Essay about Accounting Questions and Answers

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accounting quiz 1
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1 The primary purpose of accounting is to determine whether the business entity is profitable or unprofitable in its operations.

A) True
B) False This is the correct answer.
Feedback: The primary purpose of accounting is to provide information that is useful for decision-making purposes. Accounting is 'not an end', but rather it is a 'means to an end.' LO 1
2 Costs, prices, sales volume, profits, and return on investment are all accounting measurements.

A) True This is the correct answer.
B) False
Feedback: A clear understanding of accounting terms and concepts is required of those who have a financial interest in an enterprise if they are to understand and communicate about the enterprise. Accounting
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LO 3
11 Return of investment and return on investment refer to the same thing--the amount returned at the end of the investment period.

A) True
B) False This is the correct answer.
Feedback: Return of investment refers to a return of the initial investment at the end of the investment period. Return on investment refers to receiving an excess over the initial investment at the end of the investment period. LO 3
12 If you invest $50,000 and receive $52,500 at the end of the investment period, the return on your investment is 5 percent.

A) True This is the correct answer.
B) False
Feedback: $2,500 / $50,000 = 0.05 = 5%.
13 The primary financial statements are an income statement and a balance sheet.

A) True
B) False This is the correct answer.
Feedback: The primary financial statements include: (1) a balance sheet, (2) an income statement, and (3) a statement of cash flows. LO 3
14 One financial statement that covers a specific period of time is the balance sheet.

A) True
B) False This is the correct answer.
Feedback: The balance sheet is a position statement that shows where the company stands in financial terms at a specific date, not for a specific time period. LO 3
15 Externally reported financial information and financial statements are primarily historical in nature.

A) True This is the correct answer.
B) False
Feedback: One of the weaknesses of external reports is timing. Such reports show what has happened in the past and do not

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