MGMT 200 (Purdue) Exam 1| 150 QUESTIONS|
WITH COMPLETE SOLUTION
Preparing a budget for a business is considered
A. financial accounting.
B. managerial accounting Correct Answer: B
Accounting is the information system that
A. measures business activities
B. communicates the results to decision makers
C. processes information into reports
D. all of the above. Correct Answer: D
Which of the following is not an external user of a business's financial information?
A. Taxing authorities B. Customers
C. Employees
D. Investors Correct Answer: C
Which statement below best describes the accounting equation?
A. The change in retained earnings equals net income less dividends.
B. Equality of revenue and expense transactions over time.
C. Financing activities equal investing and operating activities.
D. Resources of the company equal creditors' and owners' claims to those resources. Correct
Answer: D
Owners' claims to the company's resources are referred to as:
A. Liabilities.
B. Assets.
C. Stockholders' equity.
D. Net liabilities. Correct Answer: C
If total assets of a company equal $25,000 and total stockholders' equity equals $10,000, then
total liabilities equal $15,000.
A. True
B. False Correct Answer: A
Amounts owed to suppliers for supplies purchased on account are defined as a(n):
A. Revenue.
B. Asset.
C. Liability.
D. Expense Correct Answer: C
If total liabilities of a company equal $29,000 and total stockholders' equity equals $15,000, then
total assets equal $14,000.
,A. True
B. False Correct Answer: B
Financial accounting does not deal with which of the following?
A. Measuring a company's economic activity.
B. Providing information to internal users.
C. Preparing financial reports.
D. Communicating financial results to investors. Correct Answer: B
The accounting equation shows that a company's resources equal creditors' and owners' claims to
those resources.
A. True
B. False Correct Answer: A
An alternative form of the accounting equation is:
A. Assets ‐ Liabilities = Stockholders' Equity.
B. Net Income = Revenues ‐ Expenses.
C. Stockholders' Equity = Assets + Liabilities.
D. Assets = Liabilities ‐ Stockholders' Equity. Correct Answer: A
Which of the following does not represent an asset of a company?
A. Supplies held by the company.
B. Amounts owed to suppliers.
C. Equipment owned and used for
operations.
D. Amounts receivable from customers. Correct Answer: B
The amounts recorded when the company sells products or provides services to customers are
referred to as:
A. Liabilities
B. Revenues
C. Assets
D. Expenses Correct Answer: B
If a company has stockholders' equity of $25,000 at the end of the year, which of the following
statements must be true?
A. The company has issued $25,000 of common stock.
B. Net income for the year equals $25,000.
C. The company's assets exceed liabilities by $25,000.
D. Total revenues during the year equal $25,000. Correct Answer: C
The costs of providing goods and services to customers are referred to as:
A. Assets
B. Expenses
C. Liabilities
D. Revenues Correct Answer: B
, Which of the following best describes revenue?
A. Resources of a company.
B. Sales of goods and services to a customer.
C. Cash received from a customer.
D. Dividends paid to stockholders. Correct Answer: B
The difference between revenues and expenses is referred to as net income or net loss.
A. True
B. False Correct Answer: A
Use the following amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000;
Expenses, $4,000; Assets, $19,000; Dividends, $4,000
A. $6,000.
B. $8,000.
C. $4,000
D. $14,000. Correct Answer: B
Dividends represent a return of the company's profits to its owners, the stockholders.
A. True
B. False Correct Answer: A
The resources of a company are referred to as:
A. Liabilities
B. Revenues
C. Assets
D. Expenses Correct Answer: C
Liabilities can be best described as:
A. The amount of expenses over the past year.
B. The amount expected to be distributed to stockholders.
C. The amount owed to creditors
D. The amount of services provided to customers during the year. Correct Answer: C
Most business enterprises in the United States are
A. government units.
B. partnerships
C. sole proprietorships.
D. corporations. Correct Answer: C
Transfer of ownership will not affect the continuity of a
A. corporation or partnership
B. corporation
C. partnership
D. sole proprietorship Correct Answer: B
WITH COMPLETE SOLUTION
Preparing a budget for a business is considered
A. financial accounting.
B. managerial accounting Correct Answer: B
Accounting is the information system that
A. measures business activities
B. communicates the results to decision makers
C. processes information into reports
D. all of the above. Correct Answer: D
Which of the following is not an external user of a business's financial information?
A. Taxing authorities B. Customers
C. Employees
D. Investors Correct Answer: C
Which statement below best describes the accounting equation?
A. The change in retained earnings equals net income less dividends.
B. Equality of revenue and expense transactions over time.
C. Financing activities equal investing and operating activities.
D. Resources of the company equal creditors' and owners' claims to those resources. Correct
Answer: D
Owners' claims to the company's resources are referred to as:
A. Liabilities.
B. Assets.
C. Stockholders' equity.
D. Net liabilities. Correct Answer: C
If total assets of a company equal $25,000 and total stockholders' equity equals $10,000, then
total liabilities equal $15,000.
A. True
B. False Correct Answer: A
Amounts owed to suppliers for supplies purchased on account are defined as a(n):
A. Revenue.
B. Asset.
C. Liability.
D. Expense Correct Answer: C
If total liabilities of a company equal $29,000 and total stockholders' equity equals $15,000, then
total assets equal $14,000.
,A. True
B. False Correct Answer: B
Financial accounting does not deal with which of the following?
A. Measuring a company's economic activity.
B. Providing information to internal users.
C. Preparing financial reports.
D. Communicating financial results to investors. Correct Answer: B
The accounting equation shows that a company's resources equal creditors' and owners' claims to
those resources.
A. True
B. False Correct Answer: A
An alternative form of the accounting equation is:
A. Assets ‐ Liabilities = Stockholders' Equity.
B. Net Income = Revenues ‐ Expenses.
C. Stockholders' Equity = Assets + Liabilities.
D. Assets = Liabilities ‐ Stockholders' Equity. Correct Answer: A
Which of the following does not represent an asset of a company?
A. Supplies held by the company.
B. Amounts owed to suppliers.
C. Equipment owned and used for
operations.
D. Amounts receivable from customers. Correct Answer: B
The amounts recorded when the company sells products or provides services to customers are
referred to as:
A. Liabilities
B. Revenues
C. Assets
D. Expenses Correct Answer: B
If a company has stockholders' equity of $25,000 at the end of the year, which of the following
statements must be true?
A. The company has issued $25,000 of common stock.
B. Net income for the year equals $25,000.
C. The company's assets exceed liabilities by $25,000.
D. Total revenues during the year equal $25,000. Correct Answer: C
The costs of providing goods and services to customers are referred to as:
A. Assets
B. Expenses
C. Liabilities
D. Revenues Correct Answer: B
, Which of the following best describes revenue?
A. Resources of a company.
B. Sales of goods and services to a customer.
C. Cash received from a customer.
D. Dividends paid to stockholders. Correct Answer: B
The difference between revenues and expenses is referred to as net income or net loss.
A. True
B. False Correct Answer: A
Use the following amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000;
Expenses, $4,000; Assets, $19,000; Dividends, $4,000
A. $6,000.
B. $8,000.
C. $4,000
D. $14,000. Correct Answer: B
Dividends represent a return of the company's profits to its owners, the stockholders.
A. True
B. False Correct Answer: A
The resources of a company are referred to as:
A. Liabilities
B. Revenues
C. Assets
D. Expenses Correct Answer: C
Liabilities can be best described as:
A. The amount of expenses over the past year.
B. The amount expected to be distributed to stockholders.
C. The amount owed to creditors
D. The amount of services provided to customers during the year. Correct Answer: C
Most business enterprises in the United States are
A. government units.
B. partnerships
C. sole proprietorships.
D. corporations. Correct Answer: C
Transfer of ownership will not affect the continuity of a
A. corporation or partnership
B. corporation
C. partnership
D. sole proprietorship Correct Answer: B
