This study set covers Accounting through 15 practice questions. This guide covers fundamental accounting principles, including the accounting equation, financial statements, and the accounting cycle. Every question includes the correct answer so you can learn as you go — pick any format above to get started.

Questions & Answers

Browse all 15 questions from the Basic Accounting Principles: A Beginner's Guide study set below. Each question shows the correct answer — select a study format above to practice interactively.

1 What is the primary purpose of accounting?

A To identify, measure, and communicate financial information for decision-making.
B To minimize business expenses.
C To maximize profits.
D To manage employee salaries.

2 Which of the following is NOT one of the five main financial statements?

A Balance Sheet
B Income Statement
C Statement of Changes in Equity
D Cash Flow Forecast

3 What is the fundamental accounting equation?

A Assets = Liabilities + Owner's Equity
B Assets - Liabilities = Revenue
C Revenue - Expenses = Net Income
D Assets + Liabilities = Owner's Equity

4 What are assets?

A The resources owned by a business.
B The debts owed by a business.
C The owner's investment in the business.
D The expenses incurred by a business.

5 What are liabilities?

A The obligations of a business to others.
B The resources owned by a business.
C The owner's equity in the business.
D The revenues earned by a business.

6 What is owner's equity?

A The owner's stake in the business.
B The debts owed by the business.
C The resources owned by the business.
D The expenses incurred by the business.

7 What is the purpose of the income statement?

A To measure a company's financial performance over a period of time.
B To show a company's assets, liabilities, and equity at a specific point in time.
C To track the movement of cash in and out of a company.
D To detail all financial transactions.

8 What is the end goal of the accounting process?

A To prepare financial statements.
B To minimize expenses.
C To maximize revenue.
D To analyze market trends.

9 What is the first step in the accounting cycle?

A Identifying and analyzing business transactions.
B Journalizing.
C Posting.
D Preparing the unadjusted trial balance.

10 If a company's assets are $760,000 and its liabilities are $360,000, what is the owner's equity?

A $400,000
B $1,120,000
C $360,000
D $760,000

11 Which of the following is an example of an asset?

A Cash
B Accounts Payable
C Loans Payable
D Salaries Expense

12 Which of the following is an example of a liability?

A Accounts Payable
B Cash
C Inventory
D Equipment

13 What is the formula for calculating net income?

A Revenues - Expenses
B Assets - Liabilities
C Assets + Owner's Equity
D Liabilities + Expenses

14 If a company has revenues of $840,000 and a profit of $360,000, what are its expenses?

A $480,000
B $1,200,000
C $360,000
D $840,000

15 What does a balance sheet show?

A A company's assets, liabilities, and equity at a specific point in time.
B A company's financial performance over a period of time.
C The movement of cash in and out of a company.
D A company's marketing strategy.

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