Praxis Business Education: Content Knowledge (5101) Secrets Study
Guide [2nd Edition]
Praxis Business Education (5101) — Questions 1–20
I. Accounting & Finance
1. Which financial statement shows a company’s revenues and expenses over a period of time?
A) Balance Sheet
B) Income Statement
C) Cash Flow Statement
D) Statement of Retained Earnings
✔ Correct Answer: B — Income Statement
Rationale: The income statement reports revenues, expenses, and net profit or loss for a specific
period.
2. What is the primary purpose of a balance sheet?
A) To show profitability over time
B) To list assets, liabilities, and equity at a specific date
C) To track cash inflows and outflows
D) To report dividends paid
✔ Correct Answer: B — List assets, liabilities, and equity
Rationale: The balance sheet provides a snapshot of a company’s financial position at a given
moment.
3. Which of the following is an asset?
A) Accounts Payable
B) Inventory
C) Loans Payable
D) Retained Earnings
✔ Correct Answer: B — Inventory
Rationale: Assets are resources owned by a business that provide future economic benefits;
inventory is an asset.
4. Double-entry accounting requires each transaction to:
A) Affect only revenue accounts
B) Affect two accounts equally in debit and credit
C) Be recorded once in the ledger
D) Be ignored if it is small
✔ Correct Answer: B — Affect two accounts equally
Rationale: Double-entry ensures that total debits equal total credits, maintaining the accounting
equation.
, 5. Which of the following represents a liability?
A) Cash
B) Accounts Receivable
C) Wages Payable
D) Equipment
✔ Correct Answer: C — Wages Payable
Rationale: Liabilities are obligations owed to others; unpaid wages are a liability.
II. Business Law & Ethics
6. Which legal structure provides limited liability for its owners?
A) Sole proprietorship
B) Partnership
C) Corporation
D) Cooperative
✔ Correct Answer: C — Corporation
Rationale: Owners of corporations (shareholders) are not personally liable for business debts beyond
their investment.
7. Which of the following is an example of a contract?
A) Verbal agreement to mow a neighbor’s lawn for $50
B) A casual conversation about weekend plans
C) A suggestion to meet at a café
D) None of the above
✔ Correct Answer: A — Verbal agreement to mow lawn for $50
Rationale: A valid contract requires offer, acceptance, consideration, and intent to create legal
obligations; verbal agreements can be enforceable.
8. Which ethical principle requires fairness and honesty in business dealings?
A) Transparency
B) Confidentiality
C) Profit maximization
D) Compliance
✔ Correct Answer: A — Transparency
Rationale: Transparency ensures stakeholders have access to truthful and accurate information for
decision-making.
9. Which law regulates workplace discrimination?
A) Fair Labor Standards Act
B) Civil Rights Act
C) Sherman Antitrust Act
D) Securities Exchange Act
✔ Correct Answer: B — Civil Rights Act
Rationale: Title VII of the Civil Rights Act prohibits employment discrimination based on race, color,
religion, sex, or national origin.
10. Intellectual property rights protect:
A) Physical property only
Guide [2nd Edition]
Praxis Business Education (5101) — Questions 1–20
I. Accounting & Finance
1. Which financial statement shows a company’s revenues and expenses over a period of time?
A) Balance Sheet
B) Income Statement
C) Cash Flow Statement
D) Statement of Retained Earnings
✔ Correct Answer: B — Income Statement
Rationale: The income statement reports revenues, expenses, and net profit or loss for a specific
period.
2. What is the primary purpose of a balance sheet?
A) To show profitability over time
B) To list assets, liabilities, and equity at a specific date
C) To track cash inflows and outflows
D) To report dividends paid
✔ Correct Answer: B — List assets, liabilities, and equity
Rationale: The balance sheet provides a snapshot of a company’s financial position at a given
moment.
3. Which of the following is an asset?
A) Accounts Payable
B) Inventory
C) Loans Payable
D) Retained Earnings
✔ Correct Answer: B — Inventory
Rationale: Assets are resources owned by a business that provide future economic benefits;
inventory is an asset.
4. Double-entry accounting requires each transaction to:
A) Affect only revenue accounts
B) Affect two accounts equally in debit and credit
C) Be recorded once in the ledger
D) Be ignored if it is small
✔ Correct Answer: B — Affect two accounts equally
Rationale: Double-entry ensures that total debits equal total credits, maintaining the accounting
equation.
, 5. Which of the following represents a liability?
A) Cash
B) Accounts Receivable
C) Wages Payable
D) Equipment
✔ Correct Answer: C — Wages Payable
Rationale: Liabilities are obligations owed to others; unpaid wages are a liability.
II. Business Law & Ethics
6. Which legal structure provides limited liability for its owners?
A) Sole proprietorship
B) Partnership
C) Corporation
D) Cooperative
✔ Correct Answer: C — Corporation
Rationale: Owners of corporations (shareholders) are not personally liable for business debts beyond
their investment.
7. Which of the following is an example of a contract?
A) Verbal agreement to mow a neighbor’s lawn for $50
B) A casual conversation about weekend plans
C) A suggestion to meet at a café
D) None of the above
✔ Correct Answer: A — Verbal agreement to mow lawn for $50
Rationale: A valid contract requires offer, acceptance, consideration, and intent to create legal
obligations; verbal agreements can be enforceable.
8. Which ethical principle requires fairness and honesty in business dealings?
A) Transparency
B) Confidentiality
C) Profit maximization
D) Compliance
✔ Correct Answer: A — Transparency
Rationale: Transparency ensures stakeholders have access to truthful and accurate information for
decision-making.
9. Which law regulates workplace discrimination?
A) Fair Labor Standards Act
B) Civil Rights Act
C) Sherman Antitrust Act
D) Securities Exchange Act
✔ Correct Answer: B — Civil Rights Act
Rationale: Title VII of the Civil Rights Act prohibits employment discrimination based on race, color,
religion, sex, or national origin.
10. Intellectual property rights protect:
A) Physical property only
