Quiz on Financial Statements

Which of the following best describes accounting?

• A system for only recording income

• A process of recording, classifying, summarizing, and reporting transactions

• Preparing tax returns for businesses

• Checking the accuracy of inventory

Why is accounting called the “language of business”?

• It helps companies communicate financial information

• It translates reports into different languages

• It records only profits

• It shows employee performance

Who among the following uses accounting information to decide whether to invest more money in a business?

• Employees

• Shareholders

• Customers

• Suppliers

Which of the following users is most interested in assessing a company’s ability to repay a loan?

• Tax authorities

• Competitors

• Banks and lenders

• Employees

Managers mainly use accounting information to:

• File tax returns

• Make business decisions and plans

• Compare salaries

• Control product prices

Which group of users wants accounting information to assess job security and fairness of pay?

• Employees

• Shareholders

• Customers

• The Government

Suppliers are interested in accounting information to decide:

• Whether to advertise more

• Whether to offer goods on credit

• How to set employee bonuses

• Whether to close their business

A customer may need accounting information from a supplier to:

• Ensure a long-term and stable supply source

• Determine the supplier’s tax payment

• Help them advertise their own products

• Compare wages between companies

Competitors use accounting information mainly to:

• Pay taxes

• Learn and improve their own performance

• Offer loans

• Hire employees from rivals

Which feature below makes management information most effective for decision-making?

• Complex and detailed

• Timely and relevant

• Costly and confidential

• Lengthy and detailed