Dr. M. D. Chase
1. Place your Name, Code Number of the Examination and the Examination Number on your Scantron
Failure to follow these instructions will result in a failing grade on this examination.
2. Select the best answer for each of the following questions.
3. Show complete computations in the space provided next to the questions.
Dr. M.D. Chase
BA 201 Examination 1J
1. Generally accepted accounting principles were established by
Congress in 1933 and are updated annually by the American
2. A transaction which causes a decrease in an asset may also
cause an increase in another asset, a decrease in a
liability, or a decrease in owners' equity.
3. The only business events which are entered in accounting
records are those which can be expressed in monetary terms.
4. A business is an accounting entity separate from its owners,
regardless of whether it is a single proprietorship, a
partnership, or a corporation.
5. The basic purpose of accounting is to:
Provide financial information about an economic entity.
Develop the types of information best suited to specific
Record the financial transactions of an economic entity.
Determine the taxable income of individuals and business
6. An accounting system can be designed to accomplish all the
Ensure that the business operates profitably.
Provide information to managers, owners, and outside
parties about the solvency of the business.
Summarize financial activities in a manner useful to
Record financial activity in monetary terms.
7. Which of the following events is NOT a transaction which
would be recorded in a company's accounting records?
The purchase of equipment for cash.
The purchase of equipment on account.
The death of a key executive.
Issuance of capital stock in exchange for cash.
8. The principal function of CPAs is to:
Audit income tax returns to determine if taxpayers have
underpaid their income taxes.
Conduct audits to determine whether the employees of a
business are performing their jobs honestly and
Advise individual investors on stock market investments.
Perform audits to determine the fairness and reliability
of a company's financial statements.
9. Management accountants primarily are concerned with
For use in income tax returns.
Suited to the needs of stockholders, creditors, and
other external decision makers.
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