150 Test Bank for Principles of Financial Accounting 12th
Edition by Needles
True False Questions - - Multiple Choice Questions
The correct order of the three stages of accounting is
1.

measurement, communication, and processing.

2.

measurement, processing, and communication

3.

processing, measurement, and communication.

4.

communication, processing, and measurement.

The net income figure appears in all the following financial
statements except the
1.

balance sheet.

2.

income statement.

3.


$32,000

2.

$36,000

3.

$26,000

4.

$52,000


Which of the following is legallya separate entity from its
owner(s)?
1.

Sole proprietorship and partnership only

2.

Corporation only

3.

Partnership only



3.

sole proprietorship or partnership.

4.

partnership.

The recording of data falls under which stage of accounting?
1.

processing

2.

measurement

3.

decision making

4.

communication

The best definition of assetsis the:
1.

cash owned by the company.

managers.

All of the following statements about partnerships are true
except
1.

a change in ownership will dissolve the partnership.

2.

any partner can enter into a binding agreement with a third party.

3.

partners must share profits and losses equally.

4.

all partners have unlimited liability.

The Sarbanes-Oxley Act of 2002 applies to all except
1.

internal management reports

2.

annual reports

3.

2.

Inventory

3.

Accounts Payable

4.

Trademark


Which of the following represents the proper order of financial
statement preparation?
1.

Balance sheet, statement of cash flows, statement of owner's equity, income statement

2.

Income statement, statement of owner's equity, balance sheet, statement of cash flows

3.

Statement of cash flows, balance sheet, income statement, statement of owner's equity

4.

Statement of owner's equity, income statement, statement of cash flows, balance sheet


4.

the Target scandal

Which of the following is the most appropriate definition of
accounting?
1.

Ameans of recording transactions and keeping records

2.

The interconnected network of subsystems necessary to operate a business

3.

The measurement, processing, and communication of financial information about an
identifiable economic entity

4.

Electronic collection, organization, and communication of vast amounts of information

An audit is an examination of a company’s
1.

financial statements.

2.

except
1.

ownership is represented by shares of stock.

2.

they are chartered by the state.

3.

the sale of stock does not dissolve the business.

4.

the stockholders have direct control of the business.

Which of the following is an example of an operating activity?
1.

Purchasing equipment

2.

Selling goods and services to customers

3.

Selling land



3.

management.

4.

a financial adviser.

Generally accepted accounting principles
1.

have eliminated all weaknesses in accounting practice.


2.

are accounting rules formulated by the Internal Revenue Service.

3.

are sound in theory but rarely used in practice.

4.

are changing continually.

The topic of foreign exchange rates relates most closely to the
concept of
1.


Borrowing money

The development of international accounting standards is the
primary function of the
1.

IRS.

2.

IASB.

3.

AICPA.

4.

PCAOB.

Those who lend money or deliver goods and services before
being paid are called
1.

creditors.

2.

investors.

reportingto decision makers.

2.

processing data.

3.

storing data.

4.

recording data.

All of the following items would appear on the balance sheet
except
1.

the owner's capital account.

2.

Accounts Receivable.

3.

withdrawals.

4.


3.

separate entity concept.

4.

sole proprietorship concept.

Which of the following financial statements is concerned with
the enterprise at a point in time?
1.

Statement of cash flows


2.

Balance sheet

3.

Income statement

4.

Statement of owner's equity

Which of the following is an agency of the U.S. government?
1.


$40,000

4.

$36,000

Sinoyianis Realty Company had the following balance sheet
accounts and balances: Accounts Payable $12,000,
Accounts Receivable 2,000, Building 16,000, Cash 6,000,
Equipment 14,000, Land 14,000. What is the balance of the
Flora Sinoyianis, Capital account?
1.

$28,000

2.

$40,000

3.

$8,000

4.

$12,000

The purchase of land is an example of a(n)
1.



to obtain bonus compensation

Which of the following physically prepare and audit financial
reports?
1.

chief executives

2.

accountants

3.

managers

4.

board of directors

Which of the following assets could be described as
nonphysical?
1.

Cash

2.

Inventory

in the investing activities section.

2.

nowhere on the statement.

3.

in the operating activities section.


4.

in the financing activities section.

The following users of accounting information have an indirect
financial interest in the business except
1.

taxing authority.

2.

regulatory agency.

3.

labor union.

4.

2.

thousands of people losing their jobs.

3.

prison sentences and fines for corporate executives.

4.

all of these choices.

Companies listed on the stock exchanges must file financial
statements with the
1.

Internal Revenue Service.

2.

Securities and Exchange Commission.

3.

Financial Accounting Standards Board.

4.

American Institute of Certified Public Accountants.



due care.

4.

objectivity.

The authoritative bodycurrentlyresponsible for
establishingaccountingpractice is the
1.

Federal Reserve Board.

2.

Internal Revenue Service.

3.

American Institute of Certified Public Accountants.

4.

Financial Accounting Standards Board.

Sinoyianis Realty Company had the following balance sheet
accounts and balances: Accounts Payable $12,000,
Accounts Receivable 2,000, Building 16,000, Cash 6,000,
Equipment 14,000, Land 14,000. If, $6,000 of Accounts
Payable were paid in cash, what would be the total of

liquidity.

4.

budgeting.

Which of the following is a regulatory agency?
1.

FASB

2.

SEC

3.

IASB

4.

GASB

Which of the following are required to swear that financial
reports are accurate and complete?
1.

managers

2.

be separate entities by accountants?
1.

Corporations only

2.

Sole proprietorships only

3.

Partnerships only

4.

Sole proprietorships, partnerships, and corporations


Which of the following groups uses accounting information
primarily to help protect the public?
1.

Regulatory agencies

2.

Economic planners

3.



transfer assets.

3.

provide services.

4.

pay cash.

The intentional preparation of misleading financial statements,
known as fraudulent financial reporting, can result from
all of the following except
1.

recording a revenue that has been earned but not yet received.

2.

the misapplication of accounting principles.

3.

the manipulation of inventory records.

4.

fictitious sales or orders.



4.

sole proprietorships.

Carrying out professional responsibilities with competence and
diligence is called
1.

objectivity.

2.

due care.

3.

integrity.

4.

independence.


True-False Questions
Payment to a creditor is an example of a nonexchange business
transaction.
1.

True

True

2.

False

An increase in expenses will have the effect of reducing owner's
equity.
1.

True

2.

False

Liquidity means nothaving enough funds on hand to pay debts
when they fall due.
1.

True

2.

False

Two major goals of business are to achieve profitability and to
achieve liquidity.
1.



True

2.

False

Acorporation is an economic unit that is legally separate from
its owners.
1.

True

2.

False

The economic resources invested in a business by the owner
are represented by owner's equity.
1.

True

2.

False

Accountants consider money the common unit of measure for
all business transactions.
1.

the balance sheet by showing how the owner's capital
account changed during the accounting period.
1.

True

2.

False

The liability of corporate stockholders is limited to their
percentage share of ownership.
1.

False

2.

True

The statement of cash flows discloses significant events related
to the operating, investing, and financing activities of a
business.
1.

False

2.

True

2.

True

Managerial accounting focuses on internal decision making.
1.

True

2.

False

A proper heading for the income statement could include “For
the Year Ended December 31, 20--.”
1.

True

2.

False

Financial position may be assessed by referring to a balance
sheet.
1.

True

2.


True


A major function of financial accounting is to provide the
investor with relevant and useful information.
1.

False

2.

True

Less than 20 percent of the U.S. economy is generated by
governmental and not-for-profit organizations.
1.

False

2.

True

Acompany's management information system is a subsystem of
its accounting information system.
1.

True



True

Sole proprietorships in the United States generate more
business (in terms of receipts) than partnerships and
corporations put together.
1.

True

2.

False


The account ‘Wages Payable’ would appear on the income
statement.
1.

True

2.

False

The terms “bookkeeping” and “accounting” are not
synonymous.
1.

True

False

2.

True

The day-by-day accumulation of interest is considered a
transaction involving an exchange of value.
1.

False

2.

True

Financing a business means obtaining funds so the business
can begin and continue operating.
1.

False

2.

True


Revenues have the effect of increasing owner's capital.
1.



2.

True

Owner's equity equals assets minus liabilities
1.

False

2.

True

Accounts Receivable is an asset that is considered
nonmonetary in nature.
1.

False

2.

True

The personal resources of any partner can be called upon to
pay the obligations of the partnership.
1.

False



2.

False

Accounting ratios are useful as management performance
measures.
1.

False

2.

True

Both public accountants and managerial accountants are
required to adhere to a code of professional conduct.
1.

True

2.

False

Paying taxes to the government is an example of an operating
activity.
1.

True

1.

True

2.

False

Regulatory agencies are considered information users with an
indirect financial interest.
1.

False

2.

True

The processing stage of accounting is accomplished by the
recording of data.
1.

True

2.

False

Financial accountinginformation is used primarily by
management.


True

2.

False

The Federal Reserve Board is an example of a consumer group.
1.

False

2.

True

Objectivity is the avoidance of all relationships that impair or
appear to impair the objectivity of the accountant.
1.

True

2.

False

The Securities and Exchange Commission is an accounting
information user with an indirect financial interest.
1.



2.

True

Criminal penalties can be imposed on those who prepare
fraudulent financial statements.
1.

True


2.

False

One way of stating the accounting equation is: Assets +
Liabilities = Owner's Equity.
1.

False

2.

True

Accountants focus on the needs for financial information by
both internal and external decision makers.
1.



True

2.

False

The obligation to provide services to another entity is a type of
liability.
1.

True

2.

False

The Internal Revenue Service is responsible for issuing
accounting standards for state and local governments.
1.

True