#1
Which financial account is used to record the company's revenues?
Revenue Account
ExplanationRecords incoming funds from sales or services rendered.
#2
What is the primary purpose of the 'General Ledger' in accounting?
To record detailed transactions of a specific account
ExplanationServes as the primary bookkeeping tool for recording financial transactions.
#3
What is the purpose of the 'Chart of Accounts'?
To list all the company's accounts and their codes
ExplanationOrganizes a company's financial information into categories.
#4
What is the role of the 'Income Statement' in financial reporting?
To summarize the company's revenues and expenses over a specific period
ExplanationProvides a snapshot of a company's financial performance.
#5
What is the purpose of the 'Debit' entry in double-entry accounting?
To increase assets and decrease liabilities
ExplanationRepresents an increase in assets or decrease in liabilities.
#6
What does the term 'Accounts Payable' represent in financial accounting?
Money owed by the company to its creditors
ExplanationOutstanding bills or obligations to be paid by the company to suppliers or vendors.
#7
Which financial statement reports the company's financial position at a specific point in time?
Balance Sheet
ExplanationShows assets, liabilities, and equity at a given date.
#8
Which of the following is considered a long-term liability?
Notes Payable
ExplanationObligations due beyond one year.
#9
What is the purpose of the 'Trial Balance' in accounting?
To ensure that debits equal credits after posting transactions
ExplanationVerifies the accuracy of the ledger by balancing debits and credits.
#10
Which financial statement reports the company's profitability over a specific period?
Income Statement
ExplanationShows revenues, expenses, and net income or loss.
#11
What is the purpose of the 'Matching Principle' in accounting?
To match revenues with the expenses incurred to generate them
ExplanationEnsures expenses are recognized in the same period as related revenues.
#12
In accounting, what does the term 'Amortization' refer to?
The process of allocating the cost of an intangible asset over its useful life
ExplanationSpreads the cost of intangible assets over their useful life.
#13
What is the purpose of the 'Accumulated Depreciation' account?
To record the amount of depreciation expense recognized over time
ExplanationAccumulates depreciation expenses of assets over their useful lives.
#14
In double-entry accounting, what must happen for each transaction?
One account must be debited, and another account must be credited
ExplanationMaintains the fundamental accounting equation of assets = liabilities + equity.
#15
In financial accounting, what does the term 'EBITDA' stand for?
Earnings Before Interest, Taxes, Depreciation, and Amortization
ExplanationMeasure of a company's operating performance without certain expenses.
#16
What is the purpose of the 'Cash Flow Statement'?
To analyze the flow of cash in and out of a business
ExplanationShows how cash is generated and used during a specific period.
#17
Which of the following is a contra account?
Accumulated Depreciation
ExplanationReduces the value of a related account.
#18
What is the purpose of the 'FIFO' method in inventory accounting?
To assume that inventory items are sold in the order they were acquired
ExplanationAssumes items are sold in the order they were acquired.
#19
What is the purpose of the 'Accrued Liabilities' account?
To record liabilities that have been incurred but not yet paid
ExplanationRecords obligations that are recognized but not yet paid.