00- Financial Accounting Quiz

Question 1

What is the primary purpose of financial accounting?

Answer 1

To provide financial information about a business to external users.

Question 2

True or False: Financial accounting is primarily concerned with internal management decisions.

Answer 2

False

Question 3

What are the three main financial statements?

Answer 3

The balance sheet, income statement, and cash flow statement.

Question 4

Fill in the blank: The __________ shows a company’s assets, liabilities, and equity at a specific point in time.

Answer 4

balance sheet

Question 5

What does GAAP stand for?

Answer 5

Generally Accepted Accounting Principles.

Question 6

Multiple Choice: Which of the following is NOT a component of equity? A) Common Stock B) Retained Earnings C) Accounts Payable D) Additional Paid-In Capital

Answer 6

C) Accounts Payable

Question 7

What is the accounting equation?

Answer 7

Assets = Liabilities + Equity.

Question 8

True or False: Revenue is recognized when cash is received.

Answer 8

False

Question 9

What is the purpose of the income statement?

Answer 9

To report a company’s financial performance over a specific period.

Question 10

Fill in the blank: The __________ method of accounting recognizes revenue when it is earned, regardless of when cash is received.

Answer 10

accrual

Question 11

What is depreciation?

Answer 11

The allocation of the cost of a tangible asset over its useful life.

Question 12

Multiple Choice: Which of the following is an example of a current asset? A) Land B) Inventory C) Equipment D) Patent

Answer 12

B) Inventory

Question 13

What is the purpose of the cash flow statement?

Answer 13

To provide information about a company’s cash inflows and outflows during a period.

Question 14

True or False: Liabilities are obligations that a company owes to external parties.

Answer 14

True

Question 15

What is a ledger?

Answer 15

A collection of accounts that records all transactions for a business.

Question 16

Fill in the blank: __________ accounting focuses on the preparation of financial statements for external users.

Answer 16

Financial

Question 17

What is the role of an auditor in financial accounting?

Answer 17

To examine financial statements and ensure they are accurate and comply with regulations.

Question 18

Multiple Choice: Which financial statement provides information about a company’s profitability? A) Balance Sheet B) Income Statement C) Cash Flow Statement D) Statement of Changes in Equity

Answer 18

B) Income Statement

Question 19

What is a trial balance?

Answer 19

A summary of all the debit and credit balances in the ledger accounts.

Question 20

True or False: The matching principle states that expenses should be recognized in the same period as the revenues they help to generate.

Answer 20

True

Question 21

What are accounts receivable?

Answer 21

Amounts owed to a company by customers for goods or services provided on credit.

Question 22

Fill in the blank: __________ is the process of recording financial transactions.

Answer 22

Bookkeeping

Question 23

What is the difference between gross profit and net profit?

Answer 23

Gross profit is revenue minus cost of goods sold; net profit is gross profit minus all other expenses.

Question 24

Multiple Choice: Which of the following is considered a long-term liability? A) Accounts Payable B) Notes Payable C) Mortgage Payable D) Accrued Expenses

Answer 24

C) Mortgage Payable

Question 25

What is an income statement also known as?

Answer 25

Profit and loss statement.

Question 26

True or False: The cash flow statement is divided into operating, investing, and financing activities.

Answer 26

True

Question 27

What is a balance sheet date?

Answer 27

The specific date at which a company's financial position is reported.

Question 28

Fill in the blank: __________ is the systematic allocation of the cost of an intangible asset over its useful life.

Answer 28

Amortization

Question 29

What is the purpose of the statement of changes in equity?

Answer 29

To show the movement in equity accounts over a period.

Question 30

Multiple Choice: Which of the following is a non-current asset? A) Cash B) Accounts Receivable C) Equipment D) Inventory

Answer 30

C) Equipment

Question 31

What does the term 'liquidity' refer to?

Answer 31

A company's ability to meet its short-term obligations.

Question 32

True or False: Retained earnings represent the cumulative profits of a company that have not been distributed to shareholders.

Answer 32

True

Question 33

What is a fiscal year?

Answer 33

A one-year period that companies use for financial reporting and budgeting.

Question 34

Fill in the blank: __________ is an accounting principle that requires expenses to be matched with revenues.

Answer 34

Matching principle

Question 35

What is the difference between cash basis and accrual basis accounting?

Answer 35

Cash basis recognizes revenues and expenses when cash is received or paid; accrual basis recognizes them when earned or incurred.

Question 36

Multiple Choice: Which of the following accounts would be considered an expense? A) Rent Expense B) Accounts Payable C) Cash D) Inventory

Answer 36

A) Rent Expense

Question 37

What is the significance of the notes to the financial statements?

Answer 37

They provide additional information and context about the financial statements.

Question 38

True or False: A company can have a positive cash flow but still report a net loss.

Answer 38

True

Question 39

What is a financial ratio?

Answer 39

A quantitative relationship between two financial statement items used for analysis.

Question 40

Fill in the blank: __________ is the difference between total assets and total liabilities.

Answer 40

Equity

Question 41

What is the purpose of financial accounting standards?

Answer 41

To ensure consistency and transparency in financial reporting.

Question 42

Multiple Choice: Which of the following is an example of an investing activity? A) Issuing stock B) Purchasing equipment C) Paying dividends D) Borrowing money

Answer 42

B) Purchasing equipment

Question 43

What is the role of the Financial Accounting Standards Board (FASB)?

Answer 43

To establish and improve financial accounting standards in the U.S.