporation's resources are limited to its individual owners' resources.
14. Within the United States, the dominant body in the primary development of accounting
principles is the Financial Accounting Standards Board (FASB)
15. The business entity assumption means that the entity is an individual economic unit for
which data are recorded, analyzed, and reported
16. For accounting purposes, the business entity should be considered separate from its
owners if the entity is
a. A corporation
b. A proprietorship
c. A partnership
d. Any of these
17. The measurement principle requires that amounts recorded in the financial statements be
based on independently verifiable evidence
18. Karen Meyer owns and operates Crystal Cleaning Company. Recently, Meyer withdrew
$10,000 from Crystal Cleaning, and she contributed $6,000, in her name, to the American
Red Cross. The contribution of the $6,000 should be recorded on the accounting records
of which of the following entities?
→ Karen Meyer's personal records and the American Red Cross
19. Which one of the following is the authoritative body in the United States having the
primary responsibility for developing accounting principles?
→ FASB
20. Which of the following items relates to separating the reporting of business and personal
economic transactions?
→ Business entity assumption
, Chapter 2 Test
1. Accounts payable are accounts that you expect will be paid to you.
→ False
2. Consuming goods and services in the process of generating revenues results in expenses.
→ True
3. Prepaid expenses are an example of an expense.
→ False
4. The Unearned Revenues account is an example of a liability.
→ True
5. The Dividends account is an expense
→ False
6. Accounts in the ledger are usually maintained in alphabetical order.
→ False
7. Depending on the account title, the right side of the account is referred to as the credit
side.
→ False
8. To determine the balance in an account, always subtract credits from debits.
→ False
9. An account in its simplest form has three parts to it: a title, an increase side, and a
decrease side.
→ True
10. The T account got its name because it resembles the letter “T.”
→ True
11. Which of the following is true about T accounts?
a. The left side of a T account is called the credit side.
b. Transactions are first recorded in T accounts and then posted to the journal.
c. The left side of a T account is called the debit side.
d. The right side of a T account is called the debit side.
12. A cash payment is recorded in the cash account as a credit
13. The balance of an account is determined by adding all of the debits, adding all of the
credits, and then subtracting the smaller sum from the larger sum
14. A list of the accounts used by a business is called the chart of accounts
15. In the chart of accounts, the balance sheet accounts are normally listed in which order?
→ assets, liabilities, stockholders' equity
16. In which order are the accounts listed in the chart of accounts?
→ assets, liabilities, stockholders' equity, revenues, expenses
17. Which are the parts of the T account?
→ title, debit side, credit side
18. The chart of accounts is designed to meet the information needs of a company's managers
and other users of its financial statements
