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Practical Business Knowledge > Accounting > Flashcards

Accounting Flashcards

1
Q

What is the primary purpose of accounting in a business?

A

To track financial transactions and provide insights for decision-making.

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2
Q

True or False: Accounting is only necessary for large businesses.

A

False.

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3
Q

Fill in the blank: The financial statement that summarizes a company’s revenues and expenses is called the _______.

A

Income Statement.

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4
Q

What are the two main types of accounting?

A

Financial accounting and managerial accounting.

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5
Q

Which accounting principle requires that expenses be matched with revenues?

A

The Matching Principle.

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6
Q

What does GAAP stand for?

A

Generally Accepted Accounting Principles.

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7
Q

True or False: Cash basis accounting recognizes revenues when earned and expenses when incurred.

A

False.

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8
Q

What is the accounting equation?

A

Assets = Liabilities + Equity.

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9
Q

What type of account is ‘Accounts Receivable’?

A

An asset account.

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10
Q

What document is used to track the sales and purchases of a business?

A

The General Ledger.

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11
Q

Multiple choice: Which of the following is NOT a financial statement? A) Balance Sheet B) Cash Flow Statement C) Sales Report D) Income Statement

A

C) Sales Report.

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12
Q

What is the purpose of a cash flow statement?

A

To show the inflows and outflows of cash within a business.

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13
Q

Fill in the blank: Depreciation is used to allocate the cost of a _______ over its useful life.

A

Fixed Asset.

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14
Q

What is the difference between fixed costs and variable costs?

A

Fixed costs do not change with production levels, while variable costs do.

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15
Q

True or False: An audit is an examination of a company’s financial statements by an external party.

A

True.

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16
Q

What is the role of a bookkeeper?

A

To record financial transactions and maintain accurate financial records.

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17
Q

What is a trial balance?

A

A report that lists the balances of all accounts to ensure that debits equal credits.

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18
Q

Multiple choice: Which of the following is considered a liability? A) Cash B) Accounts Payable C) Inventory D) Equipment

A

B) Accounts Payable.

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19
Q

What is the purpose of budgeting in accounting?

A

To plan for future financial activities and manage resources effectively.

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20
Q

Fill in the blank: The _______ is a financial statement that shows the owner’s equity in a business.

A

Statement of Owner’s Equity.

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21
Q

True or False: The accrual basis of accounting recognizes income when cash is received.

A

False.

22
Q

What does the term ‘liquidity’ refer to in accounting?

A

The ability of a company to meet its short-term obligations.

23
Q

What is a budget variance?

A

The difference between budgeted and actual financial performance.

24
Q

Multiple choice: Which of the following is a non-cash expense? A) Rent B) Depreciation C) Utilities D) Salaries

A

B) Depreciation.

25
Q

What is the purpose of internal controls in accounting?

A

To safeguard assets and ensure the accuracy of financial reporting.

26
Q

Fill in the blank: The _______ ratio measures a company’s ability to pay short-term liabilities.

A

Current.

27
Q

True or False: A sole proprietorship has unlimited liability.

A

True.

28
Q

What is the purpose of financial ratios?

A

To analyze a company’s financial performance and position.

29
Q

What does ‘revenue recognition’ mean?

A

The process of recognizing revenue when it is earned, regardless of when cash is received.

30
Q

Multiple choice: Which of the following is an example of an operating expense? A) Cost of Goods Sold B) Interest Expense C) Rent Expense D) Capital Expenditure

A

C) Rent Expense.

31
Q

What is the difference between gross profit and net profit?

A

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

32
Q

Fill in the blank: A _______ is a formal record of the financial activities of a business.

A

Financial Statement.

33
Q

True or False: The purpose of the balance sheet is to show the company’s financial position at a specific point in time.

A

True.

34
Q

What is the role of accounts payable?

A

To track money owed by the business to suppliers and creditors.

35
Q

What is a cash budget?

A

A budget that estimates cash inflows and outflows over a specific period.

36
Q

Multiple choice: Which of the following is an example of a current asset? A) Land B) Accounts Receivable C) Equipment D) Building

A

B) Accounts Receivable.

37
Q

What is the purpose of a financial audit?

A

To provide an independent assessment of the accuracy and fairness of financial statements.

38
Q

Fill in the blank: The _______ is a summary of a company’s financial performance over a specific period.

A

Income Statement.

39
Q

True or False: Equity represents the owners’ claims on the assets of a business.

A

True.

40
Q

What is the purpose of a statement of cash flows?

A

To provide insights into the cash inflows and outflows from operating, investing, and financing activities.

41
Q

What is a chart of accounts?

A

A list of all accounts used by a business to organize financial transactions.

42
Q

Multiple choice: Which of the following is NOT a component of the statement of cash flows? A) Operating Activities B) Investing Activities C) Financing Activities D) Revenue Activities

A

D) Revenue Activities.

43
Q

What does it mean to ‘close the books’?

A

To finalize the accounting records for a specific period, ensuring all transactions are recorded.

44
Q

Fill in the blank: The _______ principle states that financial statements should reflect the economic reality of a business.

A

Substance over form.

45
Q

True or False: A profit and loss statement is the same as an income statement.

A

True.

46
Q

What is the significance of the break-even point?

A

It is the level of sales at which total revenues equal total costs, resulting in no profit or loss.

47
Q

What is the function of the general ledger?

A

To record all financial transactions and serve as the primary accounting record.

48
Q

Multiple choice: Which type of business structure offers limited liability protection? A) Sole Proprietorship B) General Partnership C) Limited Liability Company D) Corporation

A

C) Limited Liability Company.

49
Q

What is the role of a financial controller?

A

To oversee accounting operations, financial reporting, and compliance.

50
Q

Fill in the blank: The _______ ratio indicates how much of a company’s assets are financed by debt.

A

Debt to Equity.

51
Q

True or False: The purpose of the income statement is to show the cash position of a business.

A

False.

Practical Business Knowledge (13 decks)

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