Accounting Midterm Verified Exam Questions and Answers Latest
update 2026/2027
Question:
1) Financial accounting information is:
A) Designed to assist investors and creditors.
B) Not applicable to individuals.
C) Called "special-purpose" accounting information.
D) Submitted to the IRS in lieu of a tax form.
Answer:
Designed to assist investors and creditors.
Question:
2) Which of the following does not describe accounting?
A) It is used by businesses, governments, non-profit organizations, and individuals.
B) It is useful for decision-making.
C) It is an end rather than a means to an end.
D) It is commonly referred to as the language of business.
Answer:
It is an end rather than a means to an end.
Question:
3) The field of accounting may best be described as:
A) Developing information in conformity with generally accepted accounting principles.
B) Developing the information required for the preparation of income tax returns.
C) Recording the financial transactions of an economic entity.
D) The art of interpreting, measuring, and describing economic activity.
Answer:
The art of interpreting, measuring, and describing economic activity.
Question:
4) Information is cost effective when:
A) The information is generated by a computer based accounting system.
B) The value of the information exceeds the cost of producing it.
C) The information aids management in controlling costs.
D) The information is based upon historical costs, rather than upon estimated
market values.
Answer:
The value of the information exceeds the cost of producing it.
,Question:
5) Which of the following events is not a transaction that would be recorded in a company's
accounting records?
A) The purchase of equipment on account.
B) The purchase of equipment for cash.
C) The investment of additional cash in the business by the owner.
D) The death of a key executive.
Answer:
The death of a key executive.
Question:
6) A strong internal control structure:
A) Ensures a business will remain solvent.
B) Contributes to the accuracy and verifiability of the accounting records.
C) Will prevent a business from operating at a loss.
D) Will prevent fraud, theft, and embezzlement.
Answer:
Contributes to the accuracy and verifiability of the accounting records.
Question:
7) The financial statements of a business entity:
A) Are the first step in the accounting process.
B) Are prepared for a fee by the Financial Accounting Standards Board.
C) Provide information about the cash flow prospects of the company.
D) Include the balance sheet, income statement, and income tax return.
Answer:
Provide information about the cash flow prospects of the company.
Question:
8) Financial statements are designed primarily to:
A)Provide people outside the business organization with information about the company's
financial position and operating results.
B) Provide managers with detailed information tailored to the managers' specific information
needs.
C) Indicate to investors in a particular company the current market values of their investments.
D) Report to the Internal Revenue Service the company's taxable income.
Answer:
Provide people outside the business organization with information about the company's financial
position and operating results. In comparison with a financial statement prepared in conformity with
generally accepted accounting principles, a management accounting report is more likely to:
A) Focus upon the operation results of the most recently completed accounting period.
B) Be tailored to the specific needs of an individual decision maker.
,Question:
C) View the entire organization as the reporting entity. D) Be used by decision makers outside of
the business organization.
Answer:
Be tailored to the specific needs of an individual decision maker.
Question:
Which financial statement is primarily concerned with reporting the financial position of a business at
a particular time?
A) The income statement.
B) The balance sheet.
C) The statement of cash flows.
D) Consolidated statement of stockholders' equity.
Answer:
The balance sheet.
Question:
11) Financial statements are prepared:
A) For corporations, but not for sole proprietorships or partnerships.
B) Only for publicly owned business organizations.
C) Primarily for the benefit of persons outside of the business organization.
D) In either monetary or nonmonetary terms, depending upon the need of the
decision maker.
Answer:
Primarily for the benefit of persons outside of the business organization.
Question:
12) Financial statements may be prepared for which time period?
A) Any time period.
B) One year.
C) Less than one year.
D) More than one year.
Answer:
Any time period.
Question:
13) Investors may be described as:
A) Those whose primary economic activity consists of buying and selling stocks and bonds.
B) Individuals and enterprises that have ownership interest in a reporting entity.
C) Individuals and enterprises that have provided credit to a reporting entity.
D) Anyone with an interest in the results of the operations of the reporting entity.
, Answer:
Individuals and enterprises that have ownership interest in a reporting entity.
14)Investors and creditors are interested in the probability that their original investment or loan
will eventually be returned, and that they will receive a reasonable return while their funds are
invested or borrowed. These expectations are collectively referred to as:
A) The objectives of financial reporting.
B) Cash flow prospects.
C) Expected profitability.
Question:
D) Financial position.
Answer:
Cash flow prospects.
15)Objectives of financial reporting to external investors and creditors include preparing
information about all of the following except:
A) Information that is useful in making investment and credit decisions.
B)Information about economic resources, claims to those resources, and changes in both
resources and claims.
C) Information that is useful in assessing the amount, timing, and uncertainty of future cash
flows.
Question:
D) Information used to determine which products to produce.
Answer:
Information used to determine which products to produce.
Question:
16) All of the following are characteristics of management accounting, except:
A) Its purpose is to assist managers in planning and controlling business operations.
B)Information must be developed in conformity with generally accepted accounting principles or
with income tax regulations.
C) Information may be tailored to assist in specific managerial decisions.
D) Reports are used primarily by insiders rather than by persons outside of the business entity.
Answer:
Information must be developed in conformity with generally accepted accounting principles or with
income tax regulations.
update 2026/2027
Question:
1) Financial accounting information is:
A) Designed to assist investors and creditors.
B) Not applicable to individuals.
C) Called "special-purpose" accounting information.
D) Submitted to the IRS in lieu of a tax form.
Answer:
Designed to assist investors and creditors.
Question:
2) Which of the following does not describe accounting?
A) It is used by businesses, governments, non-profit organizations, and individuals.
B) It is useful for decision-making.
C) It is an end rather than a means to an end.
D) It is commonly referred to as the language of business.
Answer:
It is an end rather than a means to an end.
Question:
3) The field of accounting may best be described as:
A) Developing information in conformity with generally accepted accounting principles.
B) Developing the information required for the preparation of income tax returns.
C) Recording the financial transactions of an economic entity.
D) The art of interpreting, measuring, and describing economic activity.
Answer:
The art of interpreting, measuring, and describing economic activity.
Question:
4) Information is cost effective when:
A) The information is generated by a computer based accounting system.
B) The value of the information exceeds the cost of producing it.
C) The information aids management in controlling costs.
D) The information is based upon historical costs, rather than upon estimated
market values.
Answer:
The value of the information exceeds the cost of producing it.
,Question:
5) Which of the following events is not a transaction that would be recorded in a company's
accounting records?
A) The purchase of equipment on account.
B) The purchase of equipment for cash.
C) The investment of additional cash in the business by the owner.
D) The death of a key executive.
Answer:
The death of a key executive.
Question:
6) A strong internal control structure:
A) Ensures a business will remain solvent.
B) Contributes to the accuracy and verifiability of the accounting records.
C) Will prevent a business from operating at a loss.
D) Will prevent fraud, theft, and embezzlement.
Answer:
Contributes to the accuracy and verifiability of the accounting records.
Question:
7) The financial statements of a business entity:
A) Are the first step in the accounting process.
B) Are prepared for a fee by the Financial Accounting Standards Board.
C) Provide information about the cash flow prospects of the company.
D) Include the balance sheet, income statement, and income tax return.
Answer:
Provide information about the cash flow prospects of the company.
Question:
8) Financial statements are designed primarily to:
A)Provide people outside the business organization with information about the company's
financial position and operating results.
B) Provide managers with detailed information tailored to the managers' specific information
needs.
C) Indicate to investors in a particular company the current market values of their investments.
D) Report to the Internal Revenue Service the company's taxable income.
Answer:
Provide people outside the business organization with information about the company's financial
position and operating results. In comparison with a financial statement prepared in conformity with
generally accepted accounting principles, a management accounting report is more likely to:
A) Focus upon the operation results of the most recently completed accounting period.
B) Be tailored to the specific needs of an individual decision maker.
,Question:
C) View the entire organization as the reporting entity. D) Be used by decision makers outside of
the business organization.
Answer:
Be tailored to the specific needs of an individual decision maker.
Question:
Which financial statement is primarily concerned with reporting the financial position of a business at
a particular time?
A) The income statement.
B) The balance sheet.
C) The statement of cash flows.
D) Consolidated statement of stockholders' equity.
Answer:
The balance sheet.
Question:
11) Financial statements are prepared:
A) For corporations, but not for sole proprietorships or partnerships.
B) Only for publicly owned business organizations.
C) Primarily for the benefit of persons outside of the business organization.
D) In either monetary or nonmonetary terms, depending upon the need of the
decision maker.
Answer:
Primarily for the benefit of persons outside of the business organization.
Question:
12) Financial statements may be prepared for which time period?
A) Any time period.
B) One year.
C) Less than one year.
D) More than one year.
Answer:
Any time period.
Question:
13) Investors may be described as:
A) Those whose primary economic activity consists of buying and selling stocks and bonds.
B) Individuals and enterprises that have ownership interest in a reporting entity.
C) Individuals and enterprises that have provided credit to a reporting entity.
D) Anyone with an interest in the results of the operations of the reporting entity.
, Answer:
Individuals and enterprises that have ownership interest in a reporting entity.
14)Investors and creditors are interested in the probability that their original investment or loan
will eventually be returned, and that they will receive a reasonable return while their funds are
invested or borrowed. These expectations are collectively referred to as:
A) The objectives of financial reporting.
B) Cash flow prospects.
C) Expected profitability.
Question:
D) Financial position.
Answer:
Cash flow prospects.
15)Objectives of financial reporting to external investors and creditors include preparing
information about all of the following except:
A) Information that is useful in making investment and credit decisions.
B)Information about economic resources, claims to those resources, and changes in both
resources and claims.
C) Information that is useful in assessing the amount, timing, and uncertainty of future cash
flows.
Question:
D) Information used to determine which products to produce.
Answer:
Information used to determine which products to produce.
Question:
16) All of the following are characteristics of management accounting, except:
A) Its purpose is to assist managers in planning and controlling business operations.
B)Information must be developed in conformity with generally accepted accounting principles or
with income tax regulations.
C) Information may be tailored to assist in specific managerial decisions.
D) Reports are used primarily by insiders rather than by persons outside of the business entity.
Answer:
Information must be developed in conformity with generally accepted accounting principles or with
income tax regulations.
