ACCT 2000 FULL SOLUTION 2026 QUESTIONS
WITH ANSWERS GRADED A+
◉ Define sole proprietorship (1.1) Answer: A business owned by
one person
◉ List the advantages of a sole proprietorship (1.1) Answer: Simple
to establish, owner-controlled, & tax advantages
◉ List the disadvantages of a sole proprietorship (1.1) Answer:
Personal liability - responsible if sued
◉ Define partnership (1.1) Answer: A business owned by two or
more persons associated as partners
◉ List the advantages of a partnership (1.1) Answer: Simple to
establish, shared control, broader skills and resources, & tax
advantages
◉ List the disadvantages of a partnership (1.1) Answer: Personal
liability - responsible if sued
,◉ Define corporation (1.) Answer: A business owned as a separate
legal entity owned by stockholders
◉ List the advantages of a corporation (1.1) Answer: Easier to
sell/transfer ownership, easier to raise funds/capital & no personal
liability
◉ List the disadvantages of a corporation (1.1) Answer: Double
taxation
◉ Define a hybrid business (1.1) Answer: A business form that
combines the tax advantages of partnerships with the limited
liability of corporations
◉ What are the two types of users of accounting information (1.1)
Answer: Internal and external users
◉ What are internal users? (1.1) Answer: Managers who plan,
organize, and run a business. Includes managers, supervisors,
directors, & officers
◉ What are external users? (1.1) Answer: Investors (owners) who
use accounting information to make decisions to buy, hold, or sell
stock & and creditors, such as suppliers and bankers, who use
,accounting to evaluate the risks of selling on credit or lending
money.
◉ What are the three types of business activity? (1.2) Answer:
Investing activities, Financing activities, and Operating activities
◉ What are investing activities? (1.2) Answer: Involves the purchase
of the resources (assets) a company needs in order to operate
◉ What are financing activities? (1.2) Answer: Involve raising money
from outside sources. Two types: borrowing money (debt financing)
and issuing (selling) shares of stock in exchange for cash
◉ What are operating activities? (1.2) Answer: The day-to-day
actions taken by a company to produce and sell a product, or
provide a service.
◉ What are the four financial statements? (1.3) Answer: 1. Income
statement, 2. Retained Earnings Statement, 3. Balance sheet, 4.
Statement of cash flow
◉ What is included on an income statement? (1.3) Answer: Shows
how successfully your business performed during a period of time
by subtracting expenses from revenue
, ◉ What is included on a Retained Earnings Statement? (1.3)
Answer: Indicates how much of the previous income was distributed
to owners of your business in the form of dividends, and how much
was retained in the business to allow for future growth
◉ What is included on a Balance Sheet? (1.3) Answer: Presents a
picture at a point in time of what your business owns (its assets) and
what it owes (its liabilities)
◉ What is included in a Statement of Cash Flows? (1.3) Answer:
Shows where your business obtained cash during a period of time
and how that cash was used
◉ What is the interrelationship and order of each financial
statement? (1.3) Answer: Income statement (net income) --> used
for Retained Earnings Statement (retained earnings) --> used for
Balance Sheet (cash) --> used for Statement of Cash Flows
◉ What are the components of an Annual Report? (1.3) Answer: 1.
The 4 Financial Statements, 2. A Management Discussion and
Analysis Section, 3. Notes to the Financial Statements, 4.
Independent Auditor's Report
◉ What all is included on a Classified Balance Sheet? (2.1) Answer:
1. Current Assets - cash, short-term inventory, accounts receivable,
inventory, prepaid, & supplies
WITH ANSWERS GRADED A+
◉ Define sole proprietorship (1.1) Answer: A business owned by
one person
◉ List the advantages of a sole proprietorship (1.1) Answer: Simple
to establish, owner-controlled, & tax advantages
◉ List the disadvantages of a sole proprietorship (1.1) Answer:
Personal liability - responsible if sued
◉ Define partnership (1.1) Answer: A business owned by two or
more persons associated as partners
◉ List the advantages of a partnership (1.1) Answer: Simple to
establish, shared control, broader skills and resources, & tax
advantages
◉ List the disadvantages of a partnership (1.1) Answer: Personal
liability - responsible if sued
,◉ Define corporation (1.) Answer: A business owned as a separate
legal entity owned by stockholders
◉ List the advantages of a corporation (1.1) Answer: Easier to
sell/transfer ownership, easier to raise funds/capital & no personal
liability
◉ List the disadvantages of a corporation (1.1) Answer: Double
taxation
◉ Define a hybrid business (1.1) Answer: A business form that
combines the tax advantages of partnerships with the limited
liability of corporations
◉ What are the two types of users of accounting information (1.1)
Answer: Internal and external users
◉ What are internal users? (1.1) Answer: Managers who plan,
organize, and run a business. Includes managers, supervisors,
directors, & officers
◉ What are external users? (1.1) Answer: Investors (owners) who
use accounting information to make decisions to buy, hold, or sell
stock & and creditors, such as suppliers and bankers, who use
,accounting to evaluate the risks of selling on credit or lending
money.
◉ What are the three types of business activity? (1.2) Answer:
Investing activities, Financing activities, and Operating activities
◉ What are investing activities? (1.2) Answer: Involves the purchase
of the resources (assets) a company needs in order to operate
◉ What are financing activities? (1.2) Answer: Involve raising money
from outside sources. Two types: borrowing money (debt financing)
and issuing (selling) shares of stock in exchange for cash
◉ What are operating activities? (1.2) Answer: The day-to-day
actions taken by a company to produce and sell a product, or
provide a service.
◉ What are the four financial statements? (1.3) Answer: 1. Income
statement, 2. Retained Earnings Statement, 3. Balance sheet, 4.
Statement of cash flow
◉ What is included on an income statement? (1.3) Answer: Shows
how successfully your business performed during a period of time
by subtracting expenses from revenue
, ◉ What is included on a Retained Earnings Statement? (1.3)
Answer: Indicates how much of the previous income was distributed
to owners of your business in the form of dividends, and how much
was retained in the business to allow for future growth
◉ What is included on a Balance Sheet? (1.3) Answer: Presents a
picture at a point in time of what your business owns (its assets) and
what it owes (its liabilities)
◉ What is included in a Statement of Cash Flows? (1.3) Answer:
Shows where your business obtained cash during a period of time
and how that cash was used
◉ What is the interrelationship and order of each financial
statement? (1.3) Answer: Income statement (net income) --> used
for Retained Earnings Statement (retained earnings) --> used for
Balance Sheet (cash) --> used for Statement of Cash Flows
◉ What are the components of an Annual Report? (1.3) Answer: 1.
The 4 Financial Statements, 2. A Management Discussion and
Analysis Section, 3. Notes to the Financial Statements, 4.
Independent Auditor's Report
◉ What all is included on a Classified Balance Sheet? (2.1) Answer:
1. Current Assets - cash, short-term inventory, accounts receivable,
inventory, prepaid, & supplies
