ACC 231 EXAM EXAM STUDY GUIDE 2026
COMPLETE QUESTIONS AND CORRECT
ANSWERS
◉ What is a key advantage of the corporate form? Answer: Limited
liability for owners, meaning they only lose what they invest.
◉ What is a disadvantage of the corporate form? Answer: Double
taxation on corporate earnings and dividends.
◉ What are authorized shares? Answer: Total shares allowed to be
sold as per the corporate charter.
◉ What are issued shares? Answer: Total shares that have actually
been sold to investors.
◉ What are outstanding shares? Answer: Issued shares that are
currently held by investors, excluding treasury shares.
◉ What is treasury stock? Answer: Shares that have been
repurchased by the company.
, ◉ What is the accounting treatment for no-par value stock? Answer:
The entire cash amount received is credited to the Common Stock
account.
◉ How is par value stock recorded? Answer: Common Stock is
credited for the par value amount, and Additional Paid-in Capital
(APIC) is credited for the excess over par value.
◉ What does 'preferred stock' mean? Answer: It has priority over
common stock for dividends and liquidation assets but usually has
no voting rights.
◉ How is treasury stock accounted for? Answer: It is recorded at
cost and is a contra-equity account that reduces total equity.
◉ What happens when treasury stock is resold above cost? Answer:
The gain is credited to Additional Paid-in Capital (APIC).
◉ What is retained earnings? Answer: The sum of all net income
since inception minus all dividends paid.
◉ What is an accumulated deficit? Answer: A negative retained
earnings balance.
COMPLETE QUESTIONS AND CORRECT
ANSWERS
◉ What is a key advantage of the corporate form? Answer: Limited
liability for owners, meaning they only lose what they invest.
◉ What is a disadvantage of the corporate form? Answer: Double
taxation on corporate earnings and dividends.
◉ What are authorized shares? Answer: Total shares allowed to be
sold as per the corporate charter.
◉ What are issued shares? Answer: Total shares that have actually
been sold to investors.
◉ What are outstanding shares? Answer: Issued shares that are
currently held by investors, excluding treasury shares.
◉ What is treasury stock? Answer: Shares that have been
repurchased by the company.
, ◉ What is the accounting treatment for no-par value stock? Answer:
The entire cash amount received is credited to the Common Stock
account.
◉ How is par value stock recorded? Answer: Common Stock is
credited for the par value amount, and Additional Paid-in Capital
(APIC) is credited for the excess over par value.
◉ What does 'preferred stock' mean? Answer: It has priority over
common stock for dividends and liquidation assets but usually has
no voting rights.
◉ How is treasury stock accounted for? Answer: It is recorded at
cost and is a contra-equity account that reduces total equity.
◉ What happens when treasury stock is resold above cost? Answer:
The gain is credited to Additional Paid-in Capital (APIC).
◉ What is retained earnings? Answer: The sum of all net income
since inception minus all dividends paid.
◉ What is an accumulated deficit? Answer: A negative retained
earnings balance.
