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Exam 1: Accounting in Business

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Question 111

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An external transaction is an exchange of value within an organization.

A) True
B) False

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Question 112

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The primary objective of financial accounting is to provide general purpose financial statements to help external users analyze and interpret an organization's activities.

A) True
B) False

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Question 113

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The Maxim Company acquired a building for $500,000. Maxim had the building appraised, and found that the building was easily worth $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Maxim to record the building on its records at $500,000?

An accounting information system communicates data to help businesses make better decisions.

Identify the international group establishing accounting principles.

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

The question of when revenue should be recognized on the income statement (according to GAAP) is addressed by the:

Planning activities are the means an organization uses to pay for resources like land, buildings, and equipment to carry out its plans.

The monetary unit assumption means that all international transactions must be expressed in dollars.

A balance sheet or a statement of financial position lists:

Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements.

The business entity assumption means that a business is accounted for separately from other business entities, including its owner or owners.

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

Identify each of the following business activities 1 through 6 into the appropriate category a, b, and c.

Revenues are:

Opportunities in accounting include auditing, consulting, market research, and tax planning.

The private group that currently has the authority to establish generally accepted accounting principles in the United States is the:

Risk is the _________________ about the return an investor expects to earn.

Zion Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?

The ____________________ describes a company's revenues and expenses over a period of time due to earnings activities.