153 Test Bank for Accounting Principles 6th Canadian Edition
153 Test Bank for Accounting Principles 6th Canadian
Edition
True - False Questions
Accounting is the information system that identifies, records, and
communicates the economic events of an organization to a wide
variety of interested users.
1.
True
2.
False
Recognition is the process of recording a transaction in the
accounting records.
1.
True
2.
False
The economic entity concept requires that an entity’s business
activities be combined with the activities of its owner for financial
reporting purposes.
1.
True
2.
False
Accounting information is used only by external users with a direct
financial interest in a company.
1.
True
2.
False
Publicly Traded Corporations can choose to report under either
ASPE or IFRS.
1.
True
2.
False
The owner’s claim on the assets of the company is known as owner’s
equity.
1.
True
2.
False
In Canada, the main standard setting board is the Accounting
Standards Board.
1.
True
2.
False
A working knowledge of accounting can be useful to doctors or
lawyers.
1.
True
2.
False
The going concern assumption is the assumption that a company will
continue to operate in the foreseeable future.
1.
True
2.
False
An obligation to pay cash to a supplier in the future is called accounts
payable.
1.
True
2.
False
One of the main advantages of a corporation is the limit of liability for
the shareholders of the company.
1.
True
2.
False
Accounts payable is the asset created when a company sells
services or products to customers who promise to pay cash in the
future.
1.
True
2.
False
An advantage of the corporation is that the shares of the corporation
are easily transferable.
1.
True
2.
False
The monetary unit assumption assumes that all transactions will take
place in Canadian dollars.
1.
True
2.
False
In a proprietorship, there may be 2 or more owners.
1.
True
2.
False
Creditors are an example of an internal user of accounting
information.
1.
True
2.
False
A Balance Sheet can also be called a Statement of Financial
Position.
1.
True
2.
False
In a situation with an ethical consideration, there is only one ethical
course of action which can be followed.
1.
True
2.
False
The main objective of financial statements is to provide useful
information to management.
1.
True
2.
False
Companies incorporated under provincial legislation report under
ASPE and companies incorporated under federal legislation report
under IFRS.
1.
True
2.
False
Profit results when a company’s expenses are higher than its
revenues.
1.
True
2.
False
A corporation is only subject to the federal laws of corporations.
1.
True
2.
False
Sometimes Canadian companies will report their results in U.S.
dollars.
1.
True
2.
False
One of the disadvantages of a proprietorship is that there is unlimited
liability for the owner.
1.
True
2.
False
Cost value is the amount of the consideration that would be agreed
upon in an arm’s-length transaction between knowledgeable, willing
parties who are under no compulsion to act.
1.
True
2.
False
A balance sheet presents the revenues and expenses, and the
resulting profit or loss for a specific period of time.
1.
True
2.
False
In a partnership, all of the partners will generally have unlimited
liability for the debts of the partnerships.
1.
True
2.
False
Revenues decrease owner’s equity and expenses increase owner’s
equity.
1.
True
2.
False
GAAP stands for Generally Accepted Accounting Principles.
1.
True
2.
False
Under the proprietorship form of business organization, no distinction
is made between the business as an economic unit and its owner.
1.
True
2.
False
A balance sheet reports the assets, liabilities, and owner’s equity at a
specific date.
1.
True
2.
False
Liabilities are the resources owned by a business that are expected
to provide future services or benefits.
1.
True
2.
False
A private company is one that issues shares to the public.
1.
True
2.
False
An accounting transaction occurs when assets, liabilities, or owner’s
equity items change as the result of some economic event.
1.
True
2.
False
A partnership must have at least 2 people in the partnership.
1.
True
2.
False
Assets are current obligations, arising from past events, to make a
future payment or to provide services.
1.
True
2.
False
Expenses are the costs of assets that are consumed or services
used in the ordinary business activities.
1.
True
2.
False
Owner’s claims to total business assets take precedence over the
claims of creditors because owners invest assets in the business and
are liable for losses.
1.
True
2.
False
Both IFRS and ASPE are considered “principles-based” as opposed
to “rules-based” standards.
1.
True
2.
False
A corporation may only be formed under the federal legislation.
1.
True
2.
False
Only the accountants should be concerned with ethics when the
financial statements are being prepared.
1.
True
2.
False
A corporation may be formed under either the provincial legislation or
the federal legislation.
1.
True
2.
False
Measurement is the process of determining the amount that should
be recognized.
1.
True
2.
False
A cash flow statement is organized into three categories, operating,
financing and investing activities of the company.
1.
True
2.
False
Employees are an example of an external user.
1.
True
2.
False
Ethics are critical in the preparation of accounting information.
1.
True
2.
False
A corporation’s ownership is divided into transferable shares.
1.
True
2.
False
The cost and fair value of an asset are the same at the time of
acquisition and in all subsequent periods.
1.
True
2.
False
An income statement will give the answer to the question – “where
did all the cash get used during this month?”
1.
True
2.
False
Multiple Choice Questions - Page 1
Generally accepted accounting principles are
1.
a. income tax regulations.
2.
b. standards that indicate how to report economic events.
3.
c. theories that are based on physical laws of the universe.
4.
d. principles that have been proven correct by academic researchers.
The main objective of the financial statements is
1.
a. to show the profit of a company.
2.
b. to allow customers to determine whether a company will honour its product
warranties.
3.
c. to provide useful information to investors and creditors to make decisions about a
business.
4.
d. to determine how many employees the company can afford to hire each year.
The going concern assumption
1.
a. states that a company will not operate long enough to utilize assets and fulfill
obligations.
2.
b. assumes the company will continue to operate in the foreseeable future.
3.
c. is inconsistent with the cost principle.
4.
d. states that net worth is the most appropriate value at which to record assets.
The partnership form of business organization
1.
a. is a separate legal entity.
2.
b. is a common form of organization for service-type businesses.
3.
c. enjoys an unlimited life.
4.
d. has limited liability.
When an owner, in a proprietorship or partnership, withdraws cash or
other assets from a business for personal use, these withdrawals are
termed
1.
a. expenses.
2.
b. salary.
3.
c. drawings.
4.
d. a credit line.
The International Accounting Standards Board
1.
a. works to reduce differences in accounting practices across countries.
2.
b. promotes unique accounting applications.
3.
c. works to increase differences in accounting practices across countries.
4.
d. only operates in countries which speak English.
Evan Guanzon owns and operates Guanzon’s Pizza Express. Evan
should record the cost of wages paid to store employees as a (an)
1.
a. revenue.
2.
b. expense.
3.
c. liability.
4.
d. asset.
An external user would NOT include
1.
a. A creditor of the company.
2.
b. Canada Revenue Agency.
3.
c. An employee.
4.
d. The company’s bank.
The common characteristic possessed by all assets is
1.
a. long life.
2.
b. great monetary value.
3.
c. tangible nature.
4.
d. future economic benefit.
Which of the following is true when considering the accounting
equation?
1.
a. An increase in an asset must always equal a decrease in a liability.
2.
b. For every transaction an asset and a liability must be affected.
3.
c. An increase in a liability must equal a decrease in owner’s equity.
4.
d. An increase in an asset may result in a decrease in another asset.
Mel Green is the proprietor (owner) of Green's, a retailer of athletic
apparel. When recording the financial transactions of Green's, Mel
does not record an entry for a car he purchased for personal use.
Mel took out a personal loan to pay for the car. What accounting
assumption guides Mel's behaviour in this situation?
1.
a. going concern assumption
2.
b. economic entity concept
3.
c. time period assumption
4.
d. monetary unit assumption
Which of the following is NOT an advantage of the corporate form of
business organization?
1.
a. limited liability of shareholders
2.
b. transferability of ownership
3.
c. unlimited personal liability for shareholders
4.
d. unlimited life
Withdrawal of cash from a business by the owner for personal
reasons will NOT affect which financial statement?
1.
a. Balance Sheet
2.
b. Income Statement
3.
c. Statement of Owner’s Equity
4.
d. Cash Flow Statement
An external user could be
1.
a. employees.
2.
b. management.
3.
c. Canada Revenue Agency.
4.
d. the human resource director.
Judy and Marilyn met at law school and decide to start a small law
practice after graduation. They agree to split revenues and expenses
evenly. The most common form of business organization for a
business such as this would be a(n)
1.
a. non profit organization.
2.
b. partnership.
3.
c. corporation.
4.
d. proprietorship.
A business organized as a corporation
1.
a. is not a separate legal entity in most provinces.
2.
b. requires that shareholders be personally liable for the debts of the business.
3.
c. is owned by its shareholders.
4.
d. terminates when one of its original shareholders dies.
The basic accounting equation, in a proprietorship, CANNOT be
restated as
1.
a. Assets – Liabilities = Owner's Equity.
2.
b. Assets – Owner's Equity = Liabilities.
3.
c. Owner's Equity + Liabilities = Assets.
4.
d. Assets + Liabilities = Owner's Equity.
All of the following are steps used to analyze ethical dilemmas
EXCEPT
1.
a. using the organization’s code of ethics to identify ethical situations.
2.
b. using personal ethics to identify ethical situations.
3.
c. identifying potential stakeholders.
4.
d. discussing the ethical dilemma with co-workers.
Revenues would NOT result from
1.
a. sale of merchandise.
2.
b. initial investment of cash by owner.
3.
c. performance of services.
4.
d. rental of property to a tenant.
Emily Hogan recently opened a new business. The business has
been very successful and as a reward for all her hard work Emily
spent a day at the local spa. Emily paid for the spa using a company
credit card and charged the amount to the expense account called
Repairs and Maintenance expense. Emily’s actions violated which of
the following?
1.
a. The going concern assumption
2.
b. The monetary unit assumption
3.
c. The cost principle
4.
d. The economic entity concept
Owner's equity is often referred to as
1.
a. residual equity.
2.
b. leftovers.
3.
c. spoils.
4.
d. a second equity.
The accounting equation, for a proprietorship, may be expressed as
1.
a. Assets = Liabilities + Shareholders' Equity.
2.
b. Assets – Liabilities = Partners' Equity.
3.
c. Assets = Liabilities + Owner's Equity.
4.
d. all of these.
An account receivable is recorded in the accounting records as a(n)
1.
a. liability.
2.
b. expense.
3.
c. asset.
4.
d. revenue.
The accounting equation, for a corporation, is best expressed as
1.
a. Assets = Liabilities + Shareholders' Equity.
2.
b. Assets – Liabilities = Partner’s Equity.
3.
c. Assets = Liabilities + Owner's Equity.
4.
d. all of these.
Which of the following would violate the economic entity concept?
1.
a. reporting amounts owed to the company’s suppliers as a liability on the balance
sheet.
2.
b. reporting equipment owned and used in the business as an asset in the balance
sheet.
3.
c. reporting withdrawals by the owner as a drawing in the statement of owner’s equity.
4.
d. reporting the owner’s personal sailboat as an asset on the balance sheet.
Which of the following principles or assumptions requires that the
activities of a business be kept distinct from those of its owner(s)?
1.
a. economic entity concept
2.
b. going concern assumption
3.
c. monetary unit assumption
4.
d. cost principle
Bing Company has total liabilities of $10,000 and total assets of
$15,000. Based on this information, Bing Company’s owner’s equity
must be
1.
a. $10,000.
2.
b. $ 0.
3.
c. $5,000.
4.
d. $15,000.
In a proprietorship, owner’s equity is affected by all of the following
EXCEPT
1.
a. the investment of cash by the owners.
2.
b. the purchase of a personal automobile by the owner using personal funds.
3.
c. the purchase of a computer for the owner’s son using cash generated by the
business.
4.
d. the sale of goods by the business.
ASPE requires less information on the financial statements of private
companies than IFRS requires because
1.
a. private companies are smaller than public companies.
2.
b. users of private company financial statements have the ability to obtain additional
information from the company if required.
3.
c. public companies have their information available on the internet.
4.
d. public companies may report in different foreign currencies.
Sources of increases to owner's equity, in a proprietorship, are
1.
a. additional investments by owners.
2.
b. purchases of merchandise.
3.
c. withdrawals by the owner.
4.
d. sale of share capital.
Owner's equity, in a proprietorship, is increased by
1.
a. drawings.
2.
b. revenues.
3.
c. expenses.
4.
d. liabilities.
Which of the following forms of business organizations typically have
their shares listed on the Toronto Stock Exchange?
1.
a. Proprietorships
2.
b. Private companies
3.
c. Public companies
4.
d. Partnerships
Which of the following would best be described as an ownership
claim on a company’s assets?
1.
a. expenses
2.
b. account receivable from the owner
3.
c. owner’s equity
4.
d. liabilities
Which of the following is true regarding the corporate form of
business organization?
1.
a. Corporations are the most prevalent form of business organization.
2.
b. Corporate businesses are generally smaller in size than partnerships and proprietorships.
3.
c. The revenues of corporations are greater than the combined revenues of
partnerships and proprietorships.
4.
d. Corporations are separate legal entities organized exclusively under federal law.
Canadian Accounting Standards allow a choice of whether or not to
use International Financial Reporting Standards for which type of
company?
1.
a. Public companies
2.
b. Only small private companies
3.
c. Banks
4.
d. All private companies in Canada
The proprietorship form of business organization
1.
a. must have at least three owners in most provinces.
2.
b. represents the largest number of businesses in Canada.
3.
c. combines the records of the business with the personal records of the owner.
4.
d. is characterized by a legal distinction between the business as an economic unit and
the owner.
GAAP stands for
1.
a. Generally Accepted Auditing Procedures.
2.
b. Generally Accepted Accounting Principles.
3.
c. Generally Accepted Auditing Principles.
4.
d. Generally Accepted Accounting Procedures.
Liabilities
1.
a. are future economic benefits.
2.
b. are current or long term obligations arising from past events.
3.
c. possess service potential.
4.
d. are things of value used by the business in its operation.
Which of the following would NOT be considered an internal user of
accounting data for the ABC Company?
1.
a. President of the company
2.
b. Production manager
3.
c. Merchandise inventory clerk
4.
d. President of the employees' labour union
104 Free Test Bank for Accounting Principles 6th
Canadian Edition by Weygandt Multiple Choice
Questions - Page 2
Shareholders' equity, in a corporation, is increased by
1.
a. an expense.
2.
b. shareholder purchase of common shares.
3.
c. payment of dividends.
4.
d. liabilities.
The income statement is prepared from the data in the
1.
a. assets column.
2.
b. liabilities column.
3.
c. owner’s equity column.
4.
d. liabilities and owner’s equity column.
If expenses, in a proprietorship, are paid in cash, then
1.
a. assets will increase.
2.
b. liabilities will decrease.
3.
c. owner's equity will increase.
4.
d. assets will decrease.
A balance sheet, in a proprietorship, shows
1.
a. revenues, liabilities, and owner's equity.
2.
b. expenses, drawings, and owner's equity.
3.
c. revenues, expenses, and drawings.
4.
d. assets, liabilities, and owner's equity.
An Income Statement
1.
a. summarizes the changes in owner's equity for a specific period of time.
2.
b. reports the changes in assets, liabilities, and owner's equity over a period of time.
3.
c. reports the assets, liabilities, and owner's equity at a specific date.
4.
d. presents the revenues and expenses for a specific period of time.
Payment of a liability for an expense that has been previously
recorded
1.
a. does not affect the owner’s equity account.
2.
b. only affects the liability accounts.
3.
c. does not affect the asset accounts.
4.
d. only affects the asset accounts.
If an individual asset, in a proprietorship, is increased, then
1.
a. there may be an equal decrease in a specific liability.
2.
b. there may be an equal decrease in owner's equity.
3.
c. there may be an equal decrease in another asset.
4.
d. none of these is possible.
The cost principle requires that when assets are acquired, they be
recorded at
1.
a. appraisal value.
2.
b. the amount paid.
3.
c. the amount the asset could be sold for.
4.
d. list price.
Which of the following statements is correct in regards to the order of
preparing financial statements?
1.
a. Income statement, Balance sheet, Statement of changes in owner’s equity, Cash
flow statement
2.
b. Balance sheet, Income statement, Cash flow statement, Statement of changes in
owner’s equity
3.
c. Income statement, Statement of changes in owner’s equity, Balance sheet, Cash
flow statement
4.
d. Income statement, Statement of changes in owner’s equity, Cash flow statement,
Balance sheet
If total liabilities increased by $5,000, then
1.
a. assets must have decreased by $5,000.
2.
b. owner's equity must have increased by $5,000.
3.
c. assets must have increased by $5,000, or owner's equity must have decreased by
$5,000.
4.
d. assets and owner's equity each increased by $2,500.
The cost of advertising purchased for the month is considered an
expense, not an asset because
1.
a. the expense will generate future benefits.
2.
b. the advertising will generate future cash inflows.
3.
c. the benefits of the expense have already been used.
4.
d. the expense has not yet been used.
Which of the following transactions would NOT affect Cash?
1.
a. payment to a supplier on account
2.
b. purchase of supplies on account
3.
c. payment of salaries for the week
4.
d. prepaying an insurance premium
Two or more items could be affected by a transaction. Which of the
following statements is INCORRECT?
1.
a. An increase in an asset may result in a decrease in another asset.
2.
b. An increase in an asset may result in a decrease in an asset and increase in a
liability.
3.
c. An increase in a liability may result in a decrease in an asset.
4.
d. An increase in a liability may result in a decrease in owner’s equity.
Owner's equity, in a proprietorship, is decreased by
1.
a. assets.
2.
b. revenues.
3.
c. expenses.
4.
d. liabilities.
Which of the following would NOT affect owner’s equity?
1.
a. a cash receipt from a customer in payment of account
2.
b. payment of an expense
3.
c. services provided for cash
4.
d. withdrawal of funds for personal use
The primary purpose of the Cash Flow Statement is to report
1.
a. a company's investing transactions.
2.
b. a company's financing transactions.
3.
c. information about cash inflows and cash outflows of a company.
4.
d. the net increase or decrease in cash.
The Income Statement is sometimes referred to as
1.
a. a Statement of Earnings.
2.
b. the Statement of Financial Position.
3.
c. the Cash Flow Statement.
4.
d. the Statement of Owner's Equity.
Jackson's Small Engine Repair Shop, a proprietorship, started the
year with total assets of $60,000 and total liabilities of $40,000.
During the year, the business recorded $100,000 in repair revenues,
$55,000 in expenses, and Mike Jackson, the owner, withdrew
$10,000. Jackson's Capital balance changed by what amount from
the beginning of the year to the end of the year?
1.
a. $10,000.
2.
b. $45,000.
3.
c. $20,000.
4.
d. $35,000.
If supplies that have been purchased are used in the course of
business, then
1.
a. a liability will increase.
2.
b. an asset will increase.
3.
c. owner's equity will decrease.
4.
d. owner's equity will increase.
Expenses do not have to be paid in cash at the time they are
incurred. When payment is made on the later date, the liability
accounts payable account will decrease and the asset
1.
a. cash will increase.
2.
b. cash will decrease.
3.
c. will not be affected.
4.
d. accounts receivable will increase.
Which of the following groups uses accounting information primarily
to ensure the entity is operating within prescribed rules?
1.
a) creditors
2.
b) Regulatory agencies
3.
c) Labour unions
4.
d) Management
Profit results when
1.
a. Assets > Liabilities.
2.
b. Revenues = Expenses.
3.
c. Revenues > Expenses.
4.
d. Revenues < Expenses.
Which of the following is an example of an economic event that
should be recorded as an accounting transaction?
1.
a. the purchase of supplies
2.
b. the signing of a contract to build a new corporate headquarters
3.
c. the appointment of a new Chief Executive Officer
4.
d. the launch of a new marketing strategy
The heading of a balance sheet must identify the
1.
a. company, statement and time period.
2.
b. statement and date.
3.
c. company, statement and date.
4.
d. company and date.
Jackson's Small Engine Repair Shop, a proprietorship, started the
year with total assets of $60,000 and total liabilities of $40,000.
During the year, the business recorded $100,000 in repair revenues,
$55,000 in expenses, and Mike Jackson, the owner, withdrew
$10,000. Jackson's Capital balance at the end of the year was
1.
a. $55,000.
2.
b. $35,000.
3.
c. $65,000.
4.
d. $45,000.
If an owner makes a withdrawal of cash from a proprietorship, then
1.
a. there has been a violation of accounting principles.
2.
b. assets will decrease and owner's equity will increase.
3.
c. assets will decrease and owner's equity will decrease.
4.
d. assets will decrease and liabilities will increase.
Owner's equity, in a proprietorship, at the end of the period is equal
to
1.
a. owner's capital at the beginning of the period plus profit minus liabilities.
2.
b. owner's capital at the beginning of the period plus profit minus drawings.
3.
c. profit.
4.
d. assets plus liabilities.
External users of accounting information include all of the following
except:
1.
a) tax authorities.
2.
b) creditors.
3.
c) the chief financial officer.
4.
d) regulatory authorities.
Jackson's Small Engine Repair Shop, a proprietorship, started the
year with total assets of $60,000 and total liabilities of $40,000.
During the year, the business recorded $100,000 in repair revenues,
$55,000 in expenses, and Mike Jackson, the owner, withdrew
$10,000. The profit reported by Jackson's Small Engine Repair Shop
for the year was
1.
a. $35,000.
2.
b. $45,000.
3.
c. $20,000.
4.
d. $90,000.
Ingrid Ltd and Bulgar Equipment rentals company sign a contract to
rent equipment in the next two years. What is the impact on the
accounting equation?
1.
a. Assets increase and liabilities increase.
2.
b. Assets decrease and liabilities decrease.
3.
c. No impact on the accounting equation.
4.
d. Owner’s equity increases and assets decrease.
If the owner's equity account increases from the beginning of the
year to the end of the year, the best explanation for this change is
1.
a. profit is less than owner drawings.
2.
b. a loss is less than owner drawings.
3.
c. additional owner investments are less than a loss.
4.
d. profit is greater than owner drawings.
Which of the following accounts would NOT be found on the Balance
Sheet?
1.
a. Cash
2.
b. Drawings
3.
c. Equipment
4.
d. Accounts Payable.
Revenues, in a proprietorship, are
1.
a. the cost of assets consumed during the period.
2.
b. the gross increases in owner's equity resulting from business activities.
3.
c. the cost of services used during the period.
4.
d. actual or expected cash outflows.
The income statement is always prepared first in order to determine
1.
a. the total assets to be reported on the balance sheet.
2.
b. the cash outflow of the company.
3.
c. the profit or loss used in the statement of changes in owner’s equity.
4.
d. the amount of investments or withdrawals used in the statement of changes in
owner’s equity.
Shareholders' equity, in a corporation, at the end of the period is
equal to
1.
a. shareholders' equity at the beginning of the period plus profit minus liabilities.
2.
b. share capital plus retained earnings.
3.
c. share capital plus dividends.
4.
d. share capital plus this year's profit.
A basic assumption of accounting assumes that the dollar is
1.
a. unrelated to business transactions.
2.
b. a poor measure of economic activities.
3.
c. the common unit of measure for all business transactions.
4.
d. useless in measuring an economic event.
If a company reported a loss in the first month of operations, the loss
would reduce owner’s capital and would be
1.
a. added in the same section as owner’s investments.
2.
b. deducted in the same section as owner’s investments.
3.
c. deducted in the same section as owner’s drawings.
4.
d. added in the same section as owner’s drawings.
If services are provided for credit, in a proprietorship, then
1.
a. assets will decrease.
2.
b. liabilities will increase.
3.
c. owner's equity will increase.
4.
d. liabilities will decrease.
An investment by a company’s owner increases a company’s cash
and
1.
a. reduces its liabilities.
2.
b. reduces a company’s total assets.
3.
c. increases owner’s equity.
4.
d. increases the company’s net earnings in the year in which the investment is made.
Collection of a $600 Accounts Receivable
1.
a. increases an asset $600; decreases an asset $600.
2.
b. increases an asset $600; decreases a liability $600.
3.
c. decreases a liability $600; increases owner's equity $600.
4.
d. decreases an asset $600; decreases a liability $600.
Partners' equity, in a partnership, is decreased by
1.
a. payment of dividends.
2.
b. drawings.
3.
c. owner's investments.
4.
d. revenues.
Recognition in the accounting terminology means
1.
a. recognizing the difference between assets and liabilities.
2.
b. recognizing the difference between income and expenses.
3.
c. recognizing that initially transactions are recorded at fair value.
4.
d. the process of recording a transaction in the accounting records.
104 Free Test Bank for Accounting Principles 6th
Canadian Edition by Weygandt Multiple Choice
Questions - Page 3
A business organized with two or more owners and unlimited liability
is a:
1.
a) proprietorship.
2.
b) partnership.
3.
c) corporation.
4.
d) all of the above can be organized as a separate legal entity.
The accounting equation can be stated as:
1.
a) Assets = Liabilities + Owner’s Equity
2.
b) Owner’s Equity = Assets – Liabilities
3.
c) Liabilities = Assets – Owner’s Equity
4.
d) all of the above.
Which accounting assumption assumes that a company will
continued in operation long enough to carry out its existing objectives
and commitments?
1.
a) Going concern assumption
2.
b) Monetary unit assumption
3.
c) Economic entity concept
4.
d) Historical cost principle
If company purchases a building for $270,000. The company pays
$70,000 cash and the remainder on credit. The impact on the
accounting equation will be:
1.
a) Total assets will increase by $270,000.
2.
b) Total assets will increase by $200,000.
3.
c) Total assets will decrease by $70,000
4.
d) Total liabilities will decrease by $70,000.
If total liabilities decrease by $14,000 during a period of time and
owner’s equity increased by $6,000 during the same period, then
total assets will change as follows during that same period:
1.
a) $20,000 increase
2.
b) $20,000 decrease.
3.
c) $8,000 increase.
4.
d) $8,000 decrease
The balance sheet
1.
a) reports the assets, liabilities, and owner’s equity at a specific date.
2.
b) summarizes the changes in owner’s equity for a specific period of time.
3.
c) reports the changes in assets, liabilities and owner’s equity at a specific date.
4.
d) summarizes the revenues and expenses for a specific period of time.
A company has liabilities of $300,000. The balance in the owner’s
capital account is $100,000; in drawings $50,000; revenues
$400,000; and expenses $370,000. What are the company’s total
assets?
1.
a) $350,000
2.
b) $400,000
3.
c) $380,000
4.
d) $330,000
Private companies must use:
1.
a) International Financial Reporting Standards only.
2.
b) Accounting Standards for Private Enterprises.
3.
c) both methods, choosing principles from either method based on their needs.
4.
d) one method and report the method used on their financial statements.
The obligations of an organization as a result of past events are
called:
1.
a) revenues.
2.
b) assets.
3.
c) liabilities.
4.
d) owner’s equity.
The statement of owner’s equity is dependent on the results of:
1.
a) the income statement.
2.
b) the balance sheet.
3.
c) the income statement and balance sheet.
4.
d) the cash flow statement.
The proprietorship form of business organization
1.
a) must have at least two owners in most provinces.
2.
b) is often chosen for small owner operated businesses.
3.
c) is difficult to set up.
4.
d) is classified as a separate legal entity.
The main objective of financial reporting is:
1.
a) to provide useful information to investors and creditors to make decisions about a
business
2.
b) to provide useful information for generating revenue for external users.
3.
c) to provide useful information to management can ensure the continued success of
the company.
4.
d) to provide useful information that is useful for internal users.
An investment of cash by the owner increases:
1.
a) revenues.
2.
b) liabilities.
3.
c) expenses.
4.
d) assets.
Generally accepted accounting principles:
1.
a) never change so as to ensure consistency for external decision making.
2.
b) change over time so as to ensure useful information is provided to investors and
creditors.
3.
c) are changed by the AcSB without input from the organizations and individuals
affected.
4.
d) have not changed in over 20 years and are unlikely to change in the near future.
The balance sheet and the statement of owner’s equity are related
because
1.
a) the ending amount on the balance sheet is reported on the statement of owner’s
equity.
2.
b) the ending amount on the statement of owner’s equity is reported on the balance
sheet.
3.
c) the ending amount on each statement is reported on the cash flow statement.
4.
d) the ending amount on each statement is reported on the income statement.
Essential parts of the financial statements include:
1.
a) the explanatory notes.
2.
b) supporting schedules.
3.
c) the company’s mission and goals.
4.
d) both the explanatory notes and supporting schedules.
A company signs a contract to rent company cars. The accounting
equation will change as follows:
1.
a) both the left and the right side will change.
2.
b) both the left and the right side will remain the same.
3.
c) only the left side will change.
4.
d) only the right side will change.
The primary purpose of a cash flow statement is to report:
1.
a) the financing activities of a company over a specific period of time.
2.
b) the operating activates of a company over a specific period of time.
3.
c) the cash inflows and cash outflows by a company over a specific period of time.
4.
d) the net change in cash over a specific period of time.
Combining the economic record keeping of three separate
businesses would violate the:
1.
a) cost principle.
2.
b) economic entity concept.
3.
c) monetary unit assumption.
4.
d) going concern assumption.
The statement that is always completed first is:
1.
a) the income statement.
2.
b) the balance sheet.
3.
c) the statement of owner’s equity.
4.
d) the cash flow statement.
A company purchases supplies on credit. The accounting equation
will change as follows:
1.
a) both the left and the right side will change.
2.
b) both the left and the right side will remain the same.
3.
c) only the left side will change.
4.
d) only the right side will change.
Generally accepted accounting principles include
1.
a) specific rules, and procedures.
2.
b) broad principles and practices.
3.
c) standards for reporting economic events.
4.
d) all of these.
Expenses results when:
1.
a) a business consumes goods and services for its business activities..
2.
b) an owner withdraws cash for personal use.
3.
c) cash exceeds liabilities .
4.
d) assets exceed liabilities.
Edition
True - False Questions
Accounting is the information system that identifies, records, and
communicates the economic events of an organization to a wide
variety of interested users.
1.
True
2.
False
Recognition is the process of recording a transaction in the
accounting records.
1.
True
2.
False
The economic entity concept requires that an entity’s business
activities be combined with the activities of its owner for financial
reporting purposes.
1.
True
2.
False
Accounting information is used only by external users with a direct
financial interest in a company.
1.
True
2.
False
Publicly Traded Corporations can choose to report under either
ASPE or IFRS.
1.
True
2.
False
The owner’s claim on the assets of the company is known as owner’s
equity.
1.
True
2.
False
In Canada, the main standard setting board is the Accounting
Standards Board.
1.
True
2.
False
A working knowledge of accounting can be useful to doctors or
lawyers.
1.
True
2.
False
The going concern assumption is the assumption that a company will
continue to operate in the foreseeable future.
1.
True
2.
False
An obligation to pay cash to a supplier in the future is called accounts
payable.
1.
True
2.
False
One of the main advantages of a corporation is the limit of liability for
the shareholders of the company.
1.
True
2.
False
Accounts payable is the asset created when a company sells
services or products to customers who promise to pay cash in the
future.
1.
True
2.
False
An advantage of the corporation is that the shares of the corporation
are easily transferable.
1.
True
2.
False
The monetary unit assumption assumes that all transactions will take
place in Canadian dollars.
1.
True
2.
False
In a proprietorship, there may be 2 or more owners.
1.
True
2.
False
Creditors are an example of an internal user of accounting
information.
1.
True
2.
False
A Balance Sheet can also be called a Statement of Financial
Position.
1.
True
2.
False
In a situation with an ethical consideration, there is only one ethical
course of action which can be followed.
1.
True
2.
False
The main objective of financial statements is to provide useful
information to management.
1.
True
2.
False
Companies incorporated under provincial legislation report under
ASPE and companies incorporated under federal legislation report
under IFRS.
1.
True
2.
False
Profit results when a company’s expenses are higher than its
revenues.
1.
True
2.
False
A corporation is only subject to the federal laws of corporations.
1.
True
2.
False
Sometimes Canadian companies will report their results in U.S.
dollars.
1.
True
2.
False
One of the disadvantages of a proprietorship is that there is unlimited
liability for the owner.
1.
True
2.
False
Cost value is the amount of the consideration that would be agreed
upon in an arm’s-length transaction between knowledgeable, willing
parties who are under no compulsion to act.
1.
True
2.
False
A balance sheet presents the revenues and expenses, and the
resulting profit or loss for a specific period of time.
1.
True
2.
False
In a partnership, all of the partners will generally have unlimited
liability for the debts of the partnerships.
1.
True
2.
False
Revenues decrease owner’s equity and expenses increase owner’s
equity.
1.
True
2.
False
GAAP stands for Generally Accepted Accounting Principles.
1.
True
2.
False
Under the proprietorship form of business organization, no distinction
is made between the business as an economic unit and its owner.
1.
True
2.
False
A balance sheet reports the assets, liabilities, and owner’s equity at a
specific date.
1.
True
2.
False
Liabilities are the resources owned by a business that are expected
to provide future services or benefits.
1.
True
2.
False
A private company is one that issues shares to the public.
1.
True
2.
False
An accounting transaction occurs when assets, liabilities, or owner’s
equity items change as the result of some economic event.
1.
True
2.
False
A partnership must have at least 2 people in the partnership.
1.
True
2.
False
Assets are current obligations, arising from past events, to make a
future payment or to provide services.
1.
True
2.
False
Expenses are the costs of assets that are consumed or services
used in the ordinary business activities.
1.
True
2.
False
Owner’s claims to total business assets take precedence over the
claims of creditors because owners invest assets in the business and
are liable for losses.
1.
True
2.
False
Both IFRS and ASPE are considered “principles-based” as opposed
to “rules-based” standards.
1.
True
2.
False
A corporation may only be formed under the federal legislation.
1.
True
2.
False
Only the accountants should be concerned with ethics when the
financial statements are being prepared.
1.
True
2.
False
A corporation may be formed under either the provincial legislation or
the federal legislation.
1.
True
2.
False
Measurement is the process of determining the amount that should
be recognized.
1.
True
2.
False
A cash flow statement is organized into three categories, operating,
financing and investing activities of the company.
1.
True
2.
False
Employees are an example of an external user.
1.
True
2.
False
Ethics are critical in the preparation of accounting information.
1.
True
2.
False
A corporation’s ownership is divided into transferable shares.
1.
True
2.
False
The cost and fair value of an asset are the same at the time of
acquisition and in all subsequent periods.
1.
True
2.
False
An income statement will give the answer to the question – “where
did all the cash get used during this month?”
1.
True
2.
False
Multiple Choice Questions - Page 1
Generally accepted accounting principles are
1.
a. income tax regulations.
2.
b. standards that indicate how to report economic events.
3.
c. theories that are based on physical laws of the universe.
4.
d. principles that have been proven correct by academic researchers.
The main objective of the financial statements is
1.
a. to show the profit of a company.
2.
b. to allow customers to determine whether a company will honour its product
warranties.
3.
c. to provide useful information to investors and creditors to make decisions about a
business.
4.
d. to determine how many employees the company can afford to hire each year.
The going concern assumption
1.
a. states that a company will not operate long enough to utilize assets and fulfill
obligations.
2.
b. assumes the company will continue to operate in the foreseeable future.
3.
c. is inconsistent with the cost principle.
4.
d. states that net worth is the most appropriate value at which to record assets.
The partnership form of business organization
1.
a. is a separate legal entity.
2.
b. is a common form of organization for service-type businesses.
3.
c. enjoys an unlimited life.
4.
d. has limited liability.
When an owner, in a proprietorship or partnership, withdraws cash or
other assets from a business for personal use, these withdrawals are
termed
1.
a. expenses.
2.
b. salary.
3.
c. drawings.
4.
d. a credit line.
The International Accounting Standards Board
1.
a. works to reduce differences in accounting practices across countries.
2.
b. promotes unique accounting applications.
3.
c. works to increase differences in accounting practices across countries.
4.
d. only operates in countries which speak English.
Evan Guanzon owns and operates Guanzon’s Pizza Express. Evan
should record the cost of wages paid to store employees as a (an)
1.
a. revenue.
2.
b. expense.
3.
c. liability.
4.
d. asset.
An external user would NOT include
1.
a. A creditor of the company.
2.
b. Canada Revenue Agency.
3.
c. An employee.
4.
d. The company’s bank.
The common characteristic possessed by all assets is
1.
a. long life.
2.
b. great monetary value.
3.
c. tangible nature.
4.
d. future economic benefit.
Which of the following is true when considering the accounting
equation?
1.
a. An increase in an asset must always equal a decrease in a liability.
2.
b. For every transaction an asset and a liability must be affected.
3.
c. An increase in a liability must equal a decrease in owner’s equity.
4.
d. An increase in an asset may result in a decrease in another asset.
Mel Green is the proprietor (owner) of Green's, a retailer of athletic
apparel. When recording the financial transactions of Green's, Mel
does not record an entry for a car he purchased for personal use.
Mel took out a personal loan to pay for the car. What accounting
assumption guides Mel's behaviour in this situation?
1.
a. going concern assumption
2.
b. economic entity concept
3.
c. time period assumption
4.
d. monetary unit assumption
Which of the following is NOT an advantage of the corporate form of
business organization?
1.
a. limited liability of shareholders
2.
b. transferability of ownership
3.
c. unlimited personal liability for shareholders
4.
d. unlimited life
Withdrawal of cash from a business by the owner for personal
reasons will NOT affect which financial statement?
1.
a. Balance Sheet
2.
b. Income Statement
3.
c. Statement of Owner’s Equity
4.
d. Cash Flow Statement
An external user could be
1.
a. employees.
2.
b. management.
3.
c. Canada Revenue Agency.
4.
d. the human resource director.
Judy and Marilyn met at law school and decide to start a small law
practice after graduation. They agree to split revenues and expenses
evenly. The most common form of business organization for a
business such as this would be a(n)
1.
a. non profit organization.
2.
b. partnership.
3.
c. corporation.
4.
d. proprietorship.
A business organized as a corporation
1.
a. is not a separate legal entity in most provinces.
2.
b. requires that shareholders be personally liable for the debts of the business.
3.
c. is owned by its shareholders.
4.
d. terminates when one of its original shareholders dies.
The basic accounting equation, in a proprietorship, CANNOT be
restated as
1.
a. Assets – Liabilities = Owner's Equity.
2.
b. Assets – Owner's Equity = Liabilities.
3.
c. Owner's Equity + Liabilities = Assets.
4.
d. Assets + Liabilities = Owner's Equity.
All of the following are steps used to analyze ethical dilemmas
EXCEPT
1.
a. using the organization’s code of ethics to identify ethical situations.
2.
b. using personal ethics to identify ethical situations.
3.
c. identifying potential stakeholders.
4.
d. discussing the ethical dilemma with co-workers.
Revenues would NOT result from
1.
a. sale of merchandise.
2.
b. initial investment of cash by owner.
3.
c. performance of services.
4.
d. rental of property to a tenant.
Emily Hogan recently opened a new business. The business has
been very successful and as a reward for all her hard work Emily
spent a day at the local spa. Emily paid for the spa using a company
credit card and charged the amount to the expense account called
Repairs and Maintenance expense. Emily’s actions violated which of
the following?
1.
a. The going concern assumption
2.
b. The monetary unit assumption
3.
c. The cost principle
4.
d. The economic entity concept
Owner's equity is often referred to as
1.
a. residual equity.
2.
b. leftovers.
3.
c. spoils.
4.
d. a second equity.
The accounting equation, for a proprietorship, may be expressed as
1.
a. Assets = Liabilities + Shareholders' Equity.
2.
b. Assets – Liabilities = Partners' Equity.
3.
c. Assets = Liabilities + Owner's Equity.
4.
d. all of these.
An account receivable is recorded in the accounting records as a(n)
1.
a. liability.
2.
b. expense.
3.
c. asset.
4.
d. revenue.
The accounting equation, for a corporation, is best expressed as
1.
a. Assets = Liabilities + Shareholders' Equity.
2.
b. Assets – Liabilities = Partner’s Equity.
3.
c. Assets = Liabilities + Owner's Equity.
4.
d. all of these.
Which of the following would violate the economic entity concept?
1.
a. reporting amounts owed to the company’s suppliers as a liability on the balance
sheet.
2.
b. reporting equipment owned and used in the business as an asset in the balance
sheet.
3.
c. reporting withdrawals by the owner as a drawing in the statement of owner’s equity.
4.
d. reporting the owner’s personal sailboat as an asset on the balance sheet.
Which of the following principles or assumptions requires that the
activities of a business be kept distinct from those of its owner(s)?
1.
a. economic entity concept
2.
b. going concern assumption
3.
c. monetary unit assumption
4.
d. cost principle
Bing Company has total liabilities of $10,000 and total assets of
$15,000. Based on this information, Bing Company’s owner’s equity
must be
1.
a. $10,000.
2.
b. $ 0.
3.
c. $5,000.
4.
d. $15,000.
In a proprietorship, owner’s equity is affected by all of the following
EXCEPT
1.
a. the investment of cash by the owners.
2.
b. the purchase of a personal automobile by the owner using personal funds.
3.
c. the purchase of a computer for the owner’s son using cash generated by the
business.
4.
d. the sale of goods by the business.
ASPE requires less information on the financial statements of private
companies than IFRS requires because
1.
a. private companies are smaller than public companies.
2.
b. users of private company financial statements have the ability to obtain additional
information from the company if required.
3.
c. public companies have their information available on the internet.
4.
d. public companies may report in different foreign currencies.
Sources of increases to owner's equity, in a proprietorship, are
1.
a. additional investments by owners.
2.
b. purchases of merchandise.
3.
c. withdrawals by the owner.
4.
d. sale of share capital.
Owner's equity, in a proprietorship, is increased by
1.
a. drawings.
2.
b. revenues.
3.
c. expenses.
4.
d. liabilities.
Which of the following forms of business organizations typically have
their shares listed on the Toronto Stock Exchange?
1.
a. Proprietorships
2.
b. Private companies
3.
c. Public companies
4.
d. Partnerships
Which of the following would best be described as an ownership
claim on a company’s assets?
1.
a. expenses
2.
b. account receivable from the owner
3.
c. owner’s equity
4.
d. liabilities
Which of the following is true regarding the corporate form of
business organization?
1.
a. Corporations are the most prevalent form of business organization.
2.
b. Corporate businesses are generally smaller in size than partnerships and proprietorships.
3.
c. The revenues of corporations are greater than the combined revenues of
partnerships and proprietorships.
4.
d. Corporations are separate legal entities organized exclusively under federal law.
Canadian Accounting Standards allow a choice of whether or not to
use International Financial Reporting Standards for which type of
company?
1.
a. Public companies
2.
b. Only small private companies
3.
c. Banks
4.
d. All private companies in Canada
The proprietorship form of business organization
1.
a. must have at least three owners in most provinces.
2.
b. represents the largest number of businesses in Canada.
3.
c. combines the records of the business with the personal records of the owner.
4.
d. is characterized by a legal distinction between the business as an economic unit and
the owner.
GAAP stands for
1.
a. Generally Accepted Auditing Procedures.
2.
b. Generally Accepted Accounting Principles.
3.
c. Generally Accepted Auditing Principles.
4.
d. Generally Accepted Accounting Procedures.
Liabilities
1.
a. are future economic benefits.
2.
b. are current or long term obligations arising from past events.
3.
c. possess service potential.
4.
d. are things of value used by the business in its operation.
Which of the following would NOT be considered an internal user of
accounting data for the ABC Company?
1.
a. President of the company
2.
b. Production manager
3.
c. Merchandise inventory clerk
4.
d. President of the employees' labour union
104 Free Test Bank for Accounting Principles 6th
Canadian Edition by Weygandt Multiple Choice
Questions - Page 2
Shareholders' equity, in a corporation, is increased by
1.
a. an expense.
2.
b. shareholder purchase of common shares.
3.
c. payment of dividends.
4.
d. liabilities.
The income statement is prepared from the data in the
1.
a. assets column.
2.
b. liabilities column.
3.
c. owner’s equity column.
4.
d. liabilities and owner’s equity column.
If expenses, in a proprietorship, are paid in cash, then
1.
a. assets will increase.
2.
b. liabilities will decrease.
3.
c. owner's equity will increase.
4.
d. assets will decrease.
A balance sheet, in a proprietorship, shows
1.
a. revenues, liabilities, and owner's equity.
2.
b. expenses, drawings, and owner's equity.
3.
c. revenues, expenses, and drawings.
4.
d. assets, liabilities, and owner's equity.
An Income Statement
1.
a. summarizes the changes in owner's equity for a specific period of time.
2.
b. reports the changes in assets, liabilities, and owner's equity over a period of time.
3.
c. reports the assets, liabilities, and owner's equity at a specific date.
4.
d. presents the revenues and expenses for a specific period of time.
Payment of a liability for an expense that has been previously
recorded
1.
a. does not affect the owner’s equity account.
2.
b. only affects the liability accounts.
3.
c. does not affect the asset accounts.
4.
d. only affects the asset accounts.
If an individual asset, in a proprietorship, is increased, then
1.
a. there may be an equal decrease in a specific liability.
2.
b. there may be an equal decrease in owner's equity.
3.
c. there may be an equal decrease in another asset.
4.
d. none of these is possible.
The cost principle requires that when assets are acquired, they be
recorded at
1.
a. appraisal value.
2.
b. the amount paid.
3.
c. the amount the asset could be sold for.
4.
d. list price.
Which of the following statements is correct in regards to the order of
preparing financial statements?
1.
a. Income statement, Balance sheet, Statement of changes in owner’s equity, Cash
flow statement
2.
b. Balance sheet, Income statement, Cash flow statement, Statement of changes in
owner’s equity
3.
c. Income statement, Statement of changes in owner’s equity, Balance sheet, Cash
flow statement
4.
d. Income statement, Statement of changes in owner’s equity, Cash flow statement,
Balance sheet
If total liabilities increased by $5,000, then
1.
a. assets must have decreased by $5,000.
2.
b. owner's equity must have increased by $5,000.
3.
c. assets must have increased by $5,000, or owner's equity must have decreased by
$5,000.
4.
d. assets and owner's equity each increased by $2,500.
The cost of advertising purchased for the month is considered an
expense, not an asset because
1.
a. the expense will generate future benefits.
2.
b. the advertising will generate future cash inflows.
3.
c. the benefits of the expense have already been used.
4.
d. the expense has not yet been used.
Which of the following transactions would NOT affect Cash?
1.
a. payment to a supplier on account
2.
b. purchase of supplies on account
3.
c. payment of salaries for the week
4.
d. prepaying an insurance premium
Two or more items could be affected by a transaction. Which of the
following statements is INCORRECT?
1.
a. An increase in an asset may result in a decrease in another asset.
2.
b. An increase in an asset may result in a decrease in an asset and increase in a
liability.
3.
c. An increase in a liability may result in a decrease in an asset.
4.
d. An increase in a liability may result in a decrease in owner’s equity.
Owner's equity, in a proprietorship, is decreased by
1.
a. assets.
2.
b. revenues.
3.
c. expenses.
4.
d. liabilities.
Which of the following would NOT affect owner’s equity?
1.
a. a cash receipt from a customer in payment of account
2.
b. payment of an expense
3.
c. services provided for cash
4.
d. withdrawal of funds for personal use
The primary purpose of the Cash Flow Statement is to report
1.
a. a company's investing transactions.
2.
b. a company's financing transactions.
3.
c. information about cash inflows and cash outflows of a company.
4.
d. the net increase or decrease in cash.
The Income Statement is sometimes referred to as
1.
a. a Statement of Earnings.
2.
b. the Statement of Financial Position.
3.
c. the Cash Flow Statement.
4.
d. the Statement of Owner's Equity.
Jackson's Small Engine Repair Shop, a proprietorship, started the
year with total assets of $60,000 and total liabilities of $40,000.
During the year, the business recorded $100,000 in repair revenues,
$55,000 in expenses, and Mike Jackson, the owner, withdrew
$10,000. Jackson's Capital balance changed by what amount from
the beginning of the year to the end of the year?
1.
a. $10,000.
2.
b. $45,000.
3.
c. $20,000.
4.
d. $35,000.
If supplies that have been purchased are used in the course of
business, then
1.
a. a liability will increase.
2.
b. an asset will increase.
3.
c. owner's equity will decrease.
4.
d. owner's equity will increase.
Expenses do not have to be paid in cash at the time they are
incurred. When payment is made on the later date, the liability
accounts payable account will decrease and the asset
1.
a. cash will increase.
2.
b. cash will decrease.
3.
c. will not be affected.
4.
d. accounts receivable will increase.
Which of the following groups uses accounting information primarily
to ensure the entity is operating within prescribed rules?
1.
a) creditors
2.
b) Regulatory agencies
3.
c) Labour unions
4.
d) Management
Profit results when
1.
a. Assets > Liabilities.
2.
b. Revenues = Expenses.
3.
c. Revenues > Expenses.
4.
d. Revenues < Expenses.
Which of the following is an example of an economic event that
should be recorded as an accounting transaction?
1.
a. the purchase of supplies
2.
b. the signing of a contract to build a new corporate headquarters
3.
c. the appointment of a new Chief Executive Officer
4.
d. the launch of a new marketing strategy
The heading of a balance sheet must identify the
1.
a. company, statement and time period.
2.
b. statement and date.
3.
c. company, statement and date.
4.
d. company and date.
Jackson's Small Engine Repair Shop, a proprietorship, started the
year with total assets of $60,000 and total liabilities of $40,000.
During the year, the business recorded $100,000 in repair revenues,
$55,000 in expenses, and Mike Jackson, the owner, withdrew
$10,000. Jackson's Capital balance at the end of the year was
1.
a. $55,000.
2.
b. $35,000.
3.
c. $65,000.
4.
d. $45,000.
If an owner makes a withdrawal of cash from a proprietorship, then
1.
a. there has been a violation of accounting principles.
2.
b. assets will decrease and owner's equity will increase.
3.
c. assets will decrease and owner's equity will decrease.
4.
d. assets will decrease and liabilities will increase.
Owner's equity, in a proprietorship, at the end of the period is equal
to
1.
a. owner's capital at the beginning of the period plus profit minus liabilities.
2.
b. owner's capital at the beginning of the period plus profit minus drawings.
3.
c. profit.
4.
d. assets plus liabilities.
External users of accounting information include all of the following
except:
1.
a) tax authorities.
2.
b) creditors.
3.
c) the chief financial officer.
4.
d) regulatory authorities.
Jackson's Small Engine Repair Shop, a proprietorship, started the
year with total assets of $60,000 and total liabilities of $40,000.
During the year, the business recorded $100,000 in repair revenues,
$55,000 in expenses, and Mike Jackson, the owner, withdrew
$10,000. The profit reported by Jackson's Small Engine Repair Shop
for the year was
1.
a. $35,000.
2.
b. $45,000.
3.
c. $20,000.
4.
d. $90,000.
Ingrid Ltd and Bulgar Equipment rentals company sign a contract to
rent equipment in the next two years. What is the impact on the
accounting equation?
1.
a. Assets increase and liabilities increase.
2.
b. Assets decrease and liabilities decrease.
3.
c. No impact on the accounting equation.
4.
d. Owner’s equity increases and assets decrease.
If the owner's equity account increases from the beginning of the
year to the end of the year, the best explanation for this change is
1.
a. profit is less than owner drawings.
2.
b. a loss is less than owner drawings.
3.
c. additional owner investments are less than a loss.
4.
d. profit is greater than owner drawings.
Which of the following accounts would NOT be found on the Balance
Sheet?
1.
a. Cash
2.
b. Drawings
3.
c. Equipment
4.
d. Accounts Payable.
Revenues, in a proprietorship, are
1.
a. the cost of assets consumed during the period.
2.
b. the gross increases in owner's equity resulting from business activities.
3.
c. the cost of services used during the period.
4.
d. actual or expected cash outflows.
The income statement is always prepared first in order to determine
1.
a. the total assets to be reported on the balance sheet.
2.
b. the cash outflow of the company.
3.
c. the profit or loss used in the statement of changes in owner’s equity.
4.
d. the amount of investments or withdrawals used in the statement of changes in
owner’s equity.
Shareholders' equity, in a corporation, at the end of the period is
equal to
1.
a. shareholders' equity at the beginning of the period plus profit minus liabilities.
2.
b. share capital plus retained earnings.
3.
c. share capital plus dividends.
4.
d. share capital plus this year's profit.
A basic assumption of accounting assumes that the dollar is
1.
a. unrelated to business transactions.
2.
b. a poor measure of economic activities.
3.
c. the common unit of measure for all business transactions.
4.
d. useless in measuring an economic event.
If a company reported a loss in the first month of operations, the loss
would reduce owner’s capital and would be
1.
a. added in the same section as owner’s investments.
2.
b. deducted in the same section as owner’s investments.
3.
c. deducted in the same section as owner’s drawings.
4.
d. added in the same section as owner’s drawings.
If services are provided for credit, in a proprietorship, then
1.
a. assets will decrease.
2.
b. liabilities will increase.
3.
c. owner's equity will increase.
4.
d. liabilities will decrease.
An investment by a company’s owner increases a company’s cash
and
1.
a. reduces its liabilities.
2.
b. reduces a company’s total assets.
3.
c. increases owner’s equity.
4.
d. increases the company’s net earnings in the year in which the investment is made.
Collection of a $600 Accounts Receivable
1.
a. increases an asset $600; decreases an asset $600.
2.
b. increases an asset $600; decreases a liability $600.
3.
c. decreases a liability $600; increases owner's equity $600.
4.
d. decreases an asset $600; decreases a liability $600.
Partners' equity, in a partnership, is decreased by
1.
a. payment of dividends.
2.
b. drawings.
3.
c. owner's investments.
4.
d. revenues.
Recognition in the accounting terminology means
1.
a. recognizing the difference between assets and liabilities.
2.
b. recognizing the difference between income and expenses.
3.
c. recognizing that initially transactions are recorded at fair value.
4.
d. the process of recording a transaction in the accounting records.
104 Free Test Bank for Accounting Principles 6th
Canadian Edition by Weygandt Multiple Choice
Questions - Page 3
A business organized with two or more owners and unlimited liability
is a:
1.
a) proprietorship.
2.
b) partnership.
3.
c) corporation.
4.
d) all of the above can be organized as a separate legal entity.
The accounting equation can be stated as:
1.
a) Assets = Liabilities + Owner’s Equity
2.
b) Owner’s Equity = Assets – Liabilities
3.
c) Liabilities = Assets – Owner’s Equity
4.
d) all of the above.
Which accounting assumption assumes that a company will
continued in operation long enough to carry out its existing objectives
and commitments?
1.
a) Going concern assumption
2.
b) Monetary unit assumption
3.
c) Economic entity concept
4.
d) Historical cost principle
If company purchases a building for $270,000. The company pays
$70,000 cash and the remainder on credit. The impact on the
accounting equation will be:
1.
a) Total assets will increase by $270,000.
2.
b) Total assets will increase by $200,000.
3.
c) Total assets will decrease by $70,000
4.
d) Total liabilities will decrease by $70,000.
If total liabilities decrease by $14,000 during a period of time and
owner’s equity increased by $6,000 during the same period, then
total assets will change as follows during that same period:
1.
a) $20,000 increase
2.
b) $20,000 decrease.
3.
c) $8,000 increase.
4.
d) $8,000 decrease
The balance sheet
1.
a) reports the assets, liabilities, and owner’s equity at a specific date.
2.
b) summarizes the changes in owner’s equity for a specific period of time.
3.
c) reports the changes in assets, liabilities and owner’s equity at a specific date.
4.
d) summarizes the revenues and expenses for a specific period of time.
A company has liabilities of $300,000. The balance in the owner’s
capital account is $100,000; in drawings $50,000; revenues
$400,000; and expenses $370,000. What are the company’s total
assets?
1.
a) $350,000
2.
b) $400,000
3.
c) $380,000
4.
d) $330,000
Private companies must use:
1.
a) International Financial Reporting Standards only.
2.
b) Accounting Standards for Private Enterprises.
3.
c) both methods, choosing principles from either method based on their needs.
4.
d) one method and report the method used on their financial statements.
The obligations of an organization as a result of past events are
called:
1.
a) revenues.
2.
b) assets.
3.
c) liabilities.
4.
d) owner’s equity.
The statement of owner’s equity is dependent on the results of:
1.
a) the income statement.
2.
b) the balance sheet.
3.
c) the income statement and balance sheet.
4.
d) the cash flow statement.
The proprietorship form of business organization
1.
a) must have at least two owners in most provinces.
2.
b) is often chosen for small owner operated businesses.
3.
c) is difficult to set up.
4.
d) is classified as a separate legal entity.
The main objective of financial reporting is:
1.
a) to provide useful information to investors and creditors to make decisions about a
business
2.
b) to provide useful information for generating revenue for external users.
3.
c) to provide useful information to management can ensure the continued success of
the company.
4.
d) to provide useful information that is useful for internal users.
An investment of cash by the owner increases:
1.
a) revenues.
2.
b) liabilities.
3.
c) expenses.
4.
d) assets.
Generally accepted accounting principles:
1.
a) never change so as to ensure consistency for external decision making.
2.
b) change over time so as to ensure useful information is provided to investors and
creditors.
3.
c) are changed by the AcSB without input from the organizations and individuals
affected.
4.
d) have not changed in over 20 years and are unlikely to change in the near future.
The balance sheet and the statement of owner’s equity are related
because
1.
a) the ending amount on the balance sheet is reported on the statement of owner’s
equity.
2.
b) the ending amount on the statement of owner’s equity is reported on the balance
sheet.
3.
c) the ending amount on each statement is reported on the cash flow statement.
4.
d) the ending amount on each statement is reported on the income statement.
Essential parts of the financial statements include:
1.
a) the explanatory notes.
2.
b) supporting schedules.
3.
c) the company’s mission and goals.
4.
d) both the explanatory notes and supporting schedules.
A company signs a contract to rent company cars. The accounting
equation will change as follows:
1.
a) both the left and the right side will change.
2.
b) both the left and the right side will remain the same.
3.
c) only the left side will change.
4.
d) only the right side will change.
The primary purpose of a cash flow statement is to report:
1.
a) the financing activities of a company over a specific period of time.
2.
b) the operating activates of a company over a specific period of time.
3.
c) the cash inflows and cash outflows by a company over a specific period of time.
4.
d) the net change in cash over a specific period of time.
Combining the economic record keeping of three separate
businesses would violate the:
1.
a) cost principle.
2.
b) economic entity concept.
3.
c) monetary unit assumption.
4.
d) going concern assumption.
The statement that is always completed first is:
1.
a) the income statement.
2.
b) the balance sheet.
3.
c) the statement of owner’s equity.
4.
d) the cash flow statement.
A company purchases supplies on credit. The accounting equation
will change as follows:
1.
a) both the left and the right side will change.
2.
b) both the left and the right side will remain the same.
3.
c) only the left side will change.
4.
d) only the right side will change.
Generally accepted accounting principles include
1.
a) specific rules, and procedures.
2.
b) broad principles and practices.
3.
c) standards for reporting economic events.
4.
d) all of these.
Expenses results when:
1.
a) a business consumes goods and services for its business activities..
2.
b) an owner withdraws cash for personal use.
3.
c) cash exceeds liabilities .
4.
d) assets exceed liabilities.