Accounting Paraprofessional Skills and Knowledge Covered Flashcards

Which form must an employer file annually to report total wages paid and taxes withheld for all employees?

Answer: Form W-3

Form W-3 is the transmittal form filed with the Social Security Administration summarizing all W-2 forms for the year.

The current ratio is calculated as:

Answer: Current Assets divided by Current Liabilities

Current Ratio = Current Assets ÷ Current Liabilities, measuring a company's ability to pay short-term obligations.

Under accrual accounting, when is revenue recognized for a service business?

Answer: When the service is performed

Under accrual accounting and the revenue recognition principle, revenue is recognized when the service is performed, not when payment is received.

A company purchases equipment for $50,000 with a $5,000 salvage value and a 5-year useful life. What is the annual straight-line depreciation?

Answer: $9,000

Straight-line depreciation = ($50,000 − $5,000) ÷ 5 years = $9,000 per year.

Which of the following best describes the purpose of internal controls in an accounting system?

Answer: To safeguard assets and ensure accuracy of financial records

Internal controls are policies and procedures designed to protect assets, prevent fraud, and ensure the reliability of financial reporting.

Which type of business entity offers limited liability to all owners while avoiding double taxation?

Answer: Limited Liability Company (LLC)

An LLC provides limited liability protection to all members while allowing pass-through taxation, avoiding the double taxation of C corporations.

If a company has $80,000 in total assets and $30,000 in total liabilities, what is the total owner's equity?

Answer: $50,000

Using the accounting equation: Equity = Assets − Liabilities = $80,000 − $30,000 = $50,000.