Which method of inventory valuation matches recent costs with current revenues?
- A. FIFO (First In, First Out)
- B. LIFO (Last In, First Out)
- C. Weighted Average
- D. Specific Identification
- Answer: B
Which type of account is prepaid insurance?
- A. Asset
- B. Liability
- C. Equity
- D. Revenue
- Answer: A
Which of the following is not a current liability?
- A. Accounts Payable
- B. Short-term Loans
- C. Bonds Payable
- D. Unearned Revenue
- Answer: C
Which principle states that expenses should be recognized in the period in which they help generate revenues?
- A. Matching Principle
- B. Revenue Recognition Principle
- C. Cost Principle
- D. Full Disclosure Principle
- Answer: A
What type of account is unearned revenue?
- A. Asset
- B. Liability
- C. Equity
- D. Expense
- Answer: B
Which of the following costs are included in manufacturing overhead?
- A. Direct materials and direct labor
- B. Indirect materials and indirect labor
- C. Selling and administrative expenses
- D. Interest expenses
- Answer: B
Which of the following best describes a contingent liability?
- A. A liability that will be settled within the next year
- B. A potential liability that depends on the outcome of a future event
- C. A liability that is already incurred but not yet paid
- D. A liability that is not reported on the balance sheet
- Answer: B
Which of the following accounts would appear on the income statement?
- A. Cash
- B. Accounts Receivable
- C. Sales Revenue
- D. Inventory
- Answer: C
The principle of conservatism in accounting means:
- A. Revenues and expenses should be recorded when they are incurred
- B. All expenses and losses should be recognized as soon as possible
- C. Financial statements should be presented conservatively
- D. Assets should be recorded at their market value
- Answer: B
What does a credit balance in the bank statement indicate?
- A. The bank account is overdrawn
- B. The bank owes money to the company
- C. The company owes money to the bank
- D. There is an error in the bank statement
- Answer: B
What is the main purpose of managerial accounting?
- A. To provide information for external users
- B. To provide information for internal decision-making
- C. To prepare tax returns
- D. To ensure compliance with GAAP
- Answer: B
Which of the following is a fixed cost?
- A. Direct materials
- B. Factory rent
- C. Sales commissions
- D. Direct labor
- Answer: B
In which section of the cash flow statement would you find the purchase of equipment?
- A. Operating activities
- B. Investing activities
- C. Financing activities
- D. None of the above
- Answer: B
Which of the following is an example of a tangible asset?
- A. Patents
- B. Trademarks
- C. Equipment
- D. Goodwill
- Answer: C
Which financial statement shows the changes in equity during a period?
- A. Income Statement
- B. Balance Sheet
- C. Statement of Cash Flows
- D. Statement of Retained Earnings
- Answer: D
Which method of depreciation is most appropriate for an asset that is expected to produce equal benefits 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 costs are included in the cost of goods manufactured?
- A. Direct materials, direct labor, and manufacturing overhead
- B. Direct materials, direct labor, and administrative expenses
- C. Direct labor, manufacturing overhead, and selling expenses
- D. Manufacturing overhead, selling expenses, and administrative expenses
- Answer: A
Which of the following is a contra revenue account?
- A. Sales Discounts
- B. Sales Revenue
- C. Cost of Goods Sold
- D. Accounts Receivable
- Answer: A
What is the primary purpose of the statement of cash flows?
- A. To show the company's financial position at a specific point in time
- B. To show the company's revenues and expenses
- C. To show the changes in cash during a period
- D. To show the company's retained earnings
- Answer: C
Which of the following is an example of a financing activity?
- A. Payment of salaries
- B. Purchase of inventory
- C. Issuance of bonds
- D. Sale of equipment
- Answer: C
Which of the following is considered an operating activity?
- A. Borrowing funds
- B. Paying dividends
- C. Selling goods
- D. Purchasing equipment
- Answer: C
Which of the following is not a characteristic of a partnership?
- A. Unlimited liability
- B. Limited life
- C. Mutual agency
- D. Separate legal entity
- Answer: D
Which financial statement provides information about the profitability of a company over a period?
- A. Balance Sheet
- B. Income Statement
- C. Statement of Cash Flows
- D. Statement of Retained Earnings
- Answer: B
Which of the following is a product cost?
- A. Advertising expense
- B. Sales commissions
- C. Factory utilities
- D. Office supplies
- Answer: C
Which of the following is an investing activity?
- A. Paying interest
- B. Issuing common stock
- C. Purchasing a building
- D. Receiving dividends
- Answer: C
The term 'liquidity' refers to:
- A. The ability to meet short-term obligations
- B. The ability to generate profits
- C. The ability to control costs
- D. The ability to pay dividends
- Answer: A
Which of the following is not included in the calculation of gross profit?
- A. Sales revenue
- B. Cost of goods sold
- C. Operating expenses
- D. None of the above
- Answer: C
Which of the following is a variable cost?
- A. Factory rent
- B. Sales commissions
- C. Property taxes
- D. Depreciation
- Answer: B
What type of account is accumulated depreciation?
- A. Asset
- B. Liability
- C. Contra asset
- D. Equity
- Answer: C
Which of the following is not a manufacturing cost?
- A. Direct materials
- B. Direct labor
- C. Manufacturing overhead
- D. Administrative expenses
- Answer: D
Which method of inventory valuation results in the lowest income tax during periods of rising prices?
- A. FIFO (First In, First Out)
- B. LIFO (Last In, First Out)
- C. Weighted Average
- D. Specific Identification
- Answer: B
Which financial statement shows a company's retained earnings at the end of a period?
- A. Income Statement
- B. Balance Sheet
- C. Statement of Cash Flows
- D. Statement of Retained Earnings
- Answer: D
Which of the following is a measure of profitability?
- A. Current Ratio
- B. Quick Ratio
- C. Gross Profit Margin
- D. Debt to Equity Ratio
- Answer: C
Which of the following is not a component of stockholders' equity?
- A. Common Stock
- B. Retained Earnings
- C. Bonds Payable
- D. Additional Paid-in Capital
- Answer: C
The matching principle is closely related to:
- A. Accrual Accounting
- B. Cash Basis Accounting
- C. Tax Accounting
- D. Managerial Accounting
- Answer: A
Which of the following is not a financial statement?
- A. Income Statement
- B. Balance Sheet
- C. Statement of Cash Flows
- D. Trial Balance
- Answer: D
Which of the following best describes retained earnings?
- A. Cash held by the company
- B. Profits not distributed to shareholders
- C. Total revenue of the company
- D. Total equity of the company
- Answer: B
Which of the following is an internal user of accounting information?
- A. Investors
- B. Creditors
- C. Managers
- D. Customers
- Answer: C
Which type of account is salaries payable?
- A. Asset
- B. Liability
- C. Equity
- D. Expense
- Answer: B
What is the primary purpose of a trial balance?
- A. To prepare the financial statements
- B. To prove the equality of debits and credits
- C. To calculate net income
- D. To determine the financial position of the company
- Answer: B
Which of the following is a period cost?
- A. Direct materials
- B. Factory rent
- C. Sales commissions
- D. Direct labor
- Answer: C
Which of the following is not a characteristic of managerial accounting?
- A. Future-oriented
- B. Provides detailed segment reports
- C. Mandatory for external reporting
- D. Used by internal management
- Answer: C
Which of the following is a measure of liquidity?
- A. Return on Equity
- B. Debt to Equity Ratio
- C. Current Ratio
- D. Gross Profit Margin
- Answer: C
Which principle states that revenue should be recognized when it is earned?
- A. Matching Principle
- B. Consistency Principle
- C. Prudence Principle
- D. Revenue Recognition Principle
- Answer: D
Which of the following is a fixed cost?
- A. Direct materials
- B. Factory rent
- C. Sales commissions
- D. Direct labor
- Answer: B
What type of account is prepaid rent?
- A. Asset
- B. Liability
- C. Equity
- D. Expense
- Answer: A
Which of the following is not an element of the statement of cash flows?
- A. Operating Activities
- B. Investing Activities
- C. Financing Activities
- D. Marketing Activities
- Answer: D
Which of the following is an indirect cost?
- A. Direct materials
- B. Direct labor
- C. Factory overhead
- D. Sales commissions
- Answer: C
The term 'current liabilities' refers to liabilities that are:
- A. Expected to be settled within one year
- B. Expected to be settled within the operating cycle
- C. Fixed liabilities
- D. Both A and B
- Answer: D
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
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