Accounting 201 Exam 1 Questions With Accurate
Solutions
Sole Proprietorship - CORRECT ANSWER✅✅✅business owned by one person
simple to establish
owner controlled
tax advantages
owner personally liable
financially difficult
Partnership - CORRECT ANSWER✅✅✅2 or more owners
simple to establish
shared control
broader skills and resources
tax advantages
personally liable
Corporation - CORRECT ANSWER✅✅✅separate legal entity owned by stockholders
easy to transfer ownership
greater capital raising potential
unfavorable tax treatment
lower legal liabilities for owners
Internal Users of Financial Info - CORRECT ANSWER✅✅✅Managers
-Finance borrow $ or issue stock?
-Marketing advertising costs
-HR hire or lay off ppl?
-Management expand busi? sell off parts?
, External Users of Financial Info - CORRECT ANSWER✅✅✅-Investors who should I
invest in?
-Creditors should I loan them $?
-Others regulatory agencies, tax authorities, customers, labor
Types of Business Activities - Financing - CORRECT ANSWER✅✅✅get large sums of $
from 2 sources:
1. Creditors- borrowing creates liabilities(things the company owes)
2. Owners- selling/issuing stock to shareholders(shareholders equity-how much of a company a
stockholder owns)
Types of Business Activities - Investing - CORRECT ANSWER✅✅✅obtaining resources or
assets(things that have value to the company) to operate a business
e.g. buying and selling land, buildings, equipment, vehicles
Types of Business Activities - Operating - CORRECT ANSWER✅✅✅primary activities of
business - normal activities the company performs to run their business
e.g. selling goods, providing services, paying employees, advertising, paying utilities
1. Revenues - increase assets resulting from the sale of g&s
2. Expense - cost of assets consumed or services used to generate revenue
Accounting - CORRECT ANSWER✅✅✅info system that identifies, records, and
communicates the economic events of an organization to interested users.
uses 4 financial statements
Income Statement - CORRECT ANSWER✅✅✅reports operating success or failure for a
period of time
summarizes revenues and expenses
Solutions
Sole Proprietorship - CORRECT ANSWER✅✅✅business owned by one person
simple to establish
owner controlled
tax advantages
owner personally liable
financially difficult
Partnership - CORRECT ANSWER✅✅✅2 or more owners
simple to establish
shared control
broader skills and resources
tax advantages
personally liable
Corporation - CORRECT ANSWER✅✅✅separate legal entity owned by stockholders
easy to transfer ownership
greater capital raising potential
unfavorable tax treatment
lower legal liabilities for owners
Internal Users of Financial Info - CORRECT ANSWER✅✅✅Managers
-Finance borrow $ or issue stock?
-Marketing advertising costs
-HR hire or lay off ppl?
-Management expand busi? sell off parts?
, External Users of Financial Info - CORRECT ANSWER✅✅✅-Investors who should I
invest in?
-Creditors should I loan them $?
-Others regulatory agencies, tax authorities, customers, labor
Types of Business Activities - Financing - CORRECT ANSWER✅✅✅get large sums of $
from 2 sources:
1. Creditors- borrowing creates liabilities(things the company owes)
2. Owners- selling/issuing stock to shareholders(shareholders equity-how much of a company a
stockholder owns)
Types of Business Activities - Investing - CORRECT ANSWER✅✅✅obtaining resources or
assets(things that have value to the company) to operate a business
e.g. buying and selling land, buildings, equipment, vehicles
Types of Business Activities - Operating - CORRECT ANSWER✅✅✅primary activities of
business - normal activities the company performs to run their business
e.g. selling goods, providing services, paying employees, advertising, paying utilities
1. Revenues - increase assets resulting from the sale of g&s
2. Expense - cost of assets consumed or services used to generate revenue
Accounting - CORRECT ANSWER✅✅✅info system that identifies, records, and
communicates the economic events of an organization to interested users.
uses 4 financial statements
Income Statement - CORRECT ANSWER✅✅✅reports operating success or failure for a
period of time
summarizes revenues and expenses
