#1
Which of the following is an example of a business transaction?
Purchasing office supplies with cash
Watching a movie with friends
Taking a walk in the park
Reading a book at home
#2
What is the accounting equation?
Assets = Liabilities - Equity
Assets = Liabilities + Equity
Assets = Liabilities / Equity
Assets = Liabilities * Equity
#3
Which financial statement provides information on a company's profitability?
Balance sheet
Income statement
Cash flow statement
Statement of retained earnings
#4
What is the purpose of a trial balance?
To identify errors in financial statements
To record financial transactions
To prepare income statements
To calculate taxes owed
#5
Which of the following is an example of an intangible asset?
Land
Buildings
Patents
Inventory
#6
What is the purpose of depreciation in accounting?
To increase the value of assets
To decrease the value of liabilities
To allocate the cost of assets over their useful lives
To record dividends paid to shareholders
#7
Which financial statement reports a company's cash inflows and outflows?
Balance sheet
Income statement
Statement of cash flows
Statement of retained earnings
#8
What is the formula to calculate gross profit?
Revenue - Expenses
Revenue / Expenses
Revenue - Cost of goods sold
Revenue / Cost of goods sold
#9
What is the purpose of the cash flow statement?
To report a company's financial position at a specific point in time
To calculate a company's profitability
To track a company's cash inflows and outflows
To calculate a company's return on investment
#10
Which accounting principle requires that assets and liabilities should be initially recorded at their acquisition cost?
Conservatism principle
Materiality principle
Cost principle
Matching principle
#11
What is the purpose of accrual accounting?
To record transactions only when cash is exchanged
To record transactions when revenues are earned and expenses are incurred, regardless of when cash is exchanged
To record transactions at the end of the accounting period
To record transactions when cash is received
#12
Which of the following is considered a long-term liability?
Accounts payable
Short-term loans
Bonds payable
Salaries payable
#13
Which financial statement shows the changes in a company's retained earnings over a specific period?
Balance sheet
Income statement
Statement of retained earnings
Statement of cash flows
#14
What is the purpose of the trial balance?
To verify that total debits equal total credits
To prepare financial statements
To record adjusting entries
To record closing entries
#15
Which of the following is a characteristic of a sole proprietorship?
Limited liability for owners
Separate legal entity from its owners
Ownership shared by multiple individuals
Unlimited liability for owners
#16
What is the formula to calculate current ratio?
Current Assets / Current Liabilities
Current Liabilities / Current Assets
Total Assets / Current Liabilities
Current Liabilities / Total Assets
#17
What is the double-entry accounting system?
A system of recording financial transactions once
A system of recording each transaction twice
A system of recording financial transactions in multiple ledgers
A system of recording financial transactions only at year-end
#18
Which of the following is an example of a non-current liability?
Accounts payable
Short-term loan
Long-term loan
Salaries payable
#19
What is the formula to calculate return on equity (ROE)?
(Net Income / Total Assets) * 100
(Net Income / Shareholder's Equity) * 100
(Total Liabilities / Shareholder's Equity) * 100
(Total Liabilities / Net Income) * 100
#20
Which accounting principle states that expenses should be recognized in the same period as the revenues to which they relate?
Matching principle
Conservatism principle
Consistency principle
Materiality principle
#21
Which of the following is an example of a contra asset account?
Accounts payable
Prepaid expenses
Accumulated depreciation
Notes payable
#22
What does the debt-to-equity ratio measure?
The company's ability to pay its short-term debts
The company's profitability
The company's leverage or financial risk
The company's liquidity
#23
Which of the following is an example of an operating activity in the cash flow statement?
Issuing common stock
Purchasing equipment
Receiving interest on investments
Paying dividends to shareholders