Tulane ACCN-2010 Test 1 (Chapters 1-4) 2026 – Study Guide
and Practice Questions
Sole Proprietorship - correct answer ✔✔ -a business owned by one person
-simple to set up and gives you control over the business
Partnership - correct answer ✔✔ a business owned by two or more persons associated as
partners
Corporation - correct answer ✔✔ a business organized as a separate legal entity owned by
stockholders
Accounting - correct answer ✔✔ the information system that identifies, records, and
communicates the economic events of an organization to interested users
Internal Users of Accounting Information - correct answer ✔✔ managers who plan, organize,
and run a business (ex. Marketing managers, production supervisors, finance directors, and
company officers)
External Users of Accounting Information - correct answer ✔✔ -Investors
-Creditors (such as suppliers and bankers use accounting information to evaluate the risks of
selling on credit or lending money)
-Taxing authorities (ex. IRS)
-Customers
-Labor unions
-Regulatory agencies (ex. Securities and Exchange Commission; Federal Trade Commission)
,Sarbanes-Oxley Act (SOX) - correct answer ✔✔ -Passed by congress to reduce unethical
corporate behavior and decrease the likelihood of future corporate scandals
-Top management must now certify the accuracy of financial information
-Penalties for fraudulent financial activity are much more severe
-Increased both the independence of the outside auditors who review the accuracy of corporate
financial statements and the oversight role of boards of directors
The two primary sources of outside funds for corporations are... - correct answer
✔✔ ...borrowing money (debt financing) and issuing (selling) shares of stock in exchange for
cash (equity financing)
Liabilities - correct answer ✔✔ -Amounts owed to creditors in the form of debt and other
obligations
-Notes payable
-Bonds payable (debt securities sold to investors that must be repaid at a particular date some
years in the future)
Common Stock - correct answer ✔✔ the term used to describe the total amount paid in by
stockholders for the shares they purchase
Dividends - correct answer ✔✔ cash payments to stockholders
Assets - correct answer ✔✔ resources owned by a business
Revenue - correct answer ✔✔ -the increase in assets or decrease in liabilities resulting from the
sale of goods or the performance of services in the normal course of business
-ex. sales revenue, service revenue, interest revenue
Inventory - correct answer ✔✔ goods available for future sales to customers
, Accounts Receivable - correct answer ✔✔ the right to receive money in the future
Expenses - correct answer ✔✔ -the cost of assets consumed or services used in the process of
generating revenues
-ex. marketing expenses, administrative expenses, interest expense, income taxes
Accounts Payable - correct answer ✔✔ obligations to pay for goods
Net Income - correct answer ✔✔ when revenues exceed expenses
Net Loss - correct answer ✔✔ when expenses exceed revenue
Income Statement - correct answer ✔✔ a financial statement that reports a company's
revenues and expenses and resulting net income or net loss for a specific period of time
Retained Earnings - correct answer ✔✔ the amount of net income retained in the corporation
Retained Earnings Statement - correct answer ✔✔ a financial statement that summarizes the
amounts and causes of changes in retained earnings for a specific time period
Balance Sheet - correct answer ✔✔ a financial statement that reports the assets and claims to
those assets at a specific point in time
Stockholders' Equity - correct answer ✔✔ the owners' claim to assets
Basic Accounting Equation - correct answer ✔✔ Assets = Liabilities + Stockholders' Equity
and Practice Questions
Sole Proprietorship - correct answer ✔✔ -a business owned by one person
-simple to set up and gives you control over the business
Partnership - correct answer ✔✔ a business owned by two or more persons associated as
partners
Corporation - correct answer ✔✔ a business organized as a separate legal entity owned by
stockholders
Accounting - correct answer ✔✔ the information system that identifies, records, and
communicates the economic events of an organization to interested users
Internal Users of Accounting Information - correct answer ✔✔ managers who plan, organize,
and run a business (ex. Marketing managers, production supervisors, finance directors, and
company officers)
External Users of Accounting Information - correct answer ✔✔ -Investors
-Creditors (such as suppliers and bankers use accounting information to evaluate the risks of
selling on credit or lending money)
-Taxing authorities (ex. IRS)
-Customers
-Labor unions
-Regulatory agencies (ex. Securities and Exchange Commission; Federal Trade Commission)
,Sarbanes-Oxley Act (SOX) - correct answer ✔✔ -Passed by congress to reduce unethical
corporate behavior and decrease the likelihood of future corporate scandals
-Top management must now certify the accuracy of financial information
-Penalties for fraudulent financial activity are much more severe
-Increased both the independence of the outside auditors who review the accuracy of corporate
financial statements and the oversight role of boards of directors
The two primary sources of outside funds for corporations are... - correct answer
✔✔ ...borrowing money (debt financing) and issuing (selling) shares of stock in exchange for
cash (equity financing)
Liabilities - correct answer ✔✔ -Amounts owed to creditors in the form of debt and other
obligations
-Notes payable
-Bonds payable (debt securities sold to investors that must be repaid at a particular date some
years in the future)
Common Stock - correct answer ✔✔ the term used to describe the total amount paid in by
stockholders for the shares they purchase
Dividends - correct answer ✔✔ cash payments to stockholders
Assets - correct answer ✔✔ resources owned by a business
Revenue - correct answer ✔✔ -the increase in assets or decrease in liabilities resulting from the
sale of goods or the performance of services in the normal course of business
-ex. sales revenue, service revenue, interest revenue
Inventory - correct answer ✔✔ goods available for future sales to customers
, Accounts Receivable - correct answer ✔✔ the right to receive money in the future
Expenses - correct answer ✔✔ -the cost of assets consumed or services used in the process of
generating revenues
-ex. marketing expenses, administrative expenses, interest expense, income taxes
Accounts Payable - correct answer ✔✔ obligations to pay for goods
Net Income - correct answer ✔✔ when revenues exceed expenses
Net Loss - correct answer ✔✔ when expenses exceed revenue
Income Statement - correct answer ✔✔ a financial statement that reports a company's
revenues and expenses and resulting net income or net loss for a specific period of time
Retained Earnings - correct answer ✔✔ the amount of net income retained in the corporation
Retained Earnings Statement - correct answer ✔✔ a financial statement that summarizes the
amounts and causes of changes in retained earnings for a specific time period
Balance Sheet - correct answer ✔✔ a financial statement that reports the assets and claims to
those assets at a specific point in time
Stockholders' Equity - correct answer ✔✔ the owners' claim to assets
Basic Accounting Equation - correct answer ✔✔ Assets = Liabilities + Stockholders' Equity
