MUHASEBE I

Assets are economic resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. 

The correct answer is A.

Liabilities are defined as a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of the entity’s resources6

Owner’s equity is the total assets of an entity, minus its total liabilities. 

The correct answer is C.

Net income results when revenues exceed expenses and loss results when expenses exceed revenues. In this sense, net income increases owner’s equity while loss decreases owner’s equity. Therefore, net income or loss is the financial result of the performance of a business in a given period.

The correct answer is A.

Income statement reports the revenues and expenses and resulting net income or loss of a company for a specific period of time.

The correct answer is B.

Statement of cash flows is a financial statement that shows the change in cash position of the company over an accounting period.

The correct answer is C.

Balance sheet reports the assets, liabilities, and owner’s equity of the business at a specific date.

The correct answer is D.

In a general sense, Accounting is an information system which provides financial information about the entity for decision makers. This system includes three kinds of basic activities which are identifying, recording and communicating of the financial transactions of an entity.

The correct answer is E.

There are several types of external users and they can be individuals or organizations outside a company such as investors, creditors, taxing authorities, government, customers, suppliers etc. The primary external users are investors and creditors, because they have a direct financial interest in a business.

The correct answer is D.

A sole proprietorship is a business owned and run by one person. They are often small type businesses (e.g. auto repair shops, used-books stores etc.). Usually a small amount of capital is needed and the owner is entitled to all profits. The owner is also personally responsible for all debts and liabilities of business. In short, there is no distinction between the business and its owner, but the accounting records of the business activities are kept separate from the personal records of its owner. 

The correct answer is D.