90 Questions
Which statement best describes accounting?
The process of identifying, recording, and summarizing economic information
Who are the intended users of financial accounting information?
Investors
Where can you find a company's financial statements in the US?
Form 10-K
Which one of these is the correct equation for the balance sheet?
Assets = Liabilities + Owners’ Equity
What are current assets?
Assets that a company expects to be used within one year
What is the purpose of double-entry accounting?
To affect more than two accounts in a transaction
Which term refers to the residual ownership of a corporation?
Common Stock
What is the term for the amount of money that stock is sold for above its par value?
Paid-in Capital Excess of Par-value
What is the term for the set of common measurement principles used to report information on financial statements?
GAAP
What is the term for the third-party that examines information used to prepare financial statements and provides assurances about their credibility?
Auditor
Which one of these is a long-term asset?
Property
Which one of these is an economic obligation of a company?
Long-term debt
Which one of these is the equation for owners' equity?
Total Assets - Total Liabilities
What is the term for a separate economic unit within an organization?
Entity
What is the term for the goods held by a company for the purpose of sale to consumers?
Inventory
What is the term for a liability that results from the purchase of goods or services on open account?
Account payable
What is the term for an asset that states the debt owed by the buyer and the terms of repayment?
Account receivable
What is the term for a transaction that affects more than two accounts?
Compound entry
What is the term for a person or entity to whom the company owes money?
Creditor
What is the term for a business organization created under the State laws of the United States, whose owners have limited liability?
Corporation
Which statement best describes financial accounting?
Financial accounting serves external decision makers.
What is the purpose of an accounting system?
To record financial data and convert them into informative financial statements.
What is the main purpose of the annual report?
To inform external decision makers about the company's past performance and future projections.
Which agency is responsible for dealing with publicly-traded stock in the US?
The Securities and Exchange Commission (SEC)
Which financial statement reports the company's assets, liabilities, and shareholders' equity at a specific point in time?
The Balance Sheet
What is the term for the process of identifying, recording, and summarizing economic information?
Financial accounting
Who are the intended users of management accounting information?
Internal decision makers
What is the term for the set of steps an organization uses to record financial data and convert them into informative financial statements?
Accounting system
What is the term for the company's past performance and future projections?
Annual report
Where can you find a company's financial statements in the US?
Form 10-K
Which term refers to the amount of capital invested by shareholders in a corporation?
Paid-in Capital
What is the term for the amount of money that stock is sold for above its par value?
Paid-in Capital Excess of Par-value
What is the term for the individuals who have a residual ownership of a corporation?
Common Shareholders
What is the term for the top manager of a company elected by the members of the board of directors?
Chief Executive Officer (CEO)
What is the term for the broad concepts and detailed practices followed in preparing and distributing financial statements?
Generally Accepted Accounting Principles (GAAP)
Which institution is responsible for establishing the US GAAP and compiling all standards into one big database called FASB Accounting Standards Codification?
Financial Accounting Standards Board (FASB)
Which institution was established to develop a single set of high-quality, understandable and enforceable global accounting standards?
International Accounting Standards Board (IASB)
What is the term for the services provided by a third-party (public accounting firm) that examines information used to prepare financial statements and provides assurances about their credibility?
Auditor
What is the term for the par-value of the stock purchased by common shareholders of a corporation?
Common Stock
What is the term for the amount of US dollars printed on stock certificates, required by many states?
Par-value
Which one of these is the correct definition of the fiscal year?
The period of time when a company measures income
Which one of these is the correct definition of revenues?
The increase in net assets from the sale of goods and services
Which one of these is the correct definition of expenses?
The decrease in net assets as a result of consuming or giving up resources
Which one of these is the correct definition of income?
The excess of revenues over expenses
Which one of these is the correct definition of retained earnings?
The total cumulative owners' equity generated by income
Which one of these is the correct definition of accounts receivable?
The asset that states the debt owed by the buyer and the terms of repayment
Which one of these is the correct definition of cost of goods sold?
The original acquisition cost of the inventory that a company sells to customers during the reporting period
Which one of these is the correct definition of accrual basis?
Records revenue as it is earned and records expenses as they are incurred
Which one of these is the correct definition of cash basis?
Recognizes revenue when a company receives cash and expenses when it pays cash
Which one of these is the correct definition of revenue recognition criteria?
The criteria used to determine when revenue should be recognized
Which of the following is a requirement for revenues to be recognized under the accrual basis?
Revenues must be earned and realized or realizable
What is the purpose of the matching method in recognizing revenues?
To record expenses in the same time period as revenues
What are period costs?
Expenses linked to the time period itself
What is the net income on an income statement?
The remainder after deducting all expenses from revenues
When expenses exceed revenues, what do we call it?
Net loss
Where are cash dividends recorded in financial statements?
Retained earnings section
What does the Statement of Stockholder's Equity show?
All changes in stockholder's equity accounts
What are the sources of changes in stockholder's equity?
Net income or net loss, transactions with shareholders, and other comprehensive income
What is the purpose of double-entry accounting?
To ensure that every transaction has equal debits and credits
What are current assets?
Assets that are expected to be converted into cash within a year
Which one of these is the correct definition of interim periods?
The periods of time that are less than a year
Which one of these is the correct definition of revenue?
The increase in net assets from the sale of goods and services
Which one of these is the correct definition of expenses?
The decrease in net assets as a result of consuming or giving up resources
Which one of these is the correct definition of income?
The excess of revenues over expenses
Which one of these is the correct definition of retained earnings?
The total cumulative owners' equity generated by income
Which one of these is the correct definition of accounts receivable?
The amount owed to a company by its customers for goods or services sold on credit
Which one of these is the correct definition of cost of goods sold?
The original acquisition cost of the inventory that a company sells to customers
Which one of these is the correct definition of net income?
The remainder after deducting all expenses from revenues
What is the term for the distribution of cash to stockholders?
Cash dividends
Which one of these is the correct definition of the Statement of Stockholder's Equity?
The report of all changes during the year in each stockholder's equity account
What are the sources of changes in stockholder's equity?
Net income or net loss, transactions with shareholders, and other comprehensive income
Where are cash dividends recorded in financial statements?
Statement of stockholder's equity
What is the term for a business organization created under the State laws of the United States, whose owners have limited liability?
Corporation
What is the term for the set of steps an organization uses to record financial data and convert them into informative financial statements?
Accounting system
What is the term for a liability that results from the purchase of goods or services on open account?
Accounts payable
Which one of these is the correct definition of retained earnings?
The total cumulative owners’ equity generated by income
What is the term for the original acquisition cost of the inventory that a company sells to customers during the reporting period?
Cost of goods sold
Which one of these is the correct definition of accrual basis?
Records revenue as it is earned and record expenses as they are incurred
What is the term for the increase in net assets from the sale of goods and services?
Revenue
Which one of these is the correct definition of cash basis?
Recognizes revenue when a company receives cash and expenses when it pays cash
What is the term for the excess of revenues over expenses?
Income
What is the term for the liability that results from the purchase of goods or services on open account?
Accounts payable
What is the purpose of the Income Statement?
To report all revenues and expenses for a specific time period
What is the definition of net income?
The remainder after deducting all expenses from revenues
What is the purpose of the Statement of Stockholder's Equity?
To show all changes in each stockholder's equity account
What are the sources of changes in stockholder's equity?
Net income or net loss, transactions with shareholders, and other comprehensive income
What is the definition of cost of goods sold?
The costs of goods and sales commissions recorded during a sale
What is the definition of accounts receivable?
The amount of debt owed by the buyer and the terms of repayment
What is the definition of accrual basis?
The requirement for revenues to be recognized when they are earned and realized or realizable
Which of the following is a requirement for revenues to be recognized under the accrual basis?
The revenues must be earned and realized or realizable
Test your knowledge of the basics of financial marketing with this quiz! Learn about the importance of accounting in summarizing economic information for decision-makers, as well as the role of financial statements and accounting systems in effective reporting.
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