Accounting Terms Quiz
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Questions and Answers

What does the fundamental accounting equation state?

  • Total Assets = Total Liabilities - Owner's Equity
  • Total Assets + Total Liabilities = Owner's Equity
  • Total Assets = Total Liabilities + Total Revenue
  • Total Assets = Total Liabilities + Owner's Equity (correct)

    • What is classified as a long-term asset used in producing goods and services?

  • Current assets
  • Liability
  • Expense
  • Fixed asset (correct)

    • Which of the following best describes the going concern concept?

  • A method of budgeting for short-term operations
  • The assumption that a company will close in the near future
  • An expectation that a company has indefinite operations (correct)
  • Indicating a business is likely to become insolvent

    • What does the term 'gross profit' refer to?

    <p>Net sales minus the cost of goods sold (C)</p> Signup and view all the answers

    What is meant by the term 'goods in process'?

    <p>Raw materials and labor applied to unfinished goods (A)</p> Signup and view all the answers

    Which statement accurately defines the 'imprest method'?

    <p>Recording cash removal only when the fund is replenished (C)</p> Signup and view all the answers

    What is the role of GAAP in accounting?

    <p>To serve as a set of guidelines for preparing financial statements (C)</p> Signup and view all the answers

    What does freight-in refer to in accounting?

    <p>Transportation costs for incoming merchandise (B)</p> Signup and view all the answers

    Which document is used by employers to report payroll data for the year to employees, including information for tax returns?

    <p>T4 slip (A)</p> Signup and view all the answers

    What is the primary purpose of a subsidiary ledger?

    <p>To maintain detailed information about individual accounts within a general ledger account (C)</p> Signup and view all the answers

    Which accounting method involves evenly distributing depreciation expense over the asset's useful life?

    <p>Straight-line method (B)</p> Signup and view all the answers

    Which of the following best describes 'stock-in-trade' in accounting terminology?

    <p>Goods that are bought and sold by a merchandising business (C)</p> Signup and view all the answers

    What is a significant advantage of using a synoptic journal in accounting?

    <p>It simplifies the process of recording transactions by combining entries from several journals (D)</p> Signup and view all the answers

    Which financial statement provides a detailed summary of a customer's account activity over a period of time?

    <p>Statement of account (B)</p> Signup and view all the answers

    Which of the following is NOT considered a temporary account in accounting?

    <p>Accumulated depreciation (C)</p> Signup and view all the answers

    What is the primary difference between a sales invoice and a sales journal?

    <p>A sales invoice is a source document, while a sales journal is a summary of sales transactions (B)</p> Signup and view all the answers

    Which of the following would be considered a source document in accounting?

    <p>Purchase order (A)</p> Signup and view all the answers

    What does 'taking off a trial balance' refer to in accounting?

    <p>Verifying the equality of debit and credit balances in a ledger (C)</p> Signup and view all the answers

    What is the primary purpose of a purchases journal?

    <p>To track all purchases made on credit (D)</p> Signup and view all the answers

    What is the definition of the quick ratio?

    <p>Current assets divided by current liabilities excluding inventory (C)</p> Signup and view all the answers

    Which account reflects capital accumulated from profits not yet distributed to shareholders?

    <p>Retained Earnings Account (B)</p> Signup and view all the answers

    What type of transaction does a purchase on account describe?

    <p>A purchase where payment is delayed (B)</p> Signup and view all the answers

    What is the significance of a remittance advice?

    <p>It accompanies the cheque explaining its purpose (C)</p> Signup and view all the answers

    What does the provincial sales tax pertain to?

    <p>Tax based on the price of goods sold (B)</p> Signup and view all the answers

    Which of the following best describes a public corporation?

    <p>A company whose shares are sold to the general public (D)</p> Signup and view all the answers

    What does the rate of return on owner’s equity measure?

    <p>Net earnings relative to average owner's equity (D)</p> Signup and view all the answers

    What is a purchase order used for?

    <p>To request shipment of goods or services (A)</p> Signup and view all the answers

    Which of the following describes a public accountant?

    <p>An accountant providing services to individuals and businesses (B)</p> Signup and view all the answers

    What is the primary function of a voucher in accounting?

    <p>It establishes the validity of accounting records. (A)</p> Signup and view all the answers

    Which statement accurately defines working capital?

    <p>The difference between current assets and current liabilities. (C)</p> Signup and view all the answers

    What is the role of a voucher system in accounting?

    <p>It establishes procedures for verifying expenditure transactions. (A)</p> Signup and view all the answers

    What does the term 'valuation account' refer to?

    <p>An account that reflects the true value alongside an asset account. (A)</p> Signup and view all the answers

    How is the working capital ratio defined?

    <p>The ratio of current assets to current liabilities. (A)</p> Signup and view all the answers

    What is an essential component of a partnership agreement?

    <p>It should outline the terms and conditions of the partnership. (C)</p> Signup and view all the answers

    What does the term 'out of balance' indicate in accounting?

    <p>The total values of all accounts do not match between debits and credits. (B)</p> Signup and view all the answers

    Which statement accurately describes an outstanding cheque?

    <p>It refers to a cheque issued and recorded but not cashed within the statement period. (C)</p> Signup and view all the answers

    What does owner's equity represent in a business?

    <p>The total assets minus total liabilities. (B)</p> Signup and view all the answers

    What is the primary purpose of a payroll journal?

    <p>To calculate and record individual net pays of employees. (D)</p> Signup and view all the answers

    Which term refers to money paid to reduce the balance owed to a creditor?

    <p>Payment on account (C)</p> Signup and view all the answers

    Which option correctly defines percentage analysis in accounting?

    <p>Converting financial statement figures into percentages of a base figure. (D)</p> Signup and view all the answers

    What does the term 'opening entry' refer to in accounting?

    <p>The first accounting entry in the general journal that records a business's starting financial position. (B)</p> Signup and view all the answers

    What is Inventory Turnover used to measure?

    <p>How quickly inventory is sold. (B)</p> Signup and view all the answers

    Which term describes the ease with which an asset can be converted to cash?

    <p>Liquidity (A)</p> Signup and view all the answers

    What does a Limited Liability Company ensure for its owners?

    <p>Liability is restricted to their investment. (A)</p> Signup and view all the answers

    What is a principal characteristic of a Merchandising Business?

    <p>It purchases goods to resell them for profit. (B)</p> Signup and view all the answers

    Which of the following describes a Journal Entry?

    <p>An accounting entry recorded in the journal. (A)</p> Signup and view all the answers

    What is the purpose of Internal Control in an organization?

    <p>To protect assets and ensure accuracy. (A)</p> Signup and view all the answers

    What does Net Income represent in financial terms?

    <p>The difference between total revenues and expenses when revenue exceeds expenses. (B)</p> Signup and view all the answers

    What is the main function of a Master Budget?

    <p>To provide a framework for performance measurement and cost control. (A)</p> Signup and view all the answers

    What differentiates Limited Partners in a Limited Partnership?

    <p>They have limited liability restricted to their investments only. (B)</p> Signup and view all the answers

    Which of the following best defines Nominal Account?

    <p>Accounts whose balances do not carry over to the next fiscal period. (B)</p> Signup and view all the answers

    What is meant by 'Accounts Payable' in accounting?

    <p>Money a business owes to its creditors. (D)</p> Signup and view all the answers

    What defines the 'Accounting Period'?

    <p>The duration for which a business records financial activities. (D)</p> Signup and view all the answers

    Which statement accurately describes 'Accounts Receivable Turnover'?

    <p>The number of days it takes to collect money from customers. (C)</p> Signup and view all the answers

    What is the purpose of an 'Adjusting Entry' in accounting?

    <p>To allocate revenues or expenses to the correct period. (C)</p> Signup and view all the answers

    What is the main characteristic of 'Audit' in accounting?

    <p>A review of accounting records and internal controls. (B)</p> Signup and view all the answers

    Which option best describes 'Asset' in terms of a business's financials?

    <p>Anything owned that has a dollar value. (D)</p> Signup and view all the answers

    What does the term 'Accrued Expense' refer to?

    <p>An incurred expense that is not yet billed or paid. (C)</p> Signup and view all the answers

    What is included in a 'Balance Sheet'?

    <p>Assets, liabilities, and capital on a specific date. (D)</p> Signup and view all the answers

    What is the function of a 'Bank Reconciliation Statement'?

    <p>To find discrepancies between bank and business records. (A)</p> Signup and view all the answers

    What does 'Book Value' represent?

    <p>The amount of equity per share for common shareholders. (B)</p> Signup and view all the answers

    Study Notes

    Accounting Terms

    • Expense: A decrease in equity, resulting from costs of materials and services used to produce revenue.
    • Factory Overhead: Costs supporting the manufacturing process.
    • Financial Analysis: Analyzing income statements and balance sheets to understand financial position.
    • Financial Position: Business status, represented by assets, liabilities, and owner's equity.
    • Fiscal Period: The time frame earnings are measured, (same as accounting period).
    • Five-Journal System: Accounting system using 5 journals to record transactions of various types.
    • Fixed Asset: A long-term asset used to produce goods or services (same as Plant and Equipment).
    • Float: Small amount of bills and coins in a cash register for making change.
    • Forwarding: Continuing an account or journal on a new page, carrying forward information.
    • Freight-in: Transportation charges on incoming merchandise.
    • Full Disclosure Principle: Guideline, see GAAP Appendix.
    • Fundamental Accounting Equation: Equation stating total assets – total liabilities = owner's equity (A-L = OE).
    • GAAP: Generally Accepted Accounting Principles.
    • General Ledger: Book/file containing business accounts, excluding subsidiary ledgers.
    • General Partner: Co-owner with unlimited liability and management responsibility.
    • Generally Accepted Accounting Principles (GAAP): Guidelines for preparing accounting records and statements.
    • Going Concern Concept: See GAAP Appendix.
    • Goods and Services Tax (GST): Canadian value-added tax on most goods and services, collected by sellers and remitted to the federal government.
    • Goods in Process: Partially finished goods with materials, labor, or overhead applied.
    • Goodwill: Intangible asset, value exceeding the sum of net assets.
    • Gross Pay: Earnings before payroll deductions.
    • Gross Profit: Net sales minus the cost of goods sold.
    • GST: See Goods and Services Tax.
    • Harmonized Sales Tax (HST): Combined provincial and federal sales tax.
    • Imprest Method: Petty cash handling where money removal is recorded when the fund is replenished.
    • In Balance: Debit and credit account totals are equal.
    • Income: Increase in equity from the sale of goods or services (same as Revenue).
    • Income Sharing Ratio: Percentage of net income apportioned to partners, after salaries and interest.
    • Income Statement: Summary of revenues and expenses, showing net income/loss.
    • Income Summary Account: Temporary account for closing revenues and expenses before calculating net income.
    • Indirect Labor: Wages for support staff in the manufacturing process (e.g., janitorial).
    • Input Tax Credit: GST paid by a non-consumer business that can be subtracted from the GST collected from customers.
    • Journal: A record of business transactions.
    • Journal Entry: A record of a transaction in a journal.
    • Liability: A company's debt, amount owed.
    • Net Income: Total revenues minus total expenses.
    • Net Loss: Total expenses are greater than total revenues.
    • Output Tax: Tax collected.
    • Owner's Equity: The difference between the business's total assets and total liabilities.
    • Partners: Co-owners of a business.
    • Plant and Equipment: Long-term assets used to produce goods or services.
    • Payroll: Record of employee wages and salaries.
    • Purchase Journal: A special journal used to record purchases.
    • Quick Ratio: The ratio of current assets, excluding inventory, to current liabilities.
    • Rate of Return on Net Sales: Percentage of net earnings to net sales.
    • Revenue: Increase in equity from the sale of goods or services.
    • Sales Tax: A tax charged on sales of goods and or services.
    • Subsidiary Ledger: Detailed records for specific accounts.
    • Transportation charges: Costs associated with moving goods.
    • Time Period: A period of time used in financial reporting.
    • Freight-out charges: The cost a business incurs to transport or deliver its products to customers.
    • Financial Analysis: The study of financial statements to assess a company's performance.
    • Financial position: The financial condition of a business, shown by assets, liabilities, and owner's equity.
    • Fiscal period: The period of time used to measure and report earnings.
    • Full Disclosure Principle: Principle requiring all significant information to be disclosed in financial statements, see GAAP Appendix.
    • GAAP: In the US, Generally Accepted Accounting Principles, guidelines for preparing financial statements.
    • General Ledger: A master accounting record for all accounts.
    • General Partner: Partner with unlimited liability for business debts.
    • Generally Accepted Accounting Principles (GAAP): Guidelines for recording and reporting financial information.
    • Imprest Method: A petty cash system where the cash float is replenished periodically.
    • Input Tax Credit: Businesses can deduct applicable GST that they collected while purchasing goods and services.
    • Income Summary Account: A temporary account that collects revenues and expenses during the fiscal period.
    • Indirect Expenses: Indirect labor, supplies
    • Journal Entry: Record of a transaction, a debit and a credit.
    • Liability: Amount of money a company owes.
    • Net Income: Income after paying all expenses and taxes.
    • Net loss: Expenses exceeding income.
    • Output Tax: Tax collected.
    • Owner's equity: Part of the business owned by the owners.
    • Partner: Co-owner of a business.
    • Plant and equipment: Long-term assets used to produce goods and/or services.
    • Payroll: Record of employee wages and/or salary.
    • Revenue: Increase in assets from selling goods and/or services.
    • Sales Tax: A tax charged on sales of goods and or services.
    • Subsidiary ledger: Detailed records for specific accounts.
    • Transportation charges: Costs associated with moving goods.
    • Time period: A period of time used in financial reporting.
    • Freight-out charges: The cost a business incurs to transport or deliver its products to customers.
    • **Transportation Charges:**Costs a business incurs to move goods from one location to another.

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    Description

    Test your knowledge on essential accounting terms and concepts. This quiz covers key definitions that are fundamental to the study of accounting, including expenses, financial analysis, and fixed assets. Perfect for students and professionals looking to reinforce their understanding of accounting terminology.

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