Accounting

Question 1

What is the primary purpose of accounting in a business?

Answer 1

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

Question 2

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

Answer 2

False.

Question 3

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

Answer 3

Income Statement.

Question 4

What are the two main types of accounting?

Answer 4

Financial accounting and managerial accounting.

Question 5

Which accounting principle requires that expenses be matched with revenues?

Answer 5

The Matching Principle.

Question 6

What does GAAP stand for?

Answer 6

Generally Accepted Accounting Principles.

Question 7

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

Answer 7

False.

Question 8

What is the accounting equation?

Answer 8

Assets = Liabilities + Equity.

Question 9

What type of account is ‘Accounts Receivable’?

Answer 9

An asset account.

Question 10

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

Answer 10

The General Ledger.

Question 11

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

Answer 11

C) Sales Report.

Question 12

What is the purpose of a cash flow statement?

Answer 12

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

Question 13

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

Answer 13

Fixed Asset.

Question 14

What is the difference between fixed costs and variable costs?

Answer 14

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

Question 15

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

Answer 15

True.

Question 16

What is the role of a bookkeeper?

Answer 16

To record financial transactions and maintain accurate financial records.

Question 17

What is a trial balance?

Answer 17

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

Question 18

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

Answer 18

B) Accounts Payable.

Question 19

What is the purpose of budgeting in accounting?

Answer 19

To plan for future financial activities and manage resources effectively.

Question 20

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

Answer 20

Statement of Owner’s Equity.

Question 21

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

Answer 21

False.

Question 22

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

Answer 22

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

Question 23

What is a budget variance?

Answer 23

The difference between budgeted and actual financial performance.

Question 24

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

Answer 24

B) Depreciation.

Question 25

What is the purpose of internal controls in accounting?

Answer 25

To safeguard assets and ensure the accuracy of financial reporting.

Question 26

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

Answer 26

Current.

Question 27

True or False: A sole proprietorship has unlimited liability.

Answer 27

True.

Question 28

What is the purpose of financial ratios?

Answer 28

To analyze a company's financial performance and position.

Question 29

What does 'revenue recognition' mean?

Answer 29

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

Question 30

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

Answer 30

C) Rent Expense.

Question 31

What is the difference between gross profit and net profit?

Answer 31

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

Question 32

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

Answer 32

Financial Statement.

Question 33

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

Answer 33

True.

Question 34

What is the role of accounts payable?

Answer 34

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

Question 35

What is a cash budget?

Answer 35

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

Question 36

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

Answer 36

B) Accounts Receivable.

Question 37

What is the purpose of a financial audit?

Answer 37

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

Question 38

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

Answer 38

Income Statement.

Question 39

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

Answer 39

True.

Question 40

What is the purpose of a statement of cash flows?

Answer 40

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

Question 41

What is a chart of accounts?

Answer 41

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

Question 42

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

Answer 42

D) Revenue Activities.

Question 43

What does it mean to 'close the books'?

Answer 43

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

Question 44

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

Answer 44

Substance over form.

Question 45

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

Answer 45

True.

Question 46

What is the significance of the break-even point?

Answer 46

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

Question 47

What is the function of the general ledger?

Answer 47

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

Question 48

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

Answer 48

C) Limited Liability Company.

Question 49

What is the role of a financial controller?

Answer 49

To oversee accounting operations, financial reporting, and compliance.

Question 50

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

Answer 50

Debt to Equity.

Question 51

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

Answer 51

False.