Financial Accounting I
Tutorial-1
True/False:
1. Owners of business firms are the only people who need accounting information.
2. Management of a business enterprise is the major external user of information.
3. Accounting communicates financial information about a business enterprise to both
internal and external users.
4. Financial statements are the major means of communicating accounting information to
interested parties.
5. The study of accounting is not useful for a business career unless your career objective is
to become an accountant.
6. A working knowledge of accounting is not relevant to a lawyer or an architect.
7. A partnership must have more than one owner.
8. The basic accounting equation states that Assets = Liabilities.
9. Accountants record both internal and external transactions.
Answers:
1. False
2. False
3. True
4. True
5. False
6. False
7. True
8. False
9. True
Q) Classify each of these items as an asset (A), liability (L), or owner’s equity (OE).
_____ 1. Accounts receivable
_____ 2. Accounts payable
_____ 3. Owner’s Capital
_____ 4. Supplies
_____ 5. Utilities expense
_____ 6. Cash
_____ 7. Notes payable
_____ 8. Equipment
MCQs:
1. Accountants refer to an economic event as a
a. purchase.
b. sale.
c. transaction.
d. change in ownership.
Answer: C
2. Which of the following would not be considered an external user of accounting data
for the LMN Company?
a. Revenue Service Agent.
b. Management.
c. Creditors.
d. Customers.
Answer: B
3. Which of the following would not be considered internal users of accounting data
for a company?
a. The president of a company.
b. The controller of a company.
c. Creditors of a company.
d. Salesmen of the company.
Answer: C
4. Which one of the following is not an external user of accounting information?
a. Regulatory agencies.
b. Customers.
c. Investors.
d. All of these answers choices are external users.
Answer: D
5. Accountants often refer to GAAP . What do the letters GAAP represent in
accounting?
A) Globally accepted and accurate policies
B) Global accommodation accounting principles
C) Generally accredited accounting policies
D) Generally accepted accounting principles
Answer:D
6. Financial accounting provides economic and financial information for all of the
following except
a. creditors.
b. investors.
c. managers.
d. other external users.
Answer: C
7. Which of the following is the CORRECT accounting equation?
A) Assets + Liabilities = Stockholders' equity
B) Assets = Liabilities + Stockholders' equity
C) Assets + Revenue = Stockholders' equity
D) Assets + Revenue = Liabilities + Expenses
Answer: B
8. Owner's equity is $150,000 and total liabilities are $90,000. Total assets would be:
A) $300,000.
B) $180,000.
C) $60,000.
D) $240,000.
Answer: D
9. Assets are $150,000 and total liabilities are $90,000. Total owner's equity will be:
A) $180,000.
B) $300,000.
C) $240,000.
D) $60,000.
Answer: D
10. Assets are $270,000 and owner's equity is $90,000. Liabilities will be:
A) $60,000.
B) $360,000.
C) $270,000.
D) $180,000.
Answer: D
11.The net income of a business is $29,000. The beginning and ending capital balances were
$34,000 and $55,000, respectively. No capital contributions were made by the owner during
the year. Calculate the amount of owner's withdrawals.
A) $18,000
B) $8,000
C) $5,000
D) $60,000
Answer: B
12.Following is an extract of account balances of Wilson Mowing Service as of
December 31 of the first year of operation:
Accounts receivable $5,000
Accounts payable 4,000
Salary expense 5,000
Repairs expense 1,000
Truck 10,000
Equipment 8,000
Notes payable 8,200
Cash 7,500
Supplies expense 1,600
Service revenue 32,000
Gasoline expense 3,800
Salary payable 200
At the end of the year, what is the amount of total assets?
A) $15,000
B) $30,500
C) $18,000
D) $25,500
Answer: B
