BUS-A 200 - FOUNDATIONS OF ACCOUNTING (NONMAJORS) | EXAM
QUESTIONS AND CORRECT ANSWERS | VERIFIED ACCOUNTING
LATEST 2026/2027
BUS-A 200 Foundations of Accounting (Nonmajors) (3 cr.)
Q1: What is the primary purpose of accounting?
A1: To provide financial information that is useful to internal and external
users in making economic decisions.
Q2: What are the two main fields of accounting?
A2: Financial accounting and managerial accounting.
Q3: Which field of accounting is primarily concerned with external users?
A3: Financial accounting.
Q4: Which field of accounting is primarily concerned with internal users?
A4: Managerial accounting.
Q5: What is the basic accounting equation?
A5: Assets = Liabilities + Stockholders' Equity.
Q6: Define "Asset."
,A6: Resources owned by a business that are expected to provide future
economic benefits.
Q7: Define "Liability."
A7: Debts or obligations of a business that require giving up assets in the
future.
Q8: Define "Stockholders' Equity."
A8: The owners' claim on the total assets of the business; it is equal to
Assets minus Liabilities.
Q9: What are the two main components of Stockholders' Equity?
A9: Common Stock (paid-in capital) and Retained Earnings.
Q10: What is Retained Earnings?
A10: The cumulative net income retained in the business after dividends
have been paid out.
Q11: If Assets are $100,000 and Liabilities are $40,000, what is
Stockholders' Equity?
A11: $60,000.
Q12: If Liabilities are $30,000 and Stockholders' Equity is $70,000, what
are Assets?
A12: $100,000.
Q13: What is the effect on the accounting equation when a company
borrows $10,000 from a bank?
A13: Assets increase by $10,000; Liabilities increase by $10,000. Equity is
unchanged.
,Q14: What is the effect on the accounting equation when a company
issues stock for $5,000 cash?
A14: Assets increase by $5,000; Stockholders' Equity (Common Stock)
increases by $5,000.
Q15: What is the effect on the accounting equation when a company
purchases supplies for $2,000 cash?
A15: One Asset (Supplies) increases by $2,000; another Asset (Cash)
decreases by $2,000. Total assets unchanged.
Q16: What are the three categories of the cash flow statement?
A16: Operating, Investing, and Financing activities.
Q17: Is purchasing land an operating, investing, or financing activity?
A17: Investing activity.
Q18: Is borrowing money from a bank an operating, investing, or
financing activity?
A18: Financing activity.
Q19: Is paying employee salaries an operating, investing, or financing
activity?
A19: Operating activity.
Q20: What does the acronym GAAP stand for?
A20: Generally Accepted Accounting Principles.
Q21: In the US, which body is primarily responsible for setting GAAP?
A21: The Financial Accounting Standards Board (FASB).
, Q22: What is the cost principle?
A22: Assets should be recorded at their original cost at the time of
acquisition.
Q23: What is the going concern assumption?
A23: The assumption that a business will remain in operation for the
foreseeable future.
Q24: What is the monetary unit assumption?
A24: Only transaction data that can be expressed in terms of money can
be included in accounting records.
Q25: What is the economic entity assumption?
A25: The activities of the business must be kept separate from the
activities of the owner(s).
Part 2: Financial Statements (26-50)
Q26: What are the four basic financial statements?
A26: Income Statement, Statement of Retained Earnings, Balance Sheet,
and Statement of Cash Flows.
Q27: What does the Income Statement report?
A27: The success or failure of the business's operations for a specific
period of time (revenues and expenses).
Q28: What is the formula for Net Income?
A28: Revenues minus Expenses.
QUESTIONS AND CORRECT ANSWERS | VERIFIED ACCOUNTING
LATEST 2026/2027
BUS-A 200 Foundations of Accounting (Nonmajors) (3 cr.)
Q1: What is the primary purpose of accounting?
A1: To provide financial information that is useful to internal and external
users in making economic decisions.
Q2: What are the two main fields of accounting?
A2: Financial accounting and managerial accounting.
Q3: Which field of accounting is primarily concerned with external users?
A3: Financial accounting.
Q4: Which field of accounting is primarily concerned with internal users?
A4: Managerial accounting.
Q5: What is the basic accounting equation?
A5: Assets = Liabilities + Stockholders' Equity.
Q6: Define "Asset."
,A6: Resources owned by a business that are expected to provide future
economic benefits.
Q7: Define "Liability."
A7: Debts or obligations of a business that require giving up assets in the
future.
Q8: Define "Stockholders' Equity."
A8: The owners' claim on the total assets of the business; it is equal to
Assets minus Liabilities.
Q9: What are the two main components of Stockholders' Equity?
A9: Common Stock (paid-in capital) and Retained Earnings.
Q10: What is Retained Earnings?
A10: The cumulative net income retained in the business after dividends
have been paid out.
Q11: If Assets are $100,000 and Liabilities are $40,000, what is
Stockholders' Equity?
A11: $60,000.
Q12: If Liabilities are $30,000 and Stockholders' Equity is $70,000, what
are Assets?
A12: $100,000.
Q13: What is the effect on the accounting equation when a company
borrows $10,000 from a bank?
A13: Assets increase by $10,000; Liabilities increase by $10,000. Equity is
unchanged.
,Q14: What is the effect on the accounting equation when a company
issues stock for $5,000 cash?
A14: Assets increase by $5,000; Stockholders' Equity (Common Stock)
increases by $5,000.
Q15: What is the effect on the accounting equation when a company
purchases supplies for $2,000 cash?
A15: One Asset (Supplies) increases by $2,000; another Asset (Cash)
decreases by $2,000. Total assets unchanged.
Q16: What are the three categories of the cash flow statement?
A16: Operating, Investing, and Financing activities.
Q17: Is purchasing land an operating, investing, or financing activity?
A17: Investing activity.
Q18: Is borrowing money from a bank an operating, investing, or
financing activity?
A18: Financing activity.
Q19: Is paying employee salaries an operating, investing, or financing
activity?
A19: Operating activity.
Q20: What does the acronym GAAP stand for?
A20: Generally Accepted Accounting Principles.
Q21: In the US, which body is primarily responsible for setting GAAP?
A21: The Financial Accounting Standards Board (FASB).
, Q22: What is the cost principle?
A22: Assets should be recorded at their original cost at the time of
acquisition.
Q23: What is the going concern assumption?
A23: The assumption that a business will remain in operation for the
foreseeable future.
Q24: What is the monetary unit assumption?
A24: Only transaction data that can be expressed in terms of money can
be included in accounting records.
Q25: What is the economic entity assumption?
A25: The activities of the business must be kept separate from the
activities of the owner(s).
Part 2: Financial Statements (26-50)
Q26: What are the four basic financial statements?
A26: Income Statement, Statement of Retained Earnings, Balance Sheet,
and Statement of Cash Flows.
Q27: What does the Income Statement report?
A27: The success or failure of the business's operations for a specific
period of time (revenues and expenses).
Q28: What is the formula for Net Income?
A28: Revenues minus Expenses.
