Question 1

Liabilities are the owner's claim on assets.

Accepted Answer

Liabilities are the claims of creditors on assets, while owner's equity is the owner's claim on assets.

Question 2

Return on assets is useful to decision makers for evaluating management, analyzing and forecasting profits, and in planning activities.

Accepted Answer

Return on assets (ROA) is a ratio used to measure how profitable a company is relative to its total assets. Decision makers can use this ratio to evaluate how effectively management is using resources to generate profits, analyze and forecast future profits, and plan activities such as investments or expansion.

Question 3

The accounting equation can be restated as:
 Assets - Equity = Liabilities.

Accepted Answer

This is the correct restatement of the accounting equation.

Question 4

A net loss occurs when revenues exceed expenses.

Accepted Answer

A net loss occurs when expenses exceed revenues.

Question 5

Strategic management is the process of determining the right mix of operating activities for the type of organization, its plans, and its market.

Accepted Answer

Strategic management involves analyzing an organization's external and internal environment, setting goals and objectives, developing strategies to achieve those goals, and allocating resources and responsibilities to implement the strategies. It is a crucial process in determining the appropriate operating activities for an organization based on its context and desired outcomes.

Question 6

Every business transaction leaves the accounting equation in balance.

Accepted Answer

The accounting equation is Assets = Liabilities + Equity. Every transaction affects at least two of these three elements, ensuring that the equation stays in balance.

Question 7

From an accounting perspective, an event is a happening that affects the accounting equation, but cannot be measured.

Accepted Answer

An event is a happening that affects the accounting equation and can be measured in monetary terms.

Question 8

Assets are the resources a company owns or controls that are expected to yield future benefits.

Accepted Answer

Assets are defined as the resources a company owns or controls that are expected to yield future benefits in the form of increased value, goodwill or income.

Question 9

Common stock is an increase in equity from a company's earnings activities.

Accepted Answer

The answer of Common stock is an increase in equity...

Question 10

Net income occurs when revenues exceed expenses.

Accepted Answer

Net income, also known as profit, is the amount by which revenues exceed expenses. This means that after all expenses have been paid, the company has profits leftover.

Question 11

Investing activities are the means an organization uses to pay for resources like land, buildings, and equipment to carry out its plans.

Accepted Answer

The answer of Investing activities are the means an organization...

Question 12

An external transaction is an exchange within an entity that may or may not affect the accounting equation.

Accepted Answer

The answer of An external transaction is an exchange within...

Question 13

Investing activities are the acquiring and disposing of resources that an organization uses to acquire and sell its products or services.

Accepted Answer

The answer of Investing activities are the acquiring and disposing...

Question 14

Dividends are expenses.

Accepted Answer

Dividends are not expenses, but rather a portion of a company's profits that are distributed to shareholders. They do not reduce the company's net income or earnings, but rather represent a return on investment for shareholders.

Question 15

Revenues are increases in equity from a company's sales of products and services to customers.

Accepted Answer

Revenues are indeed increases in equity from a company's sales of products and services to customers.

Question 16

Owner financing refers to resources contributed by creditors or lenders.

Accepted Answer

Owner financing refers to resources contributed by the owner of the property, not the creditors or lenders.

Question 17

A stockholder's investment in a business normally creates an asset (cash), a liability (note payable), and stockholders' equity (investment.)

Accepted Answer

The answer of A stockholder's investment in a business normally...

Question 18

Stockholders' equity is increased when cash is received from customers in payment of previously recorded accounts receivable.

Accepted Answer

Stockholders' equity is not directly affected by the receipt of cash from customers for previously recorded accounts receivable, as this transaction only affects the asset side of the balance sheet (increasing cash and decreasing accounts receivable) without impacting stockholders' equity.

Question 19

The accounting equation implies that:
 Assets + Liabilities = Equity.

Accepted Answer

The answer of The accounting equation implies that:
 Assets +...

Question 20

Return on assets is also known as return on investment.

Accepted Answer

Return on assets (ROA) and return on investment (ROI) are often used interchangeably, as they both measure a company's profitability in relation to its investments. However, ROI is a broader term that can also refer to returns on equity, capital, or other investments beyond just assets.

Quiz 1: Accounting in Business