Question 1

Which of the following statements best describes the term "revenues"?
A) Revenues represent an outflow of assets resulting from the sale of goods or services.
B) Revenues represent assets received from the sale of products or services.
C) Revenues represent assets used or consumed in the sale of products or services.
D) Revenues represent the dollar amount of bonds sold to the public.

Accepted Answer

Revenues are the assets received by a company from the sale of products or services. They are typically reported on the income statement as the top line, before deducting any expenses. Option A is incorrect because it describes expenses instead of revenues. Option C is also incorrect because it describes the use or consumption of assets, which is not a characteristic of revenues. Option D is incorrect because it describes a different type of financial transaction (the sale of bonds) that is not related to revenues.

Question 2

Is the name of the branch of accounting concerned with providing managers and administrators with information to facilitate the planning and control of business operations?
A) Management accounting
B) Auditing
C) Financial accounting
D) Bookkeeping

Accepted Answer

Management accounting is the branch of accounting that provides managers and administrators with information to facilitate the planning and control of business operations.

Question 3

Which of the following statements would be true if you own stock in a company?
A) You are an owner of the retained earnings and capital stock of the company.
B) You have a claim to the assets of the business.
C) You have the right to receive interest on an annual basis.
D) You have the right to a portion of the company's revenues each accounting period.

Accepted Answer

B

Question 4

Which one of the following is least likely to be a user of financial information of a grocery store?
A) The manager of the grocery store.
B) The supplier of milk to the grocery store.
C) A stockbroker looking for a possible investment.
D) A customer at the grocery store.

Accepted Answer

A customer at the grocery store is least likely to use the financial information of the store as their primary interest is in purchasing goods, not in the financial performance or investment opportunities of the store.

Question 5

The costs of doing business through the sale of goods and services are called:
A) Net income.
B) Expenses.
C) Revenues.
D) Dividends.

Accepted Answer

Expenses refer to the costs incurred by a business in order to generate revenue. This includes costs like wages, rent, utilities, and supplies. Net income refers to the profit made by a business after all expenses have been deducted from revenue. Revenues are the income generated by a business through the sale of goods and services. Dividends are the distribution of profits to shareholders, which is not necessarily a cost of doing business.

Question 6

Which of the following best describes the term "assets"?
A) The amount of total profits earned by a business since it began operations.
B) The amount of interest or claim that the owners have in the business.
C) The economic resources of a business entity.
D) The cumulative profits earned by a business less any dividends distributed.

Accepted Answer

Assets refer to the economic resources of a business entity, including physical objects (such as buildings, equipment, and inventory) as well as intangible resources (such as patents, copyrights, and trademarks). Options A, B, and D do not accurately describe the term "assets."

Question 7

Which one of the following is not an external user of financial statements?
A) Suppliers
B) Creditors
C) Investors
D) The company's controller

Accepted Answer

The company's controller is an internal user of financial statements, as they are a member of management and use financial information to make decisions within the company. Suppliers, creditors, and investors are all examples of external users, as they are parties outside of the company who rely on financial statements for various reasons such as assessing creditworthiness or making investment decisions.

Question 8

Which one of the following events involves a liability for a business?
A) Loans to be repaid to banks
B) Inventories purchased for cash
C) Amounts invested by the owners
D) Stock sold to the general public

Accepted Answer

Loans to be repaid to banks represent a legal obligation and liability for the business to repay the borrowed amount with interest within a specified time period. The other options - inventories purchased for cash, amounts invested by the owners, and stock sold to the general public - represent assets or equity for the business.

Question 9

Which one of the following is not an external user of financial information?
A) Company management
B) Internal Revenue Service
C) Creditors
D) Stockholders

Accepted Answer

Company management is an internal user of financial information as they are involved in the day-to-day operations of the company and require financial information for decision-making. The Internal Revenue Service, creditors, and stockholders are all external users who require financial information to make decisions about the company.

Question 10

Which of the following would be classified as external users of financial statements?
A) Stockholders and management of the company
B) The controller of the company and a company's stockholders
C) The company's marketing managers
D) The creditors and stockholders of the company

Accepted Answer

External users of financial statements are individuals or organizations outside of the company that rely on financial statements to make decisions. Creditors and stockholders are external users because they use financial statements to assess the financial health of a company and make decisions about lending or investing. Stockholders and management (choice A) and the controller and stockholders (choice B) include internal users who work directly with the company and have access to more detailed financial information. Marketing managers (choice C) may use financial information to make marketing decisions, but they are not considered external users.

Question 11

Which of the following would be internal users of accounting information?
A) Customers and vendors
B) Employees and managers
C) Government and banks
D) Employees and customers

Accepted Answer

Employees and managers are the internal users of accounting information as they are directly involved in the operations and decision-making of the organization. Customers and vendors, government, and banks are all external users of accounting information.

Question 12

The three forms of business entities are:
A) Government, cooperatives, and philanthropic organizations.
B) Financing, investing, and operating.
C) Sole proprietorships, partnerships, and corporations.
D) Wholesaler, manufacturer, and retailer.

Accepted Answer

The three forms of business entities are sole proprietorships, partnerships, and corporations. These are the most common and recognized legal structures for businesses. Government, cooperatives, and philanthropic organizations are not forms of business entities but rather types of organizations. Financing, investing, and operating are types of activities that businesses may engage in, but they do not represent the legal structures of businesses. Wholesaler, manufacturer, and retailer are types of businesses based on their function in the supply chain, but again, they do not represent the legal structures of businesses.

Question 13

Which of the following best describes the term "expenses"?
A) The amount of total profits earned by a business since it began operations.
B) The amount of interest or claim that the owners have in the business.
C) The future economic resources of a business entity.
D) The outflow of assets resulting from the sale of goods and services.

Accepted Answer

Expenses are the outflow of assets (money) resulting from the sale of goods and services. This includes costs such as salaries, rent, utilities, supplies, and other necessary expenses to operate the business. Expenses are subtracted from revenue to determine a company's net income or profit.

Question 14

Which one of the following business decisions will least likely require financial information?
A) The Gulf Coast Bank is reviewing the loan application from Tuo's Restaurant.
B) Tuo's Restaurant is attempting to sell its stock to the public.
C) The labor union representing Flaggler's Fitness Spa employees is negotiating a pay raise as part of a new labor agreement.
D) Tuo's Restaurant management is deciding whether to wash its catering vans today or tomorrow.

Accepted Answer

The decision of whether to wash catering vans today or tomorrow does not require financial information. The other options involve financial decisions such as loan applications, stock sales, and labor agreements.

Question 15

United Airlines is an example of a:
A) producer.
B) supplier.
C) retailer.
D) service provider.

Accepted Answer

United Airlines provides transport services to its customers, making it a service provider.

Question 16

Which of the following invests funds into a business and is considered an owner?
A) Stockholders
B) Creditors
C) Bankers
D) Lenders

Accepted Answer

Stockholders invest funds into a business by purchasing shares of stock, which makes them partial owners of the company. Creditors, bankers, and lenders, on the other hand, lend money to the business but do not have any ownership rights.

Question 17

Barton Building Company is ready to sell its bonds. Which one of the following financial questions is most relevant to the issue of the bonds and that investors will most likely want answered before they purchase the bonds?
A) How many product lines did Barton Building Company have last year?
B) What will be Barton Building Company's cost to start operations in another city?
C) How much debt does Barton Building Company already have?
D) Will Barton Building Company pay dividends?

Accepted Answer

Investors are most likely concerned with the amount of debt that the company already has as this will impact their decision to purchase the bonds.

Question 18

All of the following are examples of retailers except:
A) Sports Authority.
B) Boeing.
C) Home Depot.
D) Best Buy.

Accepted Answer

Boeing is not a retailer, but a manufacturer of aircrafts. The other choices are retailers selling sporting goods (Sports Authority), home improvement products (Home Depot), and electronics (Best Buy).

Question 19

Which one of the following is not one of the three activities included in the definition of accounting?
A) Communicating
B) Identifying
C) Measuring
D) Operating

Accepted Answer

The three activities included in the definition of accounting are identifying, measuring, and communicating financial information. Operating is not one of the activities involved in accounting.

Question 20

The inflow of assets resulting from the sale of products and services is called an:
A) asset.
B) liability.
C) revenue.
D) expense.

Accepted Answer

Revenue represents the inflow of assets resulting from the sale of products and services.

Quiz 1: Accounting As a Form of Communication

Which of the following statements best describes the term "revenues"?

Is the name of the branch of accounting concerned with providing managers and administrators with information to facilitate the planning and control of business operations?

Which of the following statements would be true if you own stock in a company?

Which one of the following is least likely to be a user of financial information of a grocery store?

The costs of doing business through the sale of goods and services are called:

Which of the following best describes the term "assets"?

Which one of the following is not an external user of financial statements?

Which one of the following events involves a liability for a business?

Which one of the following is not an external user of financial information?

Which of the following would be classified as external users of financial statements?

Which of the following would be internal users of accounting information?

The three forms of business entities are:

Which of the following best describes the term "expenses"?

Which one of the following business decisions will least likely require financial information?

United Airlines is an example of a:

Which of the following invests funds into a business and is considered an owner?

Barton Building Company is ready to sell its bonds. Which one of the following financial questions is most relevant to the issue of the bonds and that investors will most likely want answered before they purchase the bonds?

All of the following are examples of retailers except:

Which one of the following is not one of the three activities included in the definition of accounting?

The inflow of assets resulting from the sale of products and services is called an: