Chapter 1

Which of the following is not a step in the accounting process? a. Identification. b. Verification. c. Recording. d. Communication.

Which of the following statements about users of accounting information is incorrecr? a. Management is an internal user. b. Taxing authorities are external users. c. Present creditors are external users. d. Regulatory authorities are internal users.

The cost principle states that: a. assets should be initially recorded at cost and adjusted when the fair value changes. b. activities of an entity are to be kept separate and distinct from its owner. c. assets should be recorded at their cost. d. only transaction data capable of being expressed in terms of money be included in the accounting records.

Which of the following statements about basic assumptions is correct? a. Basic assumptions are the same as accounting principles b. The economic entity assumption states that there should be a particular unit of accountability. c. The monetary unit assumption enables accounting to measure employee morale. d. Partnerships are not economic entities.

The three types of business entities are: a. proprietorships, small businesses, and partnerships. b. proprietorships, partnerships, and corporations. c. proprietorships, partnerships, and large businesses. d. financial, manufacturing, and service companies.

Net income will result during a time period when: a. assets exceed liabilities. b. assets exceed revenues. c. expenses exceed revenues. d. revenues exceed expenses.

Performing services on account will have the following effects on the components of the basic accounting equation: a. increase assets and decrease owner's equity. b. increase assets and increase owner's equity. c. increase assets and increase liabilities. d. increase liabilities and increase owner's equity.

As of December 31,2012 , Stoneland Company has assets of \(\$ 3,500\) and owner's equity of \(\$ 2,000\). What are the liabilities for Stoneland Company as of December 31,2012 ? a. \(\$ 1,500\). b. \(\$ 1,000\). c. \(\$ 2,500\). d. \(\$ 2,000\).

Which of the following events is not recorded in the accounting records? a. Equipment is purchased on account. b. An employee is terminated. c. A cash investment is made into the business. d. The owner withdraws cash for personal use.

During 2012, Gibson Company's assets decreased \(\$ 50,000\) and its liabilities decreased \(\$ 90,000\). Its owner's equity therefore: a. increased \(\$ 40,000\). c. decreased \(\$ 40,000\). b. decreased \(\$ 140,000\). d. increased \(\$ 140,000\).

Payment of an account payable affects the components of the accounting equation in the following way. a. Decreases owner's equity and decreases liabilities. b. Increases assets and decreases liabilities. c. Decreases assets and increases owner's equity. d. Decreases assets and decreases liabilities.

Which of the following statements is false? a. A statement of cash flows summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time. b. A balance sheet reports the assets, liabilities, and owner's equity at a specific date. c. An income statement presents the revenues, expenses, changes in owner's equity, and resulting net income or net loss for a specific period of time. d. An owner's equity statement summarizes the changes in owner's equity for a specific period of time.

On the last day of the period, Jim Otto Company buys a \(\$ 900\) machine on credit. This transaction will affect the: a. income statement only. b. balance sheet only. c. income statement and owner's equity statement only. d. income statement, owner's equity statement, and balance sheet.

The financial statement that reports assets, liabilities, and owner's equity is the: a. income statement. b. owner's equity statement. c. balance sheet. d. statement of cash flows.

Services provided by a public accountant include: a. auditing, taxation, and management consulting. b. auditing, budgeting, and management consulting. c. auditing, budgeting, and cost accounting. d. internal auditing, budgeting, and management consulting.