PRAXIS 5101 EXAM QUESTIONS AND ANSWERS (VERIFIED AND
PRAXIS 5101
WELL DETAILED ANSWERS) LATEST 2025/2026
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1. Assets Something valuable that an entity owns, benefits from, or has use of, in generating
income.
2. Different types of Fixed, variable, intangible, tangible
assets
3. examples of fixed Tangible assets used to generate profit and will not be turned into cash within the
assets year: "plant," land, computer equipment, furniture, cars, buildings, and equip-
ment used to make products
4. What are variable May be transformed to cash sooner; inventory of product and accounts receivable
assets
5. What are intangi- Not physical-brand names, intellectual property- are high in value
ble assets?
6. What is liquidity? How easy it is to turn an item into cash without losing any money
7. What is equity? In business, it shows what the owner has contributed in addition to retained
earnings; ownership minus debts
8. What is deprecia- Loss of value for any reason.
tion?
9. What is cash the total amount of money being transferred into and out of a business; revenues
flow? and/or expenses
10. What is GAAP? 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
11. So investors understand what they are getting when they receive statements
, PRAXIS 5101
Study online at https://quizlet.com/_5v7zzg
How is GAAP
used for in-
vestors?
12. What does Economic activity measurement, timing disclosures, and how financial statements
GAAP standard- are prepared and presented.
ize/cover?
13. Who requires Companies regulated by the US Securities and Exchange Commission (SEC)
GAAP?
14. Who issues GAAP Financial Accounting Standards Board (FASB)
through pro-
nouncements?
15. Two major types Cash and accrual accounting
of accounting
systems
16. What does cash Transactions are counted when money is actually received or the expenses are
accounting en- paid out.
tail?
17. What does accru- Transactions are counted when orders are made or delivered-even if no cash has
al accounting en- been exchanged.
tail?
18. How does cash If an item is purchased in delivered in one month (accrual), but paid for in another
and accrual ac- month (cash), this affects where it is recorded for tax purposes.
counting affects
taxes?
19.
, PRAXIS 5101
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How does cash Cash accounting is more advantageous as it gives the business a better idea of
and accrual ac- cash on hand, but may not show correct profits; however, accrual accounting will
counting differ? show correct profits, but won't reflect actual cash flow.
20. Fundamental Ac- Assets = Liabilities + Owners' equity; this is the basis for the balance sheet
counting Equa-
tion
21. What is the ac- The accounting cycle describes the steps in the accounting process.
counting cycle?
22. What is the first Collect and verify source documents: attain all source documents associated with
step of the ac- financial transactions: receipts, checks, and bank statements.
counting cycle?
23. What is the sec- Analyze each transaction to see how the accounts will be affected.
ond step in the
accounting cy-
cle?
24. What is the third Record transactions in journals
step in the ac-
counting cycle?
25. What is the Prepare a trial balance
fourth step in
the accounting
cycle?
26. What is the fifth Prepare a worksheet: look for errors and make corrections called adjustments,
step in the ac- which are tracked on a worksheet.
counting cycle?
27. Adjust journal entries
PRAXIS 5101
WELL DETAILED ANSWERS) LATEST 2025/2026
Study online at https://quizlet.com/_5v7zzg
1. Assets Something valuable that an entity owns, benefits from, or has use of, in generating
income.
2. Different types of Fixed, variable, intangible, tangible
assets
3. examples of fixed Tangible assets used to generate profit and will not be turned into cash within the
assets year: "plant," land, computer equipment, furniture, cars, buildings, and equip-
ment used to make products
4. What are variable May be transformed to cash sooner; inventory of product and accounts receivable
assets
5. What are intangi- Not physical-brand names, intellectual property- are high in value
ble assets?
6. What is liquidity? How easy it is to turn an item into cash without losing any money
7. What is equity? In business, it shows what the owner has contributed in addition to retained
earnings; ownership minus debts
8. What is deprecia- Loss of value for any reason.
tion?
9. What is cash the total amount of money being transferred into and out of a business; revenues
flow? and/or expenses
10. What is GAAP? 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
11. So investors understand what they are getting when they receive statements
, PRAXIS 5101
Study online at https://quizlet.com/_5v7zzg
How is GAAP
used for in-
vestors?
12. What does Economic activity measurement, timing disclosures, and how financial statements
GAAP standard- are prepared and presented.
ize/cover?
13. Who requires Companies regulated by the US Securities and Exchange Commission (SEC)
GAAP?
14. Who issues GAAP Financial Accounting Standards Board (FASB)
through pro-
nouncements?
15. Two major types Cash and accrual accounting
of accounting
systems
16. What does cash Transactions are counted when money is actually received or the expenses are
accounting en- paid out.
tail?
17. What does accru- Transactions are counted when orders are made or delivered-even if no cash has
al accounting en- been exchanged.
tail?
18. How does cash If an item is purchased in delivered in one month (accrual), but paid for in another
and accrual ac- month (cash), this affects where it is recorded for tax purposes.
counting affects
taxes?
19.
, PRAXIS 5101
Study online at https://quizlet.com/_5v7zzg
How does cash Cash accounting is more advantageous as it gives the business a better idea of
and accrual ac- cash on hand, but may not show correct profits; however, accrual accounting will
counting differ? show correct profits, but won't reflect actual cash flow.
20. Fundamental Ac- Assets = Liabilities + Owners' equity; this is the basis for the balance sheet
counting Equa-
tion
21. What is the ac- The accounting cycle describes the steps in the accounting process.
counting cycle?
22. What is the first Collect and verify source documents: attain all source documents associated with
step of the ac- financial transactions: receipts, checks, and bank statements.
counting cycle?
23. What is the sec- Analyze each transaction to see how the accounts will be affected.
ond step in the
accounting cy-
cle?
24. What is the third Record transactions in journals
step in the ac-
counting cycle?
25. What is the Prepare a trial balance
fourth step in
the accounting
cycle?
26. What is the fifth Prepare a worksheet: look for errors and make corrections called adjustments,
step in the ac- which are tracked on a worksheet.
counting cycle?
27. Adjust journal entries
