Chapter 1: Definition to Type of Business Ownership

Question 1

What are the three activities of accounting?

Answer 1

1. Identification
2. Recording
3. Communication

Question 2

Why is accounting important in economics?

Answer 2

Accounting enables units to make choices in the allocation of scarce resources.

Question 3

What is accounting?

Answer 3

Accounting is a set of concepts and techniques used to measure and report financial information of an economic unit.

Question 4

The process of selecting and realizing economic events relevant to a business

Answer 4

Identification

Question 5

The process which involves the retention of a systematic, chronological diary of events (in monetary units)

This also entails in the classification and summarization of economic events.

Answer 5

Recording

Question 6

This process involves sharing the collected information to the interested users through accounting reports, which are known as financial statements.

Answer 6

Communication

Question 7

This process also involves the analyzation and interpretation of the reported information through the use of rations, percentages, and chart.

Interpretation also entails explaining the uses, meaning and limits of the data.

Answer 7

Communication

Question 8

Accounting involves the entire process of ____, _____, and ________ economic events

Answer 8

Identifying, Recording, and Communicating

Question 9

What are the two broad groups of users of financial information?

Answer 9

Internal and External Users

Question 10

_____ users of accounting information are those who are within businesses.

Answer 10

Internal

Question 11

_______ Accounting provide internal reports to assist users within companies to make decisions.

Answer 11

Managerial

Question 12

What type of user does the following fall under?

Finance

Answer 12

Internal User

Question 13

What type of user does the following fall under?

Marketing

Answer 13

Internal User

Question 14

What type of user does the following fall under?

Human Resources

Answer 14

Internal User

Question 15

What type of user does the following fall under?

Management

Answer 15

Internal Users

Question 16

____ Users are units outside a company who seek financial information of said company.

Answer 16

External Users

Question 17

______ accounting provide economic and financial information to recognize the company’s financial state and examine the company’s compliance with standardized accounting regulations and ethics.

Answer 17

Financial

Question 18

What type of user does the following fall under?

Investors

Answer 18

External User

Question 19

What type of user does the following fall under?

Creditors

Answer 19

External User

Question 20

_____, also known as Equity Investors, are those who utilize accounting information to decide whether to buy, hold, or sell ownership shares of a company.

Answer 20

Investors

Question 21

_____, also known as Debt Investors, are those who utilize accounting information to scrutinize the risk of granting or lending money.

Answer 21

Creditors

Question 22

One owner is solely responsible for all business decisions. They will reap both the profits and the losses, with a small capital being needed to start a business.

Their personal transactions are not included, and their liabilities include the assets of the owner/s.

Answer 22

Sole Proprietorship

Question 23

Two or more people are involved in the business decisions. A contract will set the terms, duties, and division of net income or loss of each partner.

Liabilities will be answered by at least one of the persons involved.

Answer 23

Partnership

Question 24

A type of business which is a separate legal entity under state law and are divided by shares. The holders (shareholders) have limited liability, where the owner can choose to transfer part of their ownership to others.

This type of business often enjoys long/unlimited life.

Answer 24

Corporation