Multiple Choice: Use of Accounting Select the correct answer for each of the following:

1. The accounting equation:

a. Is used to determine the amount of liabilities owed.

b. Shows the claims on the entity’s assets represented by creditors and owners.

c. Shows the claims on the owners’ equity represented by creditors.

d. Is used to determine the amount of income earned during the most recent accounting period.

2. In the accounting equation, an increase in assets can be associated with:

An increase in liabilities.

A decrease in equities.

A decrease in liabilities.

An increase in equities.

Both a and b.

. Both a and d.

3. Accounting information is used by managers to:

a. Decide on the acquisition of new machinery and equipment.

b. Evaluate the efficiency of operations.

c. Calculate year-end bonuses.

d. All of the above.

4, Accounting information is used by external decision makaoge mo ers to:

a. Decide on the acquisition of new machinery and equipment.

b. Estimate the amount of risk associated with investing in a company.

c. Estimate future demand for a company’s products in new markets.

d. Determine the amount of advertising to be undertaken by the company.