Financial Accounting Principles Quiz

What is the purpose of adjusting entries in accounting?

• To confuse stakeholders

• To increase tax liabilities

• To ensure adherence to GAAP and accuracy of financial information

• To manipulate financial statements

Which principle states that revenues and expenses should be recorded in the period they are earned or incurred?

• Materiality Principle

• Conservatism Principle

• Revenue Recognition Principle

• Matching Principle

What type of adjustment is made for late invoices in accounting?

• Unearned Revenue

• Prepaid Expenses

• Accruals

• Late Invoices

What is the purpose of the contra account in accounting?

• To increase the value of assets

• To decrease the value of liabilities

• To hide financial information

• To show a contrary effect to the associated account

Which method of amortization allocates the same expense amount each year for a fixed asset?

• Straight-Line Method

• Declining Balance Method

• Units of Production Method

• Double-Declining Method

What is the purpose of the allowance for doubtful accounts in accounting?

• To increase accounts receivable

• To decrease bad debt expense

• To hide financial losses

• To estimate uncollectible accounts

Which type of adjustment is made for supplies that are used up in a business?

• Accruals

• Supplies

• Bad Debt

• Amortization

What is the purpose of the accumulated amortization account in accounting?

• To show a profit in the income statement

• To increase the value of fixed assets

• To decrease the value of expenses

• To accumulate total amortization for a fixed asset

Which type of adjustment is made for unearned revenue in accounting?

• Unearned Revenue

• Prepaid Expenses

• Interest

• Salaries and Wages

What is the purpose of adjusting entries at the end of the accounting period?

• To manipulate financial ratios

• To ensure financial statements reflect actual performance

• To increase shareholder dividends

• To avoid paying taxes