#1
Which financial statement reports a company's revenues and expenses over a period of time?
Income Statement
ExplanationReports revenues and expenses.
#2
Which accounting principle states that assets should be recorded at their original cost?
Cost Principle
ExplanationAssets recorded at original cost.
#3
Which financial statement shows a company's financial position at a specific point in time?
Balance Sheet
ExplanationSnapshot of financial position.
#4
Which accounting principle requires that expenses should be recorded in the same period as the revenue they help to generate?
Matching Principle
ExplanationExpenses matched with revenue.
#5
What does the term 'equity' represent in accounting?
Owner's investment in the business
ExplanationOwner's stake in the business.
#6
Which of the following is NOT a component of stockholders' equity?
Accounts Receivable
ExplanationNot part of stockholders' equity.
#7
How are dividends typically accounted for in the financial statements?
As a reduction in retained earnings on the balance sheet
ExplanationDecreases retained earnings.
#8
What is the formula for calculating earnings per share (EPS)?
Net Income / Average Common Shares Outstanding
ExplanationCalculation of EPS.
#9
Which of the following is a measure of a company's profitability?
Return on Equity
ExplanationMeasures profitability.
#10
How does a company's treasury stock affect stockholders' equity?
It decreases total stockholders' equity
ExplanationDecreases stockholders' equity.
#11
What does the acid-test ratio measure?
A company's ability to meet its short-term obligations with its most liquid assets
ExplanationMeasures short-term liquidity.
#12
Which of the following represents a contra account to accounts receivable?
Allowance for Doubtful Accounts
ExplanationOffset to accounts receivable.