CHAPTER 1: ACCOUNTING AS A FORM OF
COMMUNICATION(WITH ANSWER KEY)
1. 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
2. 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
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.
4. 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.
5. 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
,6. 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.
7. Which One Of The Following Business Decisions Will Least Likely Require Financial Information?
A. The Local Bank Is Reviewing The Loan Application From Marla Boutique Corp.
B. Marla Boutique Corp. Is Attempting To Sell Its Stock To The Public.
C. The Labor Union Representing Lawn Doctor’s Employees Is Negotiating A Pay Raise As Part Of A
New Labor Agreement.
D. Marla Boutique’s Management Is Deciding Whether To Wash Its Vans Today Or Tomorrow.
8. Which One Of The Following Is Not An External User Of Financial Information?
A. Company Management
B. Internal Revenue Service
C. Creditors
D. Stockholders
9. Bush Company Is Ready To Sell Its Bonds. Which One Of The Following Financial Questions Will
Investors Most Likely Want Answered Before They Make A Purchase?
A. How Much Did Bush Company Earn Last Year?
B. What Will Be Bush Company’s Cost To Start Operations In Another City?
C. How Much Debt Does Bush Company Already Have?
D. Will Bush Company Pay Dividends?
10. What 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
,11. Which Of The Following Invests Funds Into A Business And Is Considered An Owner?
A. Stockholders
B. Creditors
C. Bankers
D. Lenders
12. 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
13. Which One Of The Following Is Not An External User Of Financial Statements?
A. Suppliers
B. Creditors
C. Investors
D. The Company’s Controller
14. 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
15. Which One Of The Following Groups Is Considered An Internal User Of Financial Statements?
A. A Bank Reviewing A Loan Application From A Corporation.
B. The Labor Union Representing Employees Of A Company That Is Involved In Labor Negotiations
C. The Financial Analysts For A Brokerage Firm Who Are Preparing Recommendations For The Firm’s
Brokers On Companies In A Certain Industry,
D. Factory Managers That Supervise Production Line Workers.
, 16. Which Of The Following Is An Organization That Lends Funds To A Business Entity And Expects
Repayment Of The Funds?
A. A Partner
B. A Stockholder
C. An Owner
D. A Creditor
17. You Are A Potential Stockholder And Are Concerned That A Particular Company You Are Ready To Invest
In Might Have Too Much Debt. Which Financial Statement Would Provide You Information Needed In Order
To Evaluate Your Concern?
A. Balance Sheet
B. Income Statement
C. Statement Of Retained Earnings
D. Statement Of Public Accounting
18. Which Financial Statement Would You Analyze To Determine If A Company Distributed Any Of Its
Profits To Its Shareholders?
A. Balance Sheet
B. Statement Of Retained Earnings
C. Income Statement
D. Statement Of Public Accounting
19. Which Financial Statement Would You Refer To In Order To Determine Whether A Company Owed
Funds To Creditors?
A. Balance Sheet
B. Statement Of Retained Earnings
C. Income Statement
D. Statement Of Public Accounting
20. Which One Of The Following Is An Economic Obligation For A Business Entity?
A. Salaries Paid To Employees For Services Rendered
B. Amounts Owed To Creditors
C. Materials Used In Manufacturing Products
D. Payment Of Rent For The Next Year
COMMUNICATION(WITH ANSWER KEY)
1. 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
2. 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
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.
4. 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.
5. 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
,6. 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.
7. Which One Of The Following Business Decisions Will Least Likely Require Financial Information?
A. The Local Bank Is Reviewing The Loan Application From Marla Boutique Corp.
B. Marla Boutique Corp. Is Attempting To Sell Its Stock To The Public.
C. The Labor Union Representing Lawn Doctor’s Employees Is Negotiating A Pay Raise As Part Of A
New Labor Agreement.
D. Marla Boutique’s Management Is Deciding Whether To Wash Its Vans Today Or Tomorrow.
8. Which One Of The Following Is Not An External User Of Financial Information?
A. Company Management
B. Internal Revenue Service
C. Creditors
D. Stockholders
9. Bush Company Is Ready To Sell Its Bonds. Which One Of The Following Financial Questions Will
Investors Most Likely Want Answered Before They Make A Purchase?
A. How Much Did Bush Company Earn Last Year?
B. What Will Be Bush Company’s Cost To Start Operations In Another City?
C. How Much Debt Does Bush Company Already Have?
D. Will Bush Company Pay Dividends?
10. What 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
,11. Which Of The Following Invests Funds Into A Business And Is Considered An Owner?
A. Stockholders
B. Creditors
C. Bankers
D. Lenders
12. 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
13. Which One Of The Following Is Not An External User Of Financial Statements?
A. Suppliers
B. Creditors
C. Investors
D. The Company’s Controller
14. 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
15. Which One Of The Following Groups Is Considered An Internal User Of Financial Statements?
A. A Bank Reviewing A Loan Application From A Corporation.
B. The Labor Union Representing Employees Of A Company That Is Involved In Labor Negotiations
C. The Financial Analysts For A Brokerage Firm Who Are Preparing Recommendations For The Firm’s
Brokers On Companies In A Certain Industry,
D. Factory Managers That Supervise Production Line Workers.
, 16. Which Of The Following Is An Organization That Lends Funds To A Business Entity And Expects
Repayment Of The Funds?
A. A Partner
B. A Stockholder
C. An Owner
D. A Creditor
17. You Are A Potential Stockholder And Are Concerned That A Particular Company You Are Ready To Invest
In Might Have Too Much Debt. Which Financial Statement Would Provide You Information Needed In Order
To Evaluate Your Concern?
A. Balance Sheet
B. Income Statement
C. Statement Of Retained Earnings
D. Statement Of Public Accounting
18. Which Financial Statement Would You Analyze To Determine If A Company Distributed Any Of Its
Profits To Its Shareholders?
A. Balance Sheet
B. Statement Of Retained Earnings
C. Income Statement
D. Statement Of Public Accounting
19. Which Financial Statement Would You Refer To In Order To Determine Whether A Company Owed
Funds To Creditors?
A. Balance Sheet
B. Statement Of Retained Earnings
C. Income Statement
D. Statement Of Public Accounting
20. Which One Of The Following Is An Economic Obligation For A Business Entity?
A. Salaries Paid To Employees For Services Rendered
B. Amounts Owed To Creditors
C. Materials Used In Manufacturing Products
D. Payment Of Rent For The Next Year
