The most common forms of business are the sole proprietorship, partnership, and corporation. When beginning a business, you must decide which form of business to use. You must consider the legal and tax considerations when deciding which form of business to use.

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Material needed to complete this assignment:

You will need IRS Publication 583, IRS Publication 541, IRS Publication 542 and IRS Publication 3402 to complete this topic.

1. Generally, a partnership does not pay tax on its income but "passes through" any profits or losses to its partners.

True False

2. An entity formed under state law by filing articles of organization where none of the members are personally liable for its debts.

A. Partnership.
B. Sole Proprietorship.
C. Limited Liability Company (LLC).
D. None of the above.

3. Members of a family can be partners. However, family members (or any other person) will be recognized as partners only if

A. If capital is a material income-producing factor they acquired their capital interest in a bona fide transaction, (even if by gift or purchase from another family member), actually own the partnership interest, and actually control the interest.
B. If capital is not a material income-producing factor they joined together in good faith to conduct a business.
C. They agreed that contributions of each entitle them to share in the profits, and some capital or service has been (or is) provided by each partner.
D. Any of the above.

4. A capital interest in a partnership is an interest in its assets that is distributable to the owner of the interest when

A. The owner withdraws from the partnership.
B. The partnership liquidates.
C. The right to share in earnings and profits.
D. Either A or B above.

5. An organization formed after 1996 is classified as a partnership for federal tax purposes if it has two or more members and is

A. An insurance company.
B. A tax-exempt organization.
C. A real estate investment trust.
D. None of the above.

6. A qualified entity is a business entity that meets the following requirement

A. The business entity is wholly owned by a husband and wife as community property under the laws of a state, a foreign country, or a possession of the United States.
B. No person other than one or both spouses would be considered an owner for federal tax purposes.
C. The business entity is not treated as a corporation.
D. All of the above.

7. If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest. A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received

A. A loan in exchange for a note that requires payment of interest at the applicable federal rate.
B. An additional payment in an amount equal to the forgone interest.
C. Both A and B above.
D. None of the above.

8. A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. Figure taxable income for this purpose without

A. The deduction for charitable contributions.
B. The dividends-received deduction.
C. The domestic production activities deduction.
D. Any of the above.

9. A corporation figures an NOL in the same way it figures taxable income. It starts with its gross income and subtracts its deductions. If its deductions are more than its gross income, the corporation has an NOL. However, the following rule for figuring the NOL applies.

A. A corporation can increase its current year NOL by carrybacks or carryovers from other years.
B. A corporation can use the domestic production activities deduction to create or increase its current year NOL, including any carryback or carryover.
C. A corporation can take the deduction for dividend, received without regard to the aggregate limits that normally apply.
D. A corporation cannot figure the deduction for dividends paid on certain preferred stock of public utilities.

10. A corporation can deduct capital losses only up to the amount of its capital gains. If a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years. When carrying a capital loss from one year to another, the following applies.

A. When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year.
B. If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first.
C. You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back.
D. All of the above.

11. To report its income, gain, losses, deductions, credit, and to figure its income tax liability a corporation generally must file

A. Form 1120.
B. Form 1040.
C. Form 2210.
D. Form 7004.

12. A corporation is treated as a small corporation exempt from the AMT for its current tax year if that year is the corporation's first tax year in existence (regardless of its gross receipts for the year) or

A. It was treated as a small corporation exempt from the AMT for all prior tax years beginning after 1997.
B. Its average annual gross receipts for the 3-tax-year period (or portion there of during which the corporation was in existence) ending before its current tax year did not exceed $7.5 million ($5 million if the corporation had only 1 prior tax year).
C. Both A and B above.
D. Use Form 4626 to figure the tentative minimum tax of a corporation.

13. This is an unincorporated business that is owned by one individual. It is the simplest form of business organization to start and maintain. This business has no existence apart from the owner, and its personal liabilities are  the owners personal liabilities.

A. Sole proprietorship.
B. Partnership.
C. Corporation.
D. Limited Liability Company.

14. This is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. It must file annual information returns to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax.

A. Sole proprietorship.
B. Partnership.
C. Corporation.
D. Limited Liability Company.

15. In this form of business organization, prospective shareholders exchange money, property, or both, for the capital stock. It generally takes the same deductions as a sole proprietorship to figure its taxable its taxable income and it can also take special deductions. Its profits are taxed when earned, and then taxed to the shareholders when distributed as dividends.

A. Sole proprietorship.
B. Partnership.
C. Corporation.
D. Limited Liability Company.

16. In this form of business organization, shareholders include their share of separately stated items of income, deductions, loss, and credit, and their share of non-separately stated income or loss. One can avoid double taxation by electing to be treated as

A. Sole proprietorship.
B. Corporation.
C. S Corporation.
D. Limited Liability Company.

17. In this form of business organization, none of the members are personally liable for its debts. It may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner. This is an entity formed under state law by filing articles of organization as

A. Limited Liability Company.
B. S Corporation.
C. Sole Proprietorship.
D. Partnership.

18. You must have a taxpayer identification number so the IRS can process your returns. The two most common kinds of taxpayer identification numbers are the social security number (SSN) and the employer identification number (EIN). If you don't already have an EIN, you need to get one if you

A. Have employees or have a qualified retirement plan.
B. Operate your business as a corporation or partnership.
C. File returns for employment taxes or excise taxes.
D. Any of the above.

19. A single-member LLC is required to use its name and EINs to

A. Register for excise tax activities on Form 637.                 
B. Pay and report excise tax taxes reported on Forms 720, 730, 2290, and 11-C.
C. Claim any refunds, credits, and payments on Form 8849.
D. All of the above.

20. If an LLC has at least two members and is classified as a partnership, it generally must file

A. Form 1065.
B. Form 1120.
C. Form 2553.
D. Form 8832.

21. A partnership terminates when

A. All its operations are discontinued and not part of any business, financial operation, or venture is continued by any of its partners in a partnership.
B. At least 50% of the total interest in the partnership capital and profits is sold or exchanged within a 12-month period, including a sale or exchange to another partner.
C. You sell or exchange 50% or more of the partnership interest within a 12-month period.
D. Either A or B above takes place.

22. If a partnership is terminated before the end of the tax year, Form 1065 must be filed for the short period, which is the period from the beginning of the tax year through the date of termination. The return is due

A. The 15th day of the fourth month following the date of termination.
B. The 15th day of the 3rd month following the date of termination.
C. The 15th day of the 5th month following the date of termination.
D. None of the above.

23. Certain partnerships that do not actively conduct a business can choose to be completely or partially excluded from being treated as partnerships for federal income tax purposes. All of the partners must agree to make the choice, and

A. The partners must be able to compute their own taxable income without computing the partnership's income.
B. The partners are not exempt form the rule that limits a partner's distributive share of partnership loss to the adjusted basis of the partner's partnership interest.
C. The partners are not exempt from the requirement of a business purpose for adopting a tax year for the partnership that differs from its required tax year.
D. All of the above.

24.  An investment partnership can be excluded if the participants in the joint purchase, retention, sale, or exchange of investment property

A. Own the property as co-owners.
B. Reserve the right separately to take or dispose of their shares of any property acquired or retained.
C. Do not actively conduct business or irrevocably authorize some person acting in a representative capacity to purchase, sell, or exchange the investment property.
D. All of the above.

25. An operating agreement partnership group can be excluded if the participants in the joint production, extraction, or use of property

A. Own the property as co-owners, either in fee or under lease or other form of contract granting exclusive operating rights.
B. Reserve the right separately to take in kind or dispose of their shares of any property produced, extracted, or used.
C. Do not jointly sell services or the property produced or exchanged.
D. All of the above.

26. A partnership distribution includes

A. A withdrawal by a partner in anticipation of the current year's earnings.
B. A distribution of the current year's or prior year's earnings not needed for working capital.
C. A complete or partial liquidation of a partner's interest or a distribution to all partners in a complete liquidation of the partnership.
D. Any of the above.

27. For any tax year in which a partnership neither receives income nor pays or incurs any expenses treated as deductions or credits for federal income tax purposes,

A. A partnership is not considered to engage in a trade or business.
B. A partnership is not required to file a Form 1065.
C. Both A and B above.
D. the partnership is considered to engage in a trade or business so is required to file a Form 1065.

28. If spouses carry on a business together and share in the profits and losses, they may be partners whether or not they have a formal partnership agreement. However, the husband and wife can elect not to treat the joint venture as a partnership if they meet certain requirements. The following is a true statement regarding a husband and wife venture.

A. The joint venture between a husband and wife can include other family members.
B. The filing status of the husband and wife can be married filing separately.
C. As long as both spouses elect not to treat the joint venture as a partnership, only one needs to materially participate in the business.
D. Each spouse should include his or her respective share of self-employment income on a separate Schedule SE (Form 1040), Self-Employment Tax to give each spouse credit for social security earnings on which retirement benefits are based.

29. The basis of an interest in a partnership is increased or decreased by certain items. A partner's basis is increased by

A. The partner's additional contribution to the partnership, including an increased share of, or assumption of partnership liabilities.
B. The partner's distributive share of taxable and nontaxable partnership income.
C. The partner's distributive share of the excess of the deductions for depletion over the basis of the depletable property, unless the property is oil or gas wells whose basis has been allocated to partners. 
D. All of the above.

30. A partner's basis in a partnership interest includes the partner's share of a partnership liability only if, and to the extent that, the liability

A. Creates or increases the partnership's basis in any of its assets.
B. Gives rise to a current deduction to the partnership.
C. Is a nondeductible, noncapital expense of the partnership.
D. All of the above.

31. Certain partnerships are required to file Form 1065, Schedules K-1, and related forms and schedules electronically if the partnership has

A. More than 50 partners.
B. More than 100 partners.
C. More than 150 partners.
D. More than 300 partners.

32. If a partner contributes property to a partnership and the partnership distributes the property to another partner within 7 years of the contribution, the contributing partner must recognize gain or loss on the distribution. A 5-year period applies to property contributed before June 9, 1997, or under a written binding contract that

A. Was in effect on June 8, 1997 and at all times thereafter before the construction.
B. Provides for the contribution of a fixed amount of property.
C. Is the difference between the property's basis and its fair market value before its contribution.
D. Both A and B above.

33. Guaranteed payments are those made by a partnership to a partner that are determined without regard to the partnership's income. The partnership generally deducts guaranteed payments on line 10 of Form 1065 as business expense. The individual partner reports as ordinary income his guaranteed payments

A. On Form 1065 as well.
B. On Schedule E (Form 1040).
C. Directly on Form 1040 or 1040A.
D. On Schedule C (Form 1040).

34. A partnership that uses an accrual method of accounting cannot deduct any business expense owed to cash basis partner until the amount is paid.

True False

35. A domestic LLC with two members that does not file Form 8832 is not classified as a partnership for federal income tax purposes.

True False

36. A contribution of money or other property to the partnership followed by a distribution of different property from the partnership to the partner is treated not as a contribution and distribution, but as a sale of property, if

A. The distribution would not have been made but for the contribution.
B. The partner's right to the distribution does not depend on the success of partnership operations.
C. The contribution and distribution occurred more than 2 years apart.
D. Both of the above.

37. A limited partner is one who is not really a partner of a partnership but has an obligation to contribute capital to the partnership which gives him or her can economic risk of loss in the partnership for tax purposes.

True False

38. An unincorporated organization with two or more members is generally classified as a ______________ for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits.

A. Sole proprietorship.
B. Partnership.
C. Corporation.
D. Any of the above.

39. Any part of a distribution that is property the partner previously contributed to the partnership is not taken into account in determining the amount of the excess distribution or the partner's net pre-contribution gain.

True False

40. Every domestic partnership must file Form 1065 even if it does not receive income or incurs any expenditures treated as deductions or credits for federal income tax purposes.

True False

41. Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed to the partner by a partnership is

A. The basis of the property to the partner that is more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction.
B. Its adjusted basis to the partnership immediately before the distribution.
C. Its adjusted basis to the partnership immediately after the distribution.
D. Either A or B above.

42. A partner's basis in a partnership interest includes the partner's share of a partnership liability only if, and to the extent that, the liability

A. Creates or increases the partnership's basis in any of its assets.
B. Gives rise to a current deduction to the partnership.
C. Is a nondeductible, noncapital expense of the partnership.  
D. All of the above.

43. A loss incurred from the abandonment or worthlessness of a partnership interest is an ordinary loss if

A. The transaction is not a sale.
B. The transaction is not a an exchange.
C. The partner has not received an actual or deemed distribution from the partnership.
D. All of the above.

44. The partnership agreement includes the original agreement and any modifications. The modifications must be agreed to by all partners or adopted in any other manner provided by the partnership agreement. The agreement or modifications

A. Must be written.
B. Cannot be oral.
C. Can be oral or written.
D. Must be drawn by an attorney.

 pub 542

You will need IRS Publication 542 to complete this topic.

Please answer the following as accurately as possible.

45. For each shareholder to whom you have paid dividends and other distributions of stock of $10 or more during a calendar year, file

A. Form W-2.
B. Form 1099-DIV.
C. Form 1099-MISC.
D. Form 1099-INT.

46. A corporation is a personal service corporation if

A. Its principal activity during the "testing period" is performing personal services.
B. Its employee-owners substantially perform the services in performing personal services.
C. Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period.
D. All of the above.

47. The tentative minimum tax of a small corporation is zero. This means that a small corporation will not owe AMT.

True False

48. If a corporation is required to use the Electronic Federal Tax Payment System (EFTPS) and fails to do so, it may be subject to a 10% penalty.

True False

49. If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. This rule applies both to individuals and to groups who transfer property to a corporation. It also applies whether the corporation is being formed or is already operating. However, it does not apply if

A. The corporation is an investment company.
B. You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors.
C. The stock received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt.
D. All of the above.

50. ABC Corporation's tax year ends on October 31, 2009. When is ABC Corporation's income tax return required to be filed?

A. January 31, 2010.
B. January 15, 2010.
C. March 15, 2010.
D. March 31, 2010.

51. Abbot Corporation's tax year ends on June 30, 2009. If Abbot Corporation (a domestic Corporation) timely files a Form 7004 Extension of Time to File, what is the extended due date of Abbot Corporation's income tax return for tax year ended June 30, 2009?

A. March 15, 2010.
B. March 30, 2010.
C. April 15, 2010.
D. May 15, 2010.

52. A corporation can accumulate its earnings for a possible expansion or other bona fide business reasons. However, if a corporation allows earnings to accumulate beyond the reasonable needs of the business, it may be subject to an accumulated earnings tax of

A. 20%.
B. 25%.
C. 15%.
D. None of the above.

53. You must treat certain transactions that increase a shareholder's proportionate interest in the earnings and profits or assets of a corporation as if they were distributions of a stock or stock rights.

True False

54. If a corporation cancels a shareholder's debt without repayment by the shareholder, the amount canceled is

A. Not taxable by the shareholder.
B. Treated as a distribution to the shareholder.
C. Forgiven and not treated as a distribution.
D. Treated as a gift.

55. The amount of a distribution is generally the amount of any money paid to the shareholder plus the fair market value (FMV) of any property transferred to the shareholder. However, this amount is reduced (but not below zero) by

A. Any liability of the corporation the shareholder assumes in connection with the distribution.
B. Any liability to which the property is subject immediately before the distribution.
C. Any liability to which the property is subject immediately after the distribution.
D. All of the above.

56. Bob Moon Forms Moon Enterprises LLC (Limited Liability Company) during the year. What form must Moon Enterprises LLC file in order to elect to be taxed as a C corporation?

A. Form 1065 (U.S. Partnership Tax Return).
B. Form 8832 (Entity Classification Election).
C. Form 1120 (U.S. Corporation Income Tax Return).
D. Form 7004 (Application for Extension of time to file for Corporations).

57. ABC Corporation is dissolved on July 9, 2009. What is the due date, without extensions, for filing of the final corporate income tax return?

A. March 15, 2010.
B. December 31, 2009.
C. October 15, 2009.
D. October 9, 2009.

58. The corporation's basis of property contributed to capital by a shareholder is

A. Zero.
B. The same as the basis the shareholder had in the property.
C. Not taxable to the corporation.
D. None of the above.

59. Small business investment companies can deduct _____ of the dividends received form taxable domestic corporations.

A. 70%.
B. 80%.
C. 100%.
D. None of the above.

60. An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock. The percentage is

A. 5% for stock preferred as to dividends.
B. 10% for other stock.
C. Either A or B above.
D. None of the above.

61. Corporations generally must make estimated tax payments if they expect their estimated tax (income tax less credits) to be equal to or more than:

A. $1.
B. $500.
C. $600.
D. $1,000.

62. A corporation is a qualified personal service corporation if

A. Substantially all the corporation's activities involve the performance of personal services.
B. At least 95% of the corporation's stock, by value, is owned, directly or indirectly, by employees performing the personal services.
C. At least 95% of the corporation's stock, by value, in owned, directly or indirectly, by an estate of the employee or retiree described above.
D. Any of the above.

63. You and John Moore buy property for $150,000. You both organize a corporation when the property has a fair market value of $450,000. You transfer the property to the corporation for all its authorized capital stock, which has a par value of $450,000. Gain is recognized by

A. You.
B. John.
C. The corporation.
D. None of the above.

64. A corporation that does not file its tax return by the due date, including extensions, may be penalized

A. 5% of the unpaid tax for each month or part of a month the return is late.
B. Up to a maximum of 25% of the unpaid tax.
C. Both A and B above.
D. None of the above.

65. A corporation that does not pay the tax when due may be penalized

A. 1/2 of 1% of the unpaid tax for each month or part of a month the tax is not paid.
B. Up to a maximum of 25% of the unpaid tax.
C. Both A and B above.
D. If the corporation can show that the failure to pay on time was due to a reasonable cause.

66. To figure your estimated payment for the corporation you will generally use one of two methods to figure each required installment. To use Method 2

A. The corporation must have filed a return for the previous year.
B. The return must have been for a full 12 months.
C. The return must have shown a positive tax liability (not zero).  
D. All of the above.

67. Use Form 2220, Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty. If the corporation is charged a penalty, the amount of the penalty depends on

A. The amount of the underpayment.
B. The period during which the underpayment was due and unpaid.
C. The interest rate for the underpayments published quarterly by the IRS in the Internal Revenue Bulletin.
D. All of the above.

68. Even if the corporation does not owe a penalty, complete and attach Form 2220 to the corporation's tax return if

A. The annualized income installment method was use to figure any required installment.
B. The adjusted seasonal installment method was used to figure any required installment.
C. The corporation is a large corporation figuring its first required installment based on the prior year's tax.
D. Any of the above.

Publication 583

You will need IRS Publication 583 to complete this topic.

Please answer the following as accurately as possible.

69. In the operation of your business, you will probably make certain payments you must report on information returns. The forms used to report these payments must include the payee's identification number. If the payee does not provide you with an identification number, you

A. Should not pay the payee.
B. May have to withhold part of the payments as backup withholding.
C. Should withhold the entire payment as backup withholding.
D. Should fire the payee as this is an indication the payee is not authorized to work in the United States.

70. You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. A tax year is usually 12 consecutive months. The following is a tax year.

A. Calendar tax year.
B. Fiscal tax year.
C. A cash year.
D. Both A and B above.

71. You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. You must use a calendar tax year if

A. You keep no books or have no annual accounting period.
B. Your present tax year does not qualify as a fiscal year.
C. You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations.
D. Any of the above.

72. You adopt a tax year by filing an application for an extension of time to file an income tax return, application for an employer identification number or paid estimated taxes for that tax year.

True False

73. This is a set of rules used to determine when and how income and expenses are reported and it is chosen when you file your first income tax return.

A. A fiscal tax year.
B. An accounting method.
C. A calendar tax year.
D. All of the above.

74. Under this method, you report income in the year you receive it and you usually deduct or capitalize expenses in the tax year you pay them.

A. The accrual method.
B. The cash method.
C. The calendar method.
D. The fiscal method.

75. Under this method, you generally report income in the tax year you earn it, even though you may receive payment in a later year. You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year.

A. The accrual method.
B. The cash method.
C. The calendar method.
D. The fiscal method.

76. You must use the same accounting method to figure your taxable income and to keep your books. An accounting method clearly shows income only if it treats all items of gross income and expenses the same from year to year.

True False

77. All businesses must file an annual income tax return, except a

A. Sole proprietorship.
B. Partnership.
C. Corporation.
D. None of the above.

78. The form of business you operate determines what taxes you must pay and how you must pay them. Generally, the kinds of business taxes you must pay are

A. Income tax and excise taxes.
B. Self-employment taxes.
C. Employment taxes.
D. All of the above.

79. A social security and Medicare tax is primarily for individuals who work for themselves. Your payments of this type contribute to your coverage under the social security system which provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.

A. Income taxes.
B. Self-employment tax.
C. Gift taxes.
D. Any of the above.

80. If you make or receive payments in your business, you may have to report them to the IRS on information returns. The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. The following is an information return

A. Partnership return.
B. Form 1099-Miss and Form W-2.
C. Form 8300.
D. All of the above.

81. Business start-up costs are the expenses you incur before you actually begin business operations. Your business start-up costs will depend on the type of business you are starting. These costs are treated as

A. Start-up expenses.
B. Ordinary expenses.
C. Capital expenses.
D. Necessary expenses.

82. Everyone in business must keep records. Good records will help you

A. Monitor the progress of your business.
B. Prepare your financial statements and tax returns.
C. Keep track of deductible expenses and identify source of receipts.
D. All of the above.

83. You need good records to prepare accurate financial statements. These included income (profit and loss) statements and balance sheets.

True False

84. Excepts in a few cases, the law does not require any specific kind records. You can choose any recordkeeping system suited to your business

A. That clearly shows your income and expenses for the year.
B. That includes a summary of your business transactions.
C. That show your gross income, as well as your deductions and credits.
D. All of the above.

85. It is important to keep these documents because they support the entries in your books and on your tax return. Gross receipts are the income your receive from your business. Documents that show gross receipts include

A. Cash register tapes and bank deposit slips.
B. Receipt books and invoices.
C. Credit card charge slips and Forms 1099-MISC.
D. All of the above.

86. Purchases are the items you buy and resell to customers. If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Documents for purchases include

A. Cancelled checks.
B. Cash register tape receipts.
C. Credit card sales slips and invoices.
D. Any of the above.

87. Expenses are the costs you incur (other than purchases) to carry on your business. You supporting documents should show the amount paid and that the amount was for a business expense. Documents for expenses include

A. Canceled checks and cash register tapes.
B. Account statements and credit card sales slips.
C. Invoices and petty cash slips for small cash payments.
D. Any of the above.

88. This is where you record each business transaction shown on your supporting documents and you may have to keep separate volumes of this kind of book for transactions that occur frequently.

A. A ledger.
B. A journal.
C. A checkbook.
D. All of the above.

89. A book that contains the totals from all your journal. It is organized into different accounts.

A. A checkbook.
B. A journal.
C. A ledger.
D. An employee compensation record.

90. You should keep your business account separate from your personal account. One of the first things you should do when you start a business is open a business checking account. The business checkbook

A. Is your basic source of information for recording your business transactions.
B. Should be checked for errors by reconciling it.
C. Should be used to deposit all daily receipts and make all payments by check to document business expenses.  
D. All of the above.

91. When you receive your bank statement, make sure the statement, your checkbook, and your books agree. By reconciling your checking account, you will

A. Verify how much money you have in the account.
B. Make sure that your checkbook and books reflect all bank charges and the correct balance in the checking account.
C. Correct any errors in your bank statement, checkbook and books.
D. All of the above.

92. You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. The period of limitations if you owe additional tax is

A. 3 years.
B. 6 years.
C. 7 years.
D. Not limited.