Question 1

Who uses accounting information?

Select one:

a. The internal revenue service.

b. Corporate treasury operations.

c. None of the listed.

d. Investors.

e. Corporate executives.

f. Corporate creditors.

g. All of the listed.

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A corporation is:

Select one:

a. A business incorporated under the laws of a state and owned by stockholders.

b. Only incorporated by the IRS.

c. A government agency.

d. A business incorporated under the laws of a state and owned by a single proprietor.

e. A business chartered directly by Congress.

f. An unincorporated business owned by two or more persons.

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When a business purchases a truck with cash on hand, that transaction is reflected on the:

Select one:

a. Income statement.

b. Balance sheet and cash flow statement.

c. Cash flow statement.

d. Balance sheet.

e. Income statement, balance sheet, and cash flow statement.

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Which of the following statements is FALSE?

Select one:

a. The balance sheet represents a “snapshot” of the company’s solvency and financial position.

b. The balance sheet reflects a company’s profitability from operations.

c. The statement of cash flows shows the cash inflows and outflows over a period of time.

d. The statement of retained earnings shows the change in retained earnings between the beginning and end of a period.

e. The income statement reflects a company’s profitability during a period of time.

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The basic accounting equation is:

Select one:

a. Assets A equals Liabilities L + Stockholders’ Salaries SS.

b. Assets A equals Liabilities L + Stockholders’ Equity SE.

c. Assets A equals Cash C – Loans L – Stockholders’ Equity SE.

d. Assets A equals Stockholders’ Equity SE – Liabilities L.

e. Stockholders’ Equity SE equals Assets A + Liabilities L.

f. None of these.

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Of the five primary accounting concepts, which one assumes an indefinite future?

Select one:

a. None of the these.

b. The money measurement concept.

c. Going-concern (continuity) concept.

d. The business entity concept.

e. Exchange-price (or cost) concept (principle).

f. Periodicity (time periods) concept.

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The ending balance in retained earnings is shown in the:

Select one:

a. Statement of retained earnings and the balance sheet.

b. Balance sheet.

c. Statement of retained earnings.

d. Income statement.

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Which of the following is not a correct form of the accounting equation?

Select one:

a. Assets equals Liabilities + Stockholders’ equity.

b. Assets + Stockholders’ equity equals Liabilities

c. Assets – Liabilities equals Stockholders’ equity.

d. Assets – Stockholders’ equity equals Liabilities.

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When the stockholders invest cash in the business, what is the effect?

Select one:

a. Both assets and stockholders’ equity increase.

b. Both assets and liabilities increase.

c. Liabilities increase and stockholders’ equity increases.

d. None of these.

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When services are performed on account, what is the accounting effect for the company that provides the services?

Select one:

a. Accounts payable increases and retained earnings decreases.

b. Both accounts receivable and retained earnings increase.

c. Both cash and retained earnings decrease.

d. Both cash and retained earnings increase.

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(T / F) The matching principle is fundamental to the accrual basis of accounting.

Select one:

True

False