Bookkeeping Basics Exam Questions
with Correct Answers
Accounting Principle #1
Economic Entity Assumption* - ANSWER-The business and its financial transactions
are separate from the owner's personal financial transactions.
Accounting Principle #4
Cost Principle - ANSWER-1) Financial transactions are shown, forever, as the original
and historical cost.
2) We do NOT adjust for inflation or the increase or decrease in the value of an item.
Accounting Principle #7
Matching Principle* - ANSWER-1) forces us to use the accrual basis of accounting.
2) Expenses are matched with revenue (ex: cost of a product is shown when sold--sales
commission is reflected in the period the sale is recorded).
Accounting Principle #8
Revenue Recognition Principle - ANSWER-1) Revenue/sales/income is shown in the
financial statement when a service is performed or a good is sold.
2) It doesn't matter when cash is actually received for the service performed or the good
sold.
Accounting Principle #10
Conservatism Principle* - ANSWER-When faced with a choice on financial statements,
choose the option that reflects: 1) decrease in net income, and/or 2) decrease in
assets/equity, and/or increase in liabilities.
Order of Accounts in
Chart of Accounts - ANSWER-Assets
Liabilities
Equity
Revenue
Expenses
Trial Balance - ANSWER-two-column summary of all debits and credits in the Chart of
Accounts
1) Is shown at end of an accounting period
2) Lists all the accounts in numerical order with assets first and expenses last
3) Debits on the left, credits on the right
4) Debits will always equal credits
Like a book summary.
with Correct Answers
Accounting Principle #1
Economic Entity Assumption* - ANSWER-The business and its financial transactions
are separate from the owner's personal financial transactions.
Accounting Principle #4
Cost Principle - ANSWER-1) Financial transactions are shown, forever, as the original
and historical cost.
2) We do NOT adjust for inflation or the increase or decrease in the value of an item.
Accounting Principle #7
Matching Principle* - ANSWER-1) forces us to use the accrual basis of accounting.
2) Expenses are matched with revenue (ex: cost of a product is shown when sold--sales
commission is reflected in the period the sale is recorded).
Accounting Principle #8
Revenue Recognition Principle - ANSWER-1) Revenue/sales/income is shown in the
financial statement when a service is performed or a good is sold.
2) It doesn't matter when cash is actually received for the service performed or the good
sold.
Accounting Principle #10
Conservatism Principle* - ANSWER-When faced with a choice on financial statements,
choose the option that reflects: 1) decrease in net income, and/or 2) decrease in
assets/equity, and/or increase in liabilities.
Order of Accounts in
Chart of Accounts - ANSWER-Assets
Liabilities
Equity
Revenue
Expenses
Trial Balance - ANSWER-two-column summary of all debits and credits in the Chart of
Accounts
1) Is shown at end of an accounting period
2) Lists all the accounts in numerical order with assets first and expenses last
3) Debits on the left, credits on the right
4) Debits will always equal credits
Like a book summary.
