FUNDAMENTALS OF ACCOUNTING. EXAM QUESTIONS AND CORRECT DETAILED ANSWERS . GRADE A+

FUNDAMENTALS OF ACCOUNTING. EXAM QUESTIONS AND
CORRECT DETAILED ANSWERS . GRADE A+



QUESTION: Assets = - ANSWER-Liabilities + Owner's Equity




QUESTION: Liabilities = - ANSWER-Assets - Owner's Equity




QUESTION: Owner's Equity = - ANSWER-Assets - Liabilities




QUESTION: Business Entity Concept - ANSWER-must keep personal records separate from business
records




QUESTION: Matching Concept - ANSWER-must record expenses as they are incurred and revenues as
they are earned

(you're matching your revenues with your expenses)




QUESTION: Going Concern Concept - ANSWER-assume your business will be in existence in the future




QUESTION: Historical Cost Concept - ANSWER-you must record the actual (nominal) amount paid for
items (like supplies and equipment)

,QUESTION: GAAP - ANSWER-Generally Accepted Accounting Principles - keeps accounting rules
consistent between

companies




QUESTION: Sole Proprietorship - ANSWER-A business that legally has no separate existence from its
owner. Income and losses are taxed on the individual's personal income tax return




QUESTION: Partnership - ANSWER-arrangement in which two or more individuals share the profits and
liabilities of a business venture




QUESTION: Corporation - ANSWER-legal entity that is separate and distinct from its owners




QUESTION: Income Statement (1. Financial Statement) - ANSWER-Revenues - Expenses = Net Income

(for a specific time period)

TEMPORARY ACCOUNTS




QUESTION: Statement of OE (2. Financial Statement) - ANSWER-Beginning Capital Balance + Investments
- Withdrawals + Revenues - Expenses




QUESTION: Balance Sheet (3. Financial Statement) - ANSWER-Assets = Liabilities + Owner's Equity
(financial position on a particular date)

, PERMANENET ACCOUNTS




QUESTION: Statement of Cash Flows (4. Financial Statement) - ANSWER-4th in Financial Statements




QUESTION: Income Statement: Always DOUBLE underline - ANSWER-Net Income




QUESTION: Balance Sheet: Always DOUBLE underline - ANSWER-Total Assets

Total Liabilities

Total OE




QUESTION: Statement of Owner's Equity: Always DOUBLE underline - ANSWER-Ending Capital




QUESTION: ALWAYS ALPHABETIZE (Income Statement) - ANSWER-EXPENSES ON INCOME STATEMENT




QUESTION: Assets in order of LIQUIDITY (Balance Sheet) - ANSWER-CASH

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