Introductory Accounting Skills Form IA-200
BUS-A 100 – INTRODUCTORY ACCOUNTING SKILLS | EXAM
QUESTIONS AND CORRECT ANSWERS | VERIFIED ACCOUNTING
LATEST 2026/2027
BUS-A 100
INTRODUCTORY ACCOUNTING SKILLS
1. Which of the following correctly states the basic accounting equation?
A. Assets + Liabilities = Stockholders' Equity
B. Assets = Revenues − Expenses
C. Liabilities = Assets + Stockholders' Equity
D. Assets = Liabilities + Stockholders' Equity
D. Assets = Liabilities + Stockholders' Equity
Everything a company owns is financed either by creditors (liabilities) or by
owners (equity).
2. Ridgeway Company reports total assets of $250,000 and total liabilities of
$90,000. What is total stockholders' equity?
A. $90,000
B. $250,000
C. $340,000
D. $160,000
D. $160,000
Equity equals assets minus liabilities: $250,000 − $90,000 = $160,000.
Page 1 of 51
,Introductory Accounting Skills Form IA-200
3. Which of the following accounts is classified as an asset?
A. Salaries Payable
B. Accounts Payable
C. Prepaid Insurance
D. Unearned Revenue
C. Prepaid Insurance
Prepaid insurance is a future benefit the company has already paid for, so it is
an asset; the others are obligations.
4. Under the revenue recognition principle, revenue should be recorded when:
A. The customer places a verbal order
B. The company satisfies its performance obligation to the customer
C. Cash is collected from the customer
D. A sales contract is first discussed
B. The company satisfies its performance obligation to the customer
Revenue is recognized when goods or services are transferred to the customer,
regardless of when cash is received.
5. The expense recognition (matching) principle requires that expenses be
recorded:
A. When the invoice is received from the supplier
B. At the end of each fiscal year only
C. Only when cash is paid
D. In the same period as the revenues they helped generate
D. In the same period as the revenues they helped generate
Expenses follow the revenues they help produce, so both appear in the same
period.
6. A company purchases land for $80,000. Two years later the land is
appraised at $110,000. At what amount should the land be reported on the
balance sheet?
A. $80,000
B. $110,000
C. $30,000
D. $95,000
A. $80,000
The historical cost principle requires assets to be reported at their original cost,
not current appraised value.
Page 2 of 51
,Introductory Accounting Skills Form IA-200
7. The owner of a small corporation pays her personal home mortgage with
personal funds. The company does not record this payment because of the:
A. Monetary unit assumption
B. Economic entity assumption
C. Going concern assumption
D. Time period assumption
B. Economic entity assumption
The business is treated as separate from its owners, so personal transactions are
excluded from company records.
8. Which assumption supports reporting long-term assets at cost less
accumulated depreciation rather than at liquidation value?
A. Full disclosure principle
B. Economic entity assumption
C. Monetary unit assumption
D. Going concern assumption
D. Going concern assumption
Assuming the business will continue operating justifies spreading asset costs
over their useful lives.
9. The monetary unit assumption requires that:
A. Only transactions measurable in money be recorded
B. Financial statements be prepared monthly
C. Inflation adjustments be made each year
D. All transactions be recorded in foreign currency
A. Only transactions measurable in money be recorded
Only events that can be expressed in monetary terms are included in the
accounting records.
10. Financial accounting information is prepared primarily for which group
of users?
A. Investors and creditors outside the company
B. Internal auditors
C. Production supervisors
D. Department managers
A. Investors and creditors outside the company
Financial accounting serves external decision makers such as investors and
lenders.
Page 3 of 51
, Introductory Accounting Skills Form IA-200
11. Which private organization is primarily responsible for establishing
generally accepted accounting principles (GAAP) in the United States?
A. Internal Revenue Service (IRS)
B. Financial Accounting Standards Board (FASB)
C. Public Company Accounting Oversight Board (PCAOB)
D. International Accounting Standards Board (IASB)
B. Financial Accounting Standards Board (FASB)
The FASB is the private-sector body that sets U.S. GAAP; the IASB sets IFRS.
12. A company purchases equipment for $12,000 cash. What is the effect on
the accounting equation?
A. One asset increases and another asset decreases; total assets are unchanged
B. Assets increase and equity increases
C. Assets decrease and equity decreases
D. Assets and liabilities both increase
A. One asset increases and another asset decreases; total assets are
unchanged
Equipment rises and Cash falls by the same amount, so total assets stay the
same.
13. A business buys supplies on account. How does this transaction affect the
accounting equation?
A. Assets increase and equity increases
B. Liabilities increase and equity decreases
C. Assets decrease and liabilities decrease
D. Assets increase and liabilities increase
D. Assets increase and liabilities increase
Supplies (asset) go up and Accounts Payable (liability) goes up by the same
amount.
14. A corporation pays a cash dividend to its stockholders. The effect on the
accounting equation is:
A. Assets decrease and stockholders' equity decreases
B. Assets decrease and liabilities decrease
C. Assets and equity are unchanged
D. Liabilities increase and equity decreases
A. Assets decrease and stockholders' equity decreases
Cash leaves the business and retained earnings are reduced by the distribution.
Page 4 of 51
BUS-A 100 – INTRODUCTORY ACCOUNTING SKILLS | EXAM
QUESTIONS AND CORRECT ANSWERS | VERIFIED ACCOUNTING
LATEST 2026/2027
BUS-A 100
INTRODUCTORY ACCOUNTING SKILLS
1. Which of the following correctly states the basic accounting equation?
A. Assets + Liabilities = Stockholders' Equity
B. Assets = Revenues − Expenses
C. Liabilities = Assets + Stockholders' Equity
D. Assets = Liabilities + Stockholders' Equity
D. Assets = Liabilities + Stockholders' Equity
Everything a company owns is financed either by creditors (liabilities) or by
owners (equity).
2. Ridgeway Company reports total assets of $250,000 and total liabilities of
$90,000. What is total stockholders' equity?
A. $90,000
B. $250,000
C. $340,000
D. $160,000
D. $160,000
Equity equals assets minus liabilities: $250,000 − $90,000 = $160,000.
Page 1 of 51
,Introductory Accounting Skills Form IA-200
3. Which of the following accounts is classified as an asset?
A. Salaries Payable
B. Accounts Payable
C. Prepaid Insurance
D. Unearned Revenue
C. Prepaid Insurance
Prepaid insurance is a future benefit the company has already paid for, so it is
an asset; the others are obligations.
4. Under the revenue recognition principle, revenue should be recorded when:
A. The customer places a verbal order
B. The company satisfies its performance obligation to the customer
C. Cash is collected from the customer
D. A sales contract is first discussed
B. The company satisfies its performance obligation to the customer
Revenue is recognized when goods or services are transferred to the customer,
regardless of when cash is received.
5. The expense recognition (matching) principle requires that expenses be
recorded:
A. When the invoice is received from the supplier
B. At the end of each fiscal year only
C. Only when cash is paid
D. In the same period as the revenues they helped generate
D. In the same period as the revenues they helped generate
Expenses follow the revenues they help produce, so both appear in the same
period.
6. A company purchases land for $80,000. Two years later the land is
appraised at $110,000. At what amount should the land be reported on the
balance sheet?
A. $80,000
B. $110,000
C. $30,000
D. $95,000
A. $80,000
The historical cost principle requires assets to be reported at their original cost,
not current appraised value.
Page 2 of 51
,Introductory Accounting Skills Form IA-200
7. The owner of a small corporation pays her personal home mortgage with
personal funds. The company does not record this payment because of the:
A. Monetary unit assumption
B. Economic entity assumption
C. Going concern assumption
D. Time period assumption
B. Economic entity assumption
The business is treated as separate from its owners, so personal transactions are
excluded from company records.
8. Which assumption supports reporting long-term assets at cost less
accumulated depreciation rather than at liquidation value?
A. Full disclosure principle
B. Economic entity assumption
C. Monetary unit assumption
D. Going concern assumption
D. Going concern assumption
Assuming the business will continue operating justifies spreading asset costs
over their useful lives.
9. The monetary unit assumption requires that:
A. Only transactions measurable in money be recorded
B. Financial statements be prepared monthly
C. Inflation adjustments be made each year
D. All transactions be recorded in foreign currency
A. Only transactions measurable in money be recorded
Only events that can be expressed in monetary terms are included in the
accounting records.
10. Financial accounting information is prepared primarily for which group
of users?
A. Investors and creditors outside the company
B. Internal auditors
C. Production supervisors
D. Department managers
A. Investors and creditors outside the company
Financial accounting serves external decision makers such as investors and
lenders.
Page 3 of 51
, Introductory Accounting Skills Form IA-200
11. Which private organization is primarily responsible for establishing
generally accepted accounting principles (GAAP) in the United States?
A. Internal Revenue Service (IRS)
B. Financial Accounting Standards Board (FASB)
C. Public Company Accounting Oversight Board (PCAOB)
D. International Accounting Standards Board (IASB)
B. Financial Accounting Standards Board (FASB)
The FASB is the private-sector body that sets U.S. GAAP; the IASB sets IFRS.
12. A company purchases equipment for $12,000 cash. What is the effect on
the accounting equation?
A. One asset increases and another asset decreases; total assets are unchanged
B. Assets increase and equity increases
C. Assets decrease and equity decreases
D. Assets and liabilities both increase
A. One asset increases and another asset decreases; total assets are
unchanged
Equipment rises and Cash falls by the same amount, so total assets stay the
same.
13. A business buys supplies on account. How does this transaction affect the
accounting equation?
A. Assets increase and equity increases
B. Liabilities increase and equity decreases
C. Assets decrease and liabilities decrease
D. Assets increase and liabilities increase
D. Assets increase and liabilities increase
Supplies (asset) go up and Accounts Payable (liability) goes up by the same
amount.
14. A corporation pays a cash dividend to its stockholders. The effect on the
accounting equation is:
A. Assets decrease and stockholders' equity decreases
B. Assets decrease and liabilities decrease
C. Assets and equity are unchanged
D. Liabilities increase and equity decreases
A. Assets decrease and stockholders' equity decreases
Cash leaves the business and retained earnings are reduced by the distribution.
Page 4 of 51
