Peregrine Business Exam 2026 |
Comprehensive Practice Questions &
Verified Answers | Business Assessment Prep
Peregrine Business Exam 2026 |
Comprehensive Practice Questions &
Verified Answers | Business Assessment Prep
PEREGRINE BUSINESS EXAM 2026
Comprehensive Practice Questions & Verified Answers
Total Questions: 200
Format: Multiple Choice
Passing Score: 80% (160 correct)
Time Limit: 4 hours
Section 1: Financial Accounting (Questions 1–20)
1. Which financial statement reports a company's financial position at a
specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Retained Earnings
Answer: C
Rationale: The balance sheet reports assets, liabilities, and shareholders'
equity as of a specific date (e.g., December 31). The income statement covers
a period of time.
2. The accounting equation is:
A) Assets = Liabilities + Owners' Equity
,B) Assets + Liabilities = Owners' Equity
C) Revenues – Expenses = Net Income
D) Assets = Revenues – Expenses
Answer: A
Rationale: The fundamental accounting equation must always balance. It is
the foundation of double-entry bookkeeping.
3. Which financial statement shows revenues and expenses over a period of
time?
A) Balance Sheet
B) Income Statement
C) Statement of Cash Flows
D) Statement of Owners' Equity
Answer: B
Rationale: The income statement (profit and loss statement) reports
revenues, expenses, gains, and losses over a period, resulting in net income
or loss.
4. Which of the following is classified as a current asset?
A) Building
B) Patent
C) Accounts Receivable
D) Long-term debt
Answer: C
Rationale: Current assets are expected to be converted to cash or used within
one year. Accounts receivable, inventory, and cash are current assets.
5. Depreciation is an example of:
A) A cash expense
B) A non-cash expense
C) An asset
D) A liability
Answer: B
,Rationale: Depreciation allocates the cost of a fixed asset over its useful life.
It reduces net income but does not require a cash outflow.
6. Which accounting principle requires that expenses be matched with the
revenues they help generate?
A) Revenue recognition principle
B) Matching principle
C) Historical cost principle
D) Materiality principle
Answer: B
Rationale: The matching principle requires recording expenses in the same
period as the related revenues, ensuring accurate profit measurement.
7. Which of the following is NOT an intangible asset?
A) Goodwill
B) Trademark
C) Inventory
D) Patent
Answer: C
Rationale: Inventory is a tangible current asset. Intangible assets lack
physical substance (patents, copyrights, trademarks, goodwill).
8. A company has $100,000 in assets and $60,000 in liabilities. Owners' equity
equals:
A) $160,000
B) $40,000
C) $60,000
D) $100,000
Answer: B
*Rationale: Assets = Liabilities + Equity → $100,000 = $60,000 + Equity →
Equity = $40,000.*
9. Which ratio measures a company's ability to pay short-term obligations?
A) Debt-to-equity ratio
B) Current ratio
, C) Return on equity
D) Gross profit margin
Answer: B
Rationale: Current ratio = Current Assets / Current Liabilities. It measures
liquidity and short-term solvency.
10. A journal entry that debits Cash and credits Common Stock records:
A) Payment of a dividend
B) Issuance of stock for cash
C) Purchase of equipment
D) Payment of an expense
Answer: B
Rationale: Issuing common stock for cash increases both cash (debit) and
common stock (credit), a financing activity.
11. The accrual basis of accounting recognizes revenue when:
A) Cash is received
B) It is earned, regardless of when cash is received
C) The invoice is sent
D) The customer places an order
Answer: B
Rationale: Accrual accounting records revenue when earned and expenses
when incurred, following GAAP. Cash basis records when cash changes
hands.
12. Which of the following appears on both the income statement and the
statement of retained earnings?
A) Cash
B) Accounts receivable
C) Net income
D) Dividends
Answer: C
Rationale: Net income from the income statement is added to retained
earnings on the statement of retained earnings.
Comprehensive Practice Questions &
Verified Answers | Business Assessment Prep
Peregrine Business Exam 2026 |
Comprehensive Practice Questions &
Verified Answers | Business Assessment Prep
PEREGRINE BUSINESS EXAM 2026
Comprehensive Practice Questions & Verified Answers
Total Questions: 200
Format: Multiple Choice
Passing Score: 80% (160 correct)
Time Limit: 4 hours
Section 1: Financial Accounting (Questions 1–20)
1. Which financial statement reports a company's financial position at a
specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Retained Earnings
Answer: C
Rationale: The balance sheet reports assets, liabilities, and shareholders'
equity as of a specific date (e.g., December 31). The income statement covers
a period of time.
2. The accounting equation is:
A) Assets = Liabilities + Owners' Equity
,B) Assets + Liabilities = Owners' Equity
C) Revenues – Expenses = Net Income
D) Assets = Revenues – Expenses
Answer: A
Rationale: The fundamental accounting equation must always balance. It is
the foundation of double-entry bookkeeping.
3. Which financial statement shows revenues and expenses over a period of
time?
A) Balance Sheet
B) Income Statement
C) Statement of Cash Flows
D) Statement of Owners' Equity
Answer: B
Rationale: The income statement (profit and loss statement) reports
revenues, expenses, gains, and losses over a period, resulting in net income
or loss.
4. Which of the following is classified as a current asset?
A) Building
B) Patent
C) Accounts Receivable
D) Long-term debt
Answer: C
Rationale: Current assets are expected to be converted to cash or used within
one year. Accounts receivable, inventory, and cash are current assets.
5. Depreciation is an example of:
A) A cash expense
B) A non-cash expense
C) An asset
D) A liability
Answer: B
,Rationale: Depreciation allocates the cost of a fixed asset over its useful life.
It reduces net income but does not require a cash outflow.
6. Which accounting principle requires that expenses be matched with the
revenues they help generate?
A) Revenue recognition principle
B) Matching principle
C) Historical cost principle
D) Materiality principle
Answer: B
Rationale: The matching principle requires recording expenses in the same
period as the related revenues, ensuring accurate profit measurement.
7. Which of the following is NOT an intangible asset?
A) Goodwill
B) Trademark
C) Inventory
D) Patent
Answer: C
Rationale: Inventory is a tangible current asset. Intangible assets lack
physical substance (patents, copyrights, trademarks, goodwill).
8. A company has $100,000 in assets and $60,000 in liabilities. Owners' equity
equals:
A) $160,000
B) $40,000
C) $60,000
D) $100,000
Answer: B
*Rationale: Assets = Liabilities + Equity → $100,000 = $60,000 + Equity →
Equity = $40,000.*
9. Which ratio measures a company's ability to pay short-term obligations?
A) Debt-to-equity ratio
B) Current ratio
, C) Return on equity
D) Gross profit margin
Answer: B
Rationale: Current ratio = Current Assets / Current Liabilities. It measures
liquidity and short-term solvency.
10. A journal entry that debits Cash and credits Common Stock records:
A) Payment of a dividend
B) Issuance of stock for cash
C) Purchase of equipment
D) Payment of an expense
Answer: B
Rationale: Issuing common stock for cash increases both cash (debit) and
common stock (credit), a financing activity.
11. The accrual basis of accounting recognizes revenue when:
A) Cash is received
B) It is earned, regardless of when cash is received
C) The invoice is sent
D) The customer places an order
Answer: B
Rationale: Accrual accounting records revenue when earned and expenses
when incurred, following GAAP. Cash basis records when cash changes
hands.
12. Which of the following appears on both the income statement and the
statement of retained earnings?
A) Cash
B) Accounts receivable
C) Net income
D) Dividends
Answer: C
Rationale: Net income from the income statement is added to retained
earnings on the statement of retained earnings.
