81 test bank for introduction to accounting an integrated approach 6th edition

81 Test Bank for Introduction to Accounting An
Integrated Approach 6th edition
by Ainsworth
Multiple Choice Questions
Limited liability means:
1.

A)A company is only liable for an amount that is established by a pre-set limit.

2.

B)Creditors are limited to just the cash available in the company at the time of
the loss.

3.

C)Creditors of a company can only claim the assets of the firm and not the
assets of the owners of the firm.

4.

D)Creditors of a firm can claim all the assets of a company but only a limited
amount of the owner's personal assets.

Which of the following computer assisted techniques test products
before they are produced?
1.

A)CAD

2.

B)CAM

3.

C)CIM

4.

D)CPA

Which of the following business organizations has general
partner(s) and limited partners that have limited liability?
1.

A)Limited Liability Company

2.

B)Limited Partnership

3.

C)Limited Corporate Partnership

4.

D)S Corporation

The statements of financial accounting standards, and other

authoritative pronouncements that define what constitutes


acceptable accounting practice for financial reporting are
collectively referred to as:
1.

A)SFAS

2.

B)FASB

3.

C)SEC

4.

D)GAAP

A system used to identify, analyze, measure, record, summarize,
and communicate relevant economic information to interested
parties is referred to as a(n):
1.

A)business system

2.

B)management system

3.

C)human resources system

4.

D)accounting system

A business entity which is legally separate and distinct from its
owners is called a:
1.

A)corporation

2.

B)sole proprietorship

3.

C)partnership

4.

D)service company

Which of the following would best describe the type of business
Disney operates?

1.

A) Service

2.

B) Service and Manufacturing

3.

C) Service and Merchandising

4.

D) Service, Merchandising, and Manufacturing


The We Build Anything Construction Company recently completed
the construction of an office building that took 14 months to
complete. Following the completion of this project the company
began construction of a shopping center that took 15 months to
complete. The company's financial statements were not prepared at
the end of each of these projects but at the end of the fiscal year.
This best describes an application of the:
1.

A)business entity concept

2.

B)periodicity concept

3.

C)monetary unit concept

4.

D)going concern concept

A company which produces a product from raw materials is called
a:
1.

A)service firm

2.

B)merchandising firm

3.

C)manufacturing firm

4.

D)distributor firm

A dry cleaning business is an example of a:
1.

A)service firm

2.

B)merchandising firm

3.

C)manufacturing firm

4.

D)distributor firm

In its annual report the FCX Company reported the value of its
ending inventory, rather than the number of units on hand. This best
describes an application of the:
1.

A)business entity concept

2.

B)going concern concept


3.

C)monetary unit concept

4.

D)periodicity concept

IFRS are produced by:
1.

A) International Accounting Standards Board

2.

B) Securities and Exchange Commission

3.

C) Financial Accounting Standards Board

4.

D) International Accounting Committee

A business owned by one person whose personal possessions are
at risk if the business fails is called a:
1.

A)partnership

2.

B)sole proprietorship

3.

C)corporation

4.

D)merchandiser

According to Concept Statement #2 accounting information should
be:
1.

A) Relevant and Reliable

2.

B) Responsible and Reconcilable

3.

C) Accurate and Meaningful

4.

D) Accurate and Timely

A supermarket is an example of a:
1.

A)merchandising firm

2.

B)service firm

3.

C)manufacturing firm

4.

D)producer firm


The accounting concept which asserts that money is the common
measurement unit for economic activity is the:
1.

A)business entity concept

2.

B)monetary unit concept

3.

C)going concern concept

4.

D)dollar-value concept

Which of the following is not an objective of financial reporting
specified in Concept Statement #1?
1.
2.

A) To provide information useful to investors and creditors
B) To provide information helpful in assessing the future amounts and timing
of cash flows.

3.

C) To provide information about the assets and claims on the assets of a firm.

4.

D) To prepare income statements on a timely basis.

The accounting concept which assumes that, absent any
information to the contrary, the business will continue into the
foreseeable future is the:
1.

A)business entity concept

2.

B)future entity concept

3.

C)going concern concept

4.

D)periodicity concept

The accounting concept requiring that the profits of a business be
determined at regular intervals throughout the life of the business is
the:
1.

A)business entity concept

2.

B)going concern concept

3.

C)monetary unit concept


4.

D)periodicity concept

Which of the following is an objective of financial reporting specified
in Concept Statement #1?
1.

A) To provide information useful to investors and creditors

2.

B) To provide a statement of cash flows

3.

C) To provide a balance sheet at the end of a year.

4.

D) To prepare income statements on a timely basis.

The owner of a dry cleaning business maintains separate
checkbooks for his business and his personal affairs. This best
describes an application of the:
1.

A)business entity concept

2.

B)going concern concept

3.

C)monetary unit concept

4.

D)periodicity concept

The organization responsible for setting U.S. external financial
reporting practice is the:
1.

A)Securities and Exchange Commission

2.

B)Financial Accounting Standards Board

3.

C)Federal Government

4.

D)American Institute of Certified Public Accountants

Dell Corporation is an example of a:
1.

A)service firm

2.

B)merchandising firm

3.

C)manufacturing firm

4.

D)distributor firm


A business owned by two or more individuals whose personal
possessions are at risk if the business fails is called a:
1.

A)sole proprietorship

2.

B)corporation

3.

C)partnership

4.

D)manufacturer

Wal-Mart is an example of which of the following?
1.

A)service firm

2.

B)merchandising firm

3.

C)manufacturing firm

4.

D)producer firm

Which of the following is has limited liability for all owners and is not
subject to double taxation?
1.

A)Corporation

2.

B)Sole Proprietorship

3.

C)Limited Liability Corporation

4.

D)Limited Partnership

A law firm is an example of which of the following?
1.

A)manufacturing firm

2.

B)merchandising firm

3.

C)service firm

4.

D)performance firm

Limited liability is an attribute of which type of business entity?
1.

A)partnership


2.

B)sole proprietorship

3.

C)service company

4.

D)corporation

IFRS stands for:
1.

A) International Financial Reporting System

2.

B) International Financial Reporting Standard

3.

C) International Financing Requirement Standard

4.

D) International Financing Regulation and Standards

Every three months, Ashmont Antiques produces a report showing
profits earned during the most recently ended quarter. This best

describes an application of the:
1.

A)business entity concept

2.

B)periodicity concept

3.

C)monetary unit concept

4.

D)going concern concept

Which of the following is not subject to double taxation?
1.

A)Limited Liability Company

2.

B)S Corporation

3.

C)Limited Liability Partnership

4.

D)Limited Partnership

5.

E)All of the above are not subject to double taxation.

An accountant who has the legal authority to attest to the fair
presentation of information in the financial statements of any
company is called a/an:
1.

A)certified public accountant


2.

B)internal auditor

3.

C)controller

4.

D)chief financial officer

Which type of business is required to pay taxes on income earned?
1.

A)sole proprietorship

2.

B)corporation

3.

C)partnership

4.

D)manufacturer

Unlimited life is a characteristic of which type of business entity?
1.

A)corporation

2.

B)sole proprietorship

3.

C)partnership

4.

D)merchandiser

The body responsible for establishing international accounting
standards today is the:
1.

A)FASB

2.

B)GAAP

3.

C)SEC

4.

D)IASB

A company that makes and sells steel is a:
1.

A)service firm

2.

B)merchandising firm

3.

C)manufacturing firm

4.

D)performance firm


Financial accounting standards that define what constitutes
acceptable accounting practice for financial reporting world wide are
referred to as:
1.

A)SFAS

2.

B)FASB

3.

C)IFRS

4.

D)GAAP

Which type of business may be owned by one individual?
1.

A)corporation

2.

B)sole proprietorship

3.

C)partnership

4.

D)both a sole proprietorship and a corporation

Which of the following best describes the type of business John
Deere Inc is?
1.

A)Manufacturing

2.

B)Manufacturing and Service

3.

C)Manufacturing and Merchandising

4.

D)Manufacturing, Service and Merchandising

The accounting concept requiring that an accounting system reflect
information relating only to those economic events pertaining to a
particular entity is the:
1.

A)business entity concept

2.

B)going entity concept

3.

C)monetary unit concept

4.

D)periodicity concept


81 Free Test Bank for Introduction to Accounting An
Integrated Approach 6th edition by Ainsworth Multiple
Choice Questions - Page 2
The owner of XYZ Corporation includes his personal liabilities with
business liabilities. What accounting concept is being violated?
1.

A)Going concern

2.

B)Business entity

3.

C)Monetary unit

4.

D)Periodicity

For information to be useful, it must be relevant. Information is
relevant when it
1.

A)is verifiable.

2.

B)causes users to reach a different decision.

3.

C)mirrors the true economic situation of a business.

4.

D)is understandable.

Which of the following has the longest product life cycle?
1.

A) Clothing style

2.

B) Rap Music

3.

C) Television Show

4.

D) Theme Park

Which of the following is NOT true about the relationship between
the financial statements?
1.

A)The net income of the firm is added to owners’ equity

2.

B)The cash on the balance sheet is found on the cash flow statement


3.

C)The net income of the firm is reported on the Income Statement and the
Statement of Changes in Shareholders’ Equity

4.

D)The cash generated by operations on the Statement of Cash Flows is
reported as an increase in Retained Earnings on the Statement of Changes in
Shareholders’ Equity

Which of the following is not a liability from accounting purposes?
1.

A)An amount which must be paid to a business that sold you some supplies

2.

B)You promise to increase wages in the coming year by $1 per hour.

3.

C)You borrow $100,000 to buy a new piece of equipment

4.

D)Your workers have worked all week and you will pay them next
Wednesday.

Which of the following explains why it is relatively easy for
corporations to raise large amounts of money?

1.

A)Owners have unlimited liability for the debts of the business.

2.

B)Close supervision by owners of day-to-day operations

3.

C)Corporations raise capital by seeking relatively small amounts from many
people.

4.

D)Corporations are not subject to as much regulation as partnerships and
sole proprietorships.

The Report of the Independent Auditor is the opinion of the CPA
firm that examined the financial statements of a company and
states which of the following?
1.

A)The financial statements are correct as reported

2.

B)The financial statements are fairly presented

3.

C)The financial statements are free from fraud

4.

D)The financial statements are presented fairly in accordance with GAAP.

Which of the following is a characteristic of a limited-liability
partnership (LLP)?


1.

A)One partner cannot be held responsible for the inappropriate actions of
another partner.

2.

B)Partners' personal liability is limited to the amount they have invested in the
business.

3.

C)Each partner is liable for the actions of all other partners.

4.

D)As a separate legal entity, the partnership must pay taxes on income.

This computer assisted technique improves the speed and

precision of the production process.
1.

A)CAD

2.

B)CAM

3.

C)CIM

4.

D)CAP

Which of the following is a characteristic of the corporate form of
business?
1.

A)Mutual agency

2.

B)Separate legal entity

3.

C)Relatively easy to form

4.

D)Owners have unlimited liability for the debts of the business.

The cash held by a company at the end of the year is found on
which of the following two statements?
1.

A)Balance Sheet and Income Statement

2.

B)Balance Sheet and Statement of Cash Flows

3.

C)Income Statement and Statement of Cash Flows

4.

D)Statement of Stockholders' Equity and Cash Flows Statement

Which of the following is true about the relationships between the
financial statements?


1.

A)The ending balances of the retained earnings found in the Statement of

Changes in Stockholders' Equity are found on the Balance Sheet.

2.

B)The net income reported on the Income Statement is also found on the
balance sheet.

3.

C)The cash inflows identified on the Statement of Cash Flows are reported on
the Income Statement.

4.

D)The cash reported on the Income Statement is reported on the Statement
of Cash Flows

Which of the following is the ratio for calculating the return on sales
ratio?
1.

A)Net Income / Total Stockholders' Equity

2.

B)Current Assets / Total Sales

3.

C)Current Liabilities / Total Sales

4.

D)Net Income / Total Sales

Which of the following is an external stakeholder in a supermarket?
1.

A)the manager of the produce department

2.

B)the company which supplies the baked goods for the bakery

3.

C)the cashier at the checkout counter

4.

D)the chief financial officer at the supermarket's corporate headquarters

Net income is found on which of the following two statements?
1.

A)Balance Sheet and Income Statement

2.

B)Statement of Changes in Stockholders' Equity and Income Statement

3.

C)Statement of Changes in Stockholders' Equity and Balance Sheet

4.

D)Statement of Cash Flows and Balance Sheet

Which of the following statements is true?


1.

A)Before the advent of a money economy, the double-entry accounting
system was not feasible.

2.

B)Accounting systems developed in the 18th century because, by then, most
people were literate.

3.

C)Double-entry accounting systems have existed for at least 2,000 years.

4.

D)The double-entry accounting system came about as a result of the Great
Depression.

The function of business responsible for providing the information
used by other functional areas to perform their jobs is referred to
as:
1.

A)production and operations

2.

B)human resources

3.

C)marketing

4.

D)accounting and information systems

The business function which is responsible for managing a
company's capital resources is referred to as:
1.

A)marketing

2.

B)human resources

3.

C)finance

4.

D)operations

Which of the following is not a cause for the number of partnerships
to be relatively small?
1.

A)Unlimited liability

2.

B)Mutual agency (each partner can act for other partners)

3.

C)Double taxation

4.

D)Difficulty of formation


The current liquidity of a company is measured by which of the
following?
1.

A)Return on Sales Ratio

2.

B)Return on Assets Ratio

3.

C)Current Ratio

4.

D)Debt to Equity Ratio

Which of the following is an example of a liability?
1.

A)An amount which must be paid to a business that sold you some supplies

2.

B)The obligation to transfer the net assets of the business to its owners

3.

C)Equipment purchased by the business on a long-term payment plan

4.

D)The amount contributed to the business by your partner

Which of the following is an internal stakeholder?
1.

A)general public

2.

B)creditors

3.

C)suppliers

4.

D)management

Which of the following is a characteristic of an S Corporation?
1.

A)No taxation of income at the corporate level

2.

B)Responsibility of owners for the firm's debt

3.

C)Unlimited liability

4.

D)Mutual agency

Which of the following is the ratio for calculating the current ratio?
1.

A)Current Assets / Current Liabilities

2.

B)Current Assets / Total Liabilities


3.

C)Current Liabilities / Current Assets

4.

D)Current Assets / Total Sales

Investors read the Independent Auditors’ Opinion because.
1.
2.

A) they want to know if financial statements are mathematically correct
B) they want some assurance that the financial statements are fairly

presented

3.

C) they want to determine if the auditors found any fraud

4.

D) they want to know if the auditor thinks the company is a good investment

Which of the following statements about the use of accounting
information by the marketing function is false?
1.

A)People in the marketing function use accounting information to help figure
selling prices.

2.

B)Accounting information would be needed to appraise different ways of
getting the product to customers.

3.

C)Those in the marketing function do not use accounting information; they
leave all of that to their accountants.

4.

D)Accounting information is needed for product-selection decisions.

Which of the following has the shortest product life cycle?
1.

A)Automobile

2.

B)Game Show

3.

C)Airplane

4.

D)Wireless Communication

The business function designed to determine the wants and needs
of consumers is referred to as:
1.

A)marketing

2.

B)finance


3.

C)human resources

4.

D)operations

All of the following are basic functions of a business except:
1.

A)marketing

2.

B)external auditing

3.

C)finance

4.

D)human resources

Which of the following is an internal stakeholder in a college?
1.

A)the company that employs graduates of the college

2.

B)the company which services the photocopy machines in the library

3.

C)the faculty

4.

D)the organization that accredits various degree programs of the college

One of the following is not one of the financial statements required
for external reporting today.
1.

A)Income Statement

2.

B)Balance Sheet

3.

C)Statement of Changes in Working Capital

4.

D)Statement of Changes in Stockholders' Equity

The primary objective of financial reporting is to

1.
2.

A)determine taxable income and income tax of a business.
B)provide management with information needed to run the day-to-day
operations of a business.

3.

C)keep businesses from going bankrupt.

4.

D)provide information useful for making economic decisions.


Which of the following led to the need for financial statements to
report to owners of a business?
1.

A)The abandonment of a barter economy

2.

B)The expansion of European businesses into Asia and Africa

3.

C)The absence of day-to-day involvement by owners

4.

D)The increased use by business owners of the cash basis of accounting

In Luca Pacioli's book "The Summa" the 15th century accounting
system he describes uses all but one of the following books.
1.

A)Memorandum

2.

B)Ledger

3.

C)Cash Book

4.

D)Journal

All of the following are external stakeholders except:
1.

A)employees

2.

B)suppliers

3.

C)customers

4.

D)creditors

The Debt to Equity Ratio is measure with which of the following?
1.

A)Total Liabilities / Total Assets

2.

B)Long-term Liabilities / Total Stockholders' Equity

3.

C)Total Stockholders' Equity / Total Liabilities

4.

D)Total Liabilities / Total Stockholders' Equity

Which of the following is not an example of a task performed by
someone in the finance function?
1.

A)Select projects for the firm to invest in


2.

B)Decide between debt and equity financing of an acquisition

3.

C)Decide when to raise new capital

4.

D)Determine the percentage of defective products

Which of he following is not a correct relationship?
1.

A)Production Function – Determine Cost of Products Manufactured

2.

B)Marketing Function - Advertising

3.

C)Finance Function – Borrow Cash

4.

D)Human Resource Function – Layoff Employees

5.

E)All are correct relationship

Which of the following statements about the use of accounting
information by the human resources function is false?
1.

A)People in human resources do not use accounting information; they leave
all of that to their accountants.

2.

B)Those in human resources use accounting information to figure employees'
pay.

3.

C)The computation of retirement benefits is a human resource function
requiring accounting information.

4.

D)Accounting information is needed to evaluate employees' performance.

If the Debt to Equity Ratio is greater than 1 it means.
1.

A)The company is using debt more than owners’ equity to finance its assets

2.

B)The company has less debt than equity

3.

C)The company has more debt than assets

4.

D)The company is using more of its assets to finance its debt

What distinguishes partnerships from sole proprietorships?
1.

A)Involvement in day-to-day business activities by owners.


2.

B)The extent of liability for the debts of the business

3.

C)The amount of income tax the entity has to pay

4.

D)Mutual agency (each partner can act for other partners)