CBAD 201 - UNIT 1 EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
What is accounting? - Answers An information system that measures business activities, processes
data into financial statements, and communicates results to decision makers.
What is bookkeeping? - Answers The mechanical part of accounting.
What is the accounting cycle? - Answers The process by which a company's financial statements are
prepared.
What are the two types of accounting? - Answers Financial Accounting and Managerial Accounting.
Who uses financial accounting? - Answers Investors, creditors, government agencies, and the public.
What is a proprietorship? - Answers A business owned by a single owner, personally liable for all
business debts.
What is a partnership? - Answers A business owned by two or more parties, where income and losses
flow through to partners.
What is a Limited Liability Company (LLC)? - Answers A business structure where the business is liable
for debts, and members have limited liability.
What is a corporation? - Answers A business owned by stockholders, legally distinct from its owners,
with limited liability.
What is the disadvantage of a corporation? - Answers Double taxation on income and dividends.
What are Generally Accepted Accounting Principles (GAAP)? - Answers Professional standards for
accounting in the U.S. formulated by the Financial Accounting Standards Board (FASB).
What are International Financial Reporting Standards (IFRS)? - Answers Standards set by the
International Accounting Standards Board (IASB) for accounting outside the U.S.
What is the Entity Assumption in accounting? - Answers An organization stands apart from other
organizations and individuals as a separate economic unit.
What is the Historical Cost Principle? - Answers Assets should be recorded at their actual cost on the
date of purchase.
What is the Stable-Monetary Unit Assumption? - Answers Assumes the dollar's purchasing power is
stable over time, not adjusting for inflation.
What does the accounting equation represent? - Answers The relationship among a company's assets,
liabilities, and equity: Assets = Liabilities + Equity.
What are assets? - Answers Economic resources expected to produce a benefit in the future.
What are liabilities? - Answers Debts owed to people and organizations outside of the business.
What is equity? - Answers The owners' claim on the assets of the business.
What are retained earnings? - Answers The amount of earned income kept for use in the business,
calculated as Retained Earnings = Revenue - Expenses - Dividends.
What is the purpose of the income statement? - Answers To report revenues, gains, expenses, and
losses to determine net income or loss.
What does the balance sheet represent? - Answers The company's position at a specific moment in
time, showing assets, liabilities, and equity.
What are current assets? - Answers Assets expected to be used or converted to cash within 12
months.
What are long-term liabilities? - Answers Debts payable after one year.
What are operating activities in the statement of cash flows? - Answers Cash flows from selling goods
and services to customers.
What are investing activities in the statement of cash flows? - Answers Cash flows from purchasing
and selling long-term assets.
What are financing activities in the statement of cash flows? - Answers Cash flows from borrowing or
repaying funds or equity transactions.
What is the formula for calculating ending retained earnings? - Answers Beginning Retained Earnings
+ Net Income - Dividends.
What does the statement of cash flows help to understand? - Answers What happened to cash during
a specific period, detailing cash receipts and payments.
What is accounting? - Answers An information system that measures business activities, processes
data into financial statements, and communicates results to decision makers.
What is bookkeeping? - Answers The mechanical part of accounting.
What is the accounting cycle? - Answers The process by which a company's financial statements are
prepared.
What are the two types of accounting? - Answers Financial Accounting and Managerial Accounting.
Who uses financial accounting? - Answers Investors, creditors, government agencies, and the public.
What is a proprietorship? - Answers A business owned by a single owner, personally liable for all
business debts.
What is a partnership? - Answers A business owned by two or more parties, where income and losses
flow through to partners.
What is a Limited Liability Company (LLC)? - Answers A business structure where the business is liable
for debts, and members have limited liability.
What is a corporation? - Answers A business owned by stockholders, legally distinct from its owners,
with limited liability.
What is the disadvantage of a corporation? - Answers Double taxation on income and dividends.
What are Generally Accepted Accounting Principles (GAAP)? - Answers Professional standards for
accounting in the U.S. formulated by the Financial Accounting Standards Board (FASB).
What are International Financial Reporting Standards (IFRS)? - Answers Standards set by the
International Accounting Standards Board (IASB) for accounting outside the U.S.
What is the Entity Assumption in accounting? - Answers An organization stands apart from other
organizations and individuals as a separate economic unit.
What is the Historical Cost Principle? - Answers Assets should be recorded at their actual cost on the
date of purchase.
What is the Stable-Monetary Unit Assumption? - Answers Assumes the dollar's purchasing power is
stable over time, not adjusting for inflation.
What does the accounting equation represent? - Answers The relationship among a company's assets,
liabilities, and equity: Assets = Liabilities + Equity.
What are assets? - Answers Economic resources expected to produce a benefit in the future.
What are liabilities? - Answers Debts owed to people and organizations outside of the business.
What is equity? - Answers The owners' claim on the assets of the business.
What are retained earnings? - Answers The amount of earned income kept for use in the business,
calculated as Retained Earnings = Revenue - Expenses - Dividends.
What is the purpose of the income statement? - Answers To report revenues, gains, expenses, and
losses to determine net income or loss.
What does the balance sheet represent? - Answers The company's position at a specific moment in
time, showing assets, liabilities, and equity.
What are current assets? - Answers Assets expected to be used or converted to cash within 12
months.
What are long-term liabilities? - Answers Debts payable after one year.
What are operating activities in the statement of cash flows? - Answers Cash flows from selling goods
and services to customers.
What are investing activities in the statement of cash flows? - Answers Cash flows from purchasing
and selling long-term assets.
What are financing activities in the statement of cash flows? - Answers Cash flows from borrowing or
repaying funds or equity transactions.
What is the formula for calculating ending retained earnings? - Answers Beginning Retained Earnings
+ Net Income - Dividends.
What does the statement of cash flows help to understand? - Answers What happened to cash during
a specific period, detailing cash receipts and payments.
