Financial Accounting Quiz

What is the primary purpose of financial accounting?

• Measure business activities and communicate those measurements to decision makers.

• Determine the amount of tax liability owed to the government.

• Measure the profitability of the company in order to assist employees with making decisions.

• Communicate business activities to internal management.

The form of business organization that is legally separate from its owners is a:

• Partnership.

• Sole proprietorship.

• Separation entity.

• Corporation.

The accounting equation is defined as:

• Liabilities + Revenues = Assets.

• Net Income = Revenues − Expenses.

• Assets = Liabilities − Stockholders' Equity.

• Assets = Liabilities + Stockholders' Equity.

Owners’ claims to the company's resources are referred to as:

• Assets.

• Revenues.

• Liabilities.

• Stockholders' equity.

Purchasing office supplies on account causes assets to increase and liabilities to increase.

• True

• False

The full set of procedures used to accomplish the measurement/communication process of financial accounting is referred to as the:

• Trial balance.

• Accounting cycle.

• General ledger.

• Chart of accounts.

Providing services and receiving cash will:

• Decrease liabilities and increase stockholders' equity.

• Increase assets and increase liabilities.

• Decrease assets and increase liabilities.

• Increase assets and increase stockholders' equity.

Which of the following accounts would normally have a credit balance?

• Income Tax Payable, Service Revenue, Dividends.

• Cash, Repairs and Maintenance Expense, Dividends.

• Accounts Payable, Service Revenue, Common Stock.

• Salaries Payable, Deferred Revenue, Delivery Expense.

Under accrual-basis accounting:

• Revenue should be recorded in the period the cash is received.

• Revenue should be recorded in the period goods and services are provided.

• Revenue should be recorded in the balance sheet.

• Revenue is a component of common stock.

Prepayments occur when:

• Cash payment occurs after the cost is used in running the company and liability is recorded.

• Customers are unable to pay the full amount due when goods are delivered.

• Cash payment (or an obligation to pay cash) occurs before the cost is used in running the business.

• Sales are delayed pending credit approval.