BSA 116 PRACTICE EXAM Questions With
Correct Answers (Verified Answers) Plus
Rationales 2026 Q&A | Instant Download
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1. What is the primary purpose of accounting?
A. To entertain stakeholders
B. To record, summarize, and report financial transactions
C. To predict weather patterns
D. To design marketing campaigns
Answer: B. To record, summarize, and report financial
transactions
Rationale: Accounting is the systematic process of identifying,
measuring, and communicating financial information for
decision-making.
2. Which of the following is an asset?
A. Rent expense
B. Accounts payable
C. Cash
D. Owner’s drawings
Answer: C. Cash
Rationale: Cash is a resource owned by the business that has
economic value, making it an asset.
,3. Liabilities are best defined as:
A. Resources owned by the business
B. Obligations owed to outsiders
C. Owner investments
D. Business profits
Answer: B. Obligations owed to outsiders
Rationale: Liabilities represent debts or obligations the business
must settle in the future.
4. The accounting equation is:
A. Assets = Liabilities + Revenue
B. Assets = Expenses + Equity
C. Assets = Liabilities + Owner’s Equity
D. Liabilities = Assets + Equity
Answer: C. Assets = Liabilities + Owner’s Equity
Rationale: This equation shows the relationship between what a
business owns, owes, and the owner’s interest.
5. Which document is prepared first in the accounting cycle?
A. Trial balance
B. Journal
C. Income statement
D. Balance sheet
Answer: B. Journal
Rationale: Transactions are first recorded in the journal before
posting to ledgers.
,6. A debit entry increases which account type?
A. Revenue
B. Liability
C. Expense
D. Capital income
Answer: C. Expense
Rationale: Expenses increase with debit entries under double-
entry accounting rules.
7. Credit entries increase:
A. Assets
B. Expenses
C. Liabilities
D. Drawings
Answer: C. Liabilities
Rationale: Liabilities increase when credited in accounting
records.
8. The main book of original entry is the:
A. Ledger
B. Journal
C. Trial balance
D. Cash flow statement
Answer: B. Journal
Rationale: The journal is the first place where transactions are
formally recorded.
, 9. A trial balance is used to:
A. Prepare tax returns
B. Detect mathematical errors
C. Record transactions
D. Calculate profits only
Answer: B. Detect mathematical errors
Rationale: A trial balance ensures that total debits equal total
credits.
10. Which of the following is an expense?
A. Equipment
B. Capital
C. Rent paid
D. Cash
Answer: C. Rent paid
Rationale: Rent is a cost incurred in running the business and is
classified as an expense.
11. Capital refers to:
A. Business debts
B. Owner’s investment in the business
C. Business expenses
D. Cash withdrawals
Answer: B. Owner’s investment in the business
Rationale: Capital represents the owner’s interest in the
business.
Correct Answers (Verified Answers) Plus
Rationales 2026 Q&A | Instant Download
1. What is the primary purpose of accounting?
A. To entertain stakeholders
B. To record, summarize, and report financial transactions
C. To predict weather patterns
D. To design marketing campaigns
Answer: B. To record, summarize, and report financial
transactions
Rationale: Accounting is the systematic process of identifying,
measuring, and communicating financial information for
decision-making.
2. Which of the following is an asset?
A. Rent expense
B. Accounts payable
C. Cash
D. Owner’s drawings
Answer: C. Cash
Rationale: Cash is a resource owned by the business that has
economic value, making it an asset.
,3. Liabilities are best defined as:
A. Resources owned by the business
B. Obligations owed to outsiders
C. Owner investments
D. Business profits
Answer: B. Obligations owed to outsiders
Rationale: Liabilities represent debts or obligations the business
must settle in the future.
4. The accounting equation is:
A. Assets = Liabilities + Revenue
B. Assets = Expenses + Equity
C. Assets = Liabilities + Owner’s Equity
D. Liabilities = Assets + Equity
Answer: C. Assets = Liabilities + Owner’s Equity
Rationale: This equation shows the relationship between what a
business owns, owes, and the owner’s interest.
5. Which document is prepared first in the accounting cycle?
A. Trial balance
B. Journal
C. Income statement
D. Balance sheet
Answer: B. Journal
Rationale: Transactions are first recorded in the journal before
posting to ledgers.
,6. A debit entry increases which account type?
A. Revenue
B. Liability
C. Expense
D. Capital income
Answer: C. Expense
Rationale: Expenses increase with debit entries under double-
entry accounting rules.
7. Credit entries increase:
A. Assets
B. Expenses
C. Liabilities
D. Drawings
Answer: C. Liabilities
Rationale: Liabilities increase when credited in accounting
records.
8. The main book of original entry is the:
A. Ledger
B. Journal
C. Trial balance
D. Cash flow statement
Answer: B. Journal
Rationale: The journal is the first place where transactions are
formally recorded.
, 9. A trial balance is used to:
A. Prepare tax returns
B. Detect mathematical errors
C. Record transactions
D. Calculate profits only
Answer: B. Detect mathematical errors
Rationale: A trial balance ensures that total debits equal total
credits.
10. Which of the following is an expense?
A. Equipment
B. Capital
C. Rent paid
D. Cash
Answer: C. Rent paid
Rationale: Rent is a cost incurred in running the business and is
classified as an expense.
11. Capital refers to:
A. Business debts
B. Owner’s investment in the business
C. Business expenses
D. Cash withdrawals
Answer: B. Owner’s investment in the business
Rationale: Capital represents the owner’s interest in the
business.
