ACCA Knowledge Level Introducing Accounts and Balances — practice questions

1. The five account categories are assets, liabilities, equity, revenue, and expenses. 2. An asset is anything of value that a business owns. 3. Cash records the money a business possesses, which is something it owns. 4. Therefore Cash is classified as an asset, not a liability, revenue, or expense. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.1 "Introducing Accounts and Balances", p.11_

1. Income from a business doing the activity it is set up to do is revenue. 2. Fees Earned is the account used to record income generated from providing a service. 3. Cash records money held, not the act of earning revenue, so it is ruled out. 4. Accounts Payable is a liability and Wages Expense is a cost, so neither records service income. 5. Therefore Fees Earned is the correct revenue account. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.1 "Introducing Accounts and Balances", p.11_