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Financial and Managerial Accounting: The Basis for Business Decisions, 12/e
Jan R. Williams, University of Tennessee
Susan F. Haka, Michigan State University
Mark S. Bettner, Bucknell University
Robert F. Meigs

Basic Financial Statements

Multiple Choice Quiz

Please answer all questions


The nature of an asset is best described as:
A)Something with physical form that is valued at cost in the accounting records.
B)An economic resource owned by a business and expected to benefit future operations.
C)An economic resource representing cash or the right to receive cash in the near future.
D)Something owned by a business that has a ready market value.

The balance sheet item that represents the resources invested by the owner is:
A)Accounts receivable.
C)Note payable.
D)Owner's equity.

The balance sheet of Bock Designs includes the following items:

Accounts ReceivableCach
Diane Bock, CapitalAccounts Payable
Notes PayableNotes Receivable

This list includes:
A)Accounts Receivable Cash
B)Diane Bock, Capital Accounts Payable
C)Equipment Supplies
D)Notes Payable Notes Receivable

Arguments that the cost principle is not a satisfactory basis for the valuation of assets in financial statements are usually based on:
A)The lack of objective evidence to permit verification of cost data.
B)Increased availability and capacity of computers.
C)Stronger internal control structures.
D)Continued inflation.

The amount of owner's equity in a business is not affected by:
A)The percentage of total assets held in cash.
B)Investments made in the business by the owner.
C)The profitability of the business.
D)The amount of dividends paid to stockholders.

An income statement communicates information regarding revenues and expenses:
A)For a period of time.
B)At a given point in time.
C)For some point of time in the future.
D)At the beginning of the fiscal year.