ch 1 t/f

question

The main objective of a not-for-profit business is not to make a profit.
answer

false
question

The role of accounting is to provide many different users with financial information to make economic decisions.
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true
question

A corporation is a business that is legally separate and distinct from its owners.
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true
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Senior executives cannot be criminally prosecuted for the wrong doings they commit on behalf of the companies where they work.
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false
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The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing entities
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false
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Managerial accounting information is used by external and internal users equally.
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false
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Financial accounting provides information to all users, while the main focus for managerial accounting is to provide information to the management.
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true
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Proper ethical conduct implies that you only consider what’s in your best interest
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false
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Some of the major fraudulent acts by senior executives started as what they considered to be small ethical lapses which grew out of control.
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true
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Two factors that typically lead to ethical violations are relevance and timeliness of accounting information.
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false
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Accounting information users need reports about the economic activities and condition of businesses.
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true
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An example of an external user of accounting information is the federal government
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true
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An example of a general-purpose financial statement would be a report about projected price increases related to transportation costs.
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false
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A business is an organization in which basic resources or inputs, like materials and labor, are assembled and processed to provide outputs in the form of goods or services to customers.
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true
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The basic difference between manufacturing and merchandising companies is the completion level of the products they purchase for resale to customers.
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true
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The main objective for all businesses is to maximize unrealized profits.
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false
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The Sarbanes-Oxley Act prohibits CPAs from providing nonaudit investment banking services.
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true
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About 90% of the businesses in the United States are organized as corporations.
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false
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Proprietorships are owned by one owner and provide only services to their customers.
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false
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Only large companies such as Wal-Mart, JCP, General Motors, and the Bank of America can be organized as corporations.
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false
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The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for developing accounting principles
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true
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The unit of measurement concept requires that economic data be recorded in a common unit of measurement.
answer

true
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No significant differences exist between the accounting standards issued by the FASB and the IASB.
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false
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The cost concept is the basis for entering the exchange price into the accounting records.
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true
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Generally accepted accounting principles regulate how and what financial information is reported by businesses.
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true
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The accounting equation can be expressed as Assets – Liabilities = Owners’ Equity.
answer

true
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The rights or claims to the assets of a business may be subdivided into rights of creditors and rights of owners.
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true
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Owners’ rights to assets rank ahead of creditors’ rights to assets.
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false
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An account receivable is typically classified as a revenue.
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false
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An account receivable is a claim against a customer arising from a sale on account.
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true
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Paying an account payable increases liabilities and decreases assets.
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false
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Receiving payments on an account receivable increases both equity and assets.
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false
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Cash dividends paid to stockholders decrease assets and increase equity.
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false
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Purchasing supplies on account increases liabilities and decreases equity.
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false
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Receiving a bill or otherwise being notified that an amount is owed is not recorded until the amount is paid.
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false
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Revenue is earned only when money is received.
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false
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Expenses are assets that are used up during the process of earning revenue.
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true
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The excess of revenue over the expenses incurred in earning the revenue is called capital stock.
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false
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The principal financial statements for a corporation are the income statement, the retained earnings statement, the balance sheet, and the budget.
answer

fasle
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An income statement is a summary of the revenues and expenses of a business as of a specific date.
answer

fasle
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A retained earnings statement reports all changes in cash for a period of time.
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false
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The statement of cash flows consists of three sections: cash flows from operating activities, cash flows from income activities, and cash flows from equity activities.
answer

false
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All financial statements are identified by the name of the business, the title of the statement, and the date or period of time
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true
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The balance sheet represents the accounting equation.
answer

true
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Net income and net profit do not mean the same thing.
answer

false

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