Intuit Bookkeeping Exam Update Actual Exam 2026/2027
| Complete Exam-Style Questions with Detailed Rationales
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Accounting Foundations and the Accounting Equation
Q1: Which of the following represents the fundamental accounting equation?
A. Assets + Liabilities = Owner’s Equity
B. Assets = Liabilities - Owner’s Equity
C. Assets = Liabilities + Owner’s Equity [CORRECT]
D. Liabilities = Assets + Owner’s Equity
Correct Answer: C
Rationale: This choice is correct because the accounting equation must always remain in
balance, showing that all assets are funded either by creditors (liabilities) or owners (equity).
Q2: What is the normal balance for an expense account?
A. Credit
B. Debit [CORRECT]
C. Zero
D. Variable, depending on the transaction
Correct Answer: C
Rationale: The best answer is a debit balance, as expenses reduce owner’s equity, and
debits are used to record increases in expense accounts.
Q3: A client receives a utility bill in December but does not pay it until January. Under the
accrual basis of accounting, when should this expense be recorded?
A. In January, when the cash is paid
B. In December, when the bill is received and the expense is incurred [CORRECT]
C. In whichever month the tax return is filed
D. It should not be recorded until the bank statement clears
Correct Answer: C
Rationale: This aligns with the matching principle of accrual accounting, which requires
expenses to be recorded in the period they are incurred, regardless of when cash changes
hands.
Q4: In a standard chart of accounts, which category is typically listed first?
A. Liabilities
B. Equity
C. Assets [CORRECT]
D. Expenses
Correct Answer: C
Rationale: This matches the principle that accounts are organized in financial statement
order, beginning with the balance sheet, starting with assets.
, Q5: The owner invests $10,000 of personal cash into the business. What is the correct
journal entry?
A. Debit Cash $10,000; Credit Revenue $10,000
B. Debit Owner’s Equity $10,000; Credit Cash $10,000
C. Debit Cash $10,000; Credit Owner’s Equity $10,000 [CORRECT]
D. Debit Accounts Receivable $10,000; Credit Owner’s Equity $10,000
Correct Answer: C
Rationale: This choice is correct because the business is receiving an asset (debit Cash) and
increasing the owner’s claim on the business (credit Owner’s Equity).
Q6: What is the primary purpose of a trial balance?
A. To calculate the company’s tax liability
B. To prove that total debits equal total credits in the ledger [CORRECT]
C. To determine the cash flow from operating activities
D. To list all outstanding customer invoices
Correct Answer: C
Rationale: The best answer is proving equality of debits and credits, which serves as a crucial
internal check before preparing financial statements.
Q7: Client Scenario: A small business owner asks how to record a monthly loan payment of
$1,000, which includes $800 in principal reduction and $200 in interest expense. What is the
correct journal entry?
A. Debit Loan Payable $1,000; Credit Cash $1,000
B. Debit Interest Expense $1,000; Credit Cash $1,000
C. Debit Loan Payable $800, Debit Interest Expense $200; Credit Cash $1,000 [CORRECT]
D. Debit Cash $1,000; Credit Loan Payable $800, Credit Interest Expense $200
Correct Answer: C
Rationale: This aligns with standard double-entry accounting, where reducing a liability
requires a debit, recognizing an expense requires a debit, and paying out cash requires a
credit.
Q8: When a company pays for a one-year insurance policy in advance, the initial entry
should debit which account?
A. Insurance Expense
B. Prepaid Insurance [CORRECT]
C. Cash
D. Accounts Payable
Correct Answer: C
Rationale: This choice is correct because the payment creates an asset (prepaid insurance)
that will be gradually expensed over the coverage period.
Q9: Unearned revenue is classified on the balance sheet as a:
A. Current asset
B. Long-term asset
C. Liability [CORRECT]
D. Contra-equity account
| Complete Exam-Style Questions with Detailed Rationales
| 100% Verified | Pass Guaranteed – A+ Graded
Accounting Foundations and the Accounting Equation
Q1: Which of the following represents the fundamental accounting equation?
A. Assets + Liabilities = Owner’s Equity
B. Assets = Liabilities - Owner’s Equity
C. Assets = Liabilities + Owner’s Equity [CORRECT]
D. Liabilities = Assets + Owner’s Equity
Correct Answer: C
Rationale: This choice is correct because the accounting equation must always remain in
balance, showing that all assets are funded either by creditors (liabilities) or owners (equity).
Q2: What is the normal balance for an expense account?
A. Credit
B. Debit [CORRECT]
C. Zero
D. Variable, depending on the transaction
Correct Answer: C
Rationale: The best answer is a debit balance, as expenses reduce owner’s equity, and
debits are used to record increases in expense accounts.
Q3: A client receives a utility bill in December but does not pay it until January. Under the
accrual basis of accounting, when should this expense be recorded?
A. In January, when the cash is paid
B. In December, when the bill is received and the expense is incurred [CORRECT]
C. In whichever month the tax return is filed
D. It should not be recorded until the bank statement clears
Correct Answer: C
Rationale: This aligns with the matching principle of accrual accounting, which requires
expenses to be recorded in the period they are incurred, regardless of when cash changes
hands.
Q4: In a standard chart of accounts, which category is typically listed first?
A. Liabilities
B. Equity
C. Assets [CORRECT]
D. Expenses
Correct Answer: C
Rationale: This matches the principle that accounts are organized in financial statement
order, beginning with the balance sheet, starting with assets.
, Q5: The owner invests $10,000 of personal cash into the business. What is the correct
journal entry?
A. Debit Cash $10,000; Credit Revenue $10,000
B. Debit Owner’s Equity $10,000; Credit Cash $10,000
C. Debit Cash $10,000; Credit Owner’s Equity $10,000 [CORRECT]
D. Debit Accounts Receivable $10,000; Credit Owner’s Equity $10,000
Correct Answer: C
Rationale: This choice is correct because the business is receiving an asset (debit Cash) and
increasing the owner’s claim on the business (credit Owner’s Equity).
Q6: What is the primary purpose of a trial balance?
A. To calculate the company’s tax liability
B. To prove that total debits equal total credits in the ledger [CORRECT]
C. To determine the cash flow from operating activities
D. To list all outstanding customer invoices
Correct Answer: C
Rationale: The best answer is proving equality of debits and credits, which serves as a crucial
internal check before preparing financial statements.
Q7: Client Scenario: A small business owner asks how to record a monthly loan payment of
$1,000, which includes $800 in principal reduction and $200 in interest expense. What is the
correct journal entry?
A. Debit Loan Payable $1,000; Credit Cash $1,000
B. Debit Interest Expense $1,000; Credit Cash $1,000
C. Debit Loan Payable $800, Debit Interest Expense $200; Credit Cash $1,000 [CORRECT]
D. Debit Cash $1,000; Credit Loan Payable $800, Credit Interest Expense $200
Correct Answer: C
Rationale: This aligns with standard double-entry accounting, where reducing a liability
requires a debit, recognizing an expense requires a debit, and paying out cash requires a
credit.
Q8: When a company pays for a one-year insurance policy in advance, the initial entry
should debit which account?
A. Insurance Expense
B. Prepaid Insurance [CORRECT]
C. Cash
D. Accounts Payable
Correct Answer: C
Rationale: This choice is correct because the payment creates an asset (prepaid insurance)
that will be gradually expensed over the coverage period.
Q9: Unearned revenue is classified on the balance sheet as a:
A. Current asset
B. Long-term asset
C. Liability [CORRECT]
D. Contra-equity account
