. Which accounting process is the recognition or nonrecognition of business activities as

accountable events?

(a) identifying (c) communicating

(b) measuring (d) summarizing

2. These are events that affect the enterprise and in which other entities participate.

Internal External Internal External

(a) Yes Yes (c) No No

(b) Yes No (d) No Yes

3. Which is an internal event?

(a) Casualty loss

(b) Exchange

(c) Nonreciprocal transfer between the enterprise and its owners.

(d) Nonreciprocal transfer between the enterprise and other entities.

4. The basic purpose of accounting is:

(a) to measure periodic income of the economic entity.

(b) to provide quantitative financial information about a business enterprise that is useful in

making rational economic decision.

(c) to provide information that the creditors of an economic entity can use in deciding

whether to make additional loans to the entity.

(d) to provide information that the managers of an economic entity need to control its

operations.

5. It focuses on general purpose reports on financial position, performance and cash flows.

(a) financial accounting (c) management advisory services

(b) managerial accounting (d) auditing

6. Which of the following is not an important characteristic or limitation of the financial

statements that accountants currently prepare?

(a) the information in financial statements is expressed in units of money adjusted for

changing purchasing power

(b) financial statements articulate with one another because measuring financial position is

related to measuring changes in financial position

(c) the information in financial statements is summarized and classified to held meet users'

needs

(d) financial statements can be justified only if the benefits they provide exceed the costs

7. The branch of accounting that is concerned primarily with providing information for internal

users is called:

(a) auditing (c) financial accounting

(b) managerial accounting (d) income tax accounting

8. Financial accounting can be broadly defined as the area of accounting that prepares:

(a) general purpose financial statements to be used by parties internal to the business

enterprise only

(b) financial statements to be used by investors only

(c) general purpose financial statements to be used by parties both internal and external to

the business enterprise

(d) financial statements to be used primarily by management

9. The primary focus of financial accounting has been on meeting the needs of which of the

following groups?

(a) managers of an enterprise

(b) present and potential creditors of an enterprise

(c) national, and local taxing authorities

(d) independent auditors

10. These are the basic notions or fundamental premises on which the accounting process is

based.

(a) accounting assumptions (c) generally accepted accounting principles

(b) accounting standards (d) accounting concepts