intro to accounting

Question 1

What is accounting?

Answer 1

The process of recording, summarizing, and reporting financial transactions.

Question 2

True or False: Accounting is only concerned with financial transactions.

Answer 2

True

Question 3

What are the two main branches of accounting?

Answer 3

Financial accounting and managerial accounting.

Question 4

Fill in the blank: The primary purpose of financial accounting is to provide information to ______.

Answer 4

external users

Question 5

What does GAAP stand for?

Answer 5

Generally Accepted Accounting Principles.

Question 6

True or False: Managerial accounting is primarily focused on providing information for internal decision-making.

Answer 6

True

Question 7

What is the accounting equation?

Answer 7

Assets = Liabilities + Equity.

Question 8

What are assets?

Answer 8

Resources owned by a business that have economic value.

Question 9

What are liabilities?

Answer 9

Obligations or debts that a business owes to external parties.

Question 10

What is equity?

Answer 10

The owner’s claim on the assets of the business after liabilities have been deducted.

Question 11

True or False: The balance sheet is a financial statement that shows a company’s revenues and expenses.

Answer 11

False

Question 12

What is a balance sheet?

Answer 12

A financial statement that reports a company’s assets, liabilities, and equity at a specific point in time.

Question 13

What is an income statement?

Answer 13

A financial statement that shows a company’s revenues and expenses over a period of time.

Question 14

Fill in the blank: The cash flow statement provides information about a company’s ______ activities.

Answer 14

cash

Question 15

What is double-entry accounting?

Answer 15

An accounting system that requires every transaction to be recorded in at least two accounts.

Question 16

True or False: In double-entry accounting, debits must equal credits.

Answer 16

True

Question 17

What is a general ledger?

Answer 17

A complete record of all financial transactions over the life of a company.

Question 18

What is a trial balance?

Answer 18

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

Question 19

What is accrual accounting?

Answer 19

An accounting method where revenue is recognized when earned and expenses when incurred, regardless of cash flow.

Question 20

Fill in the blank: The ______ principle states that expenses should be matched with revenues.

Answer 20

matching

Question 21

What is a fiscal year?

Answer 21

A one-year period that companies use for financial reporting and budgeting.

Question 22

True or False: The revenue recognition principle dictates when revenue should be recorded.

Answer 22

True

Question 23

What is a journal entry?

Answer 23

A record of a financial transaction in the accounting system.

Question 24

What is depreciation?

Answer 24

The allocation of the cost of a tangible asset over its useful life.

Question 25

What is an audit?

Answer 25

An examination of financial statements and related operations to ensure accuracy and compliance with accounting standards.

Question 26

Fill in the blank: ______ is the process of preparing financial statements.

Answer 26

Financial reporting

Question 27

What is the purpose of the statement of retained earnings?

Answer 27

To show how much of the profit is retained in the company and how much is distributed to shareholders.

Question 28

True or False: A company's fiscal year can coincide with the calendar year.

Answer 28

True

Question 29

What is a budget?

Answer 29

A financial plan that estimates future income and expenses.

Question 30

What is the purpose of internal controls in accounting?

Answer 30

To safeguard assets and ensure the accuracy of financial reporting.

Question 31

Fill in the blank: The ______ method is used to determine the value of inventory.

Answer 31

FIFO or LIFO

Question 32

What does FIFO stand for?

Answer 32

First In, First Out.

Question 33

What does LIFO stand for?

Answer 33

Last In, First Out.

Question 34

What is a financial ratio?

Answer 34

A quantitative relationship between two financial statement items.

Question 35

True or False: Liquidity ratios measure a company's ability to meet short-term obligations.

Answer 35

True

Question 36

What is the current ratio?

Answer 36

A liquidity ratio that measures a company's ability to pay short-term liabilities with short-term assets.

Question 37

What is the formula for the current ratio?

Answer 37

Current Assets / Current Liabilities.

Question 38

What is a solvency ratio?

Answer 38

A measure of a company's ability to meet its long-term obligations.

Question 39

Fill in the blank: ______ is the process of evaluating the financial health of a business.

Answer 39

Financial analysis

Question 40

What is the purpose of variance analysis?

Answer 40

To compare budgeted and actual financial performance.

Question 41

True or False: A profit and loss statement is another name for the income statement.

Answer 41

True

Question 42

What is the purpose of the cash flow statement?

Answer 42

To provide information about cash inflows and outflows during a specific period.

Question 43

What is a receivable?

Answer 43

Money owed to a company by its customers for goods or services provided.

Question 44

What is a payable?

Answer 44

Money a company owes to its suppliers for goods or services received.

Question 45

Fill in the blank: ______ accounting focuses on historical data and compliance.

Answer 45

Financial

Question 46

What is the purpose of managerial accounting?

Answer 46

To provide information for internal decision-making and planning.

Question 47

True or False: Financial statements are prepared using the same accounting principles for all companies.

Answer 47

False