FINANCIAL ACCOUNTING BASIC
CONCEPTS STUDY GUIDE 2026 COMPLETE
QUESTIONS WITH GUARANTEED CORRECT
ANSWERS GRADED A+
⩥ What are the three key questions that GAAP rules determine in
financial accounting? Answer: 1. Amount of the transaction to be
recorded, 2. What transactions are to be recorded, 3. When transactions
are to be recorded.
⩥ What is a transaction in accounting? Answer: An economic event that
affects the financial statements, involving two or more items within a
financial statement.
⩥ What is the accounting equation? Answer: Assets = Liabilities +
Stockholders' Equity
⩥ What must balance in an accounting system? Answer: The accounting
equation must balance.
⩥ What is the effect of Dr. Landry depositing $6,000 in a bank account
for shares of stock? Answer: Increases assets and stockholders' equity.
, ⩥ What is the effect of Family Health Care borrowing $10,000 from the
bank? Answer: Increases assets and liabilities.
⩥ What happens to the financial statements when Family Health Care
buys land for $12,000 cash? Answer: Decreases cash (asset) and
increases land (asset).
⩥ What is the effect of earning patient fees of $5,500 in cash? Answer:
Increases cash (asset) and increases revenues on the income statement.
⩥ What is the impact of paying $2,900 in expenses? Answer: Decreases
cash (asset) and increases expenses on the income statement.
⩥ What is the effect of paying $1,500 in cash dividends? Answer:
Decreases cash (asset) and decreases retained earnings in stockholders'
equity.
⩥ What is the relationship between the Statement of Cash Flows and the
Balance Sheet? Answer: Ending cash on the Statement of Cash Flows
must equal cash on the Balance Sheet.
⩥ How does net income affect the Statement of Stockholders Equity?
Answer: Net income affects retained earnings, which is part of
stockholders' equity.
CONCEPTS STUDY GUIDE 2026 COMPLETE
QUESTIONS WITH GUARANTEED CORRECT
ANSWERS GRADED A+
⩥ What are the three key questions that GAAP rules determine in
financial accounting? Answer: 1. Amount of the transaction to be
recorded, 2. What transactions are to be recorded, 3. When transactions
are to be recorded.
⩥ What is a transaction in accounting? Answer: An economic event that
affects the financial statements, involving two or more items within a
financial statement.
⩥ What is the accounting equation? Answer: Assets = Liabilities +
Stockholders' Equity
⩥ What must balance in an accounting system? Answer: The accounting
equation must balance.
⩥ What is the effect of Dr. Landry depositing $6,000 in a bank account
for shares of stock? Answer: Increases assets and stockholders' equity.
, ⩥ What is the effect of Family Health Care borrowing $10,000 from the
bank? Answer: Increases assets and liabilities.
⩥ What happens to the financial statements when Family Health Care
buys land for $12,000 cash? Answer: Decreases cash (asset) and
increases land (asset).
⩥ What is the effect of earning patient fees of $5,500 in cash? Answer:
Increases cash (asset) and increases revenues on the income statement.
⩥ What is the impact of paying $2,900 in expenses? Answer: Decreases
cash (asset) and increases expenses on the income statement.
⩥ What is the effect of paying $1,500 in cash dividends? Answer:
Decreases cash (asset) and decreases retained earnings in stockholders'
equity.
⩥ What is the relationship between the Statement of Cash Flows and the
Balance Sheet? Answer: Ending cash on the Statement of Cash Flows
must equal cash on the Balance Sheet.
⩥ How does net income affect the Statement of Stockholders Equity?
Answer: Net income affects retained earnings, which is part of
stockholders' equity.
