QUESTION SET WITH RATIONALES AND
ACCOUNTING PRINCIPLES AND REPORTING
REVIEW 2026
◉ Operating activities.
Answer: Daily transactions such as sales, wages, and rent.
◉ Investing activities.
Answer: Buying or selling long-term assets like buildings and land.
◉ Financing activities.
Answer: Borrowing from banks, issuing stock, and paying dividends.
◉ Sole proprietorship.
Answer: A business structure with 1 owner and full liability.
◉ Partnership.
Answer: A business structure with 2 or more owners and shared
risk.
, ◉ Corporation.
Answer: A legal entity that provides limited liability for
shareholders.
◉ Accounting Equation.
Answer: Assets = Liabilities + Stockholders' Equity.
◉ Assets.
Answer: What the company owns.
◉ Liabilities.
Answer: What the company owes.
◉ Stockholders' Equity.
Answer: Owners' claim on assets.
◉ Revenue.
Answer: Income earned from sales or services.
◉ Expense.
Answer: Costs incurred in operating the business.