Payroll Fundamentals 2 Exam with
Questions and Correct Answers 2025
The Accounting Equation - CORRECT ANSWERS Assets = Liabilities + Owners Equity
Components of Owner's Equity - CORRECT ANSWERS Owner's Equity = Contributed
Capital + Retained Earnings
Contributed Capital - CORRECT ANSWERS Payments in cash or assets made by
owners to the company
Expanded Accounting Equation - CORRECT ANSWERS Assets = Liabilities +
Contributed Capital + Retained Earnings
Accounts in a For-Profit Organization - CORRECT ANSWERS - Asset accounts
- Liability accounts
- Revenue accounts
- Expense accounts
- Owners' Equity accounts
Definition of Asset Accounts - CORRECT ANSWERS Contains the value of items
owned by the organization
Definition of Liability Accounts - CORRECT ANSWERS Indicates the money owed by
the organization to its creditors
Examples of Asset Accounts - CORRECT ANSWERS - Cash
- Accounts receivable
- Prepaid expenses
- Inventory
Examples of Liability Accounts - CORRECT ANSWERS - Accounts payable
- Salaries and wages payable
- Vacation pay payable
Purpose of Revenue Accounts - CORRECT ANSWERS Used to record the income
earned by the organization
Expense Accounts - CORRECT ANSWERS Costs incurred in earning revenue during a
specific period
, Equity Accounts - CORRECT ANSWERS Show owners' or shareholders' worth in the
organization
Owners' Equity Components - CORRECT ANSWERS Contributed capital & retained
earnings
General Ledger Accounts Elements - CORRECT ANSWERS - Account name
- Opening balance
- Reference
- Debit and credit transactions
- Closing balance
Components of a Journal Entry - CORRECT ANSWERS - Journal entry reference or
number
- Transaction date
- Debit and credit amounts per account
- Total debit and credit entries
- Brief transaction explanation
Double-Entry Accounting - CORRECT ANSWERS Each transaction affects at least two
accounts with one debit and one credit
Income Statement - CORRECT ANSWERS Presents revenue, expenses, and net profit
or loss during a specific period
Purpose of an Income Statement - CORRECT ANSWERS Determines if the
organization earned profit or incurred loss in the reported period
Balance Sheet - CORRECT ANSWERS Summarizes assets, liabilities, and owners'
equity at a specific point in time
Classification of Salaries and Wages Expenses - CORRECT ANSWERS - Direct labour
costs
- Indirect labour costs
Direct Labour Costs - CORRECT ANSWERS Payroll costs for employees performing
specific services, work, or sales activities
Indirect Labour Costs - CORRECT ANSWERS Payroll costs for employees not directly
involved in specific services, work, or sales activities, but in administrative functions
Statutory Requirements - CORRECT ANSWERS Expenses incurred due to federal and
provincial legislation
Questions and Correct Answers 2025
The Accounting Equation - CORRECT ANSWERS Assets = Liabilities + Owners Equity
Components of Owner's Equity - CORRECT ANSWERS Owner's Equity = Contributed
Capital + Retained Earnings
Contributed Capital - CORRECT ANSWERS Payments in cash or assets made by
owners to the company
Expanded Accounting Equation - CORRECT ANSWERS Assets = Liabilities +
Contributed Capital + Retained Earnings
Accounts in a For-Profit Organization - CORRECT ANSWERS - Asset accounts
- Liability accounts
- Revenue accounts
- Expense accounts
- Owners' Equity accounts
Definition of Asset Accounts - CORRECT ANSWERS Contains the value of items
owned by the organization
Definition of Liability Accounts - CORRECT ANSWERS Indicates the money owed by
the organization to its creditors
Examples of Asset Accounts - CORRECT ANSWERS - Cash
- Accounts receivable
- Prepaid expenses
- Inventory
Examples of Liability Accounts - CORRECT ANSWERS - Accounts payable
- Salaries and wages payable
- Vacation pay payable
Purpose of Revenue Accounts - CORRECT ANSWERS Used to record the income
earned by the organization
Expense Accounts - CORRECT ANSWERS Costs incurred in earning revenue during a
specific period
, Equity Accounts - CORRECT ANSWERS Show owners' or shareholders' worth in the
organization
Owners' Equity Components - CORRECT ANSWERS Contributed capital & retained
earnings
General Ledger Accounts Elements - CORRECT ANSWERS - Account name
- Opening balance
- Reference
- Debit and credit transactions
- Closing balance
Components of a Journal Entry - CORRECT ANSWERS - Journal entry reference or
number
- Transaction date
- Debit and credit amounts per account
- Total debit and credit entries
- Brief transaction explanation
Double-Entry Accounting - CORRECT ANSWERS Each transaction affects at least two
accounts with one debit and one credit
Income Statement - CORRECT ANSWERS Presents revenue, expenses, and net profit
or loss during a specific period
Purpose of an Income Statement - CORRECT ANSWERS Determines if the
organization earned profit or incurred loss in the reported period
Balance Sheet - CORRECT ANSWERS Summarizes assets, liabilities, and owners'
equity at a specific point in time
Classification of Salaries and Wages Expenses - CORRECT ANSWERS - Direct labour
costs
- Indirect labour costs
Direct Labour Costs - CORRECT ANSWERS Payroll costs for employees performing
specific services, work, or sales activities
Indirect Labour Costs - CORRECT ANSWERS Payroll costs for employees not directly
involved in specific services, work, or sales activities, but in administrative functions
Statutory Requirements - CORRECT ANSWERS Expenses incurred due to federal and
provincial legislation
