1 | Page
MAJOR FIELD TEST BUSINESS STUDY
SET QUESTIONS AND ANSWERS 2025
Balance Sheet - correct answer- Attempts to describe the
financial condition of the firm at a point in time.
Includes: Assets, Liabilities, & Equity - "net assets" what
remains after deducting liabilities from assets..
Income Statement - correct answer- Presents the results of the
operations of an entity over a peroid of time.
Includes: Revenues, Expenses, Income, Gains & Losses
Statement of Equity or Statement of Retained Earnings
(Capital) - correct answer- Bridges the gap between the income
statement and the balance sheet.
Arrangement depends on type of organization:
Proprietorship: Statement of Owners Equity
Partnership: Statement of Partners Equity
Corporation: Statement of Stockholders Equity
In addition, it contains: Investments by Owners and Distribution
to owners
,2 | Page
Statement of Cash Flows - correct answer- Provides
information about a company's cash receipts and cash
payments during a specific period of time.
Includes all 10 elements of financial statements: assets,
liabilities, equity, net income, income, gains, losses, Statement
of 'X' Equity, Investments by Owners, Distributions to Owners.
Cash Basis Accounting - correct answer- Revenue is
recognized in the accounting period in which the associated
cash is received and Expenses are recognized in the
accounting period that the cash is paid.
Accrual Basis Accounting - correct answer- Revenue is
recognized in the accounting period in which the revenue is
earned, regardless of when the associated revenue is received.
(Recorded when the sale is made, not when it is paid for.)
Depreciation - correct answer- A method of allocating the cost
of a tangible asset over its useful life. Businesses depreciate
long-term assets for both tax and accounting purposes.
Straight-Line Deprecation - correct answer- Straight Line
Depreciation - (estimated value/useful life)
,3 | Page
Equal amounts of depreciation expense are recorded in each
period of the useful life of the asset, if not disposed of prior to
the end of estimated useful life.
The value is divided among estimated life of item.
Double Declining Balance Depreciation - correct answer-
Double Declining Balance
An "accelerated" depreciation method (more expense is
recorded in the early periods of useful life and less in the later
periods.)
Basic Inventory Equation for Goods - correct answer-
Beginning Inventory + Purchases = Goods
Basic Inventory Equation for Cost of Goods Sold (COGS) -
correct answer- Goods Available for Sale - Ending Inventory =
Cost of Goods Sold (COGS)
Basic Inventory Equation for Ending Inventory - correct answer-
Beginning Inventory + Purchases = Goods Available for Sale -
Cost of Goods Sold (COGS) = ending inventory
, 4 | Page
Periodic Inventory Accounting - correct answer- No transactions
are recorded in the inventory account until the end of the
accounting period. Merchandise purchases are recorded in a
purchases account.
Inventory is counted and costed at the end of each accounting
period. The inventory account beginning balance is adjusted to
physical inventory amount and the difference is added to or
subtracted from periodic Cost of Goods Sold.
Perpetual Inventory Accounting - correct answer- Merchandise
purchases are added to the inventory account when the
merchandise is received.
Cost of Goods Sold is computed and subtracted from the
inventory account as sales are recorded.
FIFO (Inventory) - correct answer- Inventory Oldest items
inventory are sold first .(Example: Fruit)
LIFO (Inventory) - correct answer- Most recent items added to
inventory are sold first. (Example: Ore from Mining)
MAJOR FIELD TEST BUSINESS STUDY
SET QUESTIONS AND ANSWERS 2025
Balance Sheet - correct answer- Attempts to describe the
financial condition of the firm at a point in time.
Includes: Assets, Liabilities, & Equity - "net assets" what
remains after deducting liabilities from assets..
Income Statement - correct answer- Presents the results of the
operations of an entity over a peroid of time.
Includes: Revenues, Expenses, Income, Gains & Losses
Statement of Equity or Statement of Retained Earnings
(Capital) - correct answer- Bridges the gap between the income
statement and the balance sheet.
Arrangement depends on type of organization:
Proprietorship: Statement of Owners Equity
Partnership: Statement of Partners Equity
Corporation: Statement of Stockholders Equity
In addition, it contains: Investments by Owners and Distribution
to owners
,2 | Page
Statement of Cash Flows - correct answer- Provides
information about a company's cash receipts and cash
payments during a specific period of time.
Includes all 10 elements of financial statements: assets,
liabilities, equity, net income, income, gains, losses, Statement
of 'X' Equity, Investments by Owners, Distributions to Owners.
Cash Basis Accounting - correct answer- Revenue is
recognized in the accounting period in which the associated
cash is received and Expenses are recognized in the
accounting period that the cash is paid.
Accrual Basis Accounting - correct answer- Revenue is
recognized in the accounting period in which the revenue is
earned, regardless of when the associated revenue is received.
(Recorded when the sale is made, not when it is paid for.)
Depreciation - correct answer- A method of allocating the cost
of a tangible asset over its useful life. Businesses depreciate
long-term assets for both tax and accounting purposes.
Straight-Line Deprecation - correct answer- Straight Line
Depreciation - (estimated value/useful life)
,3 | Page
Equal amounts of depreciation expense are recorded in each
period of the useful life of the asset, if not disposed of prior to
the end of estimated useful life.
The value is divided among estimated life of item.
Double Declining Balance Depreciation - correct answer-
Double Declining Balance
An "accelerated" depreciation method (more expense is
recorded in the early periods of useful life and less in the later
periods.)
Basic Inventory Equation for Goods - correct answer-
Beginning Inventory + Purchases = Goods
Basic Inventory Equation for Cost of Goods Sold (COGS) -
correct answer- Goods Available for Sale - Ending Inventory =
Cost of Goods Sold (COGS)
Basic Inventory Equation for Ending Inventory - correct answer-
Beginning Inventory + Purchases = Goods Available for Sale -
Cost of Goods Sold (COGS) = ending inventory
, 4 | Page
Periodic Inventory Accounting - correct answer- No transactions
are recorded in the inventory account until the end of the
accounting period. Merchandise purchases are recorded in a
purchases account.
Inventory is counted and costed at the end of each accounting
period. The inventory account beginning balance is adjusted to
physical inventory amount and the difference is added to or
subtracted from periodic Cost of Goods Sold.
Perpetual Inventory Accounting - correct answer- Merchandise
purchases are added to the inventory account when the
merchandise is received.
Cost of Goods Sold is computed and subtracted from the
inventory account as sales are recorded.
FIFO (Inventory) - correct answer- Inventory Oldest items
inventory are sold first .(Example: Fruit)
LIFO (Inventory) - correct answer- Most recent items added to
inventory are sold first. (Example: Ore from Mining)
