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Which financial statement shows a company's revenues and expenses?
- A. Balance Sheet
- B. Income Statement
- C. Statement of Cash Flows
- D. Statement of Retained Earnings
- Answer: B
What is the primary purpose of the balance sheet?
- A. To show the company's profitability
- B. To show the company's financial position at a specific point in time
- C. To show the company's cash flows
- D. To show the company's retained earnings
- Answer: B
Which of the following is an example of a current asset?
- A. Land
- B. Building
- C. Accounts Receivable
- D. Equipment
- Answer: C
What does GAAP stand for?
- A. General Accepted Accounting Principles
- B. Generally Accepted Accounting Principles
- C. Generally Accepted Auditing Principles
- D. General Auditing Accounting Principles
- Answer: B
Which accounting concept requires that expenses be matched with revenues?
- A. Accrual Concept
- B. Consistency Concept
- C. Matching Concept
- D. Going Concern Concept
- Answer: C
Which of the following is not a part of financial statements?
- A. Income Statement
- B. Balance Sheet
- C. Budget Report
- D. Statement of Cash Flows
- Answer: C
In accounting, goodwill is classified as:
- A. A current asset
- B. A current liability
- C. An intangible asset
- D. A tangible asset
- Answer: C
Which of the following is not a liability?
- A. Accounts Payable
- B. Notes Payable
- C. Prepaid Expenses
- D. Unearned Revenue
- Answer: C
Which accounting principle states that the same accounting methods should be used from period to period?
- A. Consistency Principle
- B. Matching Principle
- C. Prudence Principle
- D. Realization Principle
- Answer: A
Depreciation is a process of:
- A. Valuation of an asset
- B. Allocation of cost over useful life
- C. Physical wear and tear
- D. None of the above
- Answer: B
What is the main objective of financial accounting?
- A. To provide information to management
- B. To provide information to external users
- C. To prepare tax returns
- D. To control costs
- Answer: B
The dual aspect concept in accounting implies:
- A. Each transaction has two effects
- B. Each transaction is recorded twice
- C. Transactions are recorded in double entry
- D. Transactions have a double entry effect
- Answer: A
Which of the following is a long-term liability?
- A. Accounts Payable
- B. Short-term Loans
- C. Bonds Payable
- D. Prepaid Expenses
- Answer: C
Which financial statement provides information about cash receipts and cash payments?
- A. Income Statement
- B. Balance Sheet
- C. Statement of Retained Earnings
- D. Statement of Cash Flows
- Answer: D
Which accounting principle requires recording revenue when it is earned and realizable, regardless of when cash is received?
- A. Realization Principle
- B. Matching Principle
- C. Conservatism Principle
- D. Consistency Principle
- Answer: A
What is the formula for calculating net income?
- A. Revenues - Liabilities
- B. Revenues - Expenses
- C. Assets - Liabilities
- D. Assets - Equity
- Answer: B
Which account is debited when goods are purchased for cash?
- A. Purchases
- B. Cash
- C. Sales
- D. Accounts Payable
- Answer: A
Which of the following is not a characteristic of managerial accounting?
- A. Future-oriented
- B. Mandatory for external reporting
- C. Provides detailed segment reports
- D. Used by internal management
- Answer: B
Which accounting principle dictates that expenses should be recorded in the period they help generate revenues?
- A. Revenue Recognition Principle
- B. Matching Principle
- C. Full Disclosure Principle
- D. Cost Principle
- Answer: B
Which of the following is not an intangible asset?
- A. Patents
- B. Trademarks
- C. Inventory
- D. Goodwill
- Answer: C
Which type of account is capital?
- A. Asset
- B. Liability
- C. Equity
- D. Revenue
- Answer: C
Which financial statement would you refer to in order to find the total liabilities of a company?
- A. Income Statement
- B. Balance Sheet
- C. Statement of Cash Flows
- D. Statement of Retained Earnings
- Answer: B
Which of the following accounts has a normal credit balance?
- A. Cash
- B. Accounts Receivable
- C. Accounts Payable
- D. Inventory
- Answer: C
The term 'current assets' refers to assets that are:
- A. Expected to be converted into cash within one year
- B. Expected to be used for more than one year
- C. Fixed assets
- D. Intangible assets
- Answer: A
Which of the following is a direct cost?
- A. Rent
- B. Factory Overhead
- C. Direct Materials
- D. Administrative Salaries
- Answer: C
The book value of an asset is equal to:
- A. Cost of the asset
- B. Fair market value
- C. Cost less accumulated depreciation
- D. Replacement cost
- Answer: C
The accounting equation is:
- A. Assets = Liabilities + Expenses
- B. Assets = Liabilities + Equity
- C. Assets = Revenue + Equity
- D. Assets = Liabilities + Revenues
- Answer: B
Which method of depreciation allocates the cost of an asset evenly over its useful life?
- A. Double Declining Balance Method
- B. Units of Production Method
- C. Sum of the Years' Digits Method
- D. Straight Line Method
- Answer: D
Which of the following accounts would be closed at the end of the accounting period?
- A. Cash
- B. Accounts Receivable
- C. Retained Earnings
- D. Revenue
- Answer: D
Which of the following is considered a financing activity?
- A. Payment of salaries
- B. Purchase of inventory
- C. Issuance of bonds
- D. Sale of equipment
- Answer: C
The primary purpose of an audit is to:
- A. Detect fraud
- B. Provide assurance on the financial statements
- C. Prepare the financial statements
- D. Ensure accuracy of tax returns
- Answer: B
Which of the following is an example of a contra asset account?
- A. Accounts Receivable
- B. Accumulated Depreciation
- C. Accounts Payable
- D. Sales Revenue
- Answer: B
Which cost is classified as a period cost?
- A. Direct Materials
- B. Factory Rent
- C. Administrative Salaries
- D. Direct Labor
- Answer: C
A trial balance is prepared to:
- A. Determine the net income for the period
- B. Prove the equality of debits and credits
- C. Determine the financial position of the company
- D. Adjust the accounts at year-end
- Answer: B
What is the primary purpose of cost accounting?
- A. To determine the selling price of products
- B. To control costs and enhance efficiency
- C. To prepare financial statements
- D. To comply with tax regulations
- Answer: B
Which of the following is a variable cost?
- A. Rent
- B. Salaries of administrative staff
- C. Direct Materials
- D.
Insurance - Answer: C
The term 'equity' in accounting refers to:
- A. Total assets of a company
- B. Total liabilities of a company
- C. The owners' claim on the assets of the company
- D. The profits earned by the company
- Answer: C
Which of the following is a non-current asset?
- A. Cash
- B. Inventory
- C. Equipment
- D. Accounts Receivable
- Answer: C
A prepaid expense is classified as:
- A. An asset
- B. A liability
- C. Equity
- D. Revenue
- Answer: A
Which of the following is included in the calculation of cost of goods sold?
- A. Advertising expenses
- B. Administrative salaries
- C. Direct labor costs
- D. Interest expenses
- Answer: C
Which of the following is not a characteristic of financial accounting?
- A. External reporting
- B. Historical data
- C. Future-oriented
- D. Standardized reports
- Answer: C
The accrual basis of accounting recognizes revenues when:
- A. Cash is received
- B. The revenue is earned and realizable
- C. Orders are received
- D. Goods are shipped
- Answer: B
A ledger is:
- A. A book of original entry
- B. A summary of all accounts
- C. A record of all transactions
- D. A financial statement
- Answer: B
Which of the following is not an element of the accounting equation?
- A. Assets
- B. Liabilities
- C. Revenues
- D. Equity
- Answer: C
Which of the following is an indirect cost?
- A. Direct materials
- B. Direct labor
- C. Factory overhead
- D. Sales commissions
- Answer: C
Which principle requires that all financial information be reported accurately and honestly?
- A. Consistency Principle
- B. Prudence Principle
- C. Full Disclosure Principle
- D. Revenue Recognition Principle
- Answer: C
Which of the following would not be included in the balance sheet?
- A. Cash
- B. Revenue
- C. Inventory
- D. Accounts Payable
- Answer: B
Which of the following is a capital expenditure?
- A. Payment of salaries
- B. Purchase of equipment
- C. Purchase of inventory
- D. Payment of rent
- Answer: B
The statement of cash flows is divided into how many main sections?
- A. Two
- B. Three
- C. Four
- D. Five
- Answer: B
Which of the following is an example of a cash equivalent?
- A. Accounts Receivable
- B. Inventory
- C. Treasury Bills
- D. Prepaid Expenses
- Answer: C
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