FUNDAMENTALS OF ACCOUNTING AND
BOOKKEEPING EXAM QUESTIONS
WITH CORRECT ANSWERS
Proprietorship / Sole Prop - ANSWER-A business owned by one person. Simplest
structure and not separate from its owner for legal purposes
Partnership - ANSWER-Business owned by two or more persons, the owners are called
partners. Not a separate legal entity. Profit/Loss "Pass through" to owners.
Corporation - ANSWER-Business organized as a separate legal entity
Limited Liability Company "LLC" - ANSWER-Separate Business and legal entity, but
choice of how it is taxed. LLCs are fairly new structures.
10 Steps of Accounting Cycle - ANSWER-1) Business transaction occur and source
documents are created
2) Analyze business transactions
3) record/Journalize the business transactions in the journals
4) Post the journals to general ledger accounts
5) Prepare a trial balance
6) Analyze the accounts, journalize and post adjusting entries
7) Prepare an adjusted trial balance
8) Prepare Financial Statements
9) Journalize and post closing entries
10) Prepare a post-closing trial balance
Accounting Transaction - ANSWER-Business event that has a monetary impact, such
as selling goods to a customer or buying supplies from a vendor.
Cash Account (definition) - ANSWER-Current balance of cash held by a business,
usually in checking or savings accounts. ASSET / Debit balance
Accounts Receivable (definition) - ANSWER-Sales on credit, which customers must pay
for at a later date. ASSET / Debit balance
Inventory (definition) - ANSWER-This is items held in stock, for eventual sale to
customers. ASSET / Debit balance
Fixed Assets (definition) - ANSWER-More expensive assets that the business plans to
use for multiple years. ASSET / Debit balance
BOOKKEEPING EXAM QUESTIONS
WITH CORRECT ANSWERS
Proprietorship / Sole Prop - ANSWER-A business owned by one person. Simplest
structure and not separate from its owner for legal purposes
Partnership - ANSWER-Business owned by two or more persons, the owners are called
partners. Not a separate legal entity. Profit/Loss "Pass through" to owners.
Corporation - ANSWER-Business organized as a separate legal entity
Limited Liability Company "LLC" - ANSWER-Separate Business and legal entity, but
choice of how it is taxed. LLCs are fairly new structures.
10 Steps of Accounting Cycle - ANSWER-1) Business transaction occur and source
documents are created
2) Analyze business transactions
3) record/Journalize the business transactions in the journals
4) Post the journals to general ledger accounts
5) Prepare a trial balance
6) Analyze the accounts, journalize and post adjusting entries
7) Prepare an adjusted trial balance
8) Prepare Financial Statements
9) Journalize and post closing entries
10) Prepare a post-closing trial balance
Accounting Transaction - ANSWER-Business event that has a monetary impact, such
as selling goods to a customer or buying supplies from a vendor.
Cash Account (definition) - ANSWER-Current balance of cash held by a business,
usually in checking or savings accounts. ASSET / Debit balance
Accounts Receivable (definition) - ANSWER-Sales on credit, which customers must pay
for at a later date. ASSET / Debit balance
Inventory (definition) - ANSWER-This is items held in stock, for eventual sale to
customers. ASSET / Debit balance
Fixed Assets (definition) - ANSWER-More expensive assets that the business plans to
use for multiple years. ASSET / Debit balance
