Question 1

1. A single proprietorship is an incorporated business owned by an individual and often managed by that individual.

True

False

Question 2

1. Manufacturing companies sell only to final customers.

True

False

Question 3

1. The "periodicity concept" states that an entity's life can be subdivided into time periods for purposes of reporting its economic activities.

True

False

Question 4

1. If stockholders receive cash dividends from the company, retained earnings and cash will decrease.

True

False

Question 5

1. The corporation is the simplest form of business organization.

True

False

Question 6

1. Revenue is:

A. a decrease in stockholders' equity.

B. the inflow of assets from products or services provided to customers

C. the difference between the selling price of a product or service and the cost of providing each product or service.

D. the same as net income.

Question 7

1. The equity ratio is found by dividing total debt by stockholders' equity.

True

False

Question 8

1. Revenues increase retained earnings, while expenses and dividends decrease retained earnings.

True

False

Question 9

1. Vertical analysis shows the percentage that each item in a financial statement is of some significant total, such as total assets or sales.

True

False

Question 10

1. Which of the following events is a business transaction for a company?

A. A major stockholder received a traffic ticket for speeding.

B. A stockholder fell and broke her leg while skiing.

C. A company employee was careless and was seriously injured when unloading some goods from a supplier.

D. The company borrowed cash from the bank.

Question 11

1. The statement of retained earnings shows the net income from the income statement and calculates the ending Retained Earnings balance to be shown on the balance sheet.

True

False

Question 12

1. Which of the following statements is(are) true?

A. A journal entry is a set of instructions.

B. Journalizing is the entering of a transaction into the chronological record of the transactions of a business.

C. Data are first entered in the accounting system through the journal.

D. All of the above answers are true.

Question 13

1. The "business entity" concept indicates that a business organization is separate from its owner(s).

True

False

Question 14

1. The assumption that every corporation has an existence separate from its stockholders and other persons and businesses is called the "continuity assumption".

True

False

Question 15

1. The formula for the equity ratio is stockholders' equity divided by total equities.

True

False

Question 16

1. Credit entries increase:

A. liabilities, expenses, and dividends and decrease assets, revenues, capital stock, and retained earnings.

B. assets, expenses, and dividends and decrease revenues, capital stock, and retained earnings.

C. liabilities, revenues, capital stock, and retained earnings and decrease assets, expenses, and dividends.

D. assets, liabilities, capital stock, and retained earnings and decrease revenues, expenses, and dividends.

Question 17

1. The basic equation of Assets = Liabilities + Stockholder's Equity is always true, assuming the underlying accounting is correct.

True

False

Question 18

1. The annual report of a company contains a statement showing the financial position of the reporting company.

True

False

Question 19

1. Only very large businesses are corporations.

True

False

Question 20

1. If supplies are purchased on credit, both cash and accounts payable will increase.

True

False

Question 21

1. Resources of a company are referred to as:

A. liabilities.

B. revenues.

C. entities.

D. assets.

Question 22

1. Cash 400

Accounts Receivable 400

The partial journal entry above reflects a:
A. debit to Accounts Receivable.

B. debit to Cash.

C. debit to both Cash and Accounts Receivable.

D. credit to both Cash and Accounts Receivable.

Question 23

1. The chart of accounts is a complete listing of the account numbers and account titles of all the accounts in the ledger.

True

False

Question 24

1. The board of directors selects the officers of a corporation, who manage the company.

True

False

Question 25

1. One normally prepares the three basic financial statements in the following order: Balance sheet, statement of retained earnings, and, finally, the income statement.

True

False

Question 26

1. The effect of a dividend is to reduce cash and retained earnings.

True

False

Question 27

1. When stockholders invest cash in a business the:

A. company's liabilities are increased.

B. stockholders' equity is increased.

C. Cash account increases and the Capital Stock account decreases.

D. company's liabilities are decreased.

Question 28

1. Payment of a note payable decreases liabilities.

True

False

Question 29

1. Providing services on account results in an increase in service revenue and a decrease in accounts receivable.

True

False

Question 30

1. Assets are usually reported at their acquisition cost even though they may have a substantially higher current fair market value.

True

False