ACCT 2301, Exam 1 Student Name:
Summer I, 2007
Chapter 1
1. Which of the items below is not a business organization form?
a. entrepreneurship
b. proprietorship
c. partnership
d. corporation
ANS: A DIF: 1 OBJ: 01
2. An entity that is organized according to state or federal statutes and in which ownership is
divided into shares of stock is a
a. proprietorship
b. corporation
c. partnership
d. governmental unit
ANS: B DIF: 1 OBJ: 01
3. Financial reports are used by
a. management
b. creditors
c. investors
d. all of the above
ANS: D DIF: 2 OBJ: 02
4. Which of the following best describes accounting?
a. records economic data but does not communicate the data to users according to
any specific rules
b. is an information system that provides reports to stakeholders
c. is of no use by individuals outside of the business
d. is used only for filling out tax returns and for financial statements for various type
of governmental reporting requirements
ANS: B DIF: 2 OBJ: 02
5. The two most common specialized fields of accounting in practice are
a. forensic accounting and financial accounting
b. managerial accounting and financial accounting
c. managerial accounting and environmental accounting
d. financial accounting and tax accounting systems
1
ANS: B DIF: 1 OBJ: 04
6. The initials GAAP stand for
a. General Accounting Procedures
b. Generally Accepted Plans
c. Generally Accepted Accounting Principles
d. Generally Accepted Accounting Practices
ANS: C DIF: 3 OBJ: 05
7. The business entity concept means that
a. the owner is part of the business entity
b. an entity is organized according to state or federal statutes
c. an entity is organized according to the rules set by the FASB
d. the entity is an individual economic unit for which data are recorded, analyzed, and
reported
ANS: D DIF: 1 OBJ: 05
8. Smith Company purchased $105,000 of computer equipment from Brown Company.
Smith Company paid for the equipment using cash that had been obtained from the initial
investment by Connie Smith. The transaction involving the computer equipment should
be recorded on the accounting records of which of the following entities?
a. Smith Company and Connie Smith’s personal records
b. Brown Company and Connie Smith’s personal records
c. Brown Company
d. Smith Company and Brown Company
ANS: D DIF: 5 OBJ: 05
9. The objectivity principle requires that
a. business transactions must be consistent with the objectives of the entity
b. the Financial Accounting Standards Board must be fair and unbiased in its
deliberations over new accounting standards
c. accounting principles must meet the objectives of the Security and Exchange
Commission
d. amounts recorded in the financial statements must be based on independently
verifiable evidence
ANS: D DIF: 2 OBJ: 05
10.The Reynolds Company estimated that the value of its land had increased from $10,000 to
$16,000 and therefore wrote up the land account to $16,000. Which accounting
concept(s) was (were) violated?
a. cost concept
b. objectivity concept
c. all of the above
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d. none of the above
ANS: C DIF: 3 OBJ: 05
11. Assets are
a. Always greater than liabilities.
b. either cash or accounts receivables
c. the same as expenses because they are acquired with cash
d. financed by the owner and/or creditors
ANS: D DIF: 2 OBJ: 06
12. The accounting equation may be expressed as
a. Assets = Equities – Liabilities
b. Assets + Liabilities = Owner’s Equity
c. Assets = Revenues less Liabilities
d. Assets – Liabilities = Owner’s Equity
ANS: D DIF: 3 OBJ: 06
13. Expenses are recorded when
a. cash is paid for services rendered
b. a bill is received in advance of services rendered
