Financial Accounting, 7Ce (Harrison)
Chapter 1 The Financial Statements
1.1 Explain why accounting is the language of business
1) Which of the following persons or groups have the ultimate control of a corporation?
A) the chief executive officer
B) the board of directors
C) the audit committee
D) the shareholders
Answer: D
Diff: 2 Type: MC
L.O.: 1-1
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
2) Financial statements are:
A) reports issued by outside consultants who are hired to analyze key operations of the business
B) reports created by management that states it is responsible for the acts of the corporation
C) standard documents that tell us how well a business is performing and where it stands in financial terms
D) standard documents issued by outside consultants who are hired to analyze key operations of the business in financial terms
Answer: C
Diff: 1 Type: MC
L.O.: 1-1
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
3) Since they are both the same activities, the terms "accounting" and "bookkeeping" are synonymous and can be used interchangeably.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 1-1
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
4) The three forms of business organizations are sole proprietorships, partnerships, and non-profit organizations.
Answer: FALSE
Diff: 1 Type: TF
L.O.: 1-1
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
5) Accounting is called an information system since it measures business activities, processes data into reports, and communicates results to decision makers.
Answer: TRUE
Diff: 1 Type: TF
L.O.: 1-1
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
6) From a legal perspective, sole proprietors, partners and shareholders are personally liable for the debts of their businesses they invest in.
Answer: FALSE
Diff: 2 Type: TF
L.O.: 1-1
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
7) From an accounting viewpoint, a proprietorship is a distinct and separate entity from the proprietor.
Answer: TRUE
Diff: 2 Type: TF