Financial Accounting Quiz

What is the purpose of financial accounting?

• To entertain the employees with financial data

• To provide information about the weather patterns in the region

• To provide information about the financial position, performance, and changes in financial position of an organization.

• To promote the sales of the organization's products

Explain the concept of double-entry accounting.

• Double-entry accounting only applies to large corporations

• Every transaction is recorded in only one account

• There is no need for both debit and credit entries for each transaction

• Every transaction is recorded in at least two accounts, with one debit and one credit entry.

What are the basic financial statements in accounting?

• Profit statement, equity sheet, and income statement

• Income statement, balance sheet, and cash flow statement

• Expense report, liability statement, and revenue statement

• Cash flow report, income summary, and balance statement

Define the term 'depreciation' in accounting.

• The process of recording revenue from the sale of an asset

• Allocation of the cost of a tangible asset over its useful life

• The increase in value of an asset over time

• Selling an asset at a higher price than its original cost

What is the difference between cash basis and accrual basis accounting?

• Cash basis records transactions when they occur, while accrual basis records transactions when they occur.

• Cash basis records transactions when they occur, while accrual basis records transactions when cash is exchanged.

• Cash basis records transactions when cash is exchanged, while accrual basis records transactions when cash is exchanged.

• Cash basis records transactions when cash is exchanged, while accrual basis records transactions when they occur.

Explain the accounting equation.

• Assets = Liabilities - Equity

• Assets - Liabilities = Equity

• Assets + Liabilities = Equity

• Assets = Liabilities + Equity

What is the role of a trial balance in financial accounting?

• To calculate the company's tax liability

• To ensure that the total debits equal the total credits in the general ledger.

• To track employee attendance

• To determine the market value of the company's assets

Discuss the concept of inventory valuation methods in accounting.

• There are several inventory valuation methods in accounting, including FIFO (First In, First Out), LIFO (Last In, First Out), and weighted average cost method.

• Average selling price method

• Specific Identification method

• FIFO (First In, Last Out)

What are the different types of financial ratios used in financial analysis?

• Growth ratios, market ratios, investment ratios, and debt ratios

• Liquidity ratios, profitability ratios, solvency ratios, and efficiency ratios

• Income ratios, expense ratios, asset ratios, and liability ratios

• Cash flow ratios, budget ratios, credit ratios, and risk ratios

Explain the concept of goodwill in accounting.

• Goodwill is the total revenue generated by a business in a year

• Goodwill is the amount of money a business has in its bank account

• Goodwill is the value of a business's physical assets such as buildings and equipment

• Goodwill represents the value of a business's reputation, customer base, and other intangible assets.