TAXATION EXAMINATION QUESTIONS AND CORRECT
ANSWER WITH EXPLANATION|GRADED A+ STUDY
GUIDE SOUTHERN NEW HAMPSHIRE UNIVERSITY
1. The primary purpose of taxation is to:
A. Eliminate private businesses
B. Generate government revenue
C. Increase corporate profits
D. Reduce accounting standards
Answer: B
Rationale: Taxes fund government operations and public services.
2. A tax is generally defined as:
A. Voluntary payment
B. Mandatory financial charge imposed by government
C. Corporate donation only
D. Investment return only
Answer: B
Rationale: Taxes are compulsory charges.
3. Income tax is imposed primarily on:
A. Inventory balances only
B. Earnings of individuals and businesses
C. Payroll hours only
D. Stock prices only
Answer: B
Rationale: Income taxes apply to taxable earnings.
4. Progressive tax systems impose:
,A. Lower rates as income rises
B. Higher tax rates on higher income levels
C. Same rate for all taxpayers
D. No taxes on corporations
Answer: B
Rationale: Progressive systems increase rates with income.
5. Regressive taxes generally:
A. Increase burden on lower-income taxpayers proportionally
B. Increase only corporate taxes
C. Apply only to investments
D. Eliminate payroll taxes
Answer: A
Rationale: Lower-income individuals bear relatively greater burden.
6. Proportional taxes apply:
A. Different rates by income level
B. Same tax rate to all taxable amounts
C. No taxes on businesses
D. Taxes only on investments
Answer: B
Rationale: Flat tax structure.
7. Gross income generally includes:
A. Only salary income
B. All income unless specifically excluded by law
C. Only investment earnings
D. Only business profits
Answer: B
Rationale: Broad taxable income definition.
8. Taxable income is generally calculated as:
, Taxable\ Income = Gross\ Income - Deductions - Exemptions
A. Assets − Liabilities
B. Gross Income − Deductions − Exemptions
C. Revenue + Expenses
D. Cash − Taxes
Answer: B
Rationale: Basic taxable income formula.
9. Adjusted gross income (AGI) is:
A. Gross income after certain adjustments
B. Net income after taxes only
C. Business revenue only
D. Inventory balance only
Answer: A
Rationale: Important intermediate tax calculation.
10. Tax deductions reduce:
A. Tax rates directly
B. Taxable income
C. Gross revenues only
D. Payroll liabilities only
Answer: B
Rationale: Deductions lower taxable income.
11. Tax credits reduce:
A. Taxable income only
B. Actual tax liability directly
C. Gross income only
D. Payroll taxes only
Answer: B
Rationale: Credits directly offset taxes owed.
12. A refundable tax credit:
ANSWER WITH EXPLANATION|GRADED A+ STUDY
GUIDE SOUTHERN NEW HAMPSHIRE UNIVERSITY
1. The primary purpose of taxation is to:
A. Eliminate private businesses
B. Generate government revenue
C. Increase corporate profits
D. Reduce accounting standards
Answer: B
Rationale: Taxes fund government operations and public services.
2. A tax is generally defined as:
A. Voluntary payment
B. Mandatory financial charge imposed by government
C. Corporate donation only
D. Investment return only
Answer: B
Rationale: Taxes are compulsory charges.
3. Income tax is imposed primarily on:
A. Inventory balances only
B. Earnings of individuals and businesses
C. Payroll hours only
D. Stock prices only
Answer: B
Rationale: Income taxes apply to taxable earnings.
4. Progressive tax systems impose:
,A. Lower rates as income rises
B. Higher tax rates on higher income levels
C. Same rate for all taxpayers
D. No taxes on corporations
Answer: B
Rationale: Progressive systems increase rates with income.
5. Regressive taxes generally:
A. Increase burden on lower-income taxpayers proportionally
B. Increase only corporate taxes
C. Apply only to investments
D. Eliminate payroll taxes
Answer: A
Rationale: Lower-income individuals bear relatively greater burden.
6. Proportional taxes apply:
A. Different rates by income level
B. Same tax rate to all taxable amounts
C. No taxes on businesses
D. Taxes only on investments
Answer: B
Rationale: Flat tax structure.
7. Gross income generally includes:
A. Only salary income
B. All income unless specifically excluded by law
C. Only investment earnings
D. Only business profits
Answer: B
Rationale: Broad taxable income definition.
8. Taxable income is generally calculated as:
, Taxable\ Income = Gross\ Income - Deductions - Exemptions
A. Assets − Liabilities
B. Gross Income − Deductions − Exemptions
C. Revenue + Expenses
D. Cash − Taxes
Answer: B
Rationale: Basic taxable income formula.
9. Adjusted gross income (AGI) is:
A. Gross income after certain adjustments
B. Net income after taxes only
C. Business revenue only
D. Inventory balance only
Answer: A
Rationale: Important intermediate tax calculation.
10. Tax deductions reduce:
A. Tax rates directly
B. Taxable income
C. Gross revenues only
D. Payroll liabilities only
Answer: B
Rationale: Deductions lower taxable income.
11. Tax credits reduce:
A. Taxable income only
B. Actual tax liability directly
C. Gross income only
D. Payroll taxes only
Answer: B
Rationale: Credits directly offset taxes owed.
12. A refundable tax credit:
