CXC CSEC Principles of Accounts Review

What is the primary purpose of financial statements?

• To serve as a marketing tool for attracting investors.

• To calculate tax liabilities for the entity.

• To provide a detailed history of the company's employees.

• The primary purpose of financial statements is to provide information about the financial position, performance, and cash flows of an entity.

Which of the following is NOT a financial statement?

• Balance Sheet

• Cash Flow Statement

• Income Statement

• Budget

In the double entry system, every transaction affects how many accounts?

• Two accounts

• One account

• Three accounts

• Five accounts

What does the accounting equation state?

• Assets = Liabilities + Equity

• Assets + Liabilities = Equity

• Assets - Liabilities = Equity

• Liabilities = Assets - Equity

Which of the following is an example of an asset?

• Cash

• Revenue

• Expense

• Liability

What is the purpose of a trial balance?

• To calculate the net income of a business.

• The purpose of a trial balance is to verify the equality of debits and credits in the accounting records.

• To prepare financial statements for external users.

• To summarize cash flow activities for the period.

Which of the following accounts typically has a credit balance?

• Assets

• Liabilities, equity, and revenue accounts

• Dividends

• Expenses

What is the first step in preparing a trial balance?

• Review the cash flow statement.

• Prepare financial statements for the month.

• List all account balances from the ledger.

• Calculate total revenue for the period.

What are adjusting entries used for?

• Adjusting entries are used to update account balances for accurate financial reporting.

• Adjusting entries are used to create new accounts.

• Adjusting entries are used to close the books at year-end.

• Adjusting entries are used to calculate tax liabilities.

Which of the following is an example of an adjusting entry?

• Recording accrued expenses at the end of the period.

• Adjusting inventory levels for sales made during the period.

• Recording revenue at the beginning of the period.

• Transferring funds between bank accounts.