Fundamentals Of accounting Flashcards
What is accounting?
Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions.
True or False: The primary purpose of accounting is to ensure compliance with legal obligations.
False
Fill in the blank: Financial accounting focuses on the __________ of financial information to external users.
reporting
What are the two main types of accounting?
Financial accounting and managerial accounting.
Multiple Choice: Which of the following is NOT a financial statement? A) Balance Sheet B) Income Statement C) Cash Flow Statement D) Journal
D) Journal
What does a balance sheet represent?
A balance sheet represents a company’s financial position at a specific point in time, showing assets, liabilities, and equity.
True or False: Assets are always equal to liabilities plus equity.
True
What is the accounting equation?
Assets = Liabilities + Equity
Fill in the blank: The __________ statement shows a company’s revenues and expenses over a period of time.
income
Multiple Choice: Which of the following is considered a current asset? A) Equipment B) Inventory C) Land D) Long-term investments
B) Inventory
What is double-entry accounting?
Double-entry accounting is a system where every financial transaction affects at least two accounts, maintaining the accounting equation.
True or False: Depreciation is the process of allocating the cost of a tangible asset over its useful life.
True
What is the purpose of a cash flow statement?
The cash flow statement provides information about a company’s cash inflows and outflows over a period of time.
Fill in the blank: Revenue recognition principle states that revenue should be recognized when it is __________.
earned
Multiple Choice: Which financial statement is primarily used to evaluate a company’s profitability? A) Balance Sheet B) Income Statement C) Cash Flow Statement D) Statement of Changes in Equity
B) Income Statement
What is the role of an auditor?
An auditor examines financial statements to ensure they are accurate and comply with accounting standards.
True or False: The Generally Accepted Accounting Principles (GAAP) are a set of rules and standards for financial reporting.
True
What is the difference between accounts payable and accounts receivable?
Accounts payable are obligations to pay money to suppliers, while accounts receivable are amounts owed to the company by customers.
Fill in the blank: __________ is the systematic process of recording financial transactions in a journal.
Bookkeeping
Multiple Choice: Which of the following is a non-current liability? A) Accounts Payable B) Short-term Debt C) Long-term Debt D) Accrued Liabilities
C) Long-term Debt
What is the purpose of managerial accounting?
Managerial accounting provides information for internal management to aid in decision-making and performance evaluation.
True or False: A trial balance is used to ensure that total debits equal total credits in the accounting records.
True
What is an income statement also known as?
Profit and loss statement.
Fill in the blank: The __________ concept requires that businesses remain separate from their owners for accounting purposes.
entity
Multiple Choice: Which of the following is an example of an operating expense? A) Cost of Goods Sold B) Rent Expense C) Interest Expense D) Tax Expense
B) Rent Expense
