What is the primary objective of accounting?
A) To prepare tax returns
B) To provide financial information for decision-making
C) To ensure compliance with laws
D) To manage cash flow
Which of the following is NOT a type of accounting?
A) Financial accounting
B) Cost accounting
C) Managerial accounting
D) Tax auditing
The accounting equation is:
A) Assets + Liabilities = Equity
B) Assets = Liabilities + Equity
C) Revenue – Expenses = Liabilities
D) Assets – Liabilities = Revenue
Which financial statement shows a company’s financial position at a specific point in time?
A) Income Statement
B) Cash Flow Statement
C) Balance Sheet
D) Statement of Retained Earnings
Revenues are recognized when:
A) Cash is received
B) The sale is made, regardless of payment
C) The customer places an order
D) The financial year ends
Expenses are recorded in accounting when they are:
A) Paid
B) Earned
C) Incurred
D) Reported
What is the purpose of a trial balance?
A) To balance the books
B) To ensure all accounts are correctly updated
C) To verify if debits equal credits
D) To calculate profits
Which of the following is a liability?
A) Cash
B) Accounts payable
C) Accounts receivable
D) Common stock
The term “capital” in accounting refers to:
A) Assets owned by the business
B) The owner’s equity in the business
C) Revenue generated by the business
D) The liabilities of the business
Which financial statement summarizes a company’s revenues and expenses over a period of time?
A) Balance Sheet
B) Income Statement
C) Cash Flow Statement
D) Equity Statement
What is depreciation in accounting?
A) An increase in the value of assets
B) A decrease in the value of assets
C) An expense related to sales revenue
D) A decrease in liabilities
Which of the following is an example of an intangible asset?
A) Building
B) Land
C) Patent
D) Equipment
Which of the following is an example of an operating expense?
A) Interest expense
B) Rent expense
C) Loan repayment
D) Capital gains
What does “accrual accounting” recognize?
A) Revenue when cash is received
B) Revenue when it is earned, regardless of cash flow
C) Expenses when paid
D) All of the above
In accounting, the term “liabilities” refers to:
A) Future economic benefits owned by the business
B) Claims against the business by creditors
C) The owner’s equity in the business
D) Assets used in operations
What is an example of a non-current asset?
A) Cash
B) Accounts receivable
C) Machinery
D) Inventory
In which financial statement do we find net income?
A) Income Statement
B) Cash Flow Statement
C) Balance Sheet
D) Statement of Changes in Equity
A business’s primary source of income is shown in which financial statement?
A) Balance Sheet
B) Income Statement
C) Cash Flow Statement
D) Statement of Retained Earnings
What is the purpose of an auditor in financial accounting?
A) To prepare the financial statements
B) To verify the accuracy and fairness of the financial statements
C) To make investment decisions for the business
D) To determine the company’s profitability
Which of the following would not appear on a balance sheet?
A) Assets
B) Liabilities
C) Revenues
D) Shareholder’s Equity
The cash flow statement categorizes cash into which of the following activities?
A) Operating, Financing, and Investing
B) Assets, Liabilities, and Equity
C) Revenue, Expenses, and Profits
D) Cash Inflows and Outflows
The matching principle in accounting means that:
A) All expenses should be matched with the revenue they help generate
B) All assets should be recorded at their purchase price
C) Revenues should be recognized only when cash is received
D) Liabilities should be reported at market value
Which of the following is an example of a current liability?
A) Long-term debt
B) Notes payable
C) Equipment
D) Land
Which accounting principle requires businesses to report their financial position honestly and accurately?
A) Cost principle
B) Revenue recognition principle
C) Going concern principle
D) Full disclosure principle
A business receives an advance payment from a customer. How is this recorded in accounting?
A) As a revenue
B) As a liability
C) As an expense
D) As an asset
Which of the following is true about the “Going Concern” principle?
A) A business will continue its operations indefinitely
B) A business will liquidate its assets soon
C) A business will not be able to pay its debts
D) A business should stop operating when liabilities exceed assets
Which of the following is a key feature of the accrual basis of accounting?
A) Revenues are recognized when cash is received
B) Expenses are recognized when cash is paid
C) Revenues and expenses are recognized when they are earned or incurred
D) Only cash transactions are recorded
What is the purpose of the Statement of Cash Flows?
A) To show the profitability of the company
B) To explain how cash is generated and used in operating, investing, and financing activities
C) To provide information about the company’s debts
D) To present the financial position of the company
What is a key difference between financial accounting and managerial accounting?
A) Financial accounting focuses on internal management; managerial accounting focuses on external reporting
B) Managerial accounting involves the preparation of financial statements; financial accounting involves decision-making
C) Financial accounting is for internal users; managerial accounting is for external users
D) Financial accounting focuses on external reporting; managerial accounting focuses on internal management
