Financial Accounting Revision
questions 2026 latest updated
questions with all clear and
verified answers
Assets - ANSWER-Economic resources that the business plans to use in the future to
make money.
Balance sheet - ANSWER-The financial report that shows business assets, liabilities,
and owner's equity as of a particular day.
Balanced books - ANSWER-When "Where did it go?" equals "Where did it come from?"
or wen a company's assets equal its liabilities plus owner's equity.
Capital - ANSWER-Assets that help a business or a person make money.
Capitalizer - ANSWER-When money is changed into another asset that helps the
business make money.
Creditors - ANSWER-Outsiders to whom the company owes money.
Current assets - ANSWER-Assets that can be used to pay current liabilities.
Current liabilities - ANSWER-Debts that must be paid within one year or one operating
cycle, whichever is longer.
Financial accounting - ANSWER-The skill of producing financial statements from
business transactions.
Fiscal Year - ANSWER-The 12-month period a business uses to report the results of its
operations.
Heading - ANSWER-All financial statement have a standard 3-line heading as follows:
1. Name of Company
2. Name of the Report
3. Date (balance sheet) or Period of Time (all other statements)
Liabilities - ANSWER-Debts owed to people outside the company.
Liquid - ANSWER-The easier it is to change an asset into cash, the more liquid that
asset is.
,Operating cycle - ANSWER-The natural period of time before certain business activities
tend to repeat- normally one year.
Owner's equity - ANSWER-The portion of the business the owner gets to keep after
paying off all creditors.
Sole proprietor - ANSWER-The individual owner (without partners) of an unincorporated
business.
Basic accounting equation - ANSWER-Assets = liabilities + Owner's equity
OR
Owner's equity = Assets - Liabilities
OR
Liabilities = Assets - Owner's equity
Business entity - ANSWER-The financial statements report about a single business.
Every business gets its own set of books. Accountants do not mix in the owner's
personal financial info.
Current - ANSWER-"Current" liabilities are those debts that must be paid within one
year of one operating cycle, whichever is longer.
Current ratio - ANSWER-(Current assets)/(Current liabilities)= Current ratio
Debt Ratio - ANSWER-(Total liabilities)/(Total assets)= debt ratio or 100%- equity ratio=
debt ratio
Double entry accounting - ANSWER-Recording business transactions twice: once to
show where the money came from , and another time to show where the money went.
Equity ratio - ANSWER-(Total equity)/(Total assets)= Equity ratio
OR
100% - Debt ratio = Equity ratio
Liability account - ANSWER-Payable or Deferred
Equity Account - ANSWER-Owner's name, Withdrawal, Dividend, Stock.
Expense Account - ANSWER-Expense. (Every expense account on the CLEP exam
should have "exp." at then end, such as "rent exp.")
Income Account - ANSWER-Sales, income or revenue.
Asset account - ANSWER-Receivable, prepaid, investment, inventory. Many asset
accounts merely list the name of the asset, such as "land" and "equipment" without any
, special identifying word. Whenever CLEP questions list an account without one of these
key words, you should assume that it is an asset account.
Account - ANSWER-A place on the financial books to keep track of financial information
that the owner wants to know.
Accumulated depreciation - ANSWER-The contra-asset account that accumulates all
the depreciation of long-lived assets over the years.
Chart of accounts - ANSWER-An account that gets subtracted from its related account.
Contra accounts always get reported as negative numbers.
Contra-asset account - ANSWER-An account that gets subtracted from an asset
account. (IE Accumulated depreciation or Allowance for Doubtful Accounts.)
Cost of goods sold - ANSWER-The cost to the business of the goods that it sells.
Depreciation expense - ANSWER-The amount of long-lived assets used up during
operations.
Expensed - ANSWER-Money is "expensed" if it is gone forever- if there remains no
useful asset as a result of the spending. The opposite of capitalized.
Expenses - ANSWER-Accounts that explain why assets went down from operations.
Income - ANSWER-Accounts that explain why assets went up from operations.
Income Statement - ANSWER-The financial report that shows the result of business
operations over a period of time.
Inventory - ANSWER-A supply of items a business has on hand
Net - ANSWER-A word that means a subtraction has occured
Net income - ANSWER-Income-Expenses=Net Income
Netted - ANSWER-When numbers are "netted" they combine so that the negative
number get subtracted from the positive numbers.
Percentage analysis - ANSWER-A financial statement analysis thecnique in which one
number is assigned as 100% and all other numbers are expressed as a percentage of
the first number. IN balance sheets, the key number is total assets. In income
statements, the key number is sales.
Sales - ANSWER-An income account that explains the increase in business assets as a
result of selling goods.
questions 2026 latest updated
questions with all clear and
verified answers
Assets - ANSWER-Economic resources that the business plans to use in the future to
make money.
Balance sheet - ANSWER-The financial report that shows business assets, liabilities,
and owner's equity as of a particular day.
Balanced books - ANSWER-When "Where did it go?" equals "Where did it come from?"
or wen a company's assets equal its liabilities plus owner's equity.
Capital - ANSWER-Assets that help a business or a person make money.
Capitalizer - ANSWER-When money is changed into another asset that helps the
business make money.
Creditors - ANSWER-Outsiders to whom the company owes money.
Current assets - ANSWER-Assets that can be used to pay current liabilities.
Current liabilities - ANSWER-Debts that must be paid within one year or one operating
cycle, whichever is longer.
Financial accounting - ANSWER-The skill of producing financial statements from
business transactions.
Fiscal Year - ANSWER-The 12-month period a business uses to report the results of its
operations.
Heading - ANSWER-All financial statement have a standard 3-line heading as follows:
1. Name of Company
2. Name of the Report
3. Date (balance sheet) or Period of Time (all other statements)
Liabilities - ANSWER-Debts owed to people outside the company.
Liquid - ANSWER-The easier it is to change an asset into cash, the more liquid that
asset is.
,Operating cycle - ANSWER-The natural period of time before certain business activities
tend to repeat- normally one year.
Owner's equity - ANSWER-The portion of the business the owner gets to keep after
paying off all creditors.
Sole proprietor - ANSWER-The individual owner (without partners) of an unincorporated
business.
Basic accounting equation - ANSWER-Assets = liabilities + Owner's equity
OR
Owner's equity = Assets - Liabilities
OR
Liabilities = Assets - Owner's equity
Business entity - ANSWER-The financial statements report about a single business.
Every business gets its own set of books. Accountants do not mix in the owner's
personal financial info.
Current - ANSWER-"Current" liabilities are those debts that must be paid within one
year of one operating cycle, whichever is longer.
Current ratio - ANSWER-(Current assets)/(Current liabilities)= Current ratio
Debt Ratio - ANSWER-(Total liabilities)/(Total assets)= debt ratio or 100%- equity ratio=
debt ratio
Double entry accounting - ANSWER-Recording business transactions twice: once to
show where the money came from , and another time to show where the money went.
Equity ratio - ANSWER-(Total equity)/(Total assets)= Equity ratio
OR
100% - Debt ratio = Equity ratio
Liability account - ANSWER-Payable or Deferred
Equity Account - ANSWER-Owner's name, Withdrawal, Dividend, Stock.
Expense Account - ANSWER-Expense. (Every expense account on the CLEP exam
should have "exp." at then end, such as "rent exp.")
Income Account - ANSWER-Sales, income or revenue.
Asset account - ANSWER-Receivable, prepaid, investment, inventory. Many asset
accounts merely list the name of the asset, such as "land" and "equipment" without any
, special identifying word. Whenever CLEP questions list an account without one of these
key words, you should assume that it is an asset account.
Account - ANSWER-A place on the financial books to keep track of financial information
that the owner wants to know.
Accumulated depreciation - ANSWER-The contra-asset account that accumulates all
the depreciation of long-lived assets over the years.
Chart of accounts - ANSWER-An account that gets subtracted from its related account.
Contra accounts always get reported as negative numbers.
Contra-asset account - ANSWER-An account that gets subtracted from an asset
account. (IE Accumulated depreciation or Allowance for Doubtful Accounts.)
Cost of goods sold - ANSWER-The cost to the business of the goods that it sells.
Depreciation expense - ANSWER-The amount of long-lived assets used up during
operations.
Expensed - ANSWER-Money is "expensed" if it is gone forever- if there remains no
useful asset as a result of the spending. The opposite of capitalized.
Expenses - ANSWER-Accounts that explain why assets went down from operations.
Income - ANSWER-Accounts that explain why assets went up from operations.
Income Statement - ANSWER-The financial report that shows the result of business
operations over a period of time.
Inventory - ANSWER-A supply of items a business has on hand
Net - ANSWER-A word that means a subtraction has occured
Net income - ANSWER-Income-Expenses=Net Income
Netted - ANSWER-When numbers are "netted" they combine so that the negative
number get subtracted from the positive numbers.
Percentage analysis - ANSWER-A financial statement analysis thecnique in which one
number is assigned as 100% and all other numbers are expressed as a percentage of
the first number. IN balance sheets, the key number is total assets. In income
statements, the key number is sales.
Sales - ANSWER-An income account that explains the increase in business assets as a
result of selling goods.
