Accounting 101- Basic Accounting
Exam Questions and Answers
Accountant - ANS-A person who keeps the financial history of the transactions of an
economic unit in written form. (p. 4)
Accounting - ANS-The process of analyzing, classifying, recording, summarizing, and
interpreting business transactions in financial or monetary terms. (p. 3)
Economic unit - ANS-Includes both business enterprises and not-for-profit entities. (p. 3)
Ethics - ANS-A philosophy or code or system of morality that is, how we conduct
ourselves from day to day in a variety of situations requiring a decision, usually of a right
or wrong nature. (p. 8)
(FASB) Financial Accounting Standards Board SEC-FASB-GAAP - ANS-The
organization, created in 1973 by the SEC, that created GAAP. (p. 4)
(GAAP) Generally Accepted Accounting Principles - ANS-The rules or guidelines used
for carrying out the accounting process. (p. 4)
(IASB) International Accounting Standards Board - ANS-The International organization
that provides Standards or rules for international financial reporting. (p. 4)
(IFRS) International Financial Reporting Standards - ANS-The rules or guidelines that
guide International Financial Reporting. (p.g 4)
Paraprofessional accountants - ANS-People who are qualified in accounting to assume
the duties of a general bookkeeper as well as some of the duties of a professional
accountant under that accountant's supervision. (p. 7)
Sarbanes-Oxley Act - ANS-A U.S. federal law enacted as a response to a number of
major corporate and accounting scandals that establishes a wide range of rules related
to the audit environment and internal controls. (p. 9)
(SEC) Securities and Exchange Commission - ANS-The agency responsible for
regulating public companies traded on a U.S. Stock Exchange. (p. 4)
Transaction - ANS-An event directly affecting an economic entity that can be expressed
in terms of money and that must be recorded in the accounting records. (p. 3)
,Owner's Equity - ANS-Owner's right to or investment in the business. (p. 13)
Assets - ANS-Cash, properties or things of value owned by an economic unit or
business entity. (p. 13)
Business entity - ANS-A business enterprise, separate and distinct from the persons
who supply the assets it uses. (p. 13)
Creditor - ANS-One to whom money is owed. (p. 14)
Capital - ANS-The owner's investment, or equity, in an enterprise.
(p. 13)
Chart of Accounts - ANS-The official list of accounts tailor-made for the business. (p.
22)
Liabilities - ANS-Debts or amounts owed to creditors. (p. 14)
Revenues - ANS-Amounts earned by a business (fees for services, income from sales,
rent income, interest earned for lending money).
Expenses - ANS-The costs that relate to earning revenue (the costs of doing business);
examples are wages, rent, interest, and advertising. They may be paid in cash
immediately or at a future time (AP) (p.21)
Account numbers - ANS-The numbers assigned to accounts according to the chart of
accounts. (p. 22)
Accounts - ANS-The categories under the Assets, Liabilities, and Owner's Equity
headings. (p.16)
Accounts Payable - ANS-A liability account used for short-term obligations or charge
accounts, usually due within 30 days (p. 18)
Accounts Receivable - ANS-An account used to record the amounts due from (legal
claims against) charge customers. (p.27)
Backups - ANS-Procedures that store company data files in a a safe place, such as
online or on a flash drive. (p. 34)
Cloud computing - ANS-Software that is used via the Internet instead of from a local
computer. Software and data can be accessed anywhere there is an Internet
connection. (p. 34)
Computerized accounting - ANS-An accounting system that records transactions using
a computer and accounting software such as QuickBooks. (p. 33)
, Double-entry accounting - ANS-The system by which each business transaction is
recorded in at least two accounts and the accounting equation is kept in balance. (p.17)
Equity - ANS-The value of a right or claim to or financial interest in an asset or group of
assets. (p. 13)
Fair market value - ANS-The present worth of an asset or the amount that would be
received if the asset were sold to an outsider on the open market. (p. 19)
Fundamental accounting equation - ANS-(Assets=Liabilities+Owner's Equity) An
equation expressing the relationship of assets, liabilities, and owner's equity. (p. 14)
Manual accounting system - ANS-An accounting system in which transactions are
recorded by hand. (p. 33)
Separate entity concept - ANS-The concept by which a business is treated as a
separate economic or accounting entity. The business stands by itself, separate from its
owners, creditors, and customers. (p. 16)
Sole proprietorship - ANS-A one-owner business. (p. 16)
Withdrawal (This is also referred to as drawing and is treated as a decrease in owner's
equity). (p.30) - ANS-The taking of cash or other assets out of a business by the owner
for his or her own use.
A QuickBooks file with the extension (.QBB) is what type of file? - ANS-a backup file
.QBW - ANS-A file extension indicating a QuickBooks working file
Purchasing supplies on credit has what impact on the accounting equation? - ANS-
Increase Supplies and increase Accounts Payable
Balance sheet - ANS-A financial statement showing the financial position of an
organization on a given date, such as June 30 or December 31. This statement lists the
balances in the asset, liability, and owner's equity accounts. (p. 78)
Compound entry - ANS-A transaction that requires more than one debit or more than
one credit to be recorded. (p. 71)
Credit - ANS-The right side of a T account; to credit is to record an amount on the right
side of a T account. Credits represent increases in liability, capital, or revenue accounts
and decreases in asset, drawing, or expense accounts. (p. 62)
Exam Questions and Answers
Accountant - ANS-A person who keeps the financial history of the transactions of an
economic unit in written form. (p. 4)
Accounting - ANS-The process of analyzing, classifying, recording, summarizing, and
interpreting business transactions in financial or monetary terms. (p. 3)
Economic unit - ANS-Includes both business enterprises and not-for-profit entities. (p. 3)
Ethics - ANS-A philosophy or code or system of morality that is, how we conduct
ourselves from day to day in a variety of situations requiring a decision, usually of a right
or wrong nature. (p. 8)
(FASB) Financial Accounting Standards Board SEC-FASB-GAAP - ANS-The
organization, created in 1973 by the SEC, that created GAAP. (p. 4)
(GAAP) Generally Accepted Accounting Principles - ANS-The rules or guidelines used
for carrying out the accounting process. (p. 4)
(IASB) International Accounting Standards Board - ANS-The International organization
that provides Standards or rules for international financial reporting. (p. 4)
(IFRS) International Financial Reporting Standards - ANS-The rules or guidelines that
guide International Financial Reporting. (p.g 4)
Paraprofessional accountants - ANS-People who are qualified in accounting to assume
the duties of a general bookkeeper as well as some of the duties of a professional
accountant under that accountant's supervision. (p. 7)
Sarbanes-Oxley Act - ANS-A U.S. federal law enacted as a response to a number of
major corporate and accounting scandals that establishes a wide range of rules related
to the audit environment and internal controls. (p. 9)
(SEC) Securities and Exchange Commission - ANS-The agency responsible for
regulating public companies traded on a U.S. Stock Exchange. (p. 4)
Transaction - ANS-An event directly affecting an economic entity that can be expressed
in terms of money and that must be recorded in the accounting records. (p. 3)
,Owner's Equity - ANS-Owner's right to or investment in the business. (p. 13)
Assets - ANS-Cash, properties or things of value owned by an economic unit or
business entity. (p. 13)
Business entity - ANS-A business enterprise, separate and distinct from the persons
who supply the assets it uses. (p. 13)
Creditor - ANS-One to whom money is owed. (p. 14)
Capital - ANS-The owner's investment, or equity, in an enterprise.
(p. 13)
Chart of Accounts - ANS-The official list of accounts tailor-made for the business. (p.
22)
Liabilities - ANS-Debts or amounts owed to creditors. (p. 14)
Revenues - ANS-Amounts earned by a business (fees for services, income from sales,
rent income, interest earned for lending money).
Expenses - ANS-The costs that relate to earning revenue (the costs of doing business);
examples are wages, rent, interest, and advertising. They may be paid in cash
immediately or at a future time (AP) (p.21)
Account numbers - ANS-The numbers assigned to accounts according to the chart of
accounts. (p. 22)
Accounts - ANS-The categories under the Assets, Liabilities, and Owner's Equity
headings. (p.16)
Accounts Payable - ANS-A liability account used for short-term obligations or charge
accounts, usually due within 30 days (p. 18)
Accounts Receivable - ANS-An account used to record the amounts due from (legal
claims against) charge customers. (p.27)
Backups - ANS-Procedures that store company data files in a a safe place, such as
online or on a flash drive. (p. 34)
Cloud computing - ANS-Software that is used via the Internet instead of from a local
computer. Software and data can be accessed anywhere there is an Internet
connection. (p. 34)
Computerized accounting - ANS-An accounting system that records transactions using
a computer and accounting software such as QuickBooks. (p. 33)
, Double-entry accounting - ANS-The system by which each business transaction is
recorded in at least two accounts and the accounting equation is kept in balance. (p.17)
Equity - ANS-The value of a right or claim to or financial interest in an asset or group of
assets. (p. 13)
Fair market value - ANS-The present worth of an asset or the amount that would be
received if the asset were sold to an outsider on the open market. (p. 19)
Fundamental accounting equation - ANS-(Assets=Liabilities+Owner's Equity) An
equation expressing the relationship of assets, liabilities, and owner's equity. (p. 14)
Manual accounting system - ANS-An accounting system in which transactions are
recorded by hand. (p. 33)
Separate entity concept - ANS-The concept by which a business is treated as a
separate economic or accounting entity. The business stands by itself, separate from its
owners, creditors, and customers. (p. 16)
Sole proprietorship - ANS-A one-owner business. (p. 16)
Withdrawal (This is also referred to as drawing and is treated as a decrease in owner's
equity). (p.30) - ANS-The taking of cash or other assets out of a business by the owner
for his or her own use.
A QuickBooks file with the extension (.QBB) is what type of file? - ANS-a backup file
.QBW - ANS-A file extension indicating a QuickBooks working file
Purchasing supplies on credit has what impact on the accounting equation? - ANS-
Increase Supplies and increase Accounts Payable
Balance sheet - ANS-A financial statement showing the financial position of an
organization on a given date, such as June 30 or December 31. This statement lists the
balances in the asset, liability, and owner's equity accounts. (p. 78)
Compound entry - ANS-A transaction that requires more than one debit or more than
one credit to be recorded. (p. 71)
Credit - ANS-The right side of a T account; to credit is to record an amount on the right
side of a T account. Credits represent increases in liability, capital, or revenue accounts
and decreases in asset, drawing, or expense accounts. (p. 62)
