Fundamental Financial Accounting Concepts, 10e Thomas Edmonds,
Frances McNair, Philip Olds (Test Bank All Chapters, 100% Original
Verified, A+ Grade)
Fundamental Financial Accounting Concepts, 10e (Edmonds)
Chapter 1 An Introduction to Accounting
1) Which of the following groups has the primary responsibility for establishing generally
accepted accounting principles for business entities in the United States?
A) Securities and Exchange Commission
B) U.S. Congress
C) International Accounting Standards Board
D) Financial Accounting Standards Board
Answer: D
Explanation: The Financial Accounting Standards Board is a privately funded group charged
with establishing accounting standards for the U.S. It is not a branch of the U.S. government.
Difficulty: 1 Easy
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Legal
2) The Heritage Company is a manufacturer of office furniture. Which term best describes
Heritage's role in society?
A) Conversion agent
B) Regulatory agency
C) Consumer
D) Resource owner
Answer: A
Explanation: Businesses serve as conversion agents in the marketplace, transforming basic
resources provided by resource owners into goods and services that consumers demand.
Regulatory agencies set policies that affect the way that businesses operate.
Difficulty: 2 Medium
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Industry
1
Copyright © 2019 McGraw-Hill
,3) Which resource providers lend financial resources to a business with the expectation of
repayment with interest?
A) Consumers
B) Creditors
C) Investors
D) Owners
Answer: B
Explanation: Businesses borrow money from creditors, and repay the amount borrowed, plus an
additional fee known as interest. Investors, in contrast, provide financial resources in exchange for
ownership interest in the business. Consumers demand goods and services from businesses.
Difficulty: 1 Easy
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
4) Which type of accounting information is intended to satisfy the needs of external users of
accounting information?
A) Cost accounting
B) Managerial accounting
C) Tax accounting
D) Financial accounting
Answer: D
Explanation: Financial accounting is intended to satisfy the needs of external users of accounting
information. Managerial accounting, including cost accounting, is intended for the needs of
internal users, or managers, of a business. Tax accounting is specifically intended for tax
regulatory agencies.
Difficulty: 1 Easy
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
2
Copyright © 2019 McGraw-Hill
,5) Which of the following statements is false regarding managerial accounting information?
A) It is often used by investors.
B) It is more detailed than financial accounting information.
C) It can include nonfinancial information.
D) It focuses on divisional rather than overall profitability.
Answer: A
Explanation: Managerial accounting provides information primarily for internal users, or
managers, of businesses. Managers require more detailed information about a business than do
external users, and sometimes that information is nonfinancial in nature. Managerial accounting
information focuses on divisional rather than overall profitability and is not typically made
available to external users, such as investors.
Difficulty: 2 Medium
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Industry
6) Financial accounting standards are known collectively as GAAP. What does that acronym stand
for?
A) Generally Accepted Accounting Principles
B) Generally Applied Accounting Procedures
C) Governmentally Approved Accounting Practices
D) Generally Authorized Auditing Principles
Answer: A
Explanation: Generally Accepted Accounting Principles are established by the Financial
Accounting Standards Board.
Difficulty: 1 Easy
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
3
Copyright © 2019 McGraw-Hill
, 7) International accounting standards are formulated by the IASB. What does that acronym stand
for?
A) Internationally Accepted Standards Board
B) International Accounting Standards Board
C) International Accountability Standards Bureau
D) International Accounting and Sustainability Board
Answer: B
Explanation: The International Accounting Standards Board establishes accounting standards for
most countries outside of the U.S.
Difficulty: 1 Easy
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement; BB Global
8) Which of the following is an example of revenue?
A) Cash received as a result of a bank loan
B) Cash received from investors from the sale of common stock
C) Cash received from customers at the time services were provided
D) Cash received from the sale of land for its original selling price
Answer: C
Explanation: Cash received from providing services to customers is an example of revenue, and
is an asset source transaction. Cash received from the result of a bank loan results in a liability,
notes payable. Cash investments made by owners increase the stockholders' equity account
common stock. Cash received from the sale of land for its original selling price is an asset
exchange transaction that decreases one asset, land, and increases another asset, cash.
Difficulty: 2 Medium
Topic: Recording Business Events Under the Accounting Equation
Learning Objective: 01-04 Show how business events affect the accounting equation.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
4
Copyright © 2019 McGraw-Hill
Frances McNair, Philip Olds (Test Bank All Chapters, 100% Original
Verified, A+ Grade)
Fundamental Financial Accounting Concepts, 10e (Edmonds)
Chapter 1 An Introduction to Accounting
1) Which of the following groups has the primary responsibility for establishing generally
accepted accounting principles for business entities in the United States?
A) Securities and Exchange Commission
B) U.S. Congress
C) International Accounting Standards Board
D) Financial Accounting Standards Board
Answer: D
Explanation: The Financial Accounting Standards Board is a privately funded group charged
with establishing accounting standards for the U.S. It is not a branch of the U.S. government.
Difficulty: 1 Easy
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Legal
2) The Heritage Company is a manufacturer of office furniture. Which term best describes
Heritage's role in society?
A) Conversion agent
B) Regulatory agency
C) Consumer
D) Resource owner
Answer: A
Explanation: Businesses serve as conversion agents in the marketplace, transforming basic
resources provided by resource owners into goods and services that consumers demand.
Regulatory agencies set policies that affect the way that businesses operate.
Difficulty: 2 Medium
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Industry
1
Copyright © 2019 McGraw-Hill
,3) Which resource providers lend financial resources to a business with the expectation of
repayment with interest?
A) Consumers
B) Creditors
C) Investors
D) Owners
Answer: B
Explanation: Businesses borrow money from creditors, and repay the amount borrowed, plus an
additional fee known as interest. Investors, in contrast, provide financial resources in exchange for
ownership interest in the business. Consumers demand goods and services from businesses.
Difficulty: 1 Easy
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
4) Which type of accounting information is intended to satisfy the needs of external users of
accounting information?
A) Cost accounting
B) Managerial accounting
C) Tax accounting
D) Financial accounting
Answer: D
Explanation: Financial accounting is intended to satisfy the needs of external users of accounting
information. Managerial accounting, including cost accounting, is intended for the needs of
internal users, or managers, of a business. Tax accounting is specifically intended for tax
regulatory agencies.
Difficulty: 1 Easy
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
2
Copyright © 2019 McGraw-Hill
,5) Which of the following statements is false regarding managerial accounting information?
A) It is often used by investors.
B) It is more detailed than financial accounting information.
C) It can include nonfinancial information.
D) It focuses on divisional rather than overall profitability.
Answer: A
Explanation: Managerial accounting provides information primarily for internal users, or
managers, of businesses. Managers require more detailed information about a business than do
external users, and sometimes that information is nonfinancial in nature. Managerial accounting
information focuses on divisional rather than overall profitability and is not typically made
available to external users, such as investors.
Difficulty: 2 Medium
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Industry
6) Financial accounting standards are known collectively as GAAP. What does that acronym stand
for?
A) Generally Accepted Accounting Principles
B) Generally Applied Accounting Procedures
C) Governmentally Approved Accounting Practices
D) Generally Authorized Auditing Principles
Answer: A
Explanation: Generally Accepted Accounting Principles are established by the Financial
Accounting Standards Board.
Difficulty: 1 Easy
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
3
Copyright © 2019 McGraw-Hill
, 7) International accounting standards are formulated by the IASB. What does that acronym stand
for?
A) Internationally Accepted Standards Board
B) International Accounting Standards Board
C) International Accountability Standards Bureau
D) International Accounting and Sustainability Board
Answer: B
Explanation: The International Accounting Standards Board establishes accounting standards for
most countries outside of the U.S.
Difficulty: 1 Easy
Topic: Role of Accounting In Society
Learning Objective: 01-01 Identify the ways accounting benefits society.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement; BB Global
8) Which of the following is an example of revenue?
A) Cash received as a result of a bank loan
B) Cash received from investors from the sale of common stock
C) Cash received from customers at the time services were provided
D) Cash received from the sale of land for its original selling price
Answer: C
Explanation: Cash received from providing services to customers is an example of revenue, and
is an asset source transaction. Cash received from the result of a bank loan results in a liability,
notes payable. Cash investments made by owners increase the stockholders' equity account
common stock. Cash received from the sale of land for its original selling price is an asset
exchange transaction that decreases one asset, land, and increases another asset, cash.
Difficulty: 2 Medium
Topic: Recording Business Events Under the Accounting Equation
Learning Objective: 01-04 Show how business events affect the accounting equation.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
4
Copyright © 2019 McGraw-Hill
