Basic Bookkeeping and Accounting Concepts
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1. The Income Statement measures the
net worth of a business profitability of a business
liquidity of a business debt paying ability of a business

2. Which of the following does not appear in a Balance Sheet ?
Cash Accounts Payable
Equipment Depreciation Expense

3. The matching principle or rule is based on
the cash basis of accounting the accrual basis of accounting
the double entry bookkeeping method the balance sheet accounting method

4. Nominal accounts
are permanent balance sheet accounts are temporary income statement and capital accounts
are not used in bookkeeping none of the listed answers is correct

5. The accrual basis of accounting that records revenue when earned and expenses when incurred is considered better than the cash basis because
it more accurately reflects net income it's easier to use
it's required by GAAP -Generally Accepted Accounting Principles none of the listed answers is correct

6. A contra account's balance is
always a debit balance always a credit balance
the opposite of the normal balance of its related account the same as the normal balance of its related account

7. Adjusting entries are used to
close the books correct errors
record accruals all of the listed answers are correct

8. Economic resources that are expected to produce future benefits are called
assets liabilities
revenue capital

9. The terms Net Assets and Net Worth, the difference between assets and liabilities, are also referred to as
Net Revenue Gross Profit
Excess Liabilities Owner's Equity

10. Net Income or Profit results from
revenues exceeding expenses expenses exceeding revenues
assets exceeding liabilities liabilities exceeding assets

11. Assets are normally recorded at
cost market value
appraised value management's estimated value

12. Which financial report measures results for a period of time ?
Balance Sheet Trial Balance
Income Statement all of the listed answers are correct

13. Using the double entry system, every business transaction
affects two or more accounts affects only one account
affects only asset accounts affects only income statement accounts

14. The mathematical expression Assets = Liabilities + Owner's Equity is
called the Balance Sheet Equation called the Accounting Equation
called the Income Statement Equation referred to as both the Accounting Equation and Balance Sheet Equation

15. A debt incurred by buying goods or services from a supplier on credit is called
property an expense
accounts payable accounts receivable

16. A debt incurred by selling goods or services to a customer on credit is called
revenue an expense
accounts payable accounts receivable

17. The accounting rule that assumes a business will continuing operating instead of being sold or closed is called the
cost concept or principle business entity concept or principle
realization concept or principle going concern concept or principle

18. Distributions of assets to the owners of a corporation are called
property draws
dividends stock

19. An organization made up of owners called shareholders is called a
corporation partnership
sole proprietorship limited liability company

20. The type of organization with the greatest risk and exposure of an individual's personal assets is a
regular corporation subchaper S corporation
limited liability company sole proprietorship

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