Financial Accounting Quiz

Which of the following is a primary objective of financial accounting?

• To determine the cost of production

• To prepare financial statements

• To control operations

• To make strategic decisions

What is the double entry system of accounting?

• A method of recording transactions where each transaction affects one account

• A method of recording transactions where each transaction affects two accounts

• A method of recording transactions where each transaction affects multiple accounts

• A method of recording transactions where each transaction affects only the cash account

Which of the following is an example of a current asset?

• Land

• Building

• Inventory

• Patents

Which financial statement provides information about a company's financial position at a specific point in time?

• Income Statement

• Statement of Cash Flows

• Balance Sheet

• Statement of Retained Earnings

What is the purpose of a trial balance?

• To prepare the income statement

• To ensure that debits equal credits

• To determine the company's profitability

• To calculate net income

Which account type increases with a debit and decreases with a credit?

• Liability

• Equity

• Revenue

• Asset

What is the term for revenues that have been earned but not yet received in cash?

• Accrued revenues

• Deferred revenues

• Prepaid revenues

• Unearned revenues

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

• Accounts Receivable

• Accumulated Depreciation

• Inventory

• Prepaid Expenses

What is the purpose of the statement of cash flows?

• To show the profitability of the company

• To show the changes in cash position of the company

• To show the financial position of the company

• To show the revenues and expenses of the company

Which principle requires that expenses be matched with revenues in the period in which efforts are made to generate those revenues?

• Revenue Recognition Principle

• Matching Principle

• Historical Cost Principle

• Full Disclosure Principle