Financial Accounting Process Quiz
Test your understanding of financial accounting with these 13 questions covering financial statements, principles, and ratios.
#1
Which of the following financial statements reports a company's financial position at a specific point in time?
Income statement
Balance sheet
Statement of cash flows
Statement of retained earnings
#2
Which accounting principle states that assets should be recorded at their original cost?
Matching principle
Revenue recognition principle
Conservatism principle
Cost principle
#3
What does the term 'depreciation' refer to in accounting?
Increase in the value of an asset
Decrease in the value of an asset over time
The total value of a company's assets
The total value of a company's liabilities
#4
What is the purpose of the trial balance?
To record adjusting entries
To prepare financial statements
To ensure the equality of debits and credits
To reconcile bank statements
#5
What is the accounting equation?
Assets = Liabilities + Equity
Assets + Liabilities = Equity
Equity = Assets - Liabilities
Liabilities = Assets - Equity
#6
Which of the following is an example of a current liability?
Notes payable due in 3 years
Accounts payable
Bonds payable due in 10 years
Mortgage payable
#7
Which financial statement summarizes a company's revenues and expenses over a period of time?
Balance sheet
Income statement
Statement of cash flows
Statement of retained earnings
#8
What is the purpose of the double-entry accounting system?
To ensure accuracy in recording financial transactions
To simplify financial reporting
To eliminate the need for trial balances
To speed up the recording process
#9
What is the formula to calculate the current ratio?
Current assets / Current liabilities
Current liabilities / Current assets
Total assets / Total liabilities
Total liabilities / Total assets
#10
Which of the following is a contra-account to accounts receivable?
Accumulated depreciation
Allowance for doubtful accounts
Unearned revenue
Inventory reserve
#11
Which of the following is an example of an operating expense?
Interest expense
Income tax expense
Cost of goods sold
Depreciation expense
#12
What is the purpose of the statement of cash flows?
To report the company's financial position at a specific point in time
To summarize the company's revenues and expenses over a period of time
To show how changes in balance sheet accounts and income affect cash and cash equivalents
To report the company's cash inflows and outflows during a period
#13
Which financial statement shows how changes in balance sheet accounts and income affect cash and cash equivalents?
Income statement
Balance sheet
Statement of cash flows
Statement of retained earnings
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