The ending retained earnings amount is shown on
Accountants refer to an economic event as a
a. purchase.
b. sale.
c. transaction.
d. change in ownership.
The accounting process involves all of the following except
a. identifying economic transactions that are relevant to the business.
b. communicating financial information to users by preparing financial reports.
c. recording nonquantifiable economic events.
d. analyzing and interpreting financial reports.
All of the following statements are correct except
a. Good decision-making depends on good information.
b. A vital element in communicating economic events is the accountant’s ability to analyze and interpret reported information.
c. The origins of accounting are generally attributed to Socrates, a classical Greek philosopher, who promoted accounting as a social contract.
d. The information that a user of financial information needs depends upon the kinds of decisions the user makes.
Which of the following is an external user of accounting information?
a. Labor unions.
b. Finance directors.
c. Company officers.
d. Managers.
The origins of accounting are generally attributed to the work of
a. Christopher Columbus.
b. Abner Doubleday.
c. Luca Pacioli.
d. Leonardo da Vinci.
Financial accounting provides economic and financial information for all of the following except
a. creditors.
b. investors.
c. managers.
d. other external users.
In order to increase comparability, in recent years, the FASB and IASB have made efforts to reduce the differences between U.S.GAAP and IFRS through a process known as
a. convergence
b. monetary unit assumption
c. the cost principle
d. the fair value principle
Generally accepted accounting principles are
a. income tax regulations of the Internal Revenue Service.
b. standards that indicate how to report economic events.
c. theories that are based on physical laws of the universe.
d. principles that have been proven correct by academic researchers.
The body of theory underlying accounting is not based on
a. physical laws of nature.
b. concepts.
c. principles.
d. definitions.
The SEC and FASB are two organizations that are primarily responsible for establishing generally accepted accounting principles. It is true that
a. they are both governmental agencies.
b. the SEC is a private organization of accountants.
c. the SEC often mandates guidelines when no accounting principles exist.
d. the SEC and FASB rarely cooperate in developing accounting standards.
GAAP stands for
a. Generally Accepted Auditing Procedures.
b. Generally Accepted Accounting Principles.
c. Generally Accepted Auditing Principles.
d. Generally Accepted Accounting Procedures.
Financial information that is capable of making a difference in a decision is
a. faithfully representative.
b. relevant.
c. convergent.
d. generally accepted.
The economic entity assumption requires that the activities
a. of different entities can be combined if all the entities are corporations.
b. must be reported to the Securities and Exchange Commission.
c. of a sole proprietorship cannot be distinguished from the personal economic events of its owners.
d. of an entity be kept separate from the activities of its owner.
A business organized as a corporation
a. is not a separate legal entity in most states.
b. requires that stockholders be personally liable for the debts of the business.
c. is owned by its stockholders.
d. terminates when one of its original stockholders dies.
John and Sam met at law school and decide to start a small law practice after graduation. They agree to split revenues and expenses evenly. The most common form of business organization for a business such as this would be a
a. joint venture.
b. partnership.
c. corporation.
d. proprietorship.
Which of the following is true regarding the corporate form of business organization?
a. Corporations are the most prevalent form of business organization.
b. Corporate businesses are generally smaller in size than partnerships and proprietor-ships.
c. The revenues of corporations are greater than the combined revenues of partnerships and proprietorships.
d. Corporations are separate legal entities organized exclusively under federal law.
The ending retained earnings amount is shown on
a. the balance sheet only.
b. the retained earnings statement only.
c. both the income statement and the retained earnings statement.
d. both the balance sheet and the retained earnings statement.
At October 1, Arcade Fire Enterprises reported stockholders’ equity of $35,000. During October, common stock of $2,000 was issued and the company earned net income of $7,000. If stockholders’ equity at October 31 totals $40,000, what amount of dividends were paid during the month?
a. $0
b. $2,000
c. $4,000
d. $5,000
The first part of the accounting process is
a. communicating.
b. identifying.
c. processing.
d. recording.
