Accounting Exam: Basic Principles! Quiz

The correct answer is "Planning, recording, analyzing, and interpreting financial information." Accounting involves the systematic process of planning, recording, analyzing, and interpreting financial information to provide accurate and reliable financial reports and statements. This process helps businesses and individuals make informed financial decisions, track their financial performance, and comply with legal and regulatory requirements.

Accounting refers to the process of planning, recording, analyzing, and interpreting financial information. It involves the systematic recording and reporting of financial transactions, as well as the preparation of financial statements such as balance sheets, income statements, and cash flow statements. Through accounting, businesses are able to track their financial performance, make informed decisions, and comply with legal and regulatory requirements.

A business that performs an activity for a fee is classified as a service business. This type of business provides intangible services to customers in exchange for payment. Unlike a wholesale merchandising business, which deals with selling physical products in large quantities, a service business focuses on offering expertise, skills, or labor to fulfill the needs of clients. Examples of service businesses include consulting firms, hair salons, law firms, and healthcare providers.

The equation "Assets = Liabilities + Owner's Equity" is a fundamental principle in accounting known as the accounting equation. It states that the total assets of a company must be equal to the sum of its liabilities and owner's equity. This equation helps in understanding the financial position of a business and how its resources are financed.

The correct answer is Cash Debit and Sales Credit. When cash is received from sales, it is recorded as a debit in the Cash column of the journal to increase the cash balance. On the other hand, the sales amount is recorded as a credit in the Sales column to show an increase in sales revenue. This follows the basic accounting principle of recording increases in assets (cash) as debits and increases in revenue (sales) as credits.

An amount owed by a business refers to a liability. A liability represents an obligation or debt that a business owes to another party. It can include things like loans, accounts payable, and accrued expenses. Liabilities are recorded on the balance sheet and are considered a crucial aspect of a company's financial obligations.

Proving cash refers to the process of verifying that the amount of cash on hand matches the amount recorded in the accounting records. This involves reconciling the physical cash with the cash balance shown in the books. By comparing the two, any discrepancies can be identified and investigated. This is an important control procedure to ensure the accuracy and integrity of the financial records.