Foundation MK

The accounting process does not include:

• identification

• verification

• recording

• communication

One of the following statements about users of accounting information is incorrect.

The incorrect statement is:

• Management is considered an internal user

• Taxing Authorities are considered external users.

• Present creditors are considered external users.

• Regulatory authorities are considered internal users.

The cost principle states that:

• assets should be recorded at cost and adjusted when the market value changes

• activities of an entity be kept separate and distinct from its owner.

• assets should be recorded at their cost.

• only transaction data capable of being expressed in terms of money be included in the accounting records.

Net income will result during a time period when:

• assets exceed liabilities.

• assets exceed revenues.

• expenses exceed revenues.

• revenues exceed expenses.

The effects on the basic accounting equation of performing services on account are:

• increase assets and decrease owner's equity.

• increase assets and increase owner's equity.

• increase assets and increase liabilities.

• increase liabilities and increase owner's equity.

As of December 31, 2022, ARK company has assets of EGP 3,500 and owner's equity of EGP 2,000. What are the liabilities for ARK company as of December 31, 2022?

• EGP 1,500

• EGP 1,000

• EGP 2,500

• EGP 2,000

ARK company buys an EGP 900 machine on credit. This transaction will affect the:

• income statement only

• balance sheet only

• income statement and owner's equity statement only

• income statement, owner's equity statement, and balance sheet

The financial statement that reports assets, liabilities and owner's equity is the

• income statement

• owner's equity statement

• balance sheet

• cash flow statement