Basics of Financial Accounting

What is the basic principle of accounting?

• Accrual accounting without adjustments.

• Cash basis accounting only.

• Single-entry accounting system.

• Double-entry accounting system.

What does a general journal record?

• All financial transactions of a business in chronological order.

• All employee records and payroll information.

• Only sales transactions of a business.

• Monthly financial summaries and reports.

How do you define a balance sheet?

• A balance sheet is a summary of a company's marketing strategies and goals.

• A balance sheet is a financial statement that shows a company's assets, liabilities, and equity at a specific date.

• A balance sheet is a report on a company's sales performance over a year.

• A balance sheet is a document that lists only a company's revenue and expenses.

What is the purpose of double-entry accounting?

• To track employee performance.

• To simplify tax calculations.

• To maintain accurate financial records and ensure the accounting equation stays balanced.

• To create marketing strategies.

What is an asset in accounting?

• An asset is a liability that incurs future costs.

• An asset is a temporary expense that reduces profit.

• An asset is a type of debt that must be repaid.

• An asset is a resource owned by a business that provides future economic benefits.

What is a liability in accounting?

• A liability is a financial investment made by the company.

• A liability is an asset owned by the company.

• A liability is a type of revenue generated by the company.

• A liability is a financial obligation or debt that a company owes to outside parties.

What does the term 'debit' mean?

• A debit is an accounting entry that increases assets or expenses and decreases liabilities or equity.

• A debit is a type of credit transaction.

• A debit increases liabilities and decreases assets.

• A debit is an entry that only affects revenue accounts.

What does the term 'credit' mean?

• The term 'credit' refers to a type of currency.

• Credit is the total amount of money in a bank account.

• Credit means the ability to pay for goods/services upfront.

• The term 'credit' means the ability to borrow money or access goods/services with the promise to pay later.

What is the purpose of a trial balance?

• To calculate the total revenue for the year.

• To summarize the financial position of a company.

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

• To prepare the income statement for the period.

What is the difference between revenue and expenses?

• Expenses are the total income, and revenue is the costs incurred.

• Revenue and expenses are the same thing; they both represent costs.

• Revenue is the total profit, and expenses are the total income.

• Revenue is the total income, and expenses are the costs incurred; the difference is profit or loss.