Financial Accounting Basics

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Questions and Answers

What is the primary purpose of financial accounting?

  • To conduct market research for businesses
  • To promote a company's products and services
  • To identify, measure, and communicate economic information about entities (correct)
  • To maximize profits for businesses

Which of the following is included in the assets section of a balance sheet?

  • Property, plant, and equipment (correct)
  • Owner's equity
  • Interest expense
  • Accounts payable

What is the purpose of a cash-flow statement?

  • To demonstrate how changes in balance sheet accounts and income affect cash and cash equivalents (correct)
  • To show the company's revenue and expenses over a period
  • To calculate the company's net profit or loss
  • To display the company's long-term investments

In double entry bookkeeping, which accounts must always be equal?

<p>Assets + Liabilities = Equity (B)</p> Signup and view all the answers

What are liquid assets typically comprised of?

<p>Cash, securities, and receivables (C)</p> Signup and view all the answers

Which financial statement reports a company's financial position at a specific point in time?

<p>Balance sheet (C)</p> Signup and view all the answers

What is the purpose of costing systems in management accounting?

<p>To allocate costs to products or services for decision-making purposes (A)</p> Signup and view all the answers

'Owners' equity' on a balance sheet represents what?

<p>'The investment by owners plus profits retained in the business' (B)</p> Signup and view all the answers

What is a key element that distinguishes financial accounting from other types of accounting?

<p>Reporting financial information to external users for decision-making purposes (D)</p> Signup and view all the answers

What does 'depreciation' represent in accounting?

<p>The allocation of cost of tangible assets over their useful life (B)</p> Signup and view all the answers

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