PRAXIS 5101 Exam Questions &
Answers (Grade A+)
Assets -
correct answer ✅Something valuable that an entity owns, benefits
from, or has use of, in generating income.
Different types of assets -
correct answer ✅Fixed, variable, intangible, tangible
examples of fixed assets -
correct answer ✅Tangible assets used to generate profit and will
not be turned into cash within the year: "plant," land, computer
equipment, furniture, cars, buildings, and equipment used to make
products
What are variable assets -
correct answer ✅May be transformed to cash sooner; inventory of
product and accounts receivable
What are intangible assets? -
correct answer ✅Not physical-brand names, intellectual property-
are high in value
,PRAXIS 5101 Exam Questions &
Answers (Grade A+)
What is liquidity? -
correct answer ✅How easy it is to turn an item into cash without
losing any money
What is equity? -
correct answer ✅In business, it shows what the owner has
contributed in addition to retained earnings; ownership minus
debts
What is depreciation? -
correct answer ✅Loss of value for any reason.
What is cash flow? -
correct answer ✅the total amount of money being transferred
into and out of a business; revenues and/or expenses
What is GAAP? -
correct answer ✅Generally accepted accounting principles. A set
of rules and practices, having substantial authortitative support,
that accounting profession recognizes as a general guideline for a
financial reporting purposes; standardized how income statements,
balance sheets, and cash flow statements are prepared
,PRAXIS 5101 Exam Questions &
Answers (Grade A+)
How is GAAP used for investors? -
correct answer ✅So investors understand what they are getting
when they receive statements
What does GAAP standardize/cover? -
correct answer ✅Economic activity measurement, timing
disclosures, and how financial statements are prepared and
presented.
Who requires GAAP? -
correct answer ✅Companies regulated by the US Securities and
Exchange Commission (SEC)
Who issues GAAP through pronouncements? -
correct answer ✅Financial Accounting Standards Board (FASB)
Two major types of accounting systems -
correct answer ✅Cash and accrual accounting
What does cash accounting entail? -
correct answer ✅Transactions are counted when money is actually
received or the expenses are paid out.
, PRAXIS 5101 Exam Questions &
Answers (Grade A+)
What does accrual accounting entail? -
correct answer ✅Transactions are counted when orders are made
or delivered-even if no cash has been exchanged.
How does cash and accrual accounting affects taxes? -
correct answer ✅If an item is purchased in delivered in one month
(accrual), but paid for in another month (cash), this affects where it
is recorded for tax purposes.
How does cash and accrual accounting differ? -
correct answer ✅Cash accounting is more advantageous as it gives
the business a better idea of cash on hand, but may not show
correct profits; however, accrual accounting will show correct
profits, but won't reflect actual cash flow.
Fundamental Accounting Equation -
correct answer ✅Assets = Liabilities + Owners' equity; this is the
basis for the balance sheet
What is the accounting cycle? -
correct answer ✅The accounting cycle describes the steps in the
accounting process.
Answers (Grade A+)
Assets -
correct answer ✅Something valuable that an entity owns, benefits
from, or has use of, in generating income.
Different types of assets -
correct answer ✅Fixed, variable, intangible, tangible
examples of fixed assets -
correct answer ✅Tangible assets used to generate profit and will
not be turned into cash within the year: "plant," land, computer
equipment, furniture, cars, buildings, and equipment used to make
products
What are variable assets -
correct answer ✅May be transformed to cash sooner; inventory of
product and accounts receivable
What are intangible assets? -
correct answer ✅Not physical-brand names, intellectual property-
are high in value
,PRAXIS 5101 Exam Questions &
Answers (Grade A+)
What is liquidity? -
correct answer ✅How easy it is to turn an item into cash without
losing any money
What is equity? -
correct answer ✅In business, it shows what the owner has
contributed in addition to retained earnings; ownership minus
debts
What is depreciation? -
correct answer ✅Loss of value for any reason.
What is cash flow? -
correct answer ✅the total amount of money being transferred
into and out of a business; revenues and/or expenses
What is GAAP? -
correct answer ✅Generally accepted accounting principles. A set
of rules and practices, having substantial authortitative support,
that accounting profession recognizes as a general guideline for a
financial reporting purposes; standardized how income statements,
balance sheets, and cash flow statements are prepared
,PRAXIS 5101 Exam Questions &
Answers (Grade A+)
How is GAAP used for investors? -
correct answer ✅So investors understand what they are getting
when they receive statements
What does GAAP standardize/cover? -
correct answer ✅Economic activity measurement, timing
disclosures, and how financial statements are prepared and
presented.
Who requires GAAP? -
correct answer ✅Companies regulated by the US Securities and
Exchange Commission (SEC)
Who issues GAAP through pronouncements? -
correct answer ✅Financial Accounting Standards Board (FASB)
Two major types of accounting systems -
correct answer ✅Cash and accrual accounting
What does cash accounting entail? -
correct answer ✅Transactions are counted when money is actually
received or the expenses are paid out.
, PRAXIS 5101 Exam Questions &
Answers (Grade A+)
What does accrual accounting entail? -
correct answer ✅Transactions are counted when orders are made
or delivered-even if no cash has been exchanged.
How does cash and accrual accounting affects taxes? -
correct answer ✅If an item is purchased in delivered in one month
(accrual), but paid for in another month (cash), this affects where it
is recorded for tax purposes.
How does cash and accrual accounting differ? -
correct answer ✅Cash accounting is more advantageous as it gives
the business a better idea of cash on hand, but may not show
correct profits; however, accrual accounting will show correct
profits, but won't reflect actual cash flow.
Fundamental Accounting Equation -
correct answer ✅Assets = Liabilities + Owners' equity; this is the
basis for the balance sheet
What is the accounting cycle? -
correct answer ✅The accounting cycle describes the steps in the
accounting process.
