Introduction to Accounting

What is the primary purpose of accounting?

• To calculate taxes owed by individuals.

• To provide useful financial information for decision-making.

• To manage employee payroll and benefits.

• To create marketing strategies for businesses.

Define the term 'assets' in accounting.

• Assets are the profits generated by a business.

• Assets are expenses incurred by a business.

• Assets are liabilities that a business owes.

• Assets are resources owned by a business that have economic value.

What is the accounting equation?

• Assets + Liabilities = Equity

• Assets - Liabilities = Equity

• Equity = Assets - Liabilities

• Assets = Liabilities + Equity

Explain the difference between revenue and expenses.

• Revenue is the total amount spent; expenses are the income generated.

• Revenue includes all costs; expenses are only variable costs.

• Revenue is the total profit after expenses; expenses are only fixed costs.

• Revenue is income from sales; expenses are costs incurred to generate that income.

What are the three main financial statements?

• Profit and Loss Statement, Equity Statement, Revenue Statement

• Financial Position Statement, Income Report, Cash Management Statement

• Expense Report, Asset Statement, Financial Summary

• Income Statement, Balance Sheet, Cash Flow Statement

What is double-entry bookkeeping?

• Double-entry bookkeeping is an accounting system that records each transaction in two accounts, maintaining balance in the financial records.

• A method that records transactions in a single account.

• An accounting system that only tracks income and expenses.

• A way to calculate profits without tracking liabilities.

Define 'liabilities' and give an example.

• A savings account.

• A stock investment.

• A piece of real estate.

• A bank loan.

What is the role of a balance sheet?

• The role of a balance sheet is to present a company's financial position by listing its assets, liabilities, and equity.

• To provide a detailed report of a company's sales performance.

• To summarize a company's cash flow activities.

• To calculate a company's revenue over a period.

Explain the concept of 'depreciation'.

• Depreciation is the process of selling an asset for a profit.

• Depreciation refers to the total cost of an asset at the time of purchase.

• Depreciation is the increase in the value of an asset over time.

• Depreciation is the reduction in the value of an asset over time, typically due to wear and tear.

What is the significance of the cash flow statement?

• It shows the company's market share and competitive position.

• It summarizes the company's revenue and expenses for the year.

• It provides a detailed breakdown of the company's assets and liabilities.

• The cash flow statement is significant for assessing a company's liquidity and financial health.