#1
Which accounting principle states that revenue should be recognized when it is earned, regardless of when the cash is received?
Matching principle
Conservatism principle
Revenue recognition principle
Consistency principle
#2
What is the fundamental accounting equation?
Assets = Liabilities + Owner's Equity
Liabilities = Assets + Owner's Equity
Owner's Equity = Assets + Liabilities
Owner's Equity = Assets - Liabilities
#3
Which financial statement summarizes a company's revenues and expenses over a period?
Balance sheet
Income statement
Statement of cash flows
Statement of retained earnings
#4
Which financial statement provides information about a company's cash inflows and outflows from operating, investing, and financing activities?
Income statement
Statement of changes in equity
Balance sheet
Statement of cash flows
#5
What is the purpose of the general ledger in accounting?
To record all transactions in one journal
To record transactions in separate journals
To post transactions to individual accounts
To prepare financial statements
#6
What is the purpose of the chart of accounts in accounting?
To record transactions in a chronological order
To summarize financial transactions
To organize and classify accounts
To prepare financial statements
#7
Which financial statement reports the changes in retained earnings for a specific period?
Income statement
Statement of cash flows
Statement of retained earnings
Balance sheet
#8
Which of the following is not an asset account?
Accounts Payable
Cash
Inventory
Accounts Receivable
#9
What does the term 'depreciation' refer to in accounting?
Increase in the value of an asset over time
Cost allocation of a long-term asset over its useful life
The process of selling an asset at a profit
The decrease in the value of an asset due to market fluctuations
#10
What is the purpose of the trial balance in accounting?
To calculate net income
To identify errors in recording transactions
To prepare financial statements
To determine the balance of the owner's equity
#11
What is the accounting equation after recording a transaction where a company borrows $10,000 from a bank?
Assets = Liabilities + Owner's Equity + $10,000
Liabilities = Assets + Owner's Equity + $10,000
Owner's Equity = Assets - Liabilities + $10,000
Assets = Liabilities + Owner's Equity - $10,000
#12
What is the purpose of the statement of cash flows?
To report the financial position of a company at a specific point in time
To summarize the changes in owner's equity over a period
To explain the reasons for changes in cash and cash equivalents over a period
To report revenues and expenses incurred during a period
#13
Which of the following is a contra account?
Accounts Payable
Accumulated Depreciation
Inventory
Accounts Receivable
#14
What does the term 'conservatism' refer to in accounting?
Valuing assets at their original cost
Recording revenues when they are earned
Recording the lower of two values when uncertain
Matching expenses with revenues
#15
Under the double-entry accounting system, what happens when a transaction is recorded?
One account is debited and another account is credited
One account is debited twice
One account is credited twice
The accounts remain unaffected
#16
Which of the following is an example of an accrual accounting adjustment?
Recording cash received from a customer
Recognizing depreciation expense
Paying utilities bill
Paying employee salaries