Accounting Final Exam Tests PDF

What does a balance sheet show? ===== #The financial position of a business ===== The list of only expenses ===== Details of company strategies ===== Salaries of employees +++++ What is double-entry accounting? ===== #A system where every transaction affects two accounts ===== A record syste...

What does a balance sheet show? ===== #The financial position of a business ===== The list of only expenses ===== Details of company strategies ===== Salaries of employees +++++ What is double-entry accounting? ===== #A system where every transaction affects two accounts ===== A record system used for employee attendance ===== A tax calculation method ===== A one-sided recording system +++++ Which type of asset is cash? ===== #Current asset ===== Fixed asset ===== Intangible asset ===== Liability +++++ What is a liability? ===== #A company’s obligation or debt ===== A type of revenue ===== A part of shareholders’ equity ===== An inventory item +++++ Which principle requires recording expenses as soon as they are incurred? ===== #Accrual principle ===== Consistency principle ===== Cost principle ===== Matching principle +++++ What does 'journalizing' mean in accounting? ===== #Recording transactions in a journal ===== Auditing financial reports ===== Preparing an income statement ===== Filing tax returns +++++ What is gross profit? ===== #The selling price of a product minus the cost of producing it ===== The total amount of money ===== The percentage of a company’s earnings ===== The amount of money after deducting operating costs +++++ Which financial statement shows cash movements? ===== #Cash flow statement ===== Income statement ===== Balance sheet ===== Trial balance +++++ What is accrued revenue? ===== #Income earned but not yet received ===== Expenses paid in advance ===== A company’s loan payment ===== Salaries owed +++++ What is a contingent liability? ===== #A potential obligation ===== A confirmed loan ===== A type of revenue ===== A future asset +++++ What is the meaning of liquidity? ===== #How easily an asset can be converted into cash ===== The total amount of liabilities ===== The company’s profit margin ===== The value of fixed +++++ What is a fixed asset? ===== #An asset used for long-term operations ===== A quickly sold asset ===== A financial obligation ===== A payment received from customers +++++ What is working capital? ===== #Current assets minus current liabilities ===== Total assets minus total liabilities ===== Total revenue for the year ===== The value of inventory +++++ What type of liability is a bank loan due in 5 years? ===== #Non-current liability ===== Current liability ===== Contingent liability ===== Revenue +++++ What is the revenue recognition principle? ===== #Revenue is recognized when earned ===== Revenue is recorded when expenses are paid ===== Revenue is recognized at the end of the fiscal year ===== Revenue is recognized only when cash is received +++++ Which account records customer payments received in advance? ===== #Unearned revenue ===== Accounts receivable ===== Inventory ===== Accrued revenue +++++ What type of asset is inventory? ===== #Current asset ===== Fixed asset ===== Intangible asset ===== Liability +++++ What does a debit entry in an asset account do? ===== #Increases the account balance ===== Decreases the account balance ===== Has no effect ===== Offsets revenue +++++ What is depreciation? ===== #A reduction in value of an asset over time ===== An increase in liabilities ===== A type of revenue ===== A rise in equity +++++ What is goodwill in accounting? ===== #The value of reputation and brand ===== Total annual sales ===== The amount paid to suppliers ===== Interest earned on savings +++++ What is the purpose of a trial balance? ===== #To ensure that debits equal credits ===== To measure profitability ===== To forecast cash flows ===== To manage employee attendance +++++ Which financial statement shows the company’s assets, liabilities, and equity? ===== #Balance sheet ===== Income statement ===== Cash flow statement ===== Statement of changes in equity +++++ What does the matching principle ensure? ===== #Expenses are recorded in the same period as related revenues ===== Assets are matched with liabilities ===== Revenues match with tax payments ===== Inventory matches production levels +++++ What is the cost principle? ===== #Assets are recorded at their original purchase price ===== Assets are updated to reflect market value ===== Assets are adjusted for inflation each year ===== Assets are recorded at future value estimates +++++ What type of account is 'retained earnings'? ===== #Equity ===== Liability ===== Asset ===== Revenue +++++ Which account tracks unpaid supplier bills? ===== #Accounts payable ===== Accounts receivable ===== Cash flow ===== Inventory +++++ What happens if total debits do not equal total credits in a trial balance? ===== #There is an error in the accounts ===== The company is making a profit ===== All accounts are correct ===== The company must pay off a loan +++++ What is a petty cash fund used for? ===== #Small, everyday expenses ===== Large equipment purchases ===== Employee salaries ===== Long-term investments +++++ What is capital in accounting? ===== #Money invested by owners ===== A type of company loan ===== Employee wages ===== Net profit for the year +++++ What does a contingent liability represent? ===== #A potential obligation ===== A confirmed loan ===== A future asset ===== A prepaid expense +++++ Which principle requires consistent accounting methods? ===== #Consistency principle ===== Matching principle ===== Accrual principle ===== Revenue recognition principle +++++ Which method is recommended by 4 NAS when evaluating materials? ===== #FIFO ===== LIFO ===== AVECO ===== Weighted average +++++ What is inventory classified as? ===== #Current asset ===== Fixed asset ===== Intangible asset ===== Contingent liability +++++ Which account records customer debts? ===== #Accounts receivable ===== Accounts payable ===== Accrued liabilities ===== Unearned revenue +++++ What happens to inventory when sold? ===== #It becomes cost of goods sold ===== It becomes a liability ===== It remains an asset ===== It increases cash flow +++++ What is the primary use of a cash flow statement? ===== #To track cash inflows and outflows ===== To calculate profit margins ===== To measure employee performance ===== To analyze customer satisfaction +++++ What does the term 'fair value' refer to? ===== #The current market value of an asset ===== The original purchase price ===== An estimated future value ===== A depreciated asset value +++++ What increases shareholders' equity? ===== #Additional capital investment ===== Payment of dividends ===== An increase in liabilities ===== A reduction in expenses +++++ What is the purpose of depreciation? ===== #To allocate the cost of an asset over its useful life ===== To increase asset value ===== To reduce liabilities ===== To decrease tax payments +++++ Which account increases with a debit entry? ===== #Expense ===== Revenue ===== Equity ===== Liability +++++ What is the main purpose of budgeting? ===== #To plan future financial activities ===== To increase profits ===== To pay off debts ===== To manage employee records +++++ What is an intangible asset? ===== #An asset without physical substance ===== A current liability ===== An asset that depreciates quickly ===== A financial obligation +++++ What is a ledger? +++++ #A book where all accounts are recorded ===== A record of bank loans ===== A list of employees ===== A payroll report +++++ What is working capital used to measure? ===== #A company’s short-term financial health ===== A company’s profitability ===== The total value of fixed assets ===== Market share growth +++++ Which principle states that revenue should be recognized when earned? ===== #Revenue recognition principle ===== Matching principle ===== Cost principle ===== Consistency principle +++++ What does debt-to-equity ratio indicate? ===== #A company’s leverage ===== Liquidity ===== Profit margin ===== Asset turnover +++++ Which financial statement summarizes a company’s performance over a period? ===== #Income statement ===== Cash flow statement ===== Balance sheet ===== Statement of changes in equity +++++ What happens if expenses exceed revenue? ===== #The company records a loss ===== Equity increases ===== Liabilities decrease ===== The company makes a profit +++++ What is the general ledger used for? ===== #To record all financial transactions systematically ===== To forecast market trends ===== To manage employee performance ===== To track product inventory +++++ What is the primary purpose of financial reporting? ===== #To provide financial performance information to stakeholders ===== To monitor inventory levels ===== To track marketing expenses ===== To forecast future revenue +++++ What is shareholders’ equity? ===== #The value of assets minus liabilities ===== A loan from investors ===== Total revenue for the year ===== Cash reserves +++++ What type of asset has no physical form? ===== #Intangible asset ===== Current asset ===== Fixed asset ===== Tangible asset +++++ What is the main accounting equation? ===== #Assets = Liabilities + Equity ===== Assets - Liabilities = Revenue ===== Cash + Liabilities = Profit ===== Assets = Capital - Expenses +++++ What is the purpose of accrued expense accounts? ===== #To record expenses incurred but not yet paid ===== To track payments received from customers ===== To monitor cash transactions only ===== To forecast operating expenses +++++ What is prepayment in accounting? ===== #An expense paid in advance ===== A tax refund ===== A loan installment ===== A bonus payment +++++ What is inventory? ===== #Goods available for sale ===== Office equipment ===== Employee records ===== Raw materials only +++++ Which financial statement tracks cash movements? ===== #Cash flow statement ===== Income statement ===== Balance sheet ===== General ledger +++++ What happens to inventory when it is sold? ===== #It becomes cost of goods sold ===== It remains an asset ===== It becomes revenue ===== It increases liabilities +++++ What is depreciation? ===== #A reduction in the value of an asset over time ===== A rise in asset value ===== Interest on a loan ===== An increase in liabilities +++++ What is a capital expenditure? ===== #Money spent to acquire or improve long-term assets ===== Money allocated for payroll ===== Cash set aside for dividends ===== Marketing costs +++++ What does the current ratio measure? ===== #A company’s ability to pay short-term obligations ===== Profit margin ===== Total value of fixed assets ===== Efficiency of operations +++++ What is a contingent liability? ===== #A potential future obligation ===== A loan repayment ===== A guaranteed asset ===== A prepaid expense +++++ What happens when equity increases? ===== #The company’s value rises ===== Liabilities decrease ===== The company records a loss ===== Inventory increases +++++ Which method is recommended by the 4th NAS for evaluating materials? ===== #FIFO ===== LIFO ===== AVECO ===== Weighted average +++++ Which account tracks money owed by customers? ===== #Accounts receivable ===== Accounts payable ===== Accrued expenses ===== Cash account +++++ What is bookkeeping? ===== #Recording financial transactions systematically ===== Forecasting future trends ===== Managing employee payroll ===== Auditing the financial statements +++++ What is petty cash used for? ===== #Covering small, daily expenses ===== Large purchases ===== Employee salaries ===== Tax payments +++++ What increases revenue? ===== #Selling products or services ===== Buying new equipment ===== Paying salaries ===== Receiving a loan +++++ What happens if total debits do not match total credits? ===== #An error exists in the accounts ===== All accounts are correct ===== Profits increase ===== A loan must be repaid +++++ What is the role of an audit? ===== #To verify the accuracy of financial records ===== To manage payroll processing ===== To track customer satisfaction ===== To forecast market trends +++++ What is the purpose of retained earnings? ===== #To reinvest profits into the company ===== To distribute profits to employees ===== To pay off debts ===== To fund inventory purchases +++++ What is fair value? ===== #The current market value of an asset ===== The purchase price ===== The depreciated value ===== An estimated future value +++++ What type of expense is rent? ===== #Operating expense ===== Capital expense ===== Financing expense ===== Marketing expense +++++ What is the purpose of financial statements? ===== #To summarize a company’s financial activities ===== To track employee performance ===== To file tax returns ===== To forecast cash flows +++++ Which financial statement shows profitability? ===== #Income statement ===== Balance sheet ===== Cash flow statement ===== Trial balance +++++ What is statistical accounting? ===== #Collecting, analyzing, and presenting economic data systematically ===== Tracking market trends for tax planning ===== Recording employee attendance and productivity ===== Analyzing physical stock movements +++++ How is the present value formed? ===== #By discounting future cash flows to the present ===== By adding future cash flows to the initial investment ===== By calculating average market values ===== By multiplying profits with interest +++++ What is the general purpose of memorial-order accounting? ===== #To display records chronologically and systematically ===== To track errors in financial reports ===== To generate payroll logs for employees ===== To calculate tax deductions +++++ Which document contains primary data on business activities? ===== #Journal ===== Bank statement ===== Trial balance ===== Profit report +++++ What are types of economic processes? ===== #Supply, production, and sales ===== Delivery, transportation, and purchase ===== Marketing, advertising, and logistics ===== Customer service and returns +++++ What is the basic accounting equation? ===== #Assets = Liabilities + Owner’s Equity ===== Assets - Liabilities = Profit ===== Liabilities + Cash = Capital ===== Revenue - Expenses = Net Income +++++ Which accounting register uses the process registration journal? ===== #Chronological ===== Systematic ===== Combined ===== Trial ledger +++++ How many types of accounts are there? ===== #Four types: assets, counter-assets, liabilities, and counter-liabilities ===== Two types: current and non-current ===== Three types: fixed, variable, and combined ===== Two types: long-term and short-term +++++ What does the “red pen” method refer to? ===== #Correcting entries made in accounting records ===== Marking overdue invoices ===== Reviewing legal documents ===== Tracking bank transactions +++++ What are direct costs in production? ===== #Costs directly linked to manufacturing a product ===== Costs related to advertising ===== General office expenses ===== Bank fees +++++ Which type of inventory is conducted randomly? ===== #Spot inventory ===== Regular inventory ===== Annual inventory ===== Financial inventory +++++ What is the significance of working capital? ===== #It ensures the business can meet short-term obligations ===== It calculates a company’s net profit ===== It tracks long-term asset investments ===== It forecasts employee performance +++++ Which type of asset requires periodic depreciation? ===== #Fixed assets ===== Current assets ===== Intangible assets ===== Financial assets +++++ What is a sole proprietorship? ===== #A business owned and operated by one person ===== A non-profit organization ===== A company with multiple investors ===== A government-controlled entity +++++ What is the main advantage of a limited liability company (LLC)? ===== #Owners have limited liability protection ===== No need to file taxes ===== Owners are taxed twice ===== No legal paperwork is required +++++ Which form of business allows profits to pass through to personal tax returns? ===== #S-Corporation ===== Corporation ===== Sole proprietorship ===== Non-profit organization +++++ What is a certificate of incorporation? ===== #A legal document establishing a corporation ===== A tax payment receipt ===== A business license for hiring employees ===== A lease agreement +++++ Which organization is typically exempt from formal business registration? ===== #Sole proprietorship ===== Corporation ===== Partnership ===== LLC +++++ What is meant by intangible assets? ===== #Assets without physical substance, like goodwill ===== Assets with a short useful life ===== Assets that depreciate rapidly ===== Assets recorded in foreign currencies +++++ What happens when equity increases? ===== #The company’s value rises ===== Liabilities decrease ===== Inventory increases ===== Revenue decreases +++++ What is the effect of a debit entry in a liability account? ===== #Decreases the account balance ===== Increases the account balance ===== Has no effect ===== Offsets expenses +++++ What is the meaning of “fair value”? ===== #The current market value of an asset ===== The original purchase cost ===== The value after depreciation ===== The book value of the asset +++++ What type of expense is rent? ===== #Operating expense ===== Financing expense ===== Capital expenditure ===== Marketing cost +++++ Which ratio measures a company’s ability to meet its short-term obligations? ===== #Current ratio ===== Debt-to-equity ratio ===== Profit margin ===== Asset turnover +++++ What is the purpose of depreciation? ===== #To allocate the cost of an asset over its useful life ===== To increase asset value ===== To track cash flow ===== To measure company profitability +++++ What is retained earnings? ===== #Profits reinvested in the company ===== Revenue from sales ===== Payments made to shareholders ===== A loan repayment +++++ What is financial reporting? ===== #Providing information on financial performance to external users ===== Filing tax returns with the government ===== Managing employee records ===== Forecasting product demand +++++ What is the role of an audit? ===== #To verify the accuracy of financial statements ===== To monitor employee performance ===== To approve marketing strategies ===== To manage cash flow +++++ What is a dividend? ===== #Profits distributed to shareholders ===== A bonus paid to employees ===== A loan installment ===== An interest payment +++++ What type of account is 'accounts payable'? ===== #Liability ===== Asset ===== Revenue ===== Equity +++++ What is a general ledger? ===== #A record of all financial transactions ===== A list of company assets ===== An inventory log ===== A tax document +++++ What is meant by accrued expenses? ===== #Expenses incurred but not yet paid ===== Future payments for equipment ===== Salaries paid in advance ===== A loan payment +++++ What type of account is 'unearned revenue'? ===== #Liability ===== Asset ===== Equity ===== Expense +++++ What does a trial balance do? ===== #Ensures that debits equal credits ===== Tracks employee hours ===== Records company profits ===== Summarizes tax payments +++++ What is a capital investment? ===== #Money invested in long-term assets ===== Cash used for payroll ===== Revenue earned from sales ===== A loan for working capital +++++ What is the impact of paying off a loan? ===== #Decreases liabilities ===== Increases assets ===== Has no effect on equity ===== Increases expenses +++++ What does the debt-to-equity ratio measure? ===== #A company’s leverage ===== Profitability ===== Liquidity ===== Market value +++++ What happens when an asset is sold at a profit? ===== #Equity increases ===== A liability is created ===== Revenue decreases ===== Cash flow is unaffected +++++ What is the accrual principle? ===== #Revenues and expenses are recognized when they occur ===== Expenses are only recorded when paid ===== Liabilities are adjusted every month ===== Revenues are recorded when cash is received +++++ What is the main use of financial statements? ===== #To provide stakeholders with financial information ===== To calculate payroll ===== To set marketing budgets ===== To evaluate employee performance +++++ Which account records money owed to suppliers? ===== #Accounts payable ===== Accounts receivable ===== Inventory ===== Retained earnings +++++ What is the purpose of the balance sheet? ===== #To summarize the financial position of the company ===== To show cash inflows and outflows ===== To calculate profit and loss ===== To track tax payments +++++ What is a contingent asset? ===== #A potential future benefit ===== An asset currently in use ===== Cash on hand ===== A depreciated building +++++ What is the purpose of forecasting? ===== #To predict future financial performance ===== To calculate past profits ===== To track employee performance ===== To manage marketing strategies +++++ What is a journal entry? ===== #A record of a specific financial transaction ===== A payroll report ===== A list of company expenses ===== A summary of monthly profits