Principles of Accounting

The basic accounting equation states that Assets = Liabilities.

• True

• False

Accountants refer to an economic event as a:

• purchase.

• sale.

• transaction.

• change in ownership.

Accounting communicates financial information about a business enterprise to both internal and external users.

• True

• False

Communication of economic events is the part of the accounting process that involves:

• identifying economic events.

• quantifying transactions into dollars and cents.

• preparing accounting reports.

• recording and classifying information.

Owner's equity is best depicted by the following:

• Assets = Liabilities.

• Liabilities + Assets.

• Residual equity + Assets.

• Assets – Liabilities.

The starting point of the accounting process is:

• communicating information to users.

• identifying economic events.

• recording economic events.

• None of these answers are correct.

The origins of accounting are attributed to Luca Pacioli, a famous mathematician.

• True

• False

Management of a business enterprise is the major external user of information.

• True

• False

Owners of business firms are the only people who need accounting information.

• True

• False

 

The accounting process involves all of the following except:

• identifying economic transactions that are relevant to the business.

• communicating financial information to users by preparing financial reports.

• recording nonquantifiable economic events.

• analyzing and interpreting financial reports.