10 Accounting - Term 2 Theory

What does 'Revenue' refer to in a business context?

• The business's legal debts or obligations

• The income a business earns from its normal business activities

• The cost incurred by a business to generate revenue

• The business's total assets minus total liabilities

What is an 'Expense' in business terminology?

• The value of a business's assets

• The business's obligations to be paid to creditors

• The cost incurred by a business in order to generate revenue

• The money generated from sales

Which of the following best describes an 'Asset'?

• A business's legal debts

• The difference between total assets and total liabilities

• Something of value that a business owns or controls

• The amounts owed by a business to its suppliers

What is a 'Liability' in a business?

• The income earned from selling goods

• The cost of goods sold

• A business's legal debts or obligations

• The owner's claim on the business assets

What does 'Owner's Equity' represent?

• The total revenue of a business

• The cash received from issuing stock

• The total liabilities of a business

• The owner's claim on the assets of the business after all liabilities are deducted

What is the 'Accrual Accounting' method?

• Recording revenues and expenses only when cash is received or paid

• Recording revenues and expenses when they are earned or incurred

• A method used only in cash-intensive businesses

• A financial statement showing business's assets and liabilities

What does the 'Statement of Profit or Loss' show?

• How cash and cash equivalents are affected by changes in balance sheet accounts

• A snapshot of a business's financial position at a specific point in time

• A business's revenues, expenses, and net income over a specific period

• The amounts owed to a business by its customers

Which statement best describes 'Accounts Receivable'?

• Amounts owed by a business to its suppliers

• The cash flows from investing activities

• Amounts owed to a business by its customers for goods or services provided on credit

• The total debts of a business

What is the primary focus of 'Operating Activities' in the Statement of Cash Flows?

• Cash flows related to the acquisition or disposal of long-term assets

• Cash flows from the primary business activities of the business

• Cash flows related to the business's capital structure

• Recording revenues when cash is received

What does 'Cash Accounting' involve?

• Recording revenues and expenses when they are earned or incurred

• Recording revenues and expenses only when cash is actually received or paid out

• The legal debts or obligations of a business

• The difference between total assets and total liabilities