Question 1

What analyzes the transactional information of the business so the owners and investors can make sound economic decisions?
A) Accounting
B) Bookkeeping
C) Financial Accounting
D) Managerial Accounting

Accepted Answer

A

Question 2

Which form of business recommends a legal agreement between two or more business partners that outlines core business issues?
A) Sole proprietorship
B) Partnership
C) Corporation
D) LLC

Accepted Answer

A legal agreement between two or more business partners that outlines core business issues is commonly known as a partnership agreement. This type of agreement is recommended for partnerships, which is Option B. Option A (Sole Proprietorship) is a form of business where there is only one owner and there is no need for a partnership agreement. Option C (Corporation) and Option D (LLC) are forms of business that have a different type of legal agreement to govern their operations.

Question 3

What is the function of the sales department?
A) Deals with the strategic financial issues associated with increasing the value of the business while observing applicable laws and social responsibilities
B) Includes the policies, plans, and procedures for the effective management of employees
C) The function of selling a good or service and focuses on increasing customer sales, which increases company revenues
D) The process associated with promoting the sale of goods or services. The marketing department supports the sales department by creating promotions that help sell the company's products

Accepted Answer

The function of the sales department is to sell a good or service and focus on increasing customer sales, which in turn increases company revenues.

Question 4

What is a dividend?
A) A distribution of earnings to shareholders
B) Refers to the amount earned resulting from the delivery or manufacture of a product or from the rendering of a service
C) Refer to the costs incurred in operating and maintaining a business
D) Anything owned that has value or earning power

Accepted Answer

A dividend is a distribution of earnings to shareholders.

Question 5

What is a hybrid entity that has the legal protections of a corporation and the ability to be taxed (one time) as a partnership?
A) Limited partnership
B) Limited liability corporation
C) Limited proprietorship
D) Limited shareholder
This is the definition of LLC.

Accepted Answer

A limited liability corporation (LLC) is a hybrid entity that offers the legal protections of a corporation while also allowing for the flexibility of a partnership in terms of taxation. This means that an LLC is not separate from its owners for tax purposes and income is only taxed once, as opposed to a regular corporation where income is taxed at both the entity and individual level.

Question 6

What is the fundamental difference found in a limited partnership?
A) Only one partner is responsible for all of the partnership's losses
B) Both partners are responsible for all of the partnership's losses
C) Both partners are protected from being responsible for all of the partnership's losses
D) None of the above

Accepted Answer

The fundamental difference found in a limited partnership is that both partners are protected from being responsible for all of the partnership's losses. In a limited partnership, there are two types of partners: general partners and limited partners. The general partners are responsible for managing the partnership and are personally liable for all of the partnership's debts and obligations. On the other hand, limited partners have limited liability and are only liable for the amount of their investment in the partnership. This means that they cannot lose more than the amount of money they put into the partnership, even if the partnership incurs significant losses.

Question 7

What involves preparing financial reports that provide information about the business's performance to external parties such as investors, creditors, and tax authorities?
A) Accounting
B) Bookkeeping
C) Financial accounting
D) Managerial accounting

Accepted Answer

Financial accounting involves preparing financial reports that provide information about the business's performance to external parties such as investors, creditors, and tax authorities. Accounting, bookkeeping, and managerial accounting all involve different aspects of financial management, but they do not specifically relate to the preparation of reports for external parties.

Question 8

Which of the following financial statements gives an accounting picture of property owned by a company and of claims against the property on a specific date?
A) Balance sheet
B) Statement of owner's equity
C) Statement of cash flows
D) Income statement

Accepted Answer

The balance sheet provides a snapshot of a company's assets (property owned) and liabilities (claims against the property) on a specific date. The statement of owner's equity shows changes in the owner's investment in the company over a period of time. The statement of cash flows shows the inflow and outflow of cash over a period of time. The income statement shows a summary of revenues, expenses, and profits over a period of time.

Question 9

What is an asset?
A) A distribution of earnings to shareholders
B) Refers to the amount earned resulting from the delivery or manufacture of a product or from the rendering of a service
C) Refer to the costs incurred in operating and maintaining a business
D) Anything owned that has value or earning power

Accepted Answer

An asset is anything owned that has value or earning power, such as property, cash, investments, or equipment. Option A refers to dividends, option B refers to revenue, and option C refers to expenses.

Question 10

What is the function of the marketing department?
A) Deals with the strategic financial issues associated with increasing the value of the business while observing applicable laws and social responsibilities
B) Includes the policies, plans, and procedures for the effective management of employees
C) The function of selling a good or service and focuses on increasing customer sales, which increases company revenues
D) The process associated with promoting the sale of goods or services. The marketing department supports the sales department by creating promotions that help sell the company's products

Accepted Answer

The answer of What is the function of the marketing...

Question 11

What tracks and communicates changes in the shareholder's earnings?
A) Balance sheet
B) Statement of owner's equity
C) Statement of cash flows
D) Income statement

Accepted Answer

The Statement of Owner's Equity tracks and communicates changes in the shareholder's earnings, reflecting adjustments in the equity portion of the balance sheet due to profits, losses, and dividends.

Question 12

What refers to the amount earned resulting from the delivery or manufacture of a product or from the rendering of a service?
A) Expense
B) Profit
C) Loss
D) Revenue

Accepted Answer

Revenue refers to the amount earned resulting from the delivery or manufacture of a product or from the rendering of a service.

Question 13

What is the rate at which the net present value of an investment equals zero?
A) Internal rate of return (IRR)
B) Return on investment (ROI)
C) Cash flow analysis
D) Break-even analysis

Accepted Answer

The rate at which the net present value of an investment equals zero is known as the Internal Rate of Return (IRR). It is the discount rate that makes the present value of cash inflows from an investment equal to the present value of cash outflows. Therefore, option A is the correct choice. The return on investment (ROI) is a financial metric that determines the profitability of an investment, whereas cash flow analysis and break-even analysis are methods used to evaluate the financial health of a business.

Question 14

What is revenue?
A) A distribution of earnings to shareholders
B) Refers to the amount earned resulting from the delivery or manufacture of a product or from the rendering of a service
C) Refer to the costs incurred in operating and maintaining a business
D) Anything owned that has value or earning power

Accepted Answer

Revenue refers to the amount earned resulting from the delivery or manufacture of a product or from the rendering of a service. Option A is incorrect as it refers to dividends. Option C refers to operating expenses. Option D refers to assets.

Question 15

What involves analyzing business operations for internal decision making and does not have to follow any rules issued by standard-setting bodies such as GAAP?
A) Accounting
B) Bookkeeping
C) Financial accounting
D) Managerial accounting

Accepted Answer

Managerial accounting involves analyzing business operations for internal decision making and does not have to follow any rules issued by standard-setting bodies such as GAAP. Accounting, bookkeeping, and financial accounting are all related to external reporting and must follow GAAP rules.

Question 16

What reports operating results (revenues minus expenses) for a given time period ending at a specified date?
A) Balance sheet
B) Statement of owner's equity
C) Statement of cash flows
D) Income statement

Accepted Answer

The income statement reports the operating results of a business for a given time period, typically ending at the end of the fiscal year or quarter. It shows the revenues earned by the business during the period and the expenses incurred in earning those revenues, resulting in the net income or loss for the period.

Question 17

What describes the basic transaction data such as its date, purpose, and amount and includes cash receipts, canceled checks, invoices, customer refunds, employee time sheet, etc?
A) Balance sheet
B) Source document
C) Transaction
D) Financial statement

Accepted Answer

Source documents are the basic transactional data that provide evidence of the transactions such as the date, purpose, and amount of the transaction. Examples of source documents are cash receipts, canceled checks, invoices, customer refunds, and employee time sheets. The balance sheet and financial statements are summary reports of the transactions. The transaction is the actual exchange of goods or services for money.

Question 18

Partnership agreements typically include all of the following, except:
A) Expectations for sharing profits and losses
B) Partner's salary requirements
C) Methods for conflict resolution
D) Shareholder's expectations for a successful business

Accepted Answer

Partnership agreements focus on the roles, responsibilities, and expectations of the partners involved, not shareholders, as shareholders are typically associated with corporations, not partnerships.

Question 19

Which of the following is not a type of business?
A) Sole partnership
B) Partnership
C) Limited partnership
D) Corporation

Accepted Answer

The correct term is "sole proprietorship," not "sole partnership."

Question 20

What occurs when businesses sell products or services for more than they cost to produce?
A) Expense
B) Profit
C) Loss
D) Revenue

Accepted Answer

When businesses sell products or services for more than they cost to produce, they make a profit.

Quiz 1: Business Basics

What analyzes the transactional information of the business so the owners and investors can make sound economic decisions?

Which form of business recommends a legal agreement between two or more business partners that outlines core business issues?

What is the function of the sales department?

What is a dividend?

What is a hybrid entity that has the legal protections of a corporation and the ability to be taxed (one time) as a partnership?

What is the fundamental difference found in a limited partnership?

What involves preparing financial reports that provide information about the business's performance to external parties such as investors, creditors, and tax authorities?

Which of the following financial statements gives an accounting picture of property owned by a company and of claims against the property on a specific date?

What is an asset?

What is the function of the marketing department?

What tracks and communicates changes in the shareholder's earnings?

What refers to the amount earned resulting from the delivery or manufacture of a product or from the rendering of a service?

What is the rate at which the net present value of an investment equals zero?

What is revenue?

What involves analyzing business operations for internal decision making and does not have to follow any rules issued by standard-setting bodies such as GAAP?

What reports operating results (revenues minus expenses) for a given time period ending at a specified date?

What describes the basic transaction data such as its date, purpose, and amount and includes cash receipts, canceled checks, invoices, customer refunds, employee time sheet, etc?

Partnership agreements typically include all of the following, except:

Which of the following is not a type of business?

What occurs when businesses sell products or services for more than they cost to produce?