Basic Accounting

What is the primary purpose of accounting?

• To prepare tax returns

• To record financial transactions and provide financial information

• To track inventory levels

• To determine employee salaries

Which of the following is an asset?

• Accounts Payable

• Revenue

• Accounts Receivable

• Owner’s Equity

The accounting equation is:

• Assets = Liabilities + Equity

• Assets = Liabilities - Equity

• Liabilities = Assets + Equity

• Equity = Assets + 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

What is another name for the Profit and Loss Statement?

• Cash Flow Statement

• Income Statement

• Retained Earnings Statement

• Balance Sheet

Which of the following is considered a liability?

• Cash

•  Equipment

• Retained Earnings

• Accounts Payable

A company’s net income is calculated as:

• Revenue - Expenses

• Assets - Liabilities

• Total Equity - Liabilities

• Revenue + Liabilities

Which account increases when cash is received?

• Accounts Payable

• Accounts Receivable

• Cash

• Retained Earnings

If a company purchases office supplies on credit, what happens?

• Assets increase, liabilities decrease

• Assets increase, liabilities increase

• Assets decrease, liabilities increase

• Liabilities decrease, equity increases

The matching principle in accounting means:

• Assets must always match liabilities

• Every transaction must have a matching entry

• Revenues and expenses must always be equal

• Expenses should be recorded in the same period as the revenues they help to generate