, TESTBANK for Survey of Accounting, 3e
Kimmel
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, CHAPTER 1
INTRODUCTION TO FINANCIAL STATEMENTS
CHAPTER LEARNING OBJECTIVES
1. Identify the forms of business organization and the uses of accounting information. A
sole proprietorship is a business owned by one person. A partnership is a business owned by
two or more people associated as partners. A corporation is a separate legal entity for which
evidence of ownership is provided by shares of stock.
Internal users are managers who need accounting information to plan, organize, and run
business operations. The primary external users are investors and creditors. Investors
(stockholders) use accounting information to decide whether to buy, hold, or sell shares of a
company’s stock. Creditors (suppliers and bankers) use accounting information to assess the
risk of granting credit or loaning money to a business. Other groups who have an indirect
interest in a business are taxing authorities, customers, labor unions, and regulatory agencies.
2. Explain the three principal types of business activity. Financing activities involve collecting
the necessary funds to support the business. Investing activities involve acquiring the resources
necessary to run the business. Operating activities involve putting the resources of the business
into action to generate a profit.
3. Describe the four financial statements and how they are prepared. An income statement
presents the revenues and expenses of a company for a specific period of time. A retained
earnings statement summarizes the changes in retained earnings that have occurred for a
specific period of time. A balance sheet reports the assets, liabilities, and stockholders’ equity
of a business at a specific date. A statement of cash flows summarizes information concerning
the cash inflows (receipts) and outflows (payments) for a specific period of time.
Assets are resources owned by a business. Liabilities are the debts and obligations of the
business. Liabilities represent claims of creditors on the assets of the business. Stockholders’
equity represents the claims of owners on the assets of the business. Stockholders’ equity is
subdivided into two parts: common stock and retained earnings. The basic accounting equation
is: Assets = Liabilities + Stockholders’ Equity.
Within the annual report, the management discussion and analysis provide management’s
interpretation of the company’s results and financial position as well as a discussion of plans
for the future. Notes to the financial statements provide additional explanation or detail to make
the financial statements more informative. The auditor’s report expresses an opinion as to
whether the financial statements present fairly the company’s results of operations and financial
position.
*4. Explain the career opportunities in accounting. Accounting offers many different jobs in
fields such as public and private accounting, governmental, and forensic accounting.
Accounting is a popular major because there are many different types of jobs, with unlimited
potential for career advancement.
FOR INSTRUCTOR USE ONLY
Copyright © John Wiley & Sons, Inc.
, 1-2 Test Bank for Kimmel, Survey of Accounting, 3e
TRUE-FALSE STATEMENTS
1. A business organized as a separate legal entity owned by stockholders is a partnership.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
2. Corporate stockholders generally pay higher taxes but have no personal liability.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Business Economics
3. The liability of corporate stockholders is limited to the amount of their investment.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Business Economics
4. The majority of U.S. business is transacted by proprietorships.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Business Economics
5. Proprietorships in the United States generate more revenue than the other two forms of
business enterprise.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
6. Owners of business firms are the only people who need accounting information.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Business Economics
7. Management of a business enterprise is the major external user of information.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
8. External users of accounting information are managers who plan, organize, and run a
business.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
9. The information needs and questions of external users vary considerably.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
10. Accounting communicates financial information about a business to both internal and
external users.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
11. Two primary external users of accounting information are investors and creditors.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
12. Financing activities for corporations include borrowing money and selling shares of their
own stock.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
13. Investing activities involve collecting the necessary funds to support the business.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
FOR INSTRUCTOR USE ONLY
Copyright © John Wiley & Sons, Inc.
Kimmel
Hello all ,
We have all what you need with best price
Our email :
Our website :
testbanks-store.com
, CHAPTER 1
INTRODUCTION TO FINANCIAL STATEMENTS
CHAPTER LEARNING OBJECTIVES
1. Identify the forms of business organization and the uses of accounting information. A
sole proprietorship is a business owned by one person. A partnership is a business owned by
two or more people associated as partners. A corporation is a separate legal entity for which
evidence of ownership is provided by shares of stock.
Internal users are managers who need accounting information to plan, organize, and run
business operations. The primary external users are investors and creditors. Investors
(stockholders) use accounting information to decide whether to buy, hold, or sell shares of a
company’s stock. Creditors (suppliers and bankers) use accounting information to assess the
risk of granting credit or loaning money to a business. Other groups who have an indirect
interest in a business are taxing authorities, customers, labor unions, and regulatory agencies.
2. Explain the three principal types of business activity. Financing activities involve collecting
the necessary funds to support the business. Investing activities involve acquiring the resources
necessary to run the business. Operating activities involve putting the resources of the business
into action to generate a profit.
3. Describe the four financial statements and how they are prepared. An income statement
presents the revenues and expenses of a company for a specific period of time. A retained
earnings statement summarizes the changes in retained earnings that have occurred for a
specific period of time. A balance sheet reports the assets, liabilities, and stockholders’ equity
of a business at a specific date. A statement of cash flows summarizes information concerning
the cash inflows (receipts) and outflows (payments) for a specific period of time.
Assets are resources owned by a business. Liabilities are the debts and obligations of the
business. Liabilities represent claims of creditors on the assets of the business. Stockholders’
equity represents the claims of owners on the assets of the business. Stockholders’ equity is
subdivided into two parts: common stock and retained earnings. The basic accounting equation
is: Assets = Liabilities + Stockholders’ Equity.
Within the annual report, the management discussion and analysis provide management’s
interpretation of the company’s results and financial position as well as a discussion of plans
for the future. Notes to the financial statements provide additional explanation or detail to make
the financial statements more informative. The auditor’s report expresses an opinion as to
whether the financial statements present fairly the company’s results of operations and financial
position.
*4. Explain the career opportunities in accounting. Accounting offers many different jobs in
fields such as public and private accounting, governmental, and forensic accounting.
Accounting is a popular major because there are many different types of jobs, with unlimited
potential for career advancement.
FOR INSTRUCTOR USE ONLY
Copyright © John Wiley & Sons, Inc.
, 1-2 Test Bank for Kimmel, Survey of Accounting, 3e
TRUE-FALSE STATEMENTS
1. A business organized as a separate legal entity owned by stockholders is a partnership.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
2. Corporate stockholders generally pay higher taxes but have no personal liability.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Business Economics
3. The liability of corporate stockholders is limited to the amount of their investment.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Business Economics
4. The majority of U.S. business is transacted by proprietorships.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Business Economics
5. Proprietorships in the United States generate more revenue than the other two forms of
business enterprise.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
6. Owners of business firms are the only people who need accounting information.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Business Economics
7. Management of a business enterprise is the major external user of information.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
8. External users of accounting information are managers who plan, organize, and run a
business.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
9. The information needs and questions of external users vary considerably.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
10. Accounting communicates financial information about a business to both internal and
external users.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
11. Two primary external users of accounting information are investors and creditors.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
12. Financing activities for corporations include borrowing money and selling shares of their
own stock.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
13. Investing activities involve collecting the necessary funds to support the business.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
FOR INSTRUCTOR USE ONLY
Copyright © John Wiley & Sons, Inc.
