Salesforce 2026 Test Bank: Understanding Custom Apps and User Access

What is the primary objective of financial accounting? a) To help employees improve their productivity b) To ensure customer satisfaction c) To provide financial information to external users d) To increase product sales Rationale: Financial accounting is designed to provide financial information to external users such as investors, creditors, and regulatory authorities. The other options focus on internal or operational objectives rather than financial reporting. Which financial statement shows a company’s financial position at a specific point in time? a) Income statement b) Statement of cash flows c) Balance sheet d) Statement of owner’s equity Rationale: The balance sheet reports assets, liabilities, and equity at a specific date. The income statement shows performance over a period, the cash flow statement reports cash movements, and the statement of owner’s equity explains equity changes. Which of the following is an example of a liability? a) Cash b) Accounts receivable c) Equipment d) Accounts payable Rationale: Accounts payable is a liability because it represents amounts owed to creditors. Cash, accounts receivable, and equipment are assets owned by the company. What is the basic accounting equation? a) Assets = Revenue – Expenses b) Assets = Liabilities + Owner’s Equity c) Assets = Owner’s Equity – Liabilities d) Assets = Liabilities – Capital Rationale: The accounting equation states that assets are financed by liabilities and owner’s equity. The other options do not correctly represent this fundamental rule. In business, what does the term "capital" refer to? a) Company profits b) Money or assets invested in a business by the owner c) Employee wages d) Business loans only Rationale: Capital refers to assets or funds invested by the owner in the business. Loans, wages, and profits are not considered owner’s capital. Which of the following best describes a sole proprietorship? a) A business owned by shareholders b) A business owned by two or more partners c) A business owned and managed by a single individual d) A government-owned organization Rationale: A sole proprietorship is a business owned and run by one individual. The other options describe partnerships, corporations, or public institutions. What does GDP stand for in economics? a) General Domestic Profit b) Gross Demand Price c) Gross Domestic Product d) Government Development Program Rationale: GDP stands for Gross Domestic Product, which measures the total value of goods and services produced in a country. The other options are incorrect terms. Which social responsibility involves companies minimizing pollution and conserving resources? a) Ethical responsibility b) Legal responsibility c) Philanthropic responsibility d) Environmental responsibility Rationale: Environmental responsibility refers to actions taken to protect the environment. Ethical refers to doing what is morally right, legal means following laws, and philanthropic means donating to society. What does “revenue” mean in accounting? a) Total money spent by a company b) Income earned from sales or services c) Losses incurred during operations d) Owner’s investment in the business Rationale: Revenue is the money earned from business activities like sales. Expenses are money spent, losses are negative income, and owner’s investments are capital, not revenue. Which of the following documents is used to record daily business transactions? a) Trial balance b) Balance sheet c) Income statement d) Journal Rationale: A journal is the book of original entry where daily transactions are recorded first. The balance sheet, trial balance, and income statement are prepared later from journal entries. Labor laws aim to protect workers' rights. Which of the following is a key purpose of labor legislation? A. To increase company profits B. To ensure fair wages and safe working conditions C. To reduce employee hours only D. To eliminate employment contracts Rationale: Labor legislation primarily ensures fair pay, safe working environments, and protection against exploitation. The other options focus on business interests or partial labor aspects. Which financial statement shows a company’s financial position at a specific point in time? A. Balance Sheet B. Income Statement C. Cash Flow Statement D. Trial Balance Rationale: The balance sheet shows assets, liabilities, and equity at a specific date. The other statements either show performance over time or are used internally for accuracy checks. Which of the following is considered a current asset? A. Accounts Receivable B. Buildings C. Long-term Loans D. Owner’s Capital Rationale: Accounts receivable are expected to be converted into cash within a year. Buildings and loans are long-term, while capital is equity. The principle of “separate legal entity” in business means: A. The business is legally separate from its owners B. Owners are personally responsible for all business debts C. Business and owner finances are the same D. Only partnerships follow this principle Rationale: This principle means a company has its own legal identity separate from owners. The other options contradict this or are limited to specific business types. What is the main objective of bookkeeping? A. To systematically record financial transactions B. To calculate profit only C. To file taxes D. To create company policies Rationale: Bookkeeping is focused on accurate and organized recording of financial data. Calculations and taxes are part of accounting, not bookkeeping. A breach of contract occurs when: A. One party fails to fulfill their contractual obligations B. A contract is signed by both parties C. A verbal agreement is made D. Parties negotiate terms Rationale: Failure to perform agreed duties is a breach. Signing, negotiating, or verbal agreements do not mean a breach by themselves. Which tax is directly paid by individuals based on income? A. Income Tax B. Value Added Tax C. Customs Duty D. Excise Tax Rationale: Income tax is based on earnings. VAT and excise tax are indirect taxes, and customs duty applies to imported goods. In accounting, depreciation is used to: A. Allocate the cost of an asset over its useful life B. Increase an asset’s value C. Record cash payments D. Eliminate liabilities Rationale: Depreciation spreads asset cost over its useful life. It does not increase value or affect liabilities directly. Which of the following is an example of corporate social responsibility (CSR)? A. Donating to community projects and reducing environmental impact B. Increasing product prices C. Ignoring labor unions D. Avoiding tax payments Rationale: CSR involves actions that benefit society and the environment. The other actions are unethical or profit-centered. Double-entry bookkeeping means: A. Every transaction affects at least two accounts (debit and credit) B. Each transaction is recorded only once C. Transactions are recorded monthly D. Debits and credits are optional Rationale: Double-entry ensures accuracy by recording both debit and credit sides. Single recording is single-entry, and debits/credits are never optional. Which document legally proves the existence of a partnership business? A. Certificate of Incorporation B. Partnership Deed C. Memorandum of Association D. Articles of Association Rationale: A partnership deed outlines rights, duties, and profit-sharing of partners. The other documents are used for companies, not partnerships. Which accounting principle states that revenue should be recorded when it is earned, not when cash is received? A. Consistency Principle B. Accrual Principle C. Going Concern Principle D. Conservatism Principle Rationale: The accrual principle records income when earned. The other principles relate to business continuity, caution, and uniformity. What is the main function of a labor union? A. Increase company profits B. Hire new employees C. Protect workers’ rights and negotiate better working conditions D. Train business managers Rationale: Labor unions represent employees to ensure fair wages and safe conditions. The other options are management functions. Which of the following is an example of a liability in accounting? A. Cash B. Furniture C. Bank Loan D. Inventory Rationale: Bank loans are obligations the business must repay. Cash and inventory are assets, not liabilities. In business law, a contract without free consent is considered: A. Valid B. Voidable C. Enforceable D. Completed Rationale: Contracts without free consent (due to fraud, coercion, etc.) are voidable. They can be rejected by the affected party. A company’s profit distributed to shareholders is called: A. Capital B. Reserve C. Dividend D. Interest Rationale: Dividends are profits shared with shareholders. Capital is investment, reserves are retained earnings. Which financial statement shows profit or loss during a period? A. Balance Sheet B. Income Statement C. Cash Flow Statement D. Owner’s Equity Statement Rationale: The income statement reports revenue and expenses to determine profit or loss. The other statements show position or cash movement. Which law protects consumers from unfair trade practices? A. Companies Act B. Consumer Protection Act C. Partnership Act D. Labor Relations Act Rationale: The Consumer Protection Act prevents exploitation in trade. The other acts focus on businesses or employment. What is the purpose of an audit? A. To create financial statements B. To verify the accuracy of financial statements C. To calculate employee salaries D. To pay taxes Rationale: Auditing ensures financial statements are correct. Preparing statements and paying taxes are different processes. Which of the following best describes equity? A. Total liabilities of a business B. Total assets minus expenses C. Owner's claim on business assets after liabilities are deducted D. Money borrowed from banks Rationale: Equity represents the owner's remaining interest after debts. Borrowed funds and expenses do not represent ownership. In accounting, drawings refer to: A. Business profits B. Business liabilities C. Money or goods taken by the owner for personal use D. Office expenses Rationale: Drawings are personal withdrawals by owners. Profits and liabilities are unrelated. Which of the following is an example of direct tax? A. Income Tax B. VAT C. Sales Tax D. Customs Duty Rationale: Direct taxes are paid directly by individuals to the government. Others are indirect taxes. A person who brings capital and shares profits but does not take part in daily operations is called: A. Active Partner B. Sleeping Partner C. Nominal Partner D. Minor Partner Rationale: A sleeping partner only invests and shares profits but does not manage the business. What is the purpose of the Social Security Fund? A. Provide business loans B. Support import/export C. Offer financial support to retired or unemployed individuals D. Train accountants Rationale: Social security helps retirees and unemployed individuals. Other options relate to business finance. Which book records credit sales of goods? A. Cash Book B. Purchase Journal C. Sales Journal D. Ledger Rationale: The sales journal records all credit sales. Cash book records cash transactions only.