1. The purpose of accounting is:

a. to summarize the cost of employee wages for a year

b. to provide accurate financial information to decision makers

c. to help individuals achieve personal goals

d. to aid decision makers in the preparation of their tax returns

2. Decision makers use accounting information to:

a. advertise products to the target market of customers

b. hire new employees when the business is growing

c. design a new product line

d. assist in attaining economic goals

3. Revenue of the enterprise is the:

a. taxes paid to the government from goods or services provided to customers

b. cash flow of the business from goods or services provided to customers

c. profit of the enterprise from goods or services provided to customers

d. money or value received from customers for goods or services provided

4. The income statement of a business measures the:

a. profit or loss for a specific time period

b. profit since the beginning of the business

c. revenue for a future year

d. losses of the owner during the startup phase of the business

5. An operating plan is:

a. used by a business owner to compute taxes owed to the government

b. specifies the way in which resources will be used in the business

c. used to keep the owner from embezzling money from the business

d. will specify the way the business owner should record the revenues and expenses of the business

6. Expenses are the:

a. cost of economic resources used in the process of trying to earn a profit

b. income lost by the owner going into business

c. borrowed money to start the business

d. cash paid for the cost of resources used up in the process of generating revenue

7. Of the following, which is the MOST distinguishing attribute when comparing a sole proprietorship and a corporation:

a. a corporation usually has more employees than a sole proprietorship

b. the revenue of a corporation is usually greater than a sole proprietorship in the same industry

c. the person heading up the proprietorship is the owner whereas the corporation head is not an owner

d. the personal assets of the owner are at risk in case of business failure in a sole proprietorship whereas the personal assets of the shareholders of a corporation are not at risk in the event of failure.

8. The balance sheet equation explains the sources of assets as follow:

a. from creditors and from owners of the business

b. from owners of the business

c. from the government

d. from owners of the business and the government

9. A liability is a debt of the business. Which of the following is NOT a liability to be reported on a balance sheet of the business:

a. promissory note payable

b. accounts payable

c. mortgage loan on the owner's personal residence

d. cash received by the business for a service to be provided in the future

10.The statement of cash flows reports:

a. the profit of the business

b. the change in the cash assets of the business during a specific period of time

c. the amount of money withdrawn by the owner since the start of the business

d. the total expenses of the business