CBAD 201 FINAL EXAM QUESTIONS AND CORRECT
ANSWERS (VERIFIED ANSWERS) Q&A
2027|INSTANT DOWNLOAD PDF
1. Which financial statement reports a company’s assets,
liabilities, and equity at a specific point in time?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Correct Answer: C. Balance sheet
Rationale: The balance sheet presents the accounting equation:
Assets = Liabilities + Equity, showing financial position at a
specific date.
2. The basic accounting equation is:
A. Assets = Revenue + Expenses
B. Assets = Liabilities + Owner’s Equity
C. Assets = Liabilities – Equity
D. Revenue = Assets + Expenses
Correct Answer: B. Assets = Liabilities + Owner’s Equity
,Rationale: Every accounting transaction must maintain the
balance between resources owned, obligations owed, and
owner claims.
3. Which account is classified as an asset?
A. Accounts payable
B. Common stock
C. Equipment
D. Sales revenue
Correct Answer: C. Equipment
Rationale: Equipment is a resource owned by a business and
provides future economic benefits.
4. Which accounting principle requires companies to record
transactions when they occur rather than when cash is
received or paid?
A. Matching principle
B. Accrual basis accounting
C. Cost principle
D. Revenue principle
Correct Answer: B. Accrual basis accounting
Rationale: Accrual accounting recognizes revenues when
earned and expenses when incurred.
,5. A company purchases supplies for cash. Which accounts are
affected?
A. Supplies increase and cash decreases
B. Cash increases and supplies decrease
C. Revenue increases and cash decreases
D. Expenses increase and liabilities increase
Correct Answer: A. Supplies increase and cash decreases
Rationale: Purchasing supplies increases an asset account while
reducing another asset (cash).
6. Which financial statement shows revenues and expenses
for a period of time?
A. Balance sheet
B. Income statement
C. Statement of equity
D. Bank statement
Correct Answer: B. Income statement
Rationale: The income statement determines whether a
business earned a profit or loss.
7. Revenue is recognized when:
, A. Cash is deposited
B. A customer places an order
C. The company earns the revenue
D. A bill is paid
Correct Answer: C. The company earns the revenue
Rationale: Under accrual accounting, revenue recognition
occurs when goods or services are provided.
8. Which account normally has a debit balance?
A. Revenue
B. Liabilities
C. Assets
D. Owner’s capital
Correct Answer: C. Assets
Rationale: Assets normally increase with debits and decrease
with credits.
9. The purpose of a journal entry is to:
A. Prepare financial statements directly
B. Record business transactions chronologically
C. Calculate taxes only
D. Replace the ledger
ANSWERS (VERIFIED ANSWERS) Q&A
2027|INSTANT DOWNLOAD PDF
1. Which financial statement reports a company’s assets,
liabilities, and equity at a specific point in time?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Correct Answer: C. Balance sheet
Rationale: The balance sheet presents the accounting equation:
Assets = Liabilities + Equity, showing financial position at a
specific date.
2. The basic accounting equation is:
A. Assets = Revenue + Expenses
B. Assets = Liabilities + Owner’s Equity
C. Assets = Liabilities – Equity
D. Revenue = Assets + Expenses
Correct Answer: B. Assets = Liabilities + Owner’s Equity
,Rationale: Every accounting transaction must maintain the
balance between resources owned, obligations owed, and
owner claims.
3. Which account is classified as an asset?
A. Accounts payable
B. Common stock
C. Equipment
D. Sales revenue
Correct Answer: C. Equipment
Rationale: Equipment is a resource owned by a business and
provides future economic benefits.
4. Which accounting principle requires companies to record
transactions when they occur rather than when cash is
received or paid?
A. Matching principle
B. Accrual basis accounting
C. Cost principle
D. Revenue principle
Correct Answer: B. Accrual basis accounting
Rationale: Accrual accounting recognizes revenues when
earned and expenses when incurred.
,5. A company purchases supplies for cash. Which accounts are
affected?
A. Supplies increase and cash decreases
B. Cash increases and supplies decrease
C. Revenue increases and cash decreases
D. Expenses increase and liabilities increase
Correct Answer: A. Supplies increase and cash decreases
Rationale: Purchasing supplies increases an asset account while
reducing another asset (cash).
6. Which financial statement shows revenues and expenses
for a period of time?
A. Balance sheet
B. Income statement
C. Statement of equity
D. Bank statement
Correct Answer: B. Income statement
Rationale: The income statement determines whether a
business earned a profit or loss.
7. Revenue is recognized when:
, A. Cash is deposited
B. A customer places an order
C. The company earns the revenue
D. A bill is paid
Correct Answer: C. The company earns the revenue
Rationale: Under accrual accounting, revenue recognition
occurs when goods or services are provided.
8. Which account normally has a debit balance?
A. Revenue
B. Liabilities
C. Assets
D. Owner’s capital
Correct Answer: C. Assets
Rationale: Assets normally increase with debits and decrease
with credits.
9. The purpose of a journal entry is to:
A. Prepare financial statements directly
B. Record business transactions chronologically
C. Calculate taxes only
D. Replace the ledger
