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Questions and Answers
What is the primary purpose of financial accounting?
What is the primary purpose of financial accounting?
Which of the following is not one of the primary financial statements?
Which of the following is not one of the primary financial statements?
In double-entry bookkeeping, each transaction affects at least:
In double-entry bookkeeping, each transaction affects at least:
The accounting equation is:
The accounting equation is:
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Which accounting method records revenues and expenses when they are incurred, regardless of when cash is exchanged?
Which accounting method records revenues and expenses when they are incurred, regardless of when cash is exchanged?
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Which of the following is an example of an adjusting entry?
Which of the following is an example of an adjusting entry?
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Under accrual basis accounting, when are revenues recognized?
Under accrual basis accounting, when are revenues recognized?
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Which statement is correct regarding current assets?
Which statement is correct regarding current assets?
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Which of the following is classified as a non-current liability?
Which of the following is classified as a non-current liability?
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Which principle requires accountants to adhere to a set of guidelines and ethical standards?
Which principle requires accountants to adhere to a set of guidelines and ethical standards?
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Study Notes
Financial Accounting Basics
- The primary purpose of financial accounting is to provide financial information to external users.
Financial Statements
- The primary financial statements include: Balance Sheet, Income Statement, and Statement of Cash Flows.
- Budget Report is not one of the primary financial statements.
Double-Entry Bookkeeping
- In double-entry bookkeeping, each transaction affects at least two accounts.
Accounting Equation
- The accounting equation is: Assets = Liabilities + Equity.
Accounting Methods
- The accrual basis accounting method records revenues and expenses when they are incurred, regardless of when cash is exchanged.
- The cash basis accounting method does not record revenues and expenses until cash is exchanged.
Adjusting Entries
- Recording depreciation expense is an example of an adjusting entry.
- Adjusting entries are used to match revenues and expenses to the correct period.
Revenue Recognition
- Under accrual basis accounting, revenues are recognized when they are earned, not when cash is received.
Assets Classification
- Current assets are expected to be used or converted into cash within one year.
- Examples of current assets include: cash, accounts receivable, and inventory.
Liabilities Classification
- Non-current liabilities are long-term debts that are not expected to be paid within one year.
- Examples of non-current liabilities include: notes payable, bonds payable, and mortgages payable.
Accounting Principles
- The Generally Accepted Accounting Principles (GAAP) require accountants to adhere to a set of guidelines and ethical standards.
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Description
Test your knowledge of financial accounting concepts, including the primary purpose of financial accounting and primary financial statements.
