#1
2. Which financial statement represents the financial position of a company at a specific point in time?
Balance Sheet
ExplanationSnapshot of a company's assets, liabilities, and equity.
#2
4. What is the purpose of the double-entry accounting system?
To ensure that the accounting equation is always balanced
ExplanationMaintaining accuracy by recording transactions in two equal parts.
#3
10. What is the role of a journal entry in the accounting cycle?
To summarize financial transactions
ExplanationInitial record of financial events for future reference.
#4
1. What is the accounting equation?
Assets = Liabilities + Equity
ExplanationFundamental equation representing a company's financial position.
#5
3. What does the term 'accrual' mean in accounting?
The recognition of revenue or expenses when incurred, not when cash changes hands
ExplanationRecognizing financial events when they occur, not when cash is exchanged.
#6
6. What is the purpose of the general ledger in accounting?
To record all financial transactions of a business
ExplanationCentralized record keeping of financial activities.
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8. What is the purpose of the trial balance in the accounting process?
To ensure that total debits equal total credits
ExplanationChecking accuracy by verifying equality of debits and credits.
#8
11. What is the difference between a debit and a credit in accounting?
Debits increase assets, while credits decrease liabilities
ExplanationEffect of transactions on account balances.
#9
5. How does the recognition of revenue differ between accrual accounting and cash accounting?
Accrual accounting recognizes revenue when earned, while cash accounting recognizes revenue when cash is received
ExplanationTiming of revenue recognition differs based on when it's earned or received.
#10
7. How does the straight-line depreciation method work?
Depreciation is calculated based on the asset's remaining useful life
ExplanationUniformly spreading asset cost over its useful life.
#11
9. In accounting, what does the term 'amortization' refer to?
The process of allocating the cost of intangible assets over their useful life
ExplanationSpreading out intangible asset costs over time.
#12
13. What is the accounting principle of conservatism?
Choosing the accounting methods that are least likely to overstate assets and income
ExplanationPreferring methods that understate assets and income.
#13
14. How does the FIFO (First-In-First-Out) method affect inventory valuation?
It values the oldest inventory items first, which affects the cost of goods sold
ExplanationAssigning oldest costs to inventory first.