Basic Accounting Concepts Quiz

Which of the following is an example of a liability?

• Cash

• Inventory

• Mortgage Payable

• Equipment

What is the purpose of a trial balance?

• To prepare financial statements

• To check the accuracy of all ledger accounts

• To calculate net income

• To determine the company's tax liability

The double-entry accounting system requires that:

• Every transaction affects at least two accounts

• Only expenses and revenues are recorded

• Financial statements are prepared monthly

• Every transaction is recorded twice in the same account

What is the primary purpose of financial accounting?

• To ensure employees are paid on time

• To provide financial information to external users

• To manage the company's internal operations

• To calculate tax liabilities

Which financial statement shows a company's financial position at a specific point in time?

• Income Statement

• Statement of Cash Flows

• Balance Sheet

• Statement of Retained Earnings

Which of the following is considered an asset?

• Accounts Payable

• Bank Loan

• Accounts Receivable

• Owner's Equity

Revenue is:

• The increase in owner's equity resulting from the sale of goods or services

• The decrease in owner's equity resulting from the sale of goods or services

• The amount of money spent by a business

• A type of asset

The accounting equation is:

• Assets = Liabilities + Owner's Equity

• Assets = Liabilities - Owner's Equity

• Assets + Liabilities = Owner's Equity

• Liabilities = Assets + Owner's Equity

Which of the following accounts would appear on the income statement?

• Prepaid Expenses

• Unearned Revenue

• Depreciation Expense

• Accounts Receivable

Which principle states that expenses should be recorded in the period in which they are incurred, regardless of when the cash is paid?

• Revenue Recognition Principle

• Matching Principle

• Historical Cost Principle

• Full Disclosure Principle