MGMT 200 EXAM 1 (PURDUE UNIVERSITY) NEWEST 2025 EXAM 1-
100 QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) |ALREADY GRADED A+
Question 1
Preparing a budget for a business is considered:
A. financial accounting.
B. managerial accounting.
C. tax accounting.
D. audit accounting.
E. forensic accounting.
Correct Answer: B) managerial accounting.
Rationale: Managerial accounting provides information to people within an organization
for internal decision-making and planning, such as budgeting.
Question 2
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.
E. only A and B.
Correct Answer: D) all of the above.
Rationale: Accounting encompasses all these functions: measuring economic events,
processing them into financial reports, and communicating these to various users.
Question 3
Which of the following is not an external user of a business's financial information?
A. Taxing authorities
B. Customers
C. Investors
D. Creditors
E. Employees
Correct Answer: E) Employees
Rationale: Employees are internal users of financial information; taxing authorities,
customers, and investors are external users.
Question 4
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.
E. Assets minus liabilities equals revenue.
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Correct Answer: D) Resources of the company equal creditors' and owners' claims to those
resources.
Rationale: The accounting equation, Assets = Liabilities + Stockholders' Equity, directly
states that a company's resources (assets) are equal to the claims against those resources by
creditors (liabilities) and owners (stockholders' equity).
Question 5
Owners' claims to the company's resources are referred to as:
A. Liabilities.
B. Assets.
C. Net liabilities.
D. Revenue.
E. Stockholders' equity.
Correct Answer: E) Stockholders' equity.
Rationale: Stockholders' equity represents the owners' residual claim on the assets of the
company after liabilities are satisfied.
Question 6
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
Rationale: Using the accounting equation (Assets = Liabilities + Equity): $25,000 (Assets) =
$15,000 (Liabilities) + $10,000 (Equity).
Question 7
Amounts owed to suppliers for supplies purchased on account are defined as a(n):
A. Revenue.
B. Asset.
C. Expense.
D. Common stock.
E. Liability.
Correct Answer: E) Liability.
Rationale: Amounts owed to others (creditors) are classified as liabilities, specifically
"Accounts Payable" for amounts owed to suppliers.
Question 8
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
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Correct Answer: B) False
Rationale: Using the accounting equation (Assets = Liabilities + Equity): Assets = $29,000 +
$15,000 = $44,000. Therefore, the statement is false.
Question 9
Financial accounting does not deal with which of the following?
A. Measuring a company's economic activity.
B. Preparing financial reports.
C. Communicating financial results to investors.
D. Providing information to external users.
E. Providing information to internal users.
Correct Answer: E) Providing information to internal users.
Rationale: Financial accounting focuses on providing information to external users
(investors, creditors, taxing authorities). Managerial accounting focuses on internal users.
Question 10
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
Rationale: This is the fundamental definition of the accounting equation: Assets = Liabilities
+ Stockholders' Equity.
Question 11
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.
E. Assets - Liabilities = Stockholders' Equity.
Correct Answer: E) Assets - Liabilities = Stockholders' Equity.
Rationale: By rearranging the basic accounting equation (Assets = Liabilities + Equity), we
can derive Assets - Liabilities = Equity.
Question 12
Which of the following does not represent an asset of a company?
A. Supplies held by the company.
B. Equipment owned and used for operations.
C. Amounts receivable from customers.
D. Cash.
E. Amounts owed to suppliers.
100 QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) |ALREADY GRADED A+
Question 1
Preparing a budget for a business is considered:
A. financial accounting.
B. managerial accounting.
C. tax accounting.
D. audit accounting.
E. forensic accounting.
Correct Answer: B) managerial accounting.
Rationale: Managerial accounting provides information to people within an organization
for internal decision-making and planning, such as budgeting.
Question 2
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.
E. only A and B.
Correct Answer: D) all of the above.
Rationale: Accounting encompasses all these functions: measuring economic events,
processing them into financial reports, and communicating these to various users.
Question 3
Which of the following is not an external user of a business's financial information?
A. Taxing authorities
B. Customers
C. Investors
D. Creditors
E. Employees
Correct Answer: E) Employees
Rationale: Employees are internal users of financial information; taxing authorities,
customers, and investors are external users.
Question 4
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.
E. Assets minus liabilities equals revenue.
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Correct Answer: D) Resources of the company equal creditors' and owners' claims to those
resources.
Rationale: The accounting equation, Assets = Liabilities + Stockholders' Equity, directly
states that a company's resources (assets) are equal to the claims against those resources by
creditors (liabilities) and owners (stockholders' equity).
Question 5
Owners' claims to the company's resources are referred to as:
A. Liabilities.
B. Assets.
C. Net liabilities.
D. Revenue.
E. Stockholders' equity.
Correct Answer: E) Stockholders' equity.
Rationale: Stockholders' equity represents the owners' residual claim on the assets of the
company after liabilities are satisfied.
Question 6
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
Rationale: Using the accounting equation (Assets = Liabilities + Equity): $25,000 (Assets) =
$15,000 (Liabilities) + $10,000 (Equity).
Question 7
Amounts owed to suppliers for supplies purchased on account are defined as a(n):
A. Revenue.
B. Asset.
C. Expense.
D. Common stock.
E. Liability.
Correct Answer: E) Liability.
Rationale: Amounts owed to others (creditors) are classified as liabilities, specifically
"Accounts Payable" for amounts owed to suppliers.
Question 8
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
, [Type here]
Correct Answer: B) False
Rationale: Using the accounting equation (Assets = Liabilities + Equity): Assets = $29,000 +
$15,000 = $44,000. Therefore, the statement is false.
Question 9
Financial accounting does not deal with which of the following?
A. Measuring a company's economic activity.
B. Preparing financial reports.
C. Communicating financial results to investors.
D. Providing information to external users.
E. Providing information to internal users.
Correct Answer: E) Providing information to internal users.
Rationale: Financial accounting focuses on providing information to external users
(investors, creditors, taxing authorities). Managerial accounting focuses on internal users.
Question 10
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
Rationale: This is the fundamental definition of the accounting equation: Assets = Liabilities
+ Stockholders' Equity.
Question 11
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.
E. Assets - Liabilities = Stockholders' Equity.
Correct Answer: E) Assets - Liabilities = Stockholders' Equity.
Rationale: By rearranging the basic accounting equation (Assets = Liabilities + Equity), we
can derive Assets - Liabilities = Equity.
Question 12
Which of the following does not represent an asset of a company?
A. Supplies held by the company.
B. Equipment owned and used for operations.
C. Amounts receivable from customers.
D. Cash.
E. Amounts owed to suppliers.
