Midterm 1 quiz 1

Question 1

Financial accounting focuses on the specific needs of decision makers external to the organization. Which of the following be an external user?

Answer 1

Stockholders
Internal Revenue Service
Banks

Question 2

Assets = ?

Answer 2

Liabilities + Owners’ Equity

Question 3

The annual report does include

Answer 3

• a letter from corporate management
• footnotes
• a report from independent auditors
• a statement on the company’s internal controls

Question 4

Another term for owners’ equity is

Answer 4

net assets

Question 5

The balance sheet shows ____

Answer 5

the financial status of a company at a particular point in time

Question 6

what does A loan from the bank do

Answer 6

increases assets and liabilities

Question 7

The purchase of inventory by paying cash causes

Answer 7

an increase in one asset and a decrease in another

Question 8

If the owners’ (stockholders’) equity section of the balance sheet includes “Additional Paid- in-Capital,” the type of organization is a __________

Answer 8

corporation

Question 9

advantages of the corporate form of ownership

Answer 9

a. Separation of ownership and management
b. Continuity of existence
c. Unlimited liability
d. Ease of raising capital

Question 10

Which organization has the responsibility to establish U.S. GAAP?

Answer 10

FASB

Question 11

An audit opinion

Answer 11

is provided by an independent CPA

Question 12

A certified public accountant (CPA) in the U.S. earns certification through

Answer 12

being an accounting major in college.

b. having sufficient experience.
c. meeting Board of Accountancy standards of knowledge and integrity.

Question 13

The overall concern of the AICPA’s Code of Professional Conduct is which of the following?

Answer 13

Whether the CPA is independent and acts with integrity and objectivity

Question 14

IFRS

Answer 14

International Financial Reporting Standards