Accounting Test 1

An income statement

• summarizes the changes in retained earnings for a specific period of time

• reports the assets, liabilities, and stockholders' equity at a specific date

• reports the changes in assets, liabilities, and stockholdrs' equity

• presents the revenues and expenses for a specific period of time

The proprietorship form of business organization

• generally receives favorable tax treatment relative to a coproration

• is classified as a separate legal entity

• combines the records of the business with the personal records of the owner

• must have at least two owners

A business organized as a corporation

• has tax advantages over a proprietorship

• is not a separate legal entity in most states

• requires that stockholders be personally liable for the debts of the business

• is owned by its stockholders

The partnership formof business organization

• is a separate legal entity

• is a common form of organization for srvice-type businesses

• enjoys an unlimited life

• has limited liability

A business organized as a separate legal entity is a

• partnership

• government unit

• corporation

• proprietor

Which is an advantage of corporations relative to partnerships and sole proprietorships?

• Reduced legal liability for investors

• most common form of organization

• harder to transfer ownership

• lower taxes

Which are internal reports that accounting provides to internal users?

• Neither forecasts of cash needs or financial comparisons is an internal reprt

• forecasts of cash needs for next year

• both forecasts of cash needs and financial comparisions are internal reports

• financial comparisions of operating activity alternatives

Which is the best definition of an internal user of accounting info?

• Creditors like banks that use accounting info to evaluate the risk of lending money

• labor unions who use accounting info to examine the ability of the commpany to pay increased wages and benefits

• managers who use accounting info to plan, organize, and run a business

• investors who use accounting info to decide whether to buy or sells stock

Which would not be considered an internal user of accounting data forthe company?

• production manager

• merchandise inventory clerk

• president of the company

• president of the employyee's labor union

Which statement concerning users of accounting info is incorrect?

• regulatory authorities are considered internal users

• taxing authorities are considered external users

• management is considered an internal user

• present creditors are considered external users