Accounting Question Test With Answer FS No 1 On Financial Statements

November 21st, 2006 Comments off
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1.The primary purpose of the balance sheet is to

            a.report the financial position of the reporting entity at a particular point in time

            b.measure the net income of a business up to a particular point in time

            c.determine cash flow for the period

            d.report the difference between cash inflows and cash outflows for the period 

2.  An expense is recorded when it is

a. paid

b. incurred

c.  15 days after receipt of invoice

d.  earned

3.   Company XYZ reported the following in 2005; total assets, $105,000; total liabilities, $20,000; contributed capital, $70,000.  Therefore, retained earnings was

a.  $45,000

b.  $35,000

c.  $25,000

d. $15,000

4.  The separate entity assumption states that

a.  assets should be recorded at their initial acquisition cost

b.  each business is considered to be part of its owners

c.  the monetary unit should be U.S. dollars

d.  for measurement purposes, the resources, debts, and activities of a business should be kept separate from those of the owners

5.  A company would report a net loss when

a.  retained earnings decreased due to paying dividends to shareholders

b.  its assets decreased during an accounting period

c.  its liabilities increased during an accounting period

d.  its expenses exceeded its revenues for an accounting period

6.  If Company XYZ owed Company ABC $50,000,  Company XYZ would reflect this in its

a.  balance sheet

b.  income statement

c.  statement of cash flows

d. statement of stockholder’s equity

7.  Liabilities are defined as

a.   possible debts or obligations of an entity as a result of future transactions which will be paid with assets or services

b.   possible debts or obligations of an entity as a result of past transactions which will be paid with assets or services

c.    probable debts or obligations of an entity as a result of future transactions which will be paid with assets or services

d.    probable debts or obligations of an entity as a result of past transactions which will be paid with assets or services

8. Which of the following is not a liability?

a.  Accounts payable

b.  Accounts receivable

c.  Notes payable

d. Income taxes payable

9.   On January 1, 2005, Company XYZ. started the year with a $50,000 credit balance in its retained earnings account.  During 2005, the company earned net income of $40,000 and declared and paid dividends of $10,000.  Also, the company received cash of $15,000 as an additional investment by its owners.  Therefore, the balance in retained earnings on December 31, 2005, would be

a.  $67,000

b.  $42,000

c.  $57,000

d.  $80,000

10. The principle which holds that all of the expenses incurred in earning revenue should be identified with the revenue recognized and reported for the same period is the

a. revenue principle

b. liability principle

c. timing principle

d. matching principle

11.  An income statement reports

a. revenues, expenses, assets, and liabilities during an accounting period

b. net income of a business for a period of time

c. net income of a business at a point in time

d. resources, liabilities, and stockholders’ equity of a business at a point in time

12.  One of the sections on the statement of cash flows is

a.  financing activities

b.  inventing activities

c.  borrowing activities

d. cycling activities

13.  A calendar year reporting company preparing its annual financial statements should use the phrase At December 31, 2005 in the heading of

a. all of the required financial statements it prepares

b. none of the required financial statements it prepares

c.  the income statement

d.  the balance sheet

Answers: 

 1a  2b  3d  4d  5d  6a 7d 8b  9d  10d  11b  12a  13d 

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Financial Accounting

 
 

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