Financial Accounting Quiz on Basic accounting

Refresh or test your accounting knowledge on Basic accounting:

Multiple Choice Questions (with answer(below))

1. Which of the following is a form of the balance sheet equation?
a. Assets=Liabilities+(Paid in Capital + Retained Income)
b. Assets+ Liabilities= Owners’ Equity
c. Assets + Owner’s Equity =Liabilities
d. Assets-Paid in capital = Liabilities-Retained income

2. _________ are distributions of assets that reduce ownership claims
a. Dividends
b. Assets
c. Expenses
d. Retained income

3. When revenues are recognized as earned and expenses are recognized as incurred, a company is using
a. The accrual basis of accounting
b. The cash basis of accounting
c. Both of these
d. Neither of these

4. The effect of purchasing inventory using trade credit on the balance sheet equation is to
a. Increase assets and increase liabilities
b. Decrease assets and increase liabilities
c. Increase assets and increase liabilities
d. Increase assets and increase owners’ equity

5. Retained income is represented in the company’s balance sheet by:
a. The balance in the inventory account
b. The balance in the plant and machinery account
c. The balance in the cash account
d. All of the assets less the liabilities and paid up capital

6. Owners’ equity in sole proprietorships and partnerships differs from that for corporations in that
a. They do not separate retained income from the owner’s paid in capital accounts
b. They separate retained income from paid in capital while corporations have only one ownership equity account
c. They reflect the sum of assets and liabilities rather than the difference
d. All of the above.

7. The principle that uses the dollar as an unchanging yardstick for measuring transaction is referred to as:
a. The stable monetary unit assumption
b. The conservatism convention
c. The going concern assumption
d. Revenue recognition

8. The practice of accounting for revenue when goods or services are delivered to customers is referred to as:
a. Revenue recognition
b. Historical cost assumption
c. Stable monetary unit assumption
d. Cost recovery

9. The practise of relating costs and revenue to a particular period for which the measurement of income is derived is known as:
a. Matching principle
b. Going concern assumption
c. Conservatism convention
d. Revenue recognition

10. The practise of carrying forward assets such as inventories, prepayments, and equipment to be recovered in cash inflows ( or reduced cash outflows ) in future period is known as :
a. Cost recovery
b. Revenue recognition
c. Matching principle
d. Conservatism convention

11. Cash, accounts receivables, inventories, deposits, prepaid expenses
a. Are current assets on the balance sheet
b. Are liabilities on the balance sheet
c. Are classifications of stockholders’ equity
d. None of the above

12. Goodwill, patents, trademarks and copyrights are
a. Intangible assets which are non- current assets
b. Current assets
c. Current liabilities
d. Long-term liabilities

13. Accounts payable, accrued liabilities and income tax payable are:
a. Current liabilities
b. Fixed assets
c. Stockholders’ equity
d. Long-term liabilities

14. Accounts in the stockholders’ equity section of the balance sheet may include
a. Common stock, preferred stock, paid-in capital in excess of par, treasury stock and retained earnings
b. Cash, accounts receivable, inventories, prepaid expenses and other current assets
c. Accounts payable, accrued liabilities and income tax payable
d. Machinery, equipment, buildings, land and leasehold improvements

15. The item on the income statement found by deducing cost of sales and other operating expenses from sales is
a. Income from operations
b. Gross profit
c. Net income
d. Earnings per share

16. The item required to be shown at the very bottom of the income statement is
a. Earnings per share
b. Net income
c. Income from operations
d. Gross profit

Answers : 1 to 16 all a except for 5 which is d

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