Week 1 Quiz

Which description fits financial accounting as this course defines it?

Select one.

• Information built for a business's own managers, in whatever form helps them decide what to stock or how to schedule staff
• A record of an owner's personal and household spending, kept beside the business's own records
• General-purpose financial statements prepared for users outside the business, such as investors and lenders
• A set of tax rules that tells each business how much it owes the IRS each year

The cycling club that paid the illustrative bicycle shop $1,200 in advance for tune-ups wants to know whether the shop will still be open to do the work. In this week's terms, how should the club be classified as a reader of the shop's numbers?

Select one.

• As an internal user, because it already has money tied up in the shop's work
• As an external user, because it is a customer that stands outside the shop and relies on its reports
• As a regulator, because it can require the shop to finish the tune-ups it paid for
• As a managerial accounting user, because it will plan its riders' schedule around the tune-ups

Which form of business organization is a legal entity separate from its owners, whose owners hold shares and have limited liability for its debts?

Select one.

• The corporation
• The sole proprietorship
• The general partnership
• An owner-operated business with no legal separation from its owner

According to the IRS's Statistics of Income counts for tax year 2022, which form of business organization is the most common in the United States?

Select one.

• The corporation, because most large companies take that form
• The partnership, because most businesses have more than one owner
• All three forms are about equally common
• The sole proprietorship, a business owned by one person

An illustrative food truck is a sole proprietorship. At one checkout, the owner pays for tortillas for the truck and cereal for the family with the truck's card. How does the economic entity assumption treat the cereal?

Select one.

• As a business expense, because the truck's card paid for it
• As personal spending that stays out of the truck's records, because it was not for the truck
• As a business expense, because a sole proprietor and the business are the same person in law
• As half business and half personal, because the owner runs the truck and the household

Which law created the Securities and Exchange Commission?

Select one.

• The Securities Act of 1933
• The Sarbanes-Oxley Act of 2002
• The Securities Exchange Act of 1934
• The law that established the FASB in 1973

Which statement about the Financial Accounting Standards Board (FASB) is accurate?

Select one.

• It is an independent, private-sector, not-for-profit standard setter, established in 1973, that sets GAAP and is recognized by the SEC
• It is the federal agency, created in 1934, that holds legal authority over public-company reporting
• It is a division of the IRS that writes the tax rules businesses follow
• It is the international board that sets International Financial Reporting Standards

Which sentence compares IFRS and GAAP the way this course does?

Select one.

• IFRS is the better framework, so U.S. companies should switch to it
• IFRS and GAAP are the same rules under two names, so the choice never matters
• GAAP is the better framework, because U.S. companies have used it longer
• IFRS is set by the IASB and GAAP by the FASB; they differ in some rules, which the course describes by their effects

Select every principle that the AICPA Code of Professional Conduct sets out.

Select every option that applies.

• Integrity
• Due Care
• Objectivity and Independence
• Loyalty to Management
• Lowest Possible Fee

Which of the four financial statements reports what a business has, what it owes, and the owners' claim at one moment in time?

Select one.

• The income statement
• The statement of cash flows
• The balance sheet
• The statement of retained earnings