Ch1: Accouting in action

The three basic business entities discussed in this chapter include sole proprietorship, partnership, and corporation. Which of these entities is considered a legal entity and is also subject to federal income taxation at the entity level?

• All three entities satisfy both requirements.

• Corporation.

• Sole proprietorship.

• Partnership.

____________________, which is one part of accounting, is the recording of transactions and events, either manually or electronically.

• Processing

• Communicating

• Record-keeping or Bookkeeping

• Preparing

If at the end of the accounting period, the company's liabilities total $19,000 and its equity totals $40,000, then what must be the total of assets?

• $59,000.

• $14,000

• $40,000

• $21,000

The historical cost principle states that

• assets should be initially recorded at cost and adjusted when the fair value changes.

• activities of an entity are to be kept separate and distinct from its owner.

• only transaction data capable of being expressed in terms of money be included in the accounting records.

• assets should be recorded at their cost

A limited liability company offers the limited liability of a partnership or proprietorship.

• False

• True

Which of the following is an external user of accounting information?

• Company officers

• Labor unions

• Finance directors