accounting Exam 1 (multiple choice)

Question 1

What are the three activities of accounting?

Answer 1

-Identifies
-records
-Communicates

Question 2

what is an external user

Answer 2

individuals and organizations outside a company who want financial information about the company

Question 3

what is an internal user

Answer 3

Users of accounting information are managers who plan, organize, and run the business. These include marketing managers, production supervisors, finance directors, and company officers. In running a business, internal users
must answer many important questions

Question 4

extenal vs internal

Answer 4

External Users:

Outside the organization.
Examples: Investors, creditors, customers, suppliers.
Purpose: Use financial information to make decisions about engaging with the company (e.g., investing, lending, purchasing).
Internal Users:

Inside the organization.
Examples: Managers, executives, employees.
Purpose: Use financial information for day-to-day operations, decision-making, and planning within the organization.

Question 5

What is accounting ethics; why is it important?

Answer 5

That separates the transactions carried out by the business from its owner

Question 6

What is the historical cost principle?

Answer 6

This principle dictates that companies record assets at their cost. This is true not only at the time the asset is purchased, but also over the time the asset is held

Question 7

What is the fair value principle?

Answer 7

This principle states that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability).

Question 8

What is the monetary unit assumption?

Answer 8

The company must record its business transactions in dollars or some unit of currency

Question 9

What is the economic entity assumption?

Answer 9

This principle requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities.

Question 10

What are the three forms of economic entity?

Answer 10

Households, companies, government

Question 11

What is the accounting equation?

Answer 11

Assets(Revenue)= liabilities(borrow money)+Equity

Question 12

What are assets?

Answer 12

The resources a business own

Question 13

What are liabilities?

Answer 13

things a person or company owes usually a sum of money

Question 14

What is equity?

Answer 14

The remaining value of an owner’s interest in a company after subtracting all liabilities from total assets

Question 15

What is GAAP?

Answer 15

Generally accepted accounting principles

Question 16

What services are provided by public accountants?

Question 17

What is the difference between public accounting vs. private
Accounting?

Answer 17

Public accountants work for external organizations and private accountants work internally for an organization.

Question 18

What does a debit do?

Question 19

What does a credit do?

Question 20

What is the normal balance of an account?

Question 21

What is a journal entry?

Answer 21

Using the tool of debit and credit to put the transaction into the accounting question.

Question 22

What is a ledger?

Answer 22

Listing of all accounts and their current balance.

Question 23

What is a trial balance?

Answer 23

Listing of all accounts and their debit or credit balances to make sure everything balances correctly.