Accounting Terms Quiz-2

Which of the following is not an accounting term?

• Journal

• Ledger

• Pencil

• Trial balance

Answer explanation

Pencil is not an accounting term because it is a writing instrument, not a financial concept.

2. Which of the following is an example of a liability

• Cash

• Accounts receivable

• Accounts payable

• Inventory

Answer explanation

Accounts payable is an example of a liability because it represents the amount owed by a company to its creditors for goods or services received.

Which of the following is an example of a revenue account?

• Rent expense

• Salaries payable

• Sales revenue

• Accounts receivable

Answer explanation

Sales revenue is an example of a revenue account because it represents the income generated from the sale of goods or services.

Which of the following is an example of a contra account?

• Depreciation expense

• Accounts payable

• Sales revenue

• Cost of goods sold

Answer explanation

Depreciation expense is an example of a contra account because it is used to reduce the value of an asset on the balance sheet.

Which of the following is a characteristic of a fixed asset?

• It is expected to be held for less than one year.

• It is not used in the production of goods or services.

• It is tangible and long-term in nature.

• It is recorded as an expense when purchased.

Answer explanation

A fixed asset is tangible and long-term in nature.

Which of the following financial statements shows a company's revenues and expenses over a period of time?

• Balance sheet

• Income statement

• Statement of cash flows

• Statement of retained earnings

Answer explanation

The income statement shows a company's revenues and expenses over a period of time, highlighting the correct choice.

Which of the following is a non-cash expense?

• Rent expense

• Depreciation expense

• Salaries expense

• Advertising expense

Answer explanation

Depreciation expense is a non-cash expense that represents the decrease in value of an asset over time.

Which of the following financial statements shows a company's assets, liabilities, and equity at a specific point in time?

• Balance sheet

• Income statement

• Statement of cash flows

• Statement of retained earnings

Answer explanation

The balance sheet shows a company's assets, liabilities, and equity at a specific point in time. It provides a snapshot of the company's financial position.

Which of the following is a term used to describe the process of allocating the cost of a long-term asset over its useful life?

• Depreciation

• Amortization

• Accrual

• Capitalization

Answer explanation

Depreciation is the process of allocating the cost of a long-term asset over its useful life. It is used to account for the gradual wear and tear or obsolescence of the asset. Therefore, the correct choice is Depreciation.

Expenditure of revenue nature that gives benefit for more than one accounting period is categorised as

• deferred revenue expenditure

• capital expenditures

• revenue expenditure

• none of these

Answer explanation

Deferred revenue expenditure is an expenditure of revenue nature that gives benefit for more than one accounting period.