Fundamentals of Accounting Principles

What does the term "assets" mean in accounting?

• Money owed to creditors

• Resources owned by a business that have economic value

• The profit earned by a business

• Expenses paid by a business

Which accounting principle states that a business should be treated as separate from its owners?

• Going Concern Principle

• Matching Principle

• Business Entity Principle

• Cost Principle

What is the basic accounting equation?

Which of the following is an example of a liability?

• Cash in hand

• Office equipment

• Bank loan

• Inventory

What does the "Going Concern" principle assume?

• A business will close down at the end of the financial year

• A business will continue to operate indefinitely into the future

• A business must record all transactions in cash

• A business must report profits every year

Which financial statement shows a company's revenues and expenses over a period of time?

• Balance Sheet

• Cash Flow Statement

• Income Statement

• Owner's Equity Statement

What is the term for the amount of money a business earns from selling goods or services?

• Expense

• Revenue

• Liability

• Capital

According to the Cost Principle, at what value should assets be recorded?

• Market value at the time of reporting

• Estimated future value

• Original purchase price

• Replacement cost

Which of the following best defines "depreciation" in accounting?

• An increase in the value of an asset over time

• The gradual reduction in the value of an asset over time

• The total cost of goods sold during a period

• The interest paid on a business loan

What is "double-entry bookkeeping"?

• Recording transactions only when cash is received

• A system where every transaction is recorded in two accounts

• Keeping two separate sets of financial records

• Recording transactions twice in the same account