ACCT 2000 LOWE-ARDOIN EXAM 1 ACTUAL
/UPDATED 2026 SORTED QUESTIONS AND ANSWERS
/TOP RATED A+ | Practice Questions | A+ Verified
• Which type of business is super easy to establish, only gets taxed once but the owner
is personally liable for everything? -✓✓Sole Proprietorship
• Which type of business is formed between two or more people giving them broader
skills and resources, super easy to establish, only gets taxed once, but the owners are
personal liable for everything? -✓✓Partnership
• Which type of business sells stock? -✓✓Corporation
• Which type of business can easily share its ownership and raise capital with no
personal liability but gets taxed twice? -✓✓Corporation
• Accounting is the information system that ___________, ___________, and
____________ the economic events of an organization to interested users. -
✓✓identifies; records; communicates
• A corporation is a ___________ __________ __________ from its investors. -
✓✓separate legal entity
• Which is an advantage of corporations relative to partnerships and sole
proprietorships? -✓✓reduced legal liability for investors
• Which forms of business organizations are considered to be separate accounting
entities? -✓✓Sole Proprietorship, Partnership, and Corporation
• Every business, regardless of the form, needs separate _______________ entities. -
✓✓accounting
• What are the types of users of accounting information? -✓✓internal and external
• What are some examples of internal accounting information users? -✓✓managers,
supervisors, and company officials
• What are some examples of external accounting information users? -✓✓investors,
creditors, and regulators
• How do internal accounting information users use financial information? -✓✓to plan,
organize, and run a business
, • How do external accounting information users use financial information? -✓✓to make
decisions about buying or selling stock or loaning company money
• Effective financial reporting depends on sound __________ ______________. -
✓✓ethic behavior
• What are the three types of business activities? -✓✓financing, investing, and
operating
• What is financing? -✓✓raising money or capitals
• What is investing? -✓✓purchasing resources needed to operate
• What is operating? -✓✓daily activities of business
• Borrowing money from creditors and issuing (selling) shares of stock to investors are
examples of ___________. -✓✓financing
• Resources that are owned and used by a business daily (computers, equipment,
delivery trucks) are considered ______________. -✓✓investments
• A shoe store selling shoes, a dentist cleaning teeth, and a lawn care company mowing
lawns would be examples of ________________ activities. -✓✓operating
• What are the four types of financial statements? -✓✓income statement, retained
earnings statement, and balance sheet
• What is the purpose of an income statement? -✓✓to report revenue and expenses
over a period of time
• What are the components of an income statement? -✓✓revenues - expenses = net
income
• What is the retained earnings statement? -✓✓reports the net income retained in the
business and any changes in the net income
• What is the purpose of a balance sheet? -✓✓reports assets and claims to assets at a
specific point in time
• What is the equation used for the balance sheet? (accounting equation) -✓✓Asset =
Liabilities + Stockholder's Equity
• What are assets? -✓✓resources owned by a business
/UPDATED 2026 SORTED QUESTIONS AND ANSWERS
/TOP RATED A+ | Practice Questions | A+ Verified
• Which type of business is super easy to establish, only gets taxed once but the owner
is personally liable for everything? -✓✓Sole Proprietorship
• Which type of business is formed between two or more people giving them broader
skills and resources, super easy to establish, only gets taxed once, but the owners are
personal liable for everything? -✓✓Partnership
• Which type of business sells stock? -✓✓Corporation
• Which type of business can easily share its ownership and raise capital with no
personal liability but gets taxed twice? -✓✓Corporation
• Accounting is the information system that ___________, ___________, and
____________ the economic events of an organization to interested users. -
✓✓identifies; records; communicates
• A corporation is a ___________ __________ __________ from its investors. -
✓✓separate legal entity
• Which is an advantage of corporations relative to partnerships and sole
proprietorships? -✓✓reduced legal liability for investors
• Which forms of business organizations are considered to be separate accounting
entities? -✓✓Sole Proprietorship, Partnership, and Corporation
• Every business, regardless of the form, needs separate _______________ entities. -
✓✓accounting
• What are the types of users of accounting information? -✓✓internal and external
• What are some examples of internal accounting information users? -✓✓managers,
supervisors, and company officials
• What are some examples of external accounting information users? -✓✓investors,
creditors, and regulators
• How do internal accounting information users use financial information? -✓✓to plan,
organize, and run a business
, • How do external accounting information users use financial information? -✓✓to make
decisions about buying or selling stock or loaning company money
• Effective financial reporting depends on sound __________ ______________. -
✓✓ethic behavior
• What are the three types of business activities? -✓✓financing, investing, and
operating
• What is financing? -✓✓raising money or capitals
• What is investing? -✓✓purchasing resources needed to operate
• What is operating? -✓✓daily activities of business
• Borrowing money from creditors and issuing (selling) shares of stock to investors are
examples of ___________. -✓✓financing
• Resources that are owned and used by a business daily (computers, equipment,
delivery trucks) are considered ______________. -✓✓investments
• A shoe store selling shoes, a dentist cleaning teeth, and a lawn care company mowing
lawns would be examples of ________________ activities. -✓✓operating
• What are the four types of financial statements? -✓✓income statement, retained
earnings statement, and balance sheet
• What is the purpose of an income statement? -✓✓to report revenue and expenses
over a period of time
• What are the components of an income statement? -✓✓revenues - expenses = net
income
• What is the retained earnings statement? -✓✓reports the net income retained in the
business and any changes in the net income
• What is the purpose of a balance sheet? -✓✓reports assets and claims to assets at a
specific point in time
• What is the equation used for the balance sheet? (accounting equation) -✓✓Asset =
Liabilities + Stockholder's Equity
• What are assets? -✓✓resources owned by a business
