BEGINNING ACCOUNTING

What is the basic accounting equation?

• Equity = Assets - Liabilities

• Assets = Liabilities + Equity

• Liabilities = Assets - Equity

• Assets = Equity - Liabilities

Define assets in accounting.

• Expenses in accounting

• Resources owned by a company that have economic value and are expected to provide future benefits.

• Liabilities in accounting

• Equity in accounting

Explain the concept of liabilities.

• Liabilities are assets owned by an entity.

• Liabilities are obligations that an entity owes to other parties.

• Liabilities are revenues generated by an entity.

• Liabilities are expenses incurred by an entity.

What is the difference between revenue and profit?

• Revenue is the amount of money left over after expenses, while profit is the total amount of money generated by a business.

• Revenue and profit are terms used interchangeably in business.

• Revenue is the total amount of money generated by a business, while profit is the amount of money reinvested back into the business.

• Revenue is the total amount of money generated by a business, while profit is the amount of money left over after subtracting expenses from revenue.

Describe the purpose of a balance sheet.

• The purpose of a balance sheet is to list all the employees of a company

• The purpose of a balance sheet is to provide a summary of a company's financial position at a specific point in time, including its assets, liabilities, and shareholders' equity.

• The purpose of a balance sheet is to track the daily sales of a company

• The purpose of a balance sheet is to showcase the marketing strategies of a company

What is the role of a trial balance in accounting?

• To prepare tax returns

• To track inventory levels

• To calculate net income

• To ensure that debits equal credits before financial statements are prepared.

Define accrual accounting.

• Accrual accounting is a method of accounting where revenues are recorded only when cash is exchanged.

• Accrual accounting is a method of accounting where revenues and expenses are recorded based on cash transactions.

• Accrual accounting is a method of accounting where expenses are recorded after cash is exchanged.

• Accrual accounting is a method of accounting where revenues and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.

Explain the difference between cash basis and accrual basis accounting.

• Accrual basis accounting is used for small businesses, while cash basis accounting is used for large corporations.

• Cash basis records revenue and expenses when cash is received or paid, while accrual basis records revenue when earned and expenses when incurred.

• Accrual basis records revenue only when cash is received, while cash basis records revenue when earned.

• Cash basis records expenses when incurred, while accrual basis records expenses when cash is paid.

What are the key components of an income statement?

• Inventory, Accounts Payable, Depreciation

• Assets, Liabilities, Equity

• Cash Flow, Balance Sheet, Retained Earnings

• Revenue, Expenses, Gains, Losses

Describe the importance of double-entry accounting.

• Double-entry accounting is only important for small businesses.

• Double-entry accounting is a time-consuming process with no benefits.

• Double-entry accounting is crucial for accuracy, error detection, fraud prevention, and financial transparency.

• Double-entry accounting is not necessary for accurate financial records.