Strayer University ACC 100 Exam 1 (pdf) | 2026/2027 | Accounting I
Q&A | Accounting
1. Which of the following best describes the primary purpose of financial
accounting?
A) To provide information for internal decision-making by managers
B) To prepare reports for external users such as investors and creditors
C) To analyze the company's production efficiency
D) To determine the company's tax liability
Correct Answer: To prepare reports for external users such as investors and
creditors
Rationale: Financial accounting is primarily concerned with preparing
financial reports for external users, including investors, creditors, and
regulatory agencies . Management accounting serves internal users for
decision-making . Financial accounting focuses on summarizing and reporting
the financial position and performance of a business to outside parties.
2. Accounting is defined as a system of:
A) Gathering financial information about a business and reporting it to users
B) Recording all business transactions in a journal
C) Preparing tax returns for businesses
D) Auditing financial statements
Correct Answer: Gathering financial information about a business and
reporting it to users
Rationale: Accounting is a system of gathering financial information about a
business and reporting this information to users . This encompasses the
,entire process from identifying economic events to communicating financial
information to stakeholders.
3. The correct order of steps in the accounting process is:
A) Recording, Analyzing, Summarizing, Reporting, Classifying, Interpreting
B) Analyzing, Recording, Classifying, Summarizing, Reporting, Interpreting
C) Classifying, Recording, Analyzing, Summarizing, Reporting, Interpreting
D) Reporting, Analyzing, Recording, Classifying, Summarizing, Interpreting
Correct Answer: Analyzing, Recording, Classifying, Summarizing, Reporting,
Interpreting
Rationale: The accounting process follows a specific sequence: analyzing
(looking at events and their effects), recording (entering financial
information), classifying (sorting and grouping similar items), summarizing
(bringing pieces together), reporting (telling the results), and interpreting
(deciding the meaning and importance) .
4. The rules of accounting are referred to as:
A) Financial Accounting Standards (FAS)
B) Generally Accepted Accounting Principles (GAAP)
C) International Accounting Rules (IAR)
D) Accounting Standards Codification (ASC)
Correct Answer: Generally Accepted Accounting Principles (GAAP)
Rationale: The rules of accounting are referred to as Generally Accepted
Accounting Principles (GAAP) . GAAP provides the standard framework of
guidelines for financial accounting and is used in the United States.
,5. Internal users of accounting information include:
A) Investors and creditors
B) Management, owners, and employees
C) Taxing authorities and regulatory agencies
D) Customers and labor unions
Correct Answer: Management, owners, and employees
Rationale: Internal users of accounting information include management,
owners, and employees who use the information to plan, organize, and run
operations . External users include investors, creditors, customers, taxing
authorities, regulatory agencies, and labor unions .
6. External users of accounting information include:
A) Managers and employees
B) Investors, creditors, and regulatory agencies
C) Production managers and human resource managers
D) Company owners
Correct Answer: Investors, creditors, and regulatory agencies
Rationale: External users include investors (who evaluate worthiness of
investment), creditors (who evaluate probability of repayment), customers,
taxing authorities, regulatory agencies, and labor unions . Internal users are
those within the organization making operational decisions.
7. The Sarbanes-Oxley Act (SOX) of 2002 was enacted to:
A) Increase corporate profits
, B) Reduce unethical behavior in corporate financial reporting
C) Eliminate the need for external auditors
D) Decrease the severity of punishment for corporate executives
Correct Answer: Reduce unethical behavior in corporate financial reporting
Rationale: The Sarbanes-Oxley Act (SOX) of 2002 was legislation aimed at
reducing unethical behavior in corporate financial reporting . It requires top
management to certify the accuracy of reports, increases the severity of
punishment for executives, and increases the independence of external
auditors.
8. Which of the following is NOT a type of business ownership structure?
A) Sole proprietorship
B) Partnership
C) Corporation
D) Non-profit organization
Correct Answer: Non-profit organization
Rationale: The three main types of business ownership structures are sole
proprietorship, partnership, and corporation . A non-profit organization is a
different type of entity that does not operate for profit and is not considered
a primary ownership structure in introductory accounting.
9. A business owned by one person is called a:
A) Partnership
B) Corporation
C) Sole proprietorship
Q&A | Accounting
1. Which of the following best describes the primary purpose of financial
accounting?
A) To provide information for internal decision-making by managers
B) To prepare reports for external users such as investors and creditors
C) To analyze the company's production efficiency
D) To determine the company's tax liability
Correct Answer: To prepare reports for external users such as investors and
creditors
Rationale: Financial accounting is primarily concerned with preparing
financial reports for external users, including investors, creditors, and
regulatory agencies . Management accounting serves internal users for
decision-making . Financial accounting focuses on summarizing and reporting
the financial position and performance of a business to outside parties.
2. Accounting is defined as a system of:
A) Gathering financial information about a business and reporting it to users
B) Recording all business transactions in a journal
C) Preparing tax returns for businesses
D) Auditing financial statements
Correct Answer: Gathering financial information about a business and
reporting it to users
Rationale: Accounting is a system of gathering financial information about a
business and reporting this information to users . This encompasses the
,entire process from identifying economic events to communicating financial
information to stakeholders.
3. The correct order of steps in the accounting process is:
A) Recording, Analyzing, Summarizing, Reporting, Classifying, Interpreting
B) Analyzing, Recording, Classifying, Summarizing, Reporting, Interpreting
C) Classifying, Recording, Analyzing, Summarizing, Reporting, Interpreting
D) Reporting, Analyzing, Recording, Classifying, Summarizing, Interpreting
Correct Answer: Analyzing, Recording, Classifying, Summarizing, Reporting,
Interpreting
Rationale: The accounting process follows a specific sequence: analyzing
(looking at events and their effects), recording (entering financial
information), classifying (sorting and grouping similar items), summarizing
(bringing pieces together), reporting (telling the results), and interpreting
(deciding the meaning and importance) .
4. The rules of accounting are referred to as:
A) Financial Accounting Standards (FAS)
B) Generally Accepted Accounting Principles (GAAP)
C) International Accounting Rules (IAR)
D) Accounting Standards Codification (ASC)
Correct Answer: Generally Accepted Accounting Principles (GAAP)
Rationale: The rules of accounting are referred to as Generally Accepted
Accounting Principles (GAAP) . GAAP provides the standard framework of
guidelines for financial accounting and is used in the United States.
,5. Internal users of accounting information include:
A) Investors and creditors
B) Management, owners, and employees
C) Taxing authorities and regulatory agencies
D) Customers and labor unions
Correct Answer: Management, owners, and employees
Rationale: Internal users of accounting information include management,
owners, and employees who use the information to plan, organize, and run
operations . External users include investors, creditors, customers, taxing
authorities, regulatory agencies, and labor unions .
6. External users of accounting information include:
A) Managers and employees
B) Investors, creditors, and regulatory agencies
C) Production managers and human resource managers
D) Company owners
Correct Answer: Investors, creditors, and regulatory agencies
Rationale: External users include investors (who evaluate worthiness of
investment), creditors (who evaluate probability of repayment), customers,
taxing authorities, regulatory agencies, and labor unions . Internal users are
those within the organization making operational decisions.
7. The Sarbanes-Oxley Act (SOX) of 2002 was enacted to:
A) Increase corporate profits
, B) Reduce unethical behavior in corporate financial reporting
C) Eliminate the need for external auditors
D) Decrease the severity of punishment for corporate executives
Correct Answer: Reduce unethical behavior in corporate financial reporting
Rationale: The Sarbanes-Oxley Act (SOX) of 2002 was legislation aimed at
reducing unethical behavior in corporate financial reporting . It requires top
management to certify the accuracy of reports, increases the severity of
punishment for executives, and increases the independence of external
auditors.
8. Which of the following is NOT a type of business ownership structure?
A) Sole proprietorship
B) Partnership
C) Corporation
D) Non-profit organization
Correct Answer: Non-profit organization
Rationale: The three main types of business ownership structures are sole
proprietorship, partnership, and corporation . A non-profit organization is a
different type of entity that does not operate for profit and is not considered
a primary ownership structure in introductory accounting.
9. A business owned by one person is called a:
A) Partnership
B) Corporation
C) Sole proprietorship
