Accounting and Its Environment

Which of the following are true of partnerships?

1. The partners' individual exposure to debt is limited.

2. Financial statemenst for the partnership by law must be produced and made public.

3. A partnership is not a separate legal entity from the partners themselves.

• 1 and 2 only

• 2 only

• 3 only

• 1 and 3 only

Which accounting concept should be considered if the owner of a business takes goods from inventory for his personal use?

• The substance over form concept

• The accrual concept

• The going concern concept

• The business entity concept

Which accounting concept states that omitting or mistating this information could influence users of the financial statement?

• The consistency concept

• The accrual concept

• The materiality concept

• The going concern concept

Which of the following accounting concepts means that similar items should receive a similar accounting treatment?

• Going concern

• Accrual

• Substance over form

• Consistency

Assets are usually valued under which basis?

• Replacement cost

• Historical cost

• Net realizable value

• Present value

Which of the following best explain the feature of consistency of presentation?

• When preparing the accounts of a firm, one should normally account for similar items in the same way from one accounting period to the next.

• Firms inthe same industry must account for similar items in the same way.

• Firms must comply with accounting standards and regulations.

• None of the above.

Which of the following statements about accounting concepts and the characteristics of financial reporting information is not correct?

1. Entities may exclude information that is relevant in financial statements because it is too difficult for the users to understand.

2. The historical cost concept means that only items capable of being measured in monetary terms can be recognized in the financial statements.

3. Consistency in use of the same accounting policies for the same or similar items from one period to the next is essential to enhance comparability among the entities.

• 1 and 2

• 1 and 3

• 2 and 3

• All of the above

Which type of business organization is owned by its stockholders?

• Corporation

• Partnership

• Proprietorship

• All of the above are owned by stockholders

Which of the following is an appropriate definition of accounting?

• The measurement, processing, and communication of financial information about an identifiable economic entity.

• A means of recording transactions and keeping records.

• The interconnected network of subsystems necessary to operate a business.

• Electronic collection, organization, and communication of vast amounts of information.

Accountants employed by a particular business firm or not-for-profit organization, perhaps as chief accountant, controller, or financial vice president, are said to be engaged in.

• general accounting

• public accounting

• practice in commerce and industry

• independent accounting