MULTIPLE CHOICE

1. Profit is the difference between

a assets and liabilities
.
b the incoming cash and outgoing cash
.
c the assets purchased with cash contributed by the owner and the cash spent to operate the
. business
d the amounts received from customers for goods or services and the amounts paid for
. the inputs used to provide the goods or services.
ANS: D PTS: 1 DIF: Easy OBJ: 01-01
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-09-Financial Statements

2. Most businesses in the United States are

a proprietorships
.
b partnerships
.
c corporations
.
d separate entities
.
ANS: A PTS: 1 DIF: Easy OBJ: 01-02
NAT: AACSB Analytic | AICPA BB-Industry | ACBSP-APC-03-Business Forms

3. Which of the items below is not a business entity?

a entrepreneurship
.
b proprietorship
.
c partnership
.
d corporation
.
ANS: A PTS: 1 DIF: Easy OBJ: 01-02
NAT: AACSB Analytic | AICPA BB-Industry | ACBSP-APC-03-Business Forms

4. An entity that is organized according to state or federal statutes and in which ownership is divided into
shares of stock is a
a proprietorship
.
b corporation
.
c partnership
.
d governmental unit
 .
ANS: B PTS: 1 DIF: Easy OBJ: 01-02
NAT: AACSB Analytic | AICPA BB-Industry | ACBSP-APC-03-Business Forms

5. Financial reports are used by

a management
.
b creditors
.
c investors
.
d all are correct
.
ANS: D PTS: 1 DIF: Easy OBJ: 01-01
NAT: AACSB Analytic | AICPA BB-Industry | ACBSP-APC-01-Purpose

6. Which of the following best describes accounting?

a records economic data but does not communicate the data to users according to any
. specific rules.
b is an information system that provides reports to users regarding economic activities and
. condition of a business.
c is of no use by individuals outside of the business.
.
d is used only for filling out tax returns and for financial statements for various type of
. governmental reporting requirements.
ANS: B PTS: 1 DIF: Moderate OBJ: 01-01
NAT: AACSB Analytic | AICPA BB-Industry | ACBSP-APC-01-Purpose

7. Two common areas of accounting that respectively provide information to internal and external users are:
a forensic accounting and financial accounting
.
b managerial accounting and financial accounting
.
c managerial accounting and environmental accounting
.
d financial accounting and tax accounting systems
.
ANS: B PTS: 1 DIF: Easy OBJ: 01-01
NAT: AACSB Analytic | AICPA BB-Industry | ACBSP-APC-01-Purpose