ACC Chapter 1

Eliminates the need for interpreting financial data.

Accounting is an information and measurement system that does all of the following except:

A.dentifies business activities.

B. Records business activities.

C. Eliminates the need for interpreting financial data.

D. Helps people make better decisions.

Purchasing managers

External users of accounting information include all of the following except:

A. Shareholders.

B. Purchasing managers.

C. Government regulators.

D. Creditors.

FASB

The Securities and Exchange Commission (SEC) has given the task of setting GAAP to the:

A. FASB.

B. AAA.

C. AICPA.

D. IASB.

Business entity assumption

The accounting concept that requires every business to be accounted for separately from other

business entities, including its owner(s), is known as the:

A. Time period assumption.

B. Business entity assumption.

C. Going-concern assumption.

D. Measurement (Cost) principle.

Going-concern assumption

The rule that requires financial statements to reflect the assumption that a business will continue

operating instead of being closed or sold is the:

A. Going-concern assumption.

B. Business entity assumption.

C. Measurement (Cost) principle.

D. Monetary unit assumption.

Measurement (Cost) principle

The accounting principle that requires accounting information to be based on actual cost and

requires assets and services to be recorded initially at the cash or cash-equivalent amount given in

exchange, is the:

A. Accounting equation.

B. Measurement (Cost) principle.

C. Going-concern assumption.

D. Cost-benefit constraint.

Expense recognition (Matching) principle

Which of the following accounting principles prescribes that a company record its expenses

incurred to generate the revenue reported?

A. Expense recognition (Matching) principle.

B. Measurement (Cost) principle.

C. Business entity assumption.

D. Consideration assumption.

When goods or services are provided to customers and at the amount expected to be

Revenue is properly recognized:

A. When the customer makes an order.

B. Only if the transaction creates an account receivable.

C. When goods or services are provided to customers and at the amount expected to be

received from the customer.

D. When cash from a sale is received.

One asset increases $1,340 and another asset decreases $1,340, causing no effect.

If a company uses $1,340 of its cash to purchase supplies, the effect on the accounting equation

would be:

A. Assets increase $1,340 and liabilities decrease $1,340.

B. One asset increases $1,340 and another asset decreases $1,340, causing no effect.

C. Assets decrease $1,340 and equity decreases $1,340.

D. Assets increase $1,340 and liabilities increase $1,340.

Assets increase $13,800 and equity increases $13,800

If a company receives $13,800 from a stockholder, the effect on the accounting equation would

be:

A. Assets decrease $13,800 and equity decreases $13,800.

B. Assets increase $13,800 and liabilities decrease $13,800.

C. Assets increase $13,800 and liabilities increase $13,800.

D. Assets increase $13,800 and equity increases $13,800.

Expenses

Which of the following decreases equity:

A. Assets.

B. Accounts receivable.

C. Revenues.

D. Expenses.

Is the excess of revenues over expenses

Net Income:

A. Represents the amount of assets owners put into a business.

B. Equals assets minus liabilities.

C. Is the excess of revenues over expenses.

D. Represents owners' claims against assets.

$524,000

If equity is $330,000 and liabilities are $194,000, then assets equal:

A. $194,000.

B. $330,000.

C. $524,000.

D. $854,000.

Assets

Resources a company owns or controls that are expected to yield future benefits are:

A. Assets.

B. Revenues.

C. Liabilities.

D. Expenses.

Accounting equation

The description of the relation between a company’s assets, liabilities, and equity, which is

expressed as Assets = Liabilities + Equity, is known as the:

A. Income statement equation.

B. Accounting equation.

C. Business equation.

D. Net income.

Net assets

Another name for equity is:

A. Net income.

B. Net assets.

C. Revenue.

D. Net loss.

Assets decrease $39,000; liabilities decrease $39,000

Saddleback Company paid off $39,000 of its accounts payable in cash. What would be the effects

of this transaction on the accounting equation?

A. Assets increase $39,000; equity increase $39,000.

B. Assets decrease $39,000; liabilities decrease $39,000.

C. Assets decrease $39,000; liabilities increase $39,000.

D. Liabilities decrease $39,000; equity increase $39,000.

Increased $57,000

If the liabilities of a business increased $99,000 during a period of time and the stockholders’

equity in the business decreased $42,000 during the same period, the assets of the business must

have:

A. Decreased $141,000.

B. Increased $42,000.

C. Increased $57,000.

D. Increased $141,000.