Accounting I chapter 1

Which of the following is not a step in the accounting process?

• Identification

• Economic entity

• Recording

• Communication

Which of the following statements about users of accounting information is incorrect?

• Management is an internal user

• Taxing authorities are external users

• Present creditors are external users

• Regulatory authorities are internal users

The historical cost basis results in:

• initially recording assets at cost and adjusting when the current value change

• keeping activities of an entity separate and distinct from its owner

• recording and reporting assets at their cost

• recording and reporting assets at their cost

Which of the following statements about basic assumptions is correct

• Basic assumptions are the same as accounting principles.

• The economic entity assumption states that there should be a particular unit of accountability

• The monetary unit assumption enables accounting to measure employee morale.

• Partnerships are not economic entities

The three types of business entities are:

• proprietorships, small businesses, and partnerships

• proprietorships, partnerships, and corporations

• proprietorships, partnerships, and large businesses

• financial, manufacturing, and service companies

Net income will result during a time period when:

• assets exceed liabilities

• assets exceed revenues

• expenses exceed revenues

• revenues exceed expenses

As of December 31, 2025, Stoneland AG has assets of €3,500 and equity of €2,000. What are the liabilities for Stoneland AG as of December 31, 2025?

• €1,500

• €1,000

• €2,500

• €2,000

Performing services on account will have the following effects on the components of the basic accounting equa

• increase assets and decrease equity

• increase assets and increase equity

• increase assets and increase liabilities

• increase liabilities and increase equity

Which of the following events is not recorded in the accounting records?

• Equipment is purchased on account

• An employee is terminated

• A cash investment is made into the business

• The company pays a cash dividend

During 2025, Xia Lin Company’s assets decreased ¥500,000 and its liabilities decreased ¥900,000. Its equity therefore:

• increased ¥400,000

• decreased ¥1,400,000

• decreased ¥400,000

• decreased ¥400,000