NAF Accounting Test Exam Question
and Answers
Sole Proprietorship - correct answer-A business owned by one person; easy to start and
inexpensive BUT unlimited personal liability for business debts and lawsuits
Partnership - correct answer-a business owned by two or more people; easy to start
and the partners have full authority over business BUT difficult to remove a partner and
unlimited personal liability for partners
Limited Liability Company (LLC) - correct answer-a form of business entity that limits the
liability of its owners while allowing flexibility; the owners can only lose the amount
invested in the business BUT goes away when a partner leaves
Corporation - correct answer-A business that is owned by many investors; ownership is
transferable and OE is limited BUT complicated to set up and hard to end
IRS - correct answer-(Internal Revenue Service) Governmental agency responsible for
collecting federal taxes, issuing regulations, and enforcing tax laws
FASB - correct answer-(Financial Accounting Standards Board) develops GAAP for
public companies.
GAAP - correct answer-Generally Accepted Accounting Principles. The standards and
rules that accountants follow while recording and reporting financial activities.
SEC - correct answer-Securities and Exchange Commission; protects and allows the
stock market to run smoothly
AICPA - correct answer-American Institute of Certified Public Accountants; creates the
CPA exam and develops behavior guidelines
IFRS - correct answer-International Financial Reporting Standards. guideline is used to
harmonize accounting standards, not used in USA
PCAOB - correct answer-Public Company Accounting Oversight Board; protects
investors and oversees public audits
step one in analyzing financial events - correct answer-collect source documents
and Answers
Sole Proprietorship - correct answer-A business owned by one person; easy to start and
inexpensive BUT unlimited personal liability for business debts and lawsuits
Partnership - correct answer-a business owned by two or more people; easy to start
and the partners have full authority over business BUT difficult to remove a partner and
unlimited personal liability for partners
Limited Liability Company (LLC) - correct answer-a form of business entity that limits the
liability of its owners while allowing flexibility; the owners can only lose the amount
invested in the business BUT goes away when a partner leaves
Corporation - correct answer-A business that is owned by many investors; ownership is
transferable and OE is limited BUT complicated to set up and hard to end
IRS - correct answer-(Internal Revenue Service) Governmental agency responsible for
collecting federal taxes, issuing regulations, and enforcing tax laws
FASB - correct answer-(Financial Accounting Standards Board) develops GAAP for
public companies.
GAAP - correct answer-Generally Accepted Accounting Principles. The standards and
rules that accountants follow while recording and reporting financial activities.
SEC - correct answer-Securities and Exchange Commission; protects and allows the
stock market to run smoothly
AICPA - correct answer-American Institute of Certified Public Accountants; creates the
CPA exam and develops behavior guidelines
IFRS - correct answer-International Financial Reporting Standards. guideline is used to
harmonize accounting standards, not used in USA
PCAOB - correct answer-Public Company Accounting Oversight Board; protects
investors and oversees public audits
step one in analyzing financial events - correct answer-collect source documents
