Contractor License Practice Exam

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Prepare for the Contractor License Exam with comprehensive quizzes. Study with multiple choice questions, flashcards, and detailed explanations to ensure you're ready for success on exam day!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

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A system of recording and summarizing business and financial transactions is called what?

Accounting
Auditing
Bookkeeping
Financial Reporting

The correct answer is: Accounting

The term that describes a system of recording and summarizing business and financial transactions is accounting. Accounting encompasses a range of activities, including the systematic recording, reporting, and analysis of financial transactions. It provides a comprehensive framework for understanding a company’s financial health, as it integrates the processes of gathering financial data, maintaining financial records, and producing financial statements. While bookkeeping, which is also present in the choices, refers specifically to the recording of financial transactions, accounting extends further to include summarizing, analyzing, and interpreting those records. Auditing, on the other hand, is the examination of financial statements and processes to ensure accuracy and compliance with laws, while financial reporting is the process of presenting financial data to stakeholders. Therefore, accounting serves as the umbrella term that encapsulates the complete system of managing and conveying financial information for a business.