Accounting 200 Exam 1 (KU) Practice
Questions All Answered Correct (2025)
Updated.
Type of Business Entities - Answer 1. Sole Proprietorship
2. Partnership
3. Corporation
Sole Proprietorship - Answer owned by single individual who usually manages the operation of
the business. Owner is liable for any debts or obligations incurred by the business. important to
keep business accounting and owner acct separate.
Partnership - Answer has two or more owners; partnership would be viewed as a separate
entity from any of the owners but law does not view like that. can wind up being responsible for
liabilities that were incurred in the name of partnership but to which they did not agree.
Corporation - Answer most complex form of ownership since it involves creating a separate
legal entity
Characteristics of Corporation - Answer Legal entity, continuous life and transferable
ownership interests, separation of ownership and management, stockholders control,
stockholders limited liability, taxes, government involvement
Legal Entity - Answer corp makes special application to specific satiate and state grants a
charter to the business giving it permission to be a corp. Business exists apart from its owners
and has right to sell property, enter agreements,
double taxation - Answer corp pays a return to investors in the form of dividends and then
these investors also may pay taxes on the same earnings. drawback to corporation form of
ownership
Generally Accepted Accounting Principles - Answer GAAP; accounting rules created by the
FASB; company must follow these rules when releasing financial statements;
US GAAP leans toward the historical cost concept
, International Financial Reporting Standards - Answer IFRS; International GAAP; IGAAP;
international accounting system with the goal of providing value accounting info that can be
compared across companies no matter what country it may originate. Created by the
International Accounting Standards Board (IASB); leans toward current cost as being more
relevant frequently referred to as the economic value concept
Assets - Answer economic resources that are expected to be of some future benefit to the
business.
Examples of Assets - Answer cash, merchandise waiting for sale, buildings, and equipment.
Liabilities - Answer economic claims against the business assets that can be made by parties
outside the business
Note Payable - Answer liability; when one company owes money to another entity as
expressed in a formal, written manner
Account Payable - Answer liability; no formal document, merely the understanding that
payment will be made
Account Receivable - Answer asset; money that is owed to the supplier by the grocer is called
this by the supplier.
Note Receivable - Answer asset; written agreement documenting the exact amount and timing
of payment the supplier would call this note receivable
Owners Equity - Answer the amount left over after the owners used the business assets to pay
off all the liabilities; residual claim against assets of the business
Fundamental Accounting Equation Equation - Answer Assets = Liabilities + Owners Equity
Retained Earnings - Answer the amount of earnings that remain in the company (retained for
use by the company); increases when a company provides a good or service to a customer in
return for immediate or future payment; dividends also reduce retained earnings
Questions All Answered Correct (2025)
Updated.
Type of Business Entities - Answer 1. Sole Proprietorship
2. Partnership
3. Corporation
Sole Proprietorship - Answer owned by single individual who usually manages the operation of
the business. Owner is liable for any debts or obligations incurred by the business. important to
keep business accounting and owner acct separate.
Partnership - Answer has two or more owners; partnership would be viewed as a separate
entity from any of the owners but law does not view like that. can wind up being responsible for
liabilities that were incurred in the name of partnership but to which they did not agree.
Corporation - Answer most complex form of ownership since it involves creating a separate
legal entity
Characteristics of Corporation - Answer Legal entity, continuous life and transferable
ownership interests, separation of ownership and management, stockholders control,
stockholders limited liability, taxes, government involvement
Legal Entity - Answer corp makes special application to specific satiate and state grants a
charter to the business giving it permission to be a corp. Business exists apart from its owners
and has right to sell property, enter agreements,
double taxation - Answer corp pays a return to investors in the form of dividends and then
these investors also may pay taxes on the same earnings. drawback to corporation form of
ownership
Generally Accepted Accounting Principles - Answer GAAP; accounting rules created by the
FASB; company must follow these rules when releasing financial statements;
US GAAP leans toward the historical cost concept
, International Financial Reporting Standards - Answer IFRS; International GAAP; IGAAP;
international accounting system with the goal of providing value accounting info that can be
compared across companies no matter what country it may originate. Created by the
International Accounting Standards Board (IASB); leans toward current cost as being more
relevant frequently referred to as the economic value concept
Assets - Answer economic resources that are expected to be of some future benefit to the
business.
Examples of Assets - Answer cash, merchandise waiting for sale, buildings, and equipment.
Liabilities - Answer economic claims against the business assets that can be made by parties
outside the business
Note Payable - Answer liability; when one company owes money to another entity as
expressed in a formal, written manner
Account Payable - Answer liability; no formal document, merely the understanding that
payment will be made
Account Receivable - Answer asset; money that is owed to the supplier by the grocer is called
this by the supplier.
Note Receivable - Answer asset; written agreement documenting the exact amount and timing
of payment the supplier would call this note receivable
Owners Equity - Answer the amount left over after the owners used the business assets to pay
off all the liabilities; residual claim against assets of the business
Fundamental Accounting Equation Equation - Answer Assets = Liabilities + Owners Equity
Retained Earnings - Answer the amount of earnings that remain in the company (retained for
use by the company); increases when a company provides a good or service to a customer in
return for immediate or future payment; dividends also reduce retained earnings
