FINANCIAL & ACCOUNTING

1. What is the main purpose of the accounting equation?

• • A. To show a company's revenue and expenses

• • B. To ensure that all debits equal credits

• • C. To keep financial statements balanced at all times

• • D. To calculate a company's profit margins

2. Which of the following is NOT a component of the accounting equation?

• A. Assets

• B. Liabilities

• C. Revenue

• D. Owner's Equity

3. The accounting equation is represented by which formula?

• A. Assets = Revenue + Expenses

• B. Liabilities = Assets + Owner’s Equity

• C. Assets = Liabilities + Owner's Equity

• D. Owner's Equity = Assets - Liabilities

4. Double-entry bookkeeping requires:

• A. Recording each transaction once as a debit only

• B. Recording each transaction in two accounts as both a debit and a credit

• C. Entering only income-related transactions

• D. Recording only transactions over a certain amount

5. In the double-entry bookkeeping system, if equipment is purchased with cash, which accounts are affected?

• A. Cash and Accounts Receivable

• B. Equipment and Liabilities

• C. Cash and Equipment

• D. Owner’s Equity and Liabilities

6. What is the purpose of the matching principle in accounting?

• A. To record revenue only when cash is received

• B. To match expenses with the revenue they help to generate

• C. To ensure all transactions are recorded twice

• D. To balance assets and liabilities

8. Under the accrual basis of accounting, when is revenue recognized?

• A. When cash is received

• B. When goods are delivered or services are provided

• C. When expenses are incurred

• D. At the end of the fiscal year

9. In double-entry bookkeeping, an entry to an asset account could be balanced by an entry to all EXCEPT:

• A. A liability account

• B. An expense account

• C. An owner’s equity account

• D. Another asset account

10. Which of the following statements about GAAP is TRUE?

• A. GAAP only applies to small businesses

• B. GAAP ensures consistency and comparability of financial statements

• C. GAAP requires companies to use cash-based accounting

• D. GAAP is only required for private companies

11. What is one main purpose of the Sarbanes-Oxley Act?

• A. To limit international accounting standards

• B. To establish stricter auditing and reporting standards

• C. To simplify tax regulations

• D. To enforce double-entry bookkeeping