2026/2027
ACG 2021 Financial Accounting Exam
Prep and Comprehensive Study Guide
2026/2027 – Florida International
University (FIU) Test Bank Review,
Practice Questions, and Quiz Companion
Question 1:
Which form of business organization allows the easiest transfer of ownership?
A. Partnership
B. Sole proprietorship
C. Corporation
D. Cooperative
Correct Answer: C. Corporation
Rationale: Corporations allow ownership transfer through the buying and selling of
shares, making them highly liquid compared to partnerships or sole proprietorships
where ownership transfer is more restricted and often requires approval or
restructuring.
Question 2:
Which of the following is considered an external user of accounting information?
A. Company manager
B. Finance director
C. Creditors
D. Internal auditor
Correct Answer: C. Creditors
Rationale: External users include individuals and organizations outside the company
such as creditors, tax authorities, and investors. Internal users like managers and
auditors operate within the organization and use accounting data for internal decision-
making.
Question 3:
Which statement best defines accounting?
,2026/2027
A. Recording only cash transactions
B. Preparing tax reports only
C. System that identifies, measures, and communicates financial information
D. Managing company payroll
Correct Answer: C. System that identifies, measures, and communicates
financial information
Rationale: Accounting is a structured information system that collects, records,
measures, and communicates economic events to stakeholders for decision-making
purposes.
Question 4:
The Sarbanes-Oxley Act (2002) primarily aims to:
A. Reduce tax rates
B. Increase company profits
C. Improve financial reporting accuracy and accountability
D. Eliminate auditing
Correct Answer: C. Improve financial reporting accuracy and accountability
Rationale: SOX was enacted to enhance corporate governance, require management
certification of financial statements, increase auditor independence, and strengthen
penalties for fraud.
Question 5:
An obligation to pay suppliers for goods purchased is called:
A. Account receivable
B. Account payable
C. Revenue
D. Expense
Correct Answer: B. Account payable
Rationale: Accounts payable represent liabilities owed to suppliers for goods or
services received on credit.
Question 6:
Which of the following are classified as liabilities?
A. Accounts receivable
B. Interest payable
, 2026/2027
C. Equipment
D. Cash
Correct Answer: B. Interest payable
Rationale: Liabilities are obligations owed by a business. Interest payable and
accounts payable represent debts, while assets like cash and equipment are resources
owned.
Question 7:
Paying for goods and services is classified as:
A. Investing activity
B. Financing activity
C. Operating activity
D. Non-cash activity
Correct Answer: C. Operating activity
Rationale: Operating activities include daily business transactions such as purchasing
inventory, paying salaries, and receiving customer payments.
Question 8:
The cost of assets or services consumed is known as:
A. Revenue
B. Liability
C. Expense
D. Equity
Correct Answer: C. Expense
Rationale: Expenses represent costs incurred in generating revenue, such as utilities,
salaries, and depreciation.
Question 9:
Net income occurs when:
A. Expenses exceed revenues
B. Revenues equal expenses
C. Revenues exceed expenses
D. Liabilities exceed assets
Correct Answer: C. Revenues exceed expenses
ACG 2021 Financial Accounting Exam
Prep and Comprehensive Study Guide
2026/2027 – Florida International
University (FIU) Test Bank Review,
Practice Questions, and Quiz Companion
Question 1:
Which form of business organization allows the easiest transfer of ownership?
A. Partnership
B. Sole proprietorship
C. Corporation
D. Cooperative
Correct Answer: C. Corporation
Rationale: Corporations allow ownership transfer through the buying and selling of
shares, making them highly liquid compared to partnerships or sole proprietorships
where ownership transfer is more restricted and often requires approval or
restructuring.
Question 2:
Which of the following is considered an external user of accounting information?
A. Company manager
B. Finance director
C. Creditors
D. Internal auditor
Correct Answer: C. Creditors
Rationale: External users include individuals and organizations outside the company
such as creditors, tax authorities, and investors. Internal users like managers and
auditors operate within the organization and use accounting data for internal decision-
making.
Question 3:
Which statement best defines accounting?
,2026/2027
A. Recording only cash transactions
B. Preparing tax reports only
C. System that identifies, measures, and communicates financial information
D. Managing company payroll
Correct Answer: C. System that identifies, measures, and communicates
financial information
Rationale: Accounting is a structured information system that collects, records,
measures, and communicates economic events to stakeholders for decision-making
purposes.
Question 4:
The Sarbanes-Oxley Act (2002) primarily aims to:
A. Reduce tax rates
B. Increase company profits
C. Improve financial reporting accuracy and accountability
D. Eliminate auditing
Correct Answer: C. Improve financial reporting accuracy and accountability
Rationale: SOX was enacted to enhance corporate governance, require management
certification of financial statements, increase auditor independence, and strengthen
penalties for fraud.
Question 5:
An obligation to pay suppliers for goods purchased is called:
A. Account receivable
B. Account payable
C. Revenue
D. Expense
Correct Answer: B. Account payable
Rationale: Accounts payable represent liabilities owed to suppliers for goods or
services received on credit.
Question 6:
Which of the following are classified as liabilities?
A. Accounts receivable
B. Interest payable
, 2026/2027
C. Equipment
D. Cash
Correct Answer: B. Interest payable
Rationale: Liabilities are obligations owed by a business. Interest payable and
accounts payable represent debts, while assets like cash and equipment are resources
owned.
Question 7:
Paying for goods and services is classified as:
A. Investing activity
B. Financing activity
C. Operating activity
D. Non-cash activity
Correct Answer: C. Operating activity
Rationale: Operating activities include daily business transactions such as purchasing
inventory, paying salaries, and receiving customer payments.
Question 8:
The cost of assets or services consumed is known as:
A. Revenue
B. Liability
C. Expense
D. Equity
Correct Answer: C. Expense
Rationale: Expenses represent costs incurred in generating revenue, such as utilities,
salaries, and depreciation.
Question 9:
Net income occurs when:
A. Expenses exceed revenues
B. Revenues equal expenses
C. Revenues exceed expenses
D. Liabilities exceed assets
Correct Answer: C. Revenues exceed expenses
