Questions On Accounting: Quiz! Test

2.

Which of the following is an example of a liability?

Cable bill
Mortgage
Accounts recievable
Car

Correct Answer

A. Mortgage

Explanation

A mortgage is an example of a liability because it represents a debt that an individual or organization owes to a lender. When someone takes out a mortgage to purchase a property, they are borrowing money and agreeing to make regular payments to repay the loan over a specific period of time. The mortgage is considered a liability because it is an obligation to repay the borrowed funds, and failure to make the required payments can result in consequences such as foreclosure or legal action by the lender.

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3.

The accounting equation is ____________________

Revenue - expenses = Net income
Assets + Liabilities = Owner's Equity
Assets - Liabilities = Owner's Equity
Liabilities + Owner's Equity = Assets

Correct Answer

A. Liabilities + Owner's Equity = Assets

Explanation

The accounting equation states that the sum of a company's liabilities and owner's equity is equal to its total assets. This equation is the foundation of double-entry bookkeeping, which ensures that every financial transaction is recorded accurately and maintains the balance between the company's resources (assets) and its obligations (liabilities and owner's equity). By understanding this equation, businesses can assess their financial health and make informed decisions about their operations and investments.

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4.

Owner's Equity is the owner's claims to the business' cash only.

True
False

Correct Answer

A. False

Explanation

This statement is false. Owner's Equity represents the owner's claims to all the assets of the business, not just cash. It includes the owner's investment in the business, retained earnings, and any profits or losses. Owner's Equity is calculated by subtracting liabilities from the total assets of the business.

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5.

The following are Types of businesses.

Service, Merchandising, Manufacturing
Service, Sole Proprietorship, Manufacturing
Sole Proprietorship, Partnership, Corporation
Assets, Expenses, Income

Correct Answer

A. Service, Merchandising, Manufacturing

Explanation

The correct answer is Service, Merchandising, Manufacturing. These three options represent different types of businesses. Service businesses are those that provide intangible services to customers, such as consulting or accounting. Merchandising businesses involve buying and selling tangible goods, such as retail stores. Manufacturing businesses involve producing goods by using raw materials, such as factories that produce cars or electronics.

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6.

The amount of money earned after the costs of operating a business are paid is_____________.

Revenue
Income
Profit
Capital

Correct Answer

A. Profit

Explanation

Profit refers to the amount of money earned after deducting the costs of operating a business. It represents the financial gain or benefit that a company or individual receives from their business activities. Revenue, on the other hand, refers to the total amount of money generated from sales or services before deducting any expenses. Income is a broader term that can encompass various sources of earnings, including wages, salaries, and investments. Capital refers to the financial resources or assets owned by a business or individual.

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7.

**Which of the following would NOT be considered a service business?**

General Motors
North American Van Lines
Delta Airlines
Alamo Rent A Car

Correct Answer

A. General Motors

Explanation

General Motors would not be considered a service business because it primarily manufactures and sells automobiles, which are tangible products, rather than providing intangible services. While they may offer some services such as maintenance and repairs, their main focus is on the production and sale of vehicles. On the other hand, North American Van Lines, Delta Airlines, and Alamo Rent A Car are all service businesses as they provide transportation services to customers.

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8.

The most common form of business organization is the ________________.

Partnership
Sole proprietorship
Corporation
Not-for-profit

Correct Answer

A. Sole proprietorship

Explanation

A sole proprietorship is the most common form of business organization because it is the simplest and easiest to set up. In this type of business, there is only one owner who has complete control and receives all the profits. Additionally, the owner is personally liable for all the debts and obligations of the business. This form of organization is often chosen by small businesses or individuals starting out on their own due to its simplicity and low cost.

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9.

The 3 forms of businesses (ownership structures) are:

Revenue, profit, income
Service, Manufacturing, Corporation
Sole proprietorship, Partnership, Corporation
Partnership, Withdrawal, Owner's equity

Correct Answer

A. Sole proprietorship, Partnership, Corporation

Explanation

The correct answer is Sole proprietorship, Partnership, Corporation. These three forms of businesses represent different ownership structures. A sole proprietorship is a business owned and operated by a single individual. A partnership is a business owned and operated by two or more individuals who share the profits and liabilities. A corporation is a legal entity separate from its owners, with shareholders who own the company and a board of directors who manage its operations. These three forms represent the most common types of businesses and each has its own advantages and disadvantages in terms of liability, taxation, and decision-making.

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10.

A service business __________

Has only one owner
Never earns a profit
Buys raw materials, uses labor and machinery to transforms them into finished products
Provides a needed service for a fee

Correct Answer

A. Provides a needed service for a fee

Explanation

A service business provides a needed service for a fee. This means that the business offers a specific service that is in demand by customers, and in return, they charge a fee for providing that service. Unlike businesses that produce and sell physical products, a service business focuses on delivering intangible services such as consulting, healthcare, or transportation. The revenue of a service business primarily comes from the fees charged for the services rendered, rather than from the sale of products.

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11.

A merchandising business _______________.

Bakes bread and packages it for the grocery store
Buys finished products and resells them to individuals or other businesses
Does not need accountants
Buys raw materials, uses labor and machinery to transforms them into finished products

Correct Answer

A. Buys finished products and resells them to individuals or other businesses

Explanation

A merchandising business buys finished products from manufacturers or wholesalers and then sells them to individuals or other businesses. This type of business does not involve baking bread or packaging it for grocery stores, nor does it involve the need for accountants. Instead, it focuses on the buying and reselling of already completed products.

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Questions On Accounting: Quiz! Test

All profits go to the owner is an advantage of a sole proprietorship.

Quiz Preview

Which of the following is an example of a liability?

The accounting equation is ____________________

Owner's Equity is the owner's claims to the business' cash only.

The following are Types of businesses.

The amount of money earned after the costs of operating a business are paid is_____________.

**Which of the following would NOT be considered a service business?**

The most common form of business organization is the ________________.

The 3 forms of businesses (ownership structures) are:

A service business __________

A merchandising business _______________.