80 Questions
What is the term for the things of value owned or leased by a business?
Assets
What is the formula for the basic accounting equation?
Assets - Liabilities = Owners' equity
What is the term for the method of recording financial transactions that requires a debit entry and credit entry for each transaction?
Double-entry bookkeeping
What is the principle that requires expenses incurred in producing revenue be deducted from the revenues they generate during an accounting period?
Matching principle
What is the portion of a company's assets that belongs to the owners after obligations to all creditors have been met?
Owners' equity
What is the term for claims against a firm's assets by creditors?
Liabilities
What is the purpose of the accounting equation?
To ensure that a company's financial statements are in balance
What is the result of subtracting liabilities from assets?
Owners' equity
What is the measure of a firm's profitability for each share of outstanding stock?
Earnings per share
Which ratio is calculated by dividing current assets by current liabilities?
Current ratio
What is the ratio between net income after taxes and total owners' equity?
Return on equity
What is calculated by adding cash, marketable securities, and receivables, then dividing that sum by current liabilities?
Quick ratio
What is the ratio between net income after taxes and net sales?
Return on sales
What is the measure of the time a company takes to turn its inventory into sales?
Inventory turnover ratio
What is calculated by dividing cost of goods sold by the average value of inventory for a period?
Inventory turnover ratio
What is the difference between current assets and current liabilities?
Working capital
What is the primary focus of financial accounting?
Preparing financial information for users outside the organization
Who is responsible for overseeing all accounting functions in a company?
Controller
What is the term for the clerical aspect of accounting?
Bookkeeping
What is the term for the formal evaluation of the fairness and reliability of a client's financial statements?
Audit
What is the term for in-house accountants employed by organizations and businesses other than a public accounting firm?
Private accountants
What is the term for professionally licensed accountants who meet certain requirements for education and experience?
Certified public accountants (CPAs)
What area of accounting is concerned with preparing data for use by managers within the organization?
Management accounting
What is the term for professionals who provide accounting services to other businesses and individuals for a fee?
Public accountants
What is the primary purpose of a balance sheet?
To provide a snapshot of a company's financial position at a specific point in time
What is the key difference between current assets and fixed assets?
Current assets can be converted to cash within a year, while fixed assets are retained for long-term use
What is the purpose of an income statement?
To record a company's revenues, expenses, and profits over a given period of time
What is the difference between current liabilities and long-term liabilities?
Current liabilities are due within a year, while long-term liabilities are due more than a year from the date of the balance sheet
What is the definition of retained earnings?
The portion of shareholders' equity earned by the company but not distributed to its owners in the form of dividends
What is the primary purpose of a cash flow statement?
To calculate a company's cash inflows and outflows over a given period
What is the difference between an income statement and a balance sheet?
An income statement records a company's revenues and expenses, while a balance sheet provides a snapshot of a company's financial position
What is the relationship between a company's retained earnings and its shareholders' equity?
Retained earnings are a component of a company's shareholders' equity
What is the term for the profit earned or loss incurred by a firm, determined by subtracting expenses from revenues?
Net income
What is the cost of producing or acquiring a company’s products for sale during a given period?
Cost of goods sold
What is the amount remaining when the cost of goods sold is deducted from net sales?
Gross profit
What is the term for all costs of operation that are not included under cost of goods sold?
Operating expenses
What is the term for a firm’s earnings before interest, taxes, depreciation, and amortization?
EBITDA
What is the statement that presents information on a firm’s sources and uses of cash?
Statement of Cash Flows
What is the term for the profit earned by a firm, determined by subtracting expenses from revenues, also referred to as the ________?
bottom line
What is the cost of producing or acquiring a company’s products for sale during a given period, also known as ________?
cost of goods sold
EBITDA is a measure of a firm's profitability for each share of outstanding stock.
False
The cost of goods sold is also known as gross profit.
False
Operating expenses are all costs of operation that are included under cost of goods sold.
False
The statement of cash flows presents information on a firm's revenues and expenses.
False
Net income is also known as gross profit.
False
The income statement is a statement of a firm's cash receipts and cash payments.
False
Gross profit is the profit earned or loss incurred by a firm, determined by subtracting expenses from revenues.
False
The statement of cash flows is a statement of a firm's revenues and expenses.
False
A debt-to-equity ratio of 1:1 indicates that a company's total liabilities are equal to its total assets.
False
The accounts receivable turnover ratio is a measure of a company's liquidity.
True
A blockchain is a type of distributed ledger that is not shared among market participants.
False
The debt-to-assets ratio is a measure of a company's profitability.
False
A distributed ledger is a type of blockchain that is used to record transactions.
False
The accounts receivable turnover ratio is calculated by dividing total assets by the average value of accounts receivable for a period.
False
The debt-to-equity ratio is a measure of a company's ability to carry long-term debt.
False
A company's total liabilities are equal to its total assets minus its total equity.
True
The role of a controller is to oversee the financial functions of a company.
True
Management accounting is concerned with preparing financial information for users outside the organization.
False
Private accountants are professionally licensed accountants who meet certain requirements for education and experience.
False
Audit is a formal evaluation of the fairness and reliability of a client's financial statements.
True
Bookkeeping is the same as financial accounting.
False
Public accountants are in-house accountants employed by organizations and businesses.
False
Controller is the lowest-ranking accountant in a company.
False
Long-term liabilities are obligations that must be met within three years.
False
Financial accounting is concerned with preparing data for use by managers within the organization.
False
Retained earnings is the portion of shareholders' equity earned by the company and distributed to its owners in the form of dividends.
False
A balance sheet is a financial record of a company's revenues, expenses, and profits over a given period of time.
False
Current assets are assets retained for long-term use.
False
An income statement is also known as a cash flow statement.
False
Fixed assets are also referred to as current assets.
False
Long-term liabilities are also referred to as current liabilities.
False
Retained earnings is the result of subtracting liabilities from assets.
False
The accounting equation is Assets + Liabilities = Owners' Equity
False
The matching principle requires that revenues be matched with expenses in an accounting period
True
Double-entry bookkeeping is a method of recording financial transactions that requires only a debit entry for each transaction
False
Assets include both things of value owned and leased by a business
True
Liabilities are the claims against a firm's assets by the owners
False
The accounting equation is a fundamental concept in financial accounting
True
The matching principle is a concept used in financial accounting to match costs with revenues
True
Double-entry bookkeeping is used to ensure that the accounting equation is always kept out of balance
False
Test your knowledge of accounting concepts, including financial accounting, management accounting, bookkeeping, and the roles of private and public accountants. Understand the differences between preparing financial information for external users and internal management.
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