Basic Accounting Quiz 1

Increasing assets and decreasing liabilities in terms of debit and credit would be

• Crediting asset and crediting liability

• Debiting asset and crediting liability

• Crediting asset and debiting liability

• Debiting asset and debiting liability

Which of the following statements regarding accounting is incorrect?

• Accounting helps in economic decision making

• Accounting is a service activity which provides financial information for economic entities and is not intended for use of non-profit entities like foundations

• Accounting deals with quantitative information which is primarily financial in nature

• Accounting is regarded as a service activity

Which of the following statements best describes the differences or similarities between financial accounting and management accounting?

• Reports generated by financial and management accounting is intended only for the use of internal users

• Financial accounting information can also be used by internal users and management accounting information can also be used by external users

• Financial accounting provides general purpose reports while management accounting provides special purpose and specific reports to answer managers needs of information

• Financial accounting provides information primarily for internal users while management accounting provides information primarily for external users

Cash will have a debit posting in the ledger in all but one of the following scenarios

• Payment by a customer to the firm of a fee outstanding

• Payment of an account payable

• Collection of accounts receivable

• Receiving cash from rendering services

A credit balance in this account as presented in the trial balance would mean that there is an error

• Accumulated depreciation equipment

• Accounts receivable customer

• Capital

• Professional fees

Unearned revenues can be best described as revenues

• Collected and earned

• Collected but not yet earned

• Not collected and not yet earned hence a remote transaction

• Not collected but already earned

Which of the following accounts should not be seen in the statement of financial position

• Prepaid expenses

• Charity contributions

• Salaries payable

• Cash

Regarding debits and credits, which is true

• In the income statement revenue is increased by a debit whereas in the statement of financial position capital account is increased by a credit

• Before adjustments, the debits will not equal credits in the trial balance

• In the income statement debits are used to increase account balances whereas in the statement of financial position credits are used to increase account balances

• The normal balance of equity is the same for liability

Which statement best defines an accrual

• Adjusting entries where revenue or expenses are recognized in the absence of cash flow evidence

• Adjusting entries where cash flow or revenue or expense recognitions are simultaneous

• Adjusting entries where revenue or expense recognition precedes cash flow

• Adjusting entries where cash flow precedes revenue or expense recognition

Accounting lies on the objective that it should be a useful tool to provide the users of financial information make better economic decisions. Which statement is related to the main objective above?

• A structured representation of the financial position, financial performance, and cash flows of an entity can be provided by accounting through reports known as financial statements

• Increased demand for accountants is needed worldwide because of the influence of the accounting to the society at large

• The manner of presenting financial information is of paramount importance to taxation and government authorities

• Management accounting being more concerned on reporting to internal users of accounting information heavily becomes more important to managers than information provided with financial accounting to outside users