ACG 2021 Chapter 1; Questions & Answers
100% Pass
Financial Accounting CORRECT ANSWER-Communicates financial information, highly
summarized, MUST adhere to GAAP. Used by external decision makers.
Managerial Accounting CORRECT ANSWER-More detailed information specific to
management's needs, does not have to follow GAAP. Used by internal decision makers.
Profitability CORRECT ANSWER-Ability to earn enough income to attract and keep
investment capital
Liquidity CORRECT ANSWER-Have enough cash available to pay debts when they are due
Sole Proprietorship CORRECT ANSWER-One owner, controlled apart from personal
interests, not a separate legal entity, not incorporated, duration of life limited by choice or
death of owner
Partnership CORRECT ANSWER-Two or more owners, controlled apart from the partners'
personal interests, not a separate legal entity, not incorporated, limited by choice or death of
any partner
Corporation CORRECT ANSWER-A business unit that is granted a state charter,
recognized as a separate legal entity, owners are stockholders but do not generally run day to
day operations, indefinite life
, ACG 2021 Chapter 1; Questions & Answers
100% Pass
Operating Activities CORRECT ANSWER-All cash inflows and outflows related to the
normal operations of a business (ex. selling goods and services, paying normal operating
expenses, employing workers, paying taxes, etc.)
Investing Activities CORRECT ANSWER-All cash inflows and outflows related to the
acquisition or sale of productive resources that will help the business achieve its goals and
objectives (ex. buying or selling of land, buildings, equipment, and other resources that are used
in the operation of the business)
Financing Activities CORRECT ANSWER-All cash inflows and outflows related to external
sources of funding (capital) for the business (ex. obtaining funding from creditors or owners,
and repaying creditors or paying a return (dividend) to owners
Management CORRECT ANSWER-those responsible for operating the business, meeting
profitability and liquidity goals
Direct Financial Interest CORRECT ANSWER-Depend on accounting information to report
on how the business has performed, as an indicator of how it will do in the future (Investors and
Creditors)
Indirect Financial Interest CORRECT ANSWER-Depend on accounting information to help
make decisions on public issues (tax authorities, regulatory agencies, financial advisors, lawyers,
suppliers, etc.)
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