CHAPTER 1

What is the primary purpose of financial reporting?

• To analyze market trends

• To prepare tax returns

• To record financial transactions

• To summarize financial data

Which of the following is NOT a type of business entity?

• Corporation

• Limited liability company

• Partnership

• Sole trader

Which financial statement shows the assets and liabilities of a business at a specific date?

• Statement of cash flows

• Statement of changes in equity

• Statement of profit or loss

• Statement of financial position

What is the main difference between financial accounting and management accounting?

• Financial accounting is for internal use only

• Management accounting focuses on historical data

• Management accounting is less detailed

• Financial accounting provides information for external users

Which of the following stakeholders is primarily interested in a company's ability to pay its debts?

• Suppliers

• Shareholders

• Employees

• Tax authorities

What is the role of directors in corporate governance?

• To handle customer relations

• To oversee marketing strategies

• To prepare financial statements

• To manage daily operations

What is the primary advantage of operating as a limited liability company?

• Complete control by the owner

• Less paperwork

• Easier access to capital

• Unlimited liability

In the context of financial statements, what does the term 'equity' refer to?

• Total assets of the company

• Total liabilities of the company

• Residual interest in the assets after liabilities

• Total revenue generated