Business Concepts Quiz

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Questions and Answers

Which of the following is NOT one of the major forms of business discussed in the text?

Human Resources

Which of the following is NOT one of the three types of business entities discussed in the text?

Nonprofit

Which type of accounting focuses on daily decision making and planning financial events?

Managerial accounting

Which type of accounting relates to the interpretation of financial statements?

Financial accounting Signup and view all the answers

What is the main role of a bookkeeper?

Recording financial data Signup and view all the answers

Which step in the accounting process involves sorting and grouping similar items together?

Classifying Signup and view all the answers

Which financial statement reports the financial position of a company at a specific point in time?

Balance sheet Signup and view all the answers

On which financial statement would you find revenue and expenses?

Income statement Signup and view all the answers

What is the basic accounting equation?

Assets = Liabilities + Owner’s Equity Signup and view all the answers

What does the current ratio measure?

Liquidity Signup and view all the answers

Which one of the following is a source document used in accounting?

Invoice Signup and view all the answers

What is the formula for calculating the Cost of Goods Sold (COGS)?

Beginning Inventory + Purchases - Ending Inventory = COGS Signup and view all the answers

What does the current ratio measure?

A firm's ability to pay its debts Signup and view all the answers

What is the abbreviation for debit?

DR Signup and view all the answers

What does liquidity analysis tell you?

A firm's ability to pay its debts Signup and view all the answers

What is the difference between a fiscal year and a calendar year?

A fiscal year is a 12-month period that starts on Jan. 1 and ends on Dec. 31, while a calendar year can start on any date. Signup and view all the answers

What is the purpose of a financial statement?

To summarize a firm's financial performance Signup and view all the answers

What is the difference between current assets and other assets?

Current assets are cash or assets that will be converted into cash within one year, while other assets are cash or withdrawals that are used or kept on the firm's behalf. Signup and view all the answers

What does the abbreviation CR stand for in accounting?

Credit Signup and view all the answers

What is the flow of data through the accounting process?

Source documents -> General Journal -> General Ledger -> Trial Balance Signup and view all the answers

What is the purpose of the closing entry?

To bring the temporary journal account balances to zero for the next accounting period Signup and view all the answers

What is the difference between temporary accounts and permanent accounts?

Temporary accounts zero out at the end of a cycle, while permanent accounts carry over to the next accounting period Signup and view all the answers

Which financial statement reports the profitability of business operations for a specific period of time?

Income Statement Signup and view all the answers

What is the formula for calculating the ending capital on the Statement of Owner's Equity?

Beginning Capital + Investments + Net Income - Withdrawals Signup and view all the answers

Which financial statement reports a firm's assets, liabilities, and owner's equity on a specific date?

Balance Sheet Signup and view all the answers

What is the purpose of ratio analysis?

To monitor the health of a business over time Signup and view all the answers

Which type of ratio analysis focuses on the ability of a business to meet its short-term obligations?

Liquidity Signup and view all the answers

Which type of ratio analysis measures the return generated on the owner's investment in the business?

Return on Owner's Equity Signup and view all the answers

Which type of ratio analysis assesses the profitability of a business?

Profitability Signup and view all the answers

Which type of ratio analysis focuses on the mix of debt and equity financing in a business?

Debt Financing Signup and view all the answers

Which of the following is true about the Basic Accounting Equation?

Assets = Liabilities + Owner's Equity Signup and view all the answers

What is the purpose of the Income Statement?

To track the revenue and expenses of a business Signup and view all the answers

What is the function of the Statement of Owner’s Equity?

To show the changes in the owner's equity over a period of time Signup and view all the answers

What is the purpose of source documents in accounting?

To verify the parties in a transaction and the services or goods sold or performed Signup and view all the answers

What is the function of the General Journal?

To serve as the book of original entry Signup and view all the answers

What is the purpose of posting in accounting?

To transfer the amounts from the General Journal to the General Ledger Signup and view all the answers

What is the purpose of the General Ledger?

To serve as the book of final entry Signup and view all the answers

Which of the following is true about Drawing in accounting?

Drawing is a withdrawal that reduces Owner's Equity Signup and view all the answers

Which of the following is true about Revenue in accounting?

Revenue is money earned for a business for products sold or services performed Signup and view all the answers

Which of the following is true about Expenses in accounting?

Expenses are an increase in liabilities as a result of efforts to produce revenues Signup and view all the answers

Study Notes

Business Forms and Accounting Entities

A sole proprietorship is a type of business entity that is owned and operated by one individual.
Partnerships and corporations are other types of business entities.

Accounting Types

Managerial accounting focuses on daily decision making and planning financial events.
Financial accounting relates to the interpretation of financial statements.

Bookkeeping

The main role of a bookkeeper is to record and classify financial transactions.

Accounting Process

The accounting process involves sorting and grouping similar items together, which is called classification.
The income statement reports the profitability of business operations for a specific period of time.
The balance sheet reports the financial position of a company at a specific point in time.
The income statement is where revenue and expenses are found.

Accounting Equation

The basic accounting equation is Assets = Liabilities + Owner's Equity.

Ratio Analysis

The current ratio measures the ability of a business to pay its short-term debts.
Liquidity analysis tells you about a company's ability to pay its short-term debts.
Profitability analysis measures the return generated on the owner's investment in the business.
Solvency analysis focuses on the mix of debt and equity financing in a business.

Financial Statements

The purpose of a financial statement is to provide stakeholders with financial information about a company.
The balance sheet reports a firm's assets, liabilities, and owner's equity on a specific date.
The purpose of the income statement is to report the profitability of business operations for a specific period of time.
The function of the statement of owner's equity is to report the changes in owner's equity over a specific period of time.

Accounting Terms

The abbreviation for debit is DR.
CR stands for credit in accounting.
A source document is a document used to record a financial transaction, such as a receipt or invoice.

Accounting Process Flow

The flow of data through the accounting process is from source documents to the general journal, then to the general ledger, and finally to the financial statements.

Closing Entry

The purpose of the closing entry is to close temporary accounts and transfer their balances to permanent accounts.

Accounts

Temporary accounts are closed at the end of an accounting period, while permanent accounts remain open.
The difference between current assets and other assets is that current assets are expected to be converted into cash within one year.

Fiscal Year and Calendar Year

A fiscal year is a 12-month period that may not necessarily coincide with the calendar year, while a calendar year is a 12-month period that begins on January 1 and ends on December 31.

Cost of Goods Sold (COGS)

The formula for calculating the COGS is Beginning Inventory + Purchases - Ending Inventory.

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Business Concepts Quiz

Questions and Answers

Which of the following is NOT one of the major forms of business discussed in the text?

Which of the following is NOT one of the three types of business entities discussed in the text?

Which type of accounting focuses on daily decision making and planning financial events?

Which type of accounting relates to the interpretation of financial statements?

What is the main role of a bookkeeper?

Which step in the accounting process involves sorting and grouping similar items together?

Which financial statement reports the financial position of a company at a specific point in time?

On which financial statement would you find revenue and expenses?

What is the basic accounting equation?

What does the current ratio measure?

Which one of the following is a source document used in accounting?

What is the formula for calculating the Cost of Goods Sold (COGS)?

What does the current ratio measure?

What is the abbreviation for debit?

What does liquidity analysis tell you?

What is the difference between a fiscal year and a calendar year?

What is the purpose of a financial statement?

What is the difference between current assets and other assets?

What does the abbreviation CR stand for in accounting?

What is the flow of data through the accounting process?

What is the purpose of the closing entry?

What is the difference between temporary accounts and permanent accounts?

Which financial statement reports the profitability of business operations for a specific period of time?

What is the formula for calculating the ending capital on the Statement of Owner's Equity?

Which financial statement reports a firm's assets, liabilities, and owner's equity on a specific date?

What is the purpose of ratio analysis?

Which type of ratio analysis focuses on the ability of a business to meet its short-term obligations?

Which type of ratio analysis measures the return generated on the owner's investment in the business?

Which type of ratio analysis assesses the profitability of a business?

Which type of ratio analysis focuses on the mix of debt and equity financing in a business?

Which of the following is true about the Basic Accounting Equation?

What is the purpose of the Income Statement?

What is the function of the Statement of Owner’s Equity?

What is the purpose of source documents in accounting?

What is the function of the General Journal?

What is the purpose of posting in accounting?

What is the purpose of the General Ledger?

Which of the following is true about Drawing in accounting?

Which of the following is true about Revenue in accounting?

Which of the following is true about Expenses in accounting?

Study Notes

Business Forms and Accounting Entities

Accounting Types

Bookkeeping

Accounting Process

Accounting Equation

Ratio Analysis

Financial Statements

Accounting Terms

Accounting Process Flow

Closing Entry

Accounts

Fiscal Year and Calendar Year

Cost of Goods Sold (COGS)

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