MGMT 200 Exam 1 - Purdue University
QUESTIONS AND ANSWERS| GRADED A
Preparing a budget for a business is considered
A. financial accounting.
B. managerial accounting. Correct Answer: B. managerial accounting.
(Management accounting provides information to people within an organization while financial
accounting is mainly for those outside it, such as shareholders.)
Accounting is the information system that
A. measures business activities
B. communicates the results to decision
makers
C. processes information into reports
D. all of the above. Correct Answer: D. all of the above.
Which of the following is not an external user of
a business's financial information?
A. Taxing authorities
B. Customers
C. Employees
D. Investors Correct Answer: C. Employees
Which statement below best describes the accounting
equation?
A. The change in retained earnings equals net
income less dividends.
B. Equality of revenue and expense transactions
over time.
C. Financing activities equal investing and
operating activities.
D. Resources of the company equal creditors' and
owners' claims to those resources. Correct Answer: D. Resources of the company equal
creditors' and
owners' claims to those resources.
(assets = liabilities + stockholders' equity)
Owners' claims to the company's resources are
referred to as:
A. Liabilities.
B. Assets.
C. Stockholders' equity.
D. Net liabilities. Correct Answer: C. Stockholders' equity.
(assets = liabilities + stockholders' equity)
, If total assets of a company equal $25,000 and
total stockholders' equity equals $10,000, then
total liabilities equal $15,000.
A. True
B. False Correct Answer: A. True
(Assets = Liabilities + Equity
$25,000 = $15,000 + $10,000)
Amounts owed to suppliers for supplies
purchased on account are defined as a(n):
A. Revenue.
B. Asset.
C. Liability.
D. Expense. Correct Answer: C. Liability
(assets = liabilities + stockholders' equity)
If total liabilities of a company equal $29,000
and total stockholders' equity equals $15,000,
then total assets equal $14,000.
A. True
B. False Correct Answer: B. False
(Assets = Liabilities + Equity
$44,000 = $29,000 + $15,000)
Financial accounting does not deal with which of the following?
A. Measuring a company's economic activity.
B. Providing information to internal users.
C. Preparing financial reports.
D. Communicating financial results to
investors. Correct Answer: B. Providing information to internal users.
The accounting equation shows that a
company's resources equal creditors' and owners' claims to those resources.
A. True
B. False Correct Answer: A. True
An alternative form of the accounting equation is:
A. Assets ‐ Liabilities = Stockholders' Equity.
B. Net Income = Revenues ‐ Expenses.
C. Stockholders' Equity = Assets + Liabilities.
D. Assets = Liabilities ‐ Stockholders' Equity. Correct Answer: A. Assets ‐ Liabilities =
Stockholders' Equity.
Which of the following does not represent an asset of a company?
A. Supplies held by the company.
B. Amounts owed to suppliers.
QUESTIONS AND ANSWERS| GRADED A
Preparing a budget for a business is considered
A. financial accounting.
B. managerial accounting. Correct Answer: B. managerial accounting.
(Management accounting provides information to people within an organization while financial
accounting is mainly for those outside it, such as shareholders.)
Accounting is the information system that
A. measures business activities
B. communicates the results to decision
makers
C. processes information into reports
D. all of the above. Correct Answer: D. all of the above.
Which of the following is not an external user of
a business's financial information?
A. Taxing authorities
B. Customers
C. Employees
D. Investors Correct Answer: C. Employees
Which statement below best describes the accounting
equation?
A. The change in retained earnings equals net
income less dividends.
B. Equality of revenue and expense transactions
over time.
C. Financing activities equal investing and
operating activities.
D. Resources of the company equal creditors' and
owners' claims to those resources. Correct Answer: D. Resources of the company equal
creditors' and
owners' claims to those resources.
(assets = liabilities + stockholders' equity)
Owners' claims to the company's resources are
referred to as:
A. Liabilities.
B. Assets.
C. Stockholders' equity.
D. Net liabilities. Correct Answer: C. Stockholders' equity.
(assets = liabilities + stockholders' equity)
, If total assets of a company equal $25,000 and
total stockholders' equity equals $10,000, then
total liabilities equal $15,000.
A. True
B. False Correct Answer: A. True
(Assets = Liabilities + Equity
$25,000 = $15,000 + $10,000)
Amounts owed to suppliers for supplies
purchased on account are defined as a(n):
A. Revenue.
B. Asset.
C. Liability.
D. Expense. Correct Answer: C. Liability
(assets = liabilities + stockholders' equity)
If total liabilities of a company equal $29,000
and total stockholders' equity equals $15,000,
then total assets equal $14,000.
A. True
B. False Correct Answer: B. False
(Assets = Liabilities + Equity
$44,000 = $29,000 + $15,000)
Financial accounting does not deal with which of the following?
A. Measuring a company's economic activity.
B. Providing information to internal users.
C. Preparing financial reports.
D. Communicating financial results to
investors. Correct Answer: B. Providing information to internal users.
The accounting equation shows that a
company's resources equal creditors' and owners' claims to those resources.
A. True
B. False Correct Answer: A. True
An alternative form of the accounting equation is:
A. Assets ‐ Liabilities = Stockholders' Equity.
B. Net Income = Revenues ‐ Expenses.
C. Stockholders' Equity = Assets + Liabilities.
D. Assets = Liabilities ‐ Stockholders' Equity. Correct Answer: A. Assets ‐ Liabilities =
Stockholders' Equity.
Which of the following does not represent an asset of a company?
A. Supplies held by the company.
B. Amounts owed to suppliers.
