Financial accounting primarily focuses on:
a) Internal decision-making
b) Recording, summarizing, and reporting financial transactions
c) Managing employee salaries
d) Setting product prices
Which of the following is NOT a primary financial statement?
a) Balance Sheet
b) Income Statement
c) Cash Flow Statement
d) Trial Balance
Which financial statement shows a company’s financial position at a specific point in time?
a) Balance Sheet
b) Income Statement
c) Statement of Cash Flows
d) Notes to Financial Statements
Which financial statement provides information about revenues and expenses?
a) Balance Sheet
b) Cash Flow Statement
c) Income Statement
d) Statement of Financial Position
Which equation is fundamental to financial accounting?
a) Assets = Liabilities + Equity
b) Assets = Revenue – Expenses
c) Liabilities = Assets + Capital
d) Profit = Revenue – Equity
What is the purpose of a Cash Flow Statement?
a) To show a company’s financial position
b) To display profit or loss
c) To summarize cash inflows and outflows
d) To list all assets and liabilities
Which of the following is a current asset?
a) Land
b) Machinery
c) Accounts Receivable
d) Trademark
Which accounting principle states that financial transactions should be recorded at their original cost?
a) Matching Principle
b) Cost Principle
c) Conservatism Principle
d) Consistency Principle
Which of the following is an example of a liability?
a) Cash
b) Accounts Payable
c) Inventory
d) Buildings
Which of the following accounts represents owner’s equity?
a) Cash
b) Retained Earnings
c) Accounts Payable
d) Inventory
What is the primary objective of financial accounting?
a) To prepare tax returns
b) To provide useful financial information to external users
c) To track daily transactions for internal use
d) To ensure compliance with labor laws
Which accounting assumption states that the business will continue operating indefinitely?
a) Monetary Unit Assumption
b) Going Concern Assumption
c) Accrual Basis Assumption
d) Materiality Principle
Which financial statement reports net income or net loss?
a) Income Statement
b) Balance Sheet
c) Statement of Cash Flows
d) Statement of Retained Earnings
Which accounting concept states that business transactions should be recorded separately from personal transactions?
a) Going Concern Concept
b) Business Entity Concept
c) Consistency Principle
d) Conservatism Principle
Which of the following transactions increases assets and equity?
a) Borrowing from a bank
b) Purchasing inventory on credit
c) Receiving cash from an investor
d) Paying off a loan
Which of the following accounts has a normal debit balance?
a) Accounts Payable
b) Capital
c) Revenue
d) Cash
Which type of account is recorded in the income statement?
a) Assets
b) Liabilities
c) Revenues and Expenses
d) Equity
Depreciation is recorded as a:
a) Revenue
b) Liability
c) Expense
d) Asset
What does the dual aspect concept state?
a) Every transaction has two effects
b) Every transaction affects only assets
c) Every transaction must be cash-based
d) Every transaction requires an auditor’s approval
Which of the following is an intangible asset?
a) Equipment
b) Inventory
c) Goodwill
d) Land
Which accounting principle ensures expenses are recorded in the same period as related revenues?
a) Matching Principle
b) Revenue Recognition Principle
c) Cost Principle
d) Objectivity Principle
Which of the following is NOT included in financial statements?
a) Income Statement
b) Balance Sheet
c) General Ledger
d) Statement of Cash Flows
Which financial statement shows the financial position of a business?
a) Balance Sheet
b) Income Statement
c) Cash Flow Statement
d) Bank Statement
Which of the following is considered a financing activity in the Cash Flow Statement?
a) Paying for inventory
b) Receiving cash from customers
c) Issuing shares to investors
d) Purchasing new equipment
What is the first step in the accounting cycle?
a) Preparing financial statements
b) Analyzing transactions
c) Posting to ledger accounts
d) Recording journal entries
What is the normal balance of a liability account?
a) Debit
b) Credit
c) Either debit or credit
d) Zero balance
Which type of account is ‘Accounts Receivable’?
a) Asset
b) Liability
c) Expense
d) Revenue
Which of the following is an example of an operating expense?
a) Loan repayment
b) Office rent
c) Sale of land
d) Issuance of shares
