Financial Accounting Test #1, Chapters 1-3
Exam Questions and Answers | Verified Study
Guide | 2026/2027
Accounting - correct answer-an information system that measures business
activities, processes that information into reports for decision makers.
What do we call the branch of accounting that provides information to external
users ? - correct answer-Financial Accounting.
What do we call the branch of accounting that provides information to internal
users ? - correct answer-Managerial Accounting
List the four common types of business organizations and indicate which of these
types are required to pay tax on their income. - correct answer-1. Sole
Proprietorship = no income tax
2. Partnership = no income tax
3. Limited Liability Company = no income tax
4. Corporation = pays tax on its income
List the four common types of business organizations and indicate which of these
types of businesses the owners of the business are personally liable for the
liabilities of the business entity. - correct answer-1. Sole Proprietorship =
personally liable
2. Partnership = personally liable
, 3. Limited Liability Company = not liable
4. Corporation = not liable
What types of accounts compromise and make up Net Income ? - correct answer-
Revenues and Expenses
What types of accounts appear on the balance sheet ? - correct answer-Assets,
liabilities, and stockholder's equity
Revenue - correct answer-inflows of resources that increase retained earnings
Expenses - correct answer-outflows of resources that decrease retained earnings.
Financial statements - correct answer-the business documents that companies
use to report the results of their activities.
Assets - correct answer-economic resources expected to produce a benefit in the
future. ex. Corporation's cash, merchandise inventory, equipment, buildings
Liabilities - correct answer-Debts you must pay to outsiders or creditors. ex.
account payables, note payables.
Owner's Equity - correct answer-Equity means ownership. A companie's
stockholder's equity is the stockholder's interest in the assets of the company.
Assets = ??? - correct answer-= Liabitlies + Owner's Equity
Exam Questions and Answers | Verified Study
Guide | 2026/2027
Accounting - correct answer-an information system that measures business
activities, processes that information into reports for decision makers.
What do we call the branch of accounting that provides information to external
users ? - correct answer-Financial Accounting.
What do we call the branch of accounting that provides information to internal
users ? - correct answer-Managerial Accounting
List the four common types of business organizations and indicate which of these
types are required to pay tax on their income. - correct answer-1. Sole
Proprietorship = no income tax
2. Partnership = no income tax
3. Limited Liability Company = no income tax
4. Corporation = pays tax on its income
List the four common types of business organizations and indicate which of these
types of businesses the owners of the business are personally liable for the
liabilities of the business entity. - correct answer-1. Sole Proprietorship =
personally liable
2. Partnership = personally liable
, 3. Limited Liability Company = not liable
4. Corporation = not liable
What types of accounts compromise and make up Net Income ? - correct answer-
Revenues and Expenses
What types of accounts appear on the balance sheet ? - correct answer-Assets,
liabilities, and stockholder's equity
Revenue - correct answer-inflows of resources that increase retained earnings
Expenses - correct answer-outflows of resources that decrease retained earnings.
Financial statements - correct answer-the business documents that companies
use to report the results of their activities.
Assets - correct answer-economic resources expected to produce a benefit in the
future. ex. Corporation's cash, merchandise inventory, equipment, buildings
Liabilities - correct answer-Debts you must pay to outsiders or creditors. ex.
account payables, note payables.
Owner's Equity - correct answer-Equity means ownership. A companie's
stockholder's equity is the stockholder's interest in the assets of the company.
Assets = ??? - correct answer-= Liabitlies + Owner's Equity
