Nix QE

What is the Basic Accounting equation?

• Assets = Liability + Equity

• Assets = Liabilities - Equity

• Assets + Liabilities = Equity

• Assets - Liabilities = Equity

Define the term "double-entry accounting.

• Recording transactions twice

• Recording transactions in two accounts

• Recording transactions once

• Recording transactions in one account

Explain the difference between assets and liabilities.

• Assets are debts; liabilities are possessions

• Assets are what the company owns; liabilities are what it owes

• Assets and liabilities are the same

• Liabilities are revenues; assets are expenses

Define accrual accounting and cash accounting.

• Accrual records cash transactions; cash records accrual transactions

• Accrual recognizes revenues and expenses when they are incurred; cash records transactions when money changes hands

• Accrual and cash accounting are the same

• Cash recognizes revenues and expenses when they are incurred; accrual records transactions when money changes hands

What is the purpose of Trial Balance?

• To prepare financial statements

• To check the arithmetic accuracy of ledger accounts

• A journal and a ledger are the same

• A journal is used for external reporting; a ledger is used for internal reporting

Differentiate between revenue and capital expenditures.

• Revenue expenditures increase the company's wealth; capital expenditures maintain it

• Revenue expenditures are for short-term benefits; capital expenditures are for long-term benefits

• Revenue expenditures decrease the company's wealth; capital expenditures increase it

• Revenue expenditures and capital expenditures are the same

Explain the accounting principle of conservatism.

• Always overstate assets

• Recognize expenses as soon as they are reasonably certain; recognize revenues only when realized

• Always overstate revenues

• Recognize revenues as soon as they are reasonably certain; recognize expenses only when realized

Define depreciation and provide an example.

• Depreciation is the increase in value of an asset over time; Example: land

• Depreciation is the allocation of the cost of an asset over its useful life; Example: machinery

• Depreciation is the decrease in value of an asset over time; Example: patents

• Depreciation is the cost of purchasing an asset; Example: building

Explain the concept of the "matching principle" in accounting.

• Recognize revenues when realized; recognize expenses when incurred

• Recognize revenues when incurred; recognize expenses when realized

• Recognize both revenues and expenses when realized

• Recognize both revenues and expenses when incurred

What is the difference between a journal and a ledger?

• A journal is a summary of all transactions; a ledger is a detailed record of each transaction

• A journal is a detailed record of each transaction; a ledger is a summary of all transactions

• A journal and a ledger are the same

• A journal is used for external reporting; a ledger is used for internal reporting