151 Test Bank for Principles of Financial Accounting 11th
Edition by Needles
Multiple Choice Questions-Page 1
The communication stage of accounting is accomplished by
1.

a.storing data.

2.

b.reporting to decision makers.

3.

c.processing data.

4.

d.recording data.

A company's ability to attract and hold investment capital ultimately depends
on its
1.

a.budgeting.

2.

b.planning.

3.


2.

b.Selling goods and services to customers

3.

c.Purchasing equipment

4.

d.Selling land

An accounting measurement is concerned with all except which of the
following?
1.

a.Money measure

2.

b.Financial position

3.

c.Separate entity

4.

d.Business transaction


c.taxing authority.

4.

d.labor union.

The group of users of accounting information charged with achieving the
goals of the business is its
1.

a.auditors.

2.

b.creditors.

3.

c.management.

4.

d.investors.

The measurement stage of accounting is accomplished by
1.

a.recording data.



The separate entity concept requires that
1.

a.the personal assets and liabilities of an owner not be shown on the business's
financial statements.

2.

b.transactions that involve an exchange of value be kept separate from those that do
not.

3.

c.tax records be kept separate from financial reporting records.

4.

d.a separate set of books be established for each segment of a business.

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

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

2.

b.The interconnected network of subsystems necessary to operate a business



a.separate entity.

2.

b.money measure.

3.

c.nonexchange transactions.

4.

d.business transactions.

All of the following statements are true about the Sarbanes-Oxley Act except
1.

a.it applies to publicly traded companies.

2.

b.it shields chief executives from criminal penalties.

3.

c.it orders the SEC to draw up certain rules.

4.



c.underwriters.


4.

d.creditors.

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

a.Purchasing a building

2.

b.Obtaining a bank loan

3.

c.Paying taxes to the government

4.

d.Producing goods and services

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

a.the misapplication of accounting principles.

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

a.Sole proprietorship only

2.

b.Sole proprietorship and partnership only


3.

c.Corporation only

4.

d.Partnership only

Which of the following transactions involves an exchange of value?
1.

a.Accumulation of interest

2.

b.Sale of services

3.

c.Flood loss


3.

c.capital activity.

4.

d.financing activity.

The correct order of the three stages of accounting is
1.

a.communication, processing, and measurement.


2.

b.measurement, communication, and processing.

3.

c.processing, measurement, and communication.

4.

d.measurement, processing, and communication.

54 Free Test Bank for Principles of Financial Accounting
11th Edition by Needles Multiple Choice Questions-Page
2

4.

d.Assets + Liabilities = Owner's Equity

Standards for state and local governments are established by the
1.

a.IRS.

2.

b.IASB.

3.

c.GASB.


4.

d.AICPA.

Most business enterprises in the United States are
1.

a.government units.

2.

b.partnerships.


2.

b.Cash

3.

c.Patents

4.

d.Equipment

The statement of cash flows would disclose the withdrawal of cash by the
owner
1.

a.in the financing activities section.

2.

b.in the investing activities section.


3.

c.in the operating activities section.

4.


c.auditing the company's financial statements.

4.

d.ascertaining that the company safeguards its resources.

Which of the following is a regulatory agency?
1.

a.IASB

2.

b.SEC

3.

c.FASB

4.

d.GASB

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

a.partners must share profits and losses equally.


2.

1.

a.nowhere on the statement.

2.

b.in the operating activities section.

3.

c.in the investing activities section.

4.

d.in the financing activities section.

An example of a monetary asset is
1.

a.Accounts Receivable.

2.

b.Copyright.

3.

c.Retained Earnings.

4.


3.

c.IASB.

4.

d.PCAOB.

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

a.statement of cash flows.

2.

b.income statement.

3.

c.statement of owner's equity.

4.

d.balance sheet.

Which of the following accounts is not considered an asset?
1.


statement

4.

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

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

a.withdrawals.

2.

b.the owner's Capital account.

3.

c.Accounts Receivable.

4.

d.Patents.

The authoritative body currently responsible for establishing accounting
practice is the
1.

a.Internal Revenue Service.



Which of the following forms of organization are considered to be separate
entities by accountants?
1.

a.Partnerships only

2.

b.Sole proprietorships only

3.

c.Corporations only

4.

d.Sole proprietorships, partnerships, and corporations

A liability would not include an obligation to
1.

a.transfer assets.

2.

b.hire an employee.

3.



2.

b.Income statement

3.

c.Statement of cash flows

4.

d.Balance sheet

Which of the following is not one of the broad principles underlying the
accountant's code of professional ethics?
1.

a.Objectivity

2.

b.Integrity

3.

c.Loyalty

4.

d.Independence

c.IRS.

4.

d.IASB.


True-False Questions-Page 1
Creditors are those who lend money to others or deliver goods and services
before being paid.
1.

True

2.

False

Responsibility for ethical financial reporting rests solely with the accountant.
1.

True

2.

False

A major function of management is to provide the accountant with relevant
and useful information.
1.


True

2.

False

The evaluation and interpretation of financial statements and related
performance measures is called technical analysis.
1.

True

2.

False

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

True

2.

False

Financial accounting information is used primarily by management.
1.

True


2.

False

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

True

2.

False

Management accounting focuses on external decision making.
1.

True

2.

False

Earned income is a measure of profitability.
1.

True

2.



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

True

2.

False

The intentional preparation of misleading financial statements is referred to as
fraudulent financial reporting.
1.

True

2.

False

Criminal penalties cannot be imposed on those who prepare fraudulent
financial statements.
1.

True

2.

False

False

The Federal Reserve Board is an example of an economic planner.
1.

True

2.

False

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

True

2.

False

Buying and selling goods and services are examples of operating activities.
1.

True

2.

False



False

When a corporate stockholder sells his or her shares of stock, the corporation
is technically dissolved.
1.

True

2.

False

Creditors' equities is another term for liabilities.
1.

True

2.

False

Net income is another term for revenues.
1.

True

2.

False


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

True

2.

False

For reporting purposes, the personal assets and debts of a business owner
should be combined with the assets and debts of the business.
1.

True

2.

False

Corporations represent the largest number of businesses in the United
States.
1.

True


2.

False

For accounting purposes, a business and its owners are considered separate
entities.
1.

True

2.

False

Equipment is an asset that is considered nonmonetary in nature.
1.

True

2.

False

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

True


2.

False

Only about 10 percent of the U.S. economy is generated by governmental and


True

2.

False

In general, any partner can obligate the partnership to another party.
1.

True

2.

False

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

True