Accounting Online Program Accounting Basics 5

Question 1

Which type of business organization offers limited liability to all its owners?

Accepted Answer

Corporation

Answer

A corporation's shareholders enjoy limited liability, meaning they are not personally responsible for the company's debts beyond their investment.

Question 2

What does 'double-entry bookkeeping' mean?

Accepted Answer

Every transaction affects at least two accounts with equal debits and credits

Answer

Double-entry bookkeeping requires each transaction to affect at least two accounts so that total debits always equal total credits.

Question 3

Which of the following would be classified as an intangible asset?

Accepted Answer

Patent

Answer

A patent is an intangible asset — it has value but lacks physical substance and provides legal rights to the holder.

Question 4

The closing process at the end of an accounting period transfers balances from temporary accounts to:

Accepted Answer

Retained Earnings (or Owner's Capital)

Answer

Closing entries zero out temporary accounts (revenues, expenses, dividends) by transferring their net balances to Retained Earnings or Owner's Capital.

Question 5

If a company collects cash in advance for services not yet performed, this is recorded as:

Accepted Answer

A liability called Unearned Revenue

Answer

Cash collected before the service is performed creates an Unearned Revenue liability until the company fulfills its obligation.

Accounting Online Program Practice Test

Accounting Online Program Practice Test

Accounting Online Program Accounting Basics 5