Chapter 1: Accounting and the Business Environment
1.1-1 Accounting is the information system that measures business activity, processes the data into reports, and
communicates the results to decisions makers.
Answer: True
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic/Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-2 Accounting is "the language of business."
Answer: True
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic/Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-3 Which financial statement is defined as reporting the inflows and outflows of cash in a proprietorship?
A) Income statement
B) Statement of owner’s equity
C) Balance sheet
D) Statement of cash flows
Answer: D
, LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic, Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-4 An obligation that a proprietorship owes to an outside person or agency is called a(n):
A) asset.
B) liability.
C) owner’s equity.
D) revenue.
Answer: B
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic, Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
,1.1-5 There are relatively few types of revenue. Which of the following in NOT a type of revenue?
A) Withdrawals paid to proprietors
B) Service
C) Interest
D) Sales
Answer: A
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic/Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-6 A promise to pay from customers for goods and services that they received from a company represent:
A) accounts receivable.
B) accounts payable.
C) revenues.
D) expenses.
Answer: A
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic, Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-7 Accounting information may be generated for a variety of purposes. The key products of accounting are:
, A) financial statements.
B) remittance advices.
C) spreadsheets.
D) work sheets.
Answer: A
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic/Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-8 Accounting is the information system that provides information to various users. This process includes:
A) compiling the data into reports.
B) measuring business activity.
C) communicating the results to decisions makers.
D) all of the above.
Answer: D
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic, Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-9 Which of the following statements best describes managerial accounting?
A) Managerial accounting focuses on information for internal decision making.
B) Managerial accounting focuses on outside investors and lenders that are not part of day-to-day
management.
1.1-1 Accounting is the information system that measures business activity, processes the data into reports, and
communicates the results to decisions makers.
Answer: True
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic/Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-2 Accounting is "the language of business."
Answer: True
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic/Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-3 Which financial statement is defined as reporting the inflows and outflows of cash in a proprietorship?
A) Income statement
B) Statement of owner’s equity
C) Balance sheet
D) Statement of cash flows
Answer: D
, LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic, Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-4 An obligation that a proprietorship owes to an outside person or agency is called a(n):
A) asset.
B) liability.
C) owner’s equity.
D) revenue.
Answer: B
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic, Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
,1.1-5 There are relatively few types of revenue. Which of the following in NOT a type of revenue?
A) Withdrawals paid to proprietors
B) Service
C) Interest
D) Sales
Answer: A
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic/Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-6 A promise to pay from customers for goods and services that they received from a company represent:
A) accounts receivable.
B) accounts payable.
C) revenues.
D) expenses.
Answer: A
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic, Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-7 Accounting information may be generated for a variety of purposes. The key products of accounting are:
, A) financial statements.
B) remittance advices.
C) spreadsheets.
D) work sheets.
Answer: A
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic/Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-8 Accounting is the information system that provides information to various users. This process includes:
A) compiling the data into reports.
B) measuring business activity.
C) communicating the results to decisions makers.
D) all of the above.
Answer: D
LO: 1-1
Diff: 1
EOC Ref: E1-14
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Strategic, Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
1.1-9 Which of the following statements best describes managerial accounting?
A) Managerial accounting focuses on information for internal decision making.
B) Managerial accounting focuses on outside investors and lenders that are not part of day-to-day
management.
