88 Free Test Bank for Financial and Managerial Accounting 2nd Edition Charles Horngren

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A corporation possesses all but one of the following characteristics. Which of the following is NOT a characteristic of a corporation?

•  A) If a corporation cannot pay its debts, lenders can take the owners' personal assets to satisfy the obligations.
•  B) A corporation is an "artificial person" in the eyes of the law.
•  C) Ownership is divided into individual shares.
•  D) A corporation is owned by shareholders or stockholders.

Which of the following is a licensed accountant who serves the general public rather than an accountant who serves one particular company?

•  A) CPA
•  B) CMA
•  C) SEC
•  D) FASB

A partnership possesses which of the following characteristics?

•  A) A partnership is owned by shareholders or stockholders.
•  B) If a partnership cannot pay its debts, lenders cannot take the owners' personal assets to satisfy the obligations.
•  C) A partnership joins two or more individuals as co-owners.
•  D) None of the above is a characteristic of a partnership.

Organizing as a corporation separates management from the:

•  A) proprietors.
•  B) vendors.
•  C) customers.
•  D) stockholders.

Which of the following is most likely to be a user of information in a managerial accounting setting?

•  A) Potential investors
•  B) Creditors
•  C) Customers
•  D) Department heads

Phillip and Reed have developed a new technology for home computer systems. However, they need to raise a large amount of capital to build the production and support facilities to market their product successfully. Which of the following business types would most likely attract enough investors to provide the company with the necessary capital to begin production?

•  A) Corporation
•  B) Proprietorship
•  C) Partnership
•  D) Limited liability partnership

Which financial statement is defined as reporting the inflows and outflows of cash in a corporation?

•  A) Income statement
•  B) Statement of retained earnings
•  C) Balance sheet
•  D) Statement of cash flows

Accounting information may be generated for a variety of purposes. The key products of accounting are:

•  A) financial statements.
•  B) remittance advices.
•  C) spreadsheets.
•  D) work sheets.

Corporate ownership is a very popular type of ownership in the United States. Which of the following is a major reason that corporate ownership is popular?

•  A) Corporate shareholders have limited liability for the debts of the corporation.
•  B) Most corporations are small or medium-sized.
•  C) The life of a corporation is limited by the death of an owner.
•  D) A corporation is usually managed by the owners.

Accountants often refer to GAAP. What do the letters GAAP represent in accounting?

•  A) Globally accepted and accurate policies
•  B) Global accommodation accounting principles
•  C) Generate accurate accounting policies
•  D) Generally accepted accounting principles

The principles called GAAP are established by the:

•  A) SEC.
•  B) AICPA.
•  C) FASB.
•  D) IRS.

The first step in incorporation is to:

•  A) have the board of directors designate a president.
•  B) agree to a set of bylaws.
•  C) issue the first shares of stock.
•  D) obtain a charter from the state.

There are more __________ than any other form of business organization.

•  A) partnerships
•  B) sole proprietorships
•  C) corporations
•  D) limited liability partnerships

The primary objective of financial reporting is to provide information useful for making investment and lending decisions. To be useful, information must possess certain characteristics. Which of the following is NOT one of the basic characteristics that financial statements must possess to be useful?

•  A) Reliability
•  B) A stockholders’ equity section
•  C) Relevance
•  D) Comparability

An obligation that a corporation owes to an outside person or agency is called a(n):

•  A) asset.
•  B) liability.
•  C) stockholders’ equity.
•  D) revenue.

Many organizations have contributed to the process of creating and/or using generally accepted accounting principles. Which of the following organizations has the primary responsibility for formulating accounting standards?

•  A) FASB
•  B) CMA
•  C) AICPA
•  D) SEC

Items such as buildings and land are:

•  A) liabilities.
•  B) equity.
•  C) assets.
•  D) part of equity or assets, depending upon the paperwork.

A proprietorship possesses which of the following characteristics?

•  A) A proprietorship joins two or more individuals as co-owners.
•  B) If a proprietorship cannot pay its debts, lenders cannot take the owners' personal assets to satisfy the obligations.
•  C) A proprietorship has a single owner.
•  D) None of the above is a characteristic of a proprietorship.

Which of the following statements best describes managerial accounting?

•  A) Managerial accounting focuses on information for internal decision making.
•  B) Managerial accounting focuses on outside investors and lenders that are not part of day-to-day management.
•  C) Managerial accounting provides information for the public.
•  D) None of these statements is true.

In an LLC, who is responsible for the company’s debts?

•  A) The company itself
•  B) The partners
•  C) The individual investors
•  D) The proprietor

A promise to pay from customers for goods and services that they received from a company represent:

•  A) accounts receivable.
•  B) accounts payable.
•  C) revenues.
•  D) expenses.

By definition, which of the following represent the owners of a corporation?

•  A) Customers
•  B) Creditors
•  C) Stockholders
•  D) None of the above

Which of the following statements best defines accounting financial statements?

•  A) Financial statements are the information system that measures business activities.
•  B) Financial statements are the verbal statements made to business news organizations by chief financial officers.
•  C) Financial statements are documents that report on a business in monetary terms, providing information to help people make informed business decisions.
•  D) Financial statements process information into reports.

Which of the following is likely to be a user of information in a financial accounting setting?

•  A) Taxing authorities
•  B) Other businesses
•  C) Potential investors
•  D) All of the above

Dylan Chase is a CPA and one of the tax partners in a CPA practice. One of Dylan's partners sometimes takes a very aggressive position when auditing clients. Which of the following business types would protect Dylan's personal assets from malpractice liability for his partner’s aggressive auditing tactics?

•  A) Limited liability partnership
•  B) Partnership
•  C) Limited liability company
•  D) Proprietorship