Which of the following best defines the term "equity"?

• A. Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants
• B. Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants
• C. A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
• D. The residual interest in the assets of the entity after deducting all its liabilities

Which of the following is the term that describes total net sales minus total expenses?

• A. Net income
• B. Operating expenses
• C. Total income
• D. Current assets

The following requirements are characteristic of which term below?
Must be reported on the balance sheet; must be owned or controlled by the company; and must possess expected future benefits.

• A. Liabilities
• B. Assets
• C. Contributed capital
• D. Owners' equity

Why is accounting for short-term employee benefits generally a straightforward process?

• A. Because short-term employee benefits are not provided in exchange for the service of the employee
• B. Because the employer is required to incorporate actuarial assumptions into measurement of the obligation and the expenses
• C. Because short-term employee benefit obligations are measured on a discounted basis
• D. Because no actuarial assumptions are required to measure the obligation or cost and there is no possibility of any actuarial gain or loss

Which of the following is true of accrual accounting?

• A. The recognition of revenue involves the receipt or payment of cash, while the recording of expense does not
• B. Neither the recognition of revenue nor the recording of expense necessarily involves the receipt or payment of cash
• C. It rests on a primary guiding principle, which is recognition
• D. It entails recording income or expenditure only when money comes into or leaves the company