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Exam 1: Accounting in Business

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Question 31

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Unlimited liability and separate taxation of the business are advantages of a sole proprietorship.

A) True
B) False

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Question 32

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If the liabilities of a company increased $92,000 during a period of time and equity in the business decreased $30,000 during the same period,did the assets of the company increase or decrease? By what amount?

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Assets increased by ...

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Question 33

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The income statement describes revenues earned and expenses incurred along with the resulting net income or loss over a specified period of time.

The full disclosure principle:

All of the following are classified as assets except:

An example of an operating activity is:

Doc's Ribhouse had beginning equity of $52,000; net income of $35,000,and dividends of $12,000.There were no stockholder investments during the year.Calculate the ending equity.

Return on assets is often stated in ratio form as the amount of income divided by assets invested.

If assets are $300,000 and liabilities are $192,000,then equity equals:

Revenues are increases in equity (via net income)from a company's sales of products and services to customers.

To include the personal assets and transactions of a business's owner(s) in the records and reports of the business would be in conflict with the:

The measurement principle prescribes that accounting information is based on subjective opinion rather than cost.

Auditors verify the effectiveness of internal controls.

Marsha Bogswell is the sole stockholder of Bogswell Legal Services.Which accounting principle requires Marsha to keep her personal financial information separate from the financial information of Bogswell Legal Services?

Rico's Taqueria had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000,and cash outflows from financing activities of $12,000.Calculate the net increase or decrease in cash.

The term ________ refers to a liability that promises a future outflow of resources.

Operating activities include long-term borrowing and repaying cash from lenders,stockholder investments and dividends paid to stockholders.

The fraud triangle asserts that the three factors that must exist for a person to commit fraud are opportunity,pressure,and rationalization.

What is the balance sheet? What is its purpose?

The characteristics below apply to at least one of the forms of business organization. a.Is a separate legal entity. b.Is allowed to be owned by one person only. c.Owner or owners are personally liable for debts of the business. d.Is a separately taxable entity. e.Is a business entity. f.May have a contract specifying the division of profits among the owners. g.Has an unlimited life Use the following format to indicate (with a "yes" or "no")whether or not a characteristic applies to each type of business organization.