Basic Bookkeeping and Accounting Fundamentals for Small Business

Question 1
1. What is the primary purpose of bookkeeping in a small business?

(A) Recording and tracking all financial transactions systematically.

(B) Monitoring employee performance and daily attendance.

(C) Recording only tax-related information from transactions.

(D) Creating long-term business strategies and plans.

Question 2
2. What best describes the role of a general ledger in accounting?

(A) It functions as both a summary of transactions and a fixed asset register.

(B) It compiles and summarizes all financial transactions recorded by the business.

(C) It directly calculates the company's tax liability.

(D) It records only cash inflows and outflows.

Question 3
3. Which statement correctly characterizes a balance sheet?

(A) It shows the flow of cash in and out of the business over a period.

(B) It details the company's revenue and expenses over an extended period.

(C) It provides a snapshot of a company’s financial position at a specific point in time.

(D) It measures the company’s performance over time with periodic reports.

Question 4
4. Which of the following best defines double-entry bookkeeping?

(A) Every transaction is recorded twice in two separate ledgers without linking debits to credits.

(B) Only income-related transactions are recorded in duplicate to verify accuracy.

(C) Transactions are recorded once in a single ledger for simplicity.

(D) Every transaction is recorded in two accounts as a debit and a credit to keep the books balanced.

Question 5
5. In a scenario where a business purchases equipment on credit, which of the following is the correct accounting treatment?

(A) Increase the Equipment account while recording the expense immediately.

(B) Increase the Equipment account (asset) and increase the Accounts Payable account (liability).

(C) Increase the Equipment account and decrease the Cash account.

(D) Increase the Equipment account and increase the Cash account.

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