COMMERCE 4AK3 - Exam Study Notes
2025/2026 Exam Questions and Answers
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What is the primary objective of financial reporting? - 🧠 ANSWER
✔✔Provide information that is useful for making investment and credit
decisions
What are the 3 aspects of double entry accounting? - 🧠 ANSWER ✔✔1.
Every transaction will involve at least two accounts (i.e., a debit and a
credit).
2. Involves the accounting equation -> assets = liabilities + owners' equity.
3. The accounting equation should always be in balance.
What are assets? - 🧠 ANSWER ✔✔Resources that a company owns with
future benefit
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. 1
PRIVACY STATEMENT. ALL RIGHTS RESERVED
,What are liabilities? - 🧠 ANSWER ✔✔Represent the creditors' claims on the
assets of the business
What is owners' equity? - 🧠 ANSWER ✔✔Represents the owners' claims
on the assets of the business
What is a current asset? - 🧠 ANSWER ✔✔Assets that the company expects
to convert to cash, sell or consume during the next 12 months or within a
year or the business' normal operating cycle.
What are examples of current assets? - 🧠 ANSWER ✔✔- Inventory
- Cash
- Accounts Receivable
- Prepaid Rent
Is equipment a current asset? - 🧠 ANSWER ✔✔NO
Where are business transactions first recorded? - 🧠 ANSWER ✔✔Journal
What is the flow of accounting information? - 🧠 ANSWER ✔✔Journalize
transactions --> post transactions to accounts --> prepare a trial balance
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. 2
PRIVACY STATEMENT. ALL RIGHTS RESERVED
, How to calculate ending retained earnings? - 🧠 ANSWER ✔✔Ending
retained earnings = Beginning retained earnings + Net Income - Dividends
(Note that Net Income = Revenue - Expenses)
How to calculate net income? - 🧠 ANSWER ✔✔Net Income = Revenues -
Expenses
Is prepaid rent an asset account? - 🧠 ANSWER ✔✔YES
What is the matching principle? - 🧠 ANSWER ✔✔Expenses are recorded
when incurred, not necessarily when paid.
What is the revenue recognition principle? - 🧠 ANSWER ✔✔Revenues are
recorded when earned, not necessarily when received.
What is book value? - 🧠 ANSWER ✔✔The cost of the depreciable asset
minus accumulated depreciation
How to calculate change in shareholder's equity? - 🧠 ANSWER ✔✔Change
in Shareholder's Equity = Net Income - Dividends
What is a long-term/non-current asset? - 🧠 ANSWER ✔✔Assets that are
partially used, or amortized
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. 3
PRIVACY STATEMENT. ALL RIGHTS RESERVED
2025/2026 Exam Questions and Answers
100% Guaranteed Success | Already
Rated A+
What is the primary objective of financial reporting? - 🧠 ANSWER
✔✔Provide information that is useful for making investment and credit
decisions
What are the 3 aspects of double entry accounting? - 🧠 ANSWER ✔✔1.
Every transaction will involve at least two accounts (i.e., a debit and a
credit).
2. Involves the accounting equation -> assets = liabilities + owners' equity.
3. The accounting equation should always be in balance.
What are assets? - 🧠 ANSWER ✔✔Resources that a company owns with
future benefit
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. 1
PRIVACY STATEMENT. ALL RIGHTS RESERVED
,What are liabilities? - 🧠 ANSWER ✔✔Represent the creditors' claims on the
assets of the business
What is owners' equity? - 🧠 ANSWER ✔✔Represents the owners' claims
on the assets of the business
What is a current asset? - 🧠 ANSWER ✔✔Assets that the company expects
to convert to cash, sell or consume during the next 12 months or within a
year or the business' normal operating cycle.
What are examples of current assets? - 🧠 ANSWER ✔✔- Inventory
- Cash
- Accounts Receivable
- Prepaid Rent
Is equipment a current asset? - 🧠 ANSWER ✔✔NO
Where are business transactions first recorded? - 🧠 ANSWER ✔✔Journal
What is the flow of accounting information? - 🧠 ANSWER ✔✔Journalize
transactions --> post transactions to accounts --> prepare a trial balance
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. 2
PRIVACY STATEMENT. ALL RIGHTS RESERVED
, How to calculate ending retained earnings? - 🧠 ANSWER ✔✔Ending
retained earnings = Beginning retained earnings + Net Income - Dividends
(Note that Net Income = Revenue - Expenses)
How to calculate net income? - 🧠 ANSWER ✔✔Net Income = Revenues -
Expenses
Is prepaid rent an asset account? - 🧠 ANSWER ✔✔YES
What is the matching principle? - 🧠 ANSWER ✔✔Expenses are recorded
when incurred, not necessarily when paid.
What is the revenue recognition principle? - 🧠 ANSWER ✔✔Revenues are
recorded when earned, not necessarily when received.
What is book value? - 🧠 ANSWER ✔✔The cost of the depreciable asset
minus accumulated depreciation
How to calculate change in shareholder's equity? - 🧠 ANSWER ✔✔Change
in Shareholder's Equity = Net Income - Dividends
What is a long-term/non-current asset? - 🧠 ANSWER ✔✔Assets that are
partially used, or amortized
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. 3
PRIVACY STATEMENT. ALL RIGHTS RESERVED
