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PACE Exam Questions and Answers (Graded A+)
Question 1: What are assets?
CORRECT ANSWER : resources controlled by
company
Question 2: What are the basic elements of a balance
sheet?
CORRECT ANSWER : assets
liabilities stockholder equity
Question 3: What is a sole proprietorship?
CORRECT ANSWER : 1 person owning company
Question 4: What is a partnership?
CORRECT ANSWER : 2 or more owners
Question 5: What is a corporation?
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CORRECT ANSWER : separate entity from legal and
accounting perspective
Question 6: What is the accounting equation?
CORRECT ANSWER : A=L+SE
Question 7: How are debits and credits displayed?
CORRECT ANSWER : DR on left and CR on right
Question 8: What are expenses?
CORRECT ANSWER : all cost of doing business that
are necessary to earn revenue
Question 9: What is the purpose of retained earnings?
CORRECT ANSWER : reports the way net income and
distribution of dividends affect financial position
Question 10: What is the retained earnings formula?
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CORRECT ANSWER : beg RE + NI -
DIVIDENDS=end RE
Question 11: What do the headings of financial
statements contain?
CORRECT ANSWER : COMPANY NAME
TYPE OF STATEMENT
DATE
Question 12: What are the types of cash flows?
CORRECT ANSWER : Financing
Investing Operating
Question 13: What is operating cash flow?
CORRECT ANSWER : running the business; short term
asset change asset and liabilities
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Question 14: What is investing cash flow?
CORRECT ANSWER : buying and selling resources;
long term asset
Question 15: What is financing cash flow?
CORRECT ANSWER : borrowing from banks; long
term liability; stocks and bonds
Question 16: What are dividends?
CORRECT ANSWER : distribution of earnings
Question 17: What is revenue?
CORRECT ANSWER : selling goods or services to
customers
Question 18: What are the purposes of internal controls?
CORRECT ANSWER : methods company use to protect
against THEFT, enhance RELIABILITY, promote EFFICIENCY, ensure COMPLIANCE WITH LAWS