Fundamental Principles and Practices in Accounting Quiz
Test your knowledge of basic accounting principles with these questions on financial statements, GAAP, depreciation, and more.
#1
Which of the following is not an accounting principle?
Consistency
Materiality
Objectivity
Volatility
#2
What is the basic accounting equation?
Assets = Liabilities + Equity
Assets + Liabilities = Equity
Liabilities = Assets + Equity
Equity = Assets - Liabilities
#3
What is the purpose of the double-entry accounting system?
To ensure that every financial transaction is recorded twice
To keep track of only income and expenses
To record transactions in a single ledger
To simplify financial reporting
#4
What is the primary objective of financial accounting?
To provide information for internal decision-making
To provide information for external decision-making
To forecast future financial performance
To control and manage day-to-day operations
#5
Which financial statement reports a company's revenues and expenses over a period of time?
Balance Sheet
Income Statement
Statement of Cash Flows
Statement of Retained Earnings
#6
Which financial statement represents a snapshot of a company's financial position at a specific point in time?
Income Statement
Balance Sheet
Statement of Cash Flows
Statement of Retained Earnings
#7
Which accounting principle dictates that expenses should be recognized in the period in which they are incurred, regardless of when cash is paid?
Matching Principle
Revenue Recognition Principle
Conservatism Principle
Time Period Principle
#8
Which of the following is a contra account?
Accounts Receivable
Accumulated Depreciation
Inventory
Prepaid Expenses
#9
Which of the following is not a component of the Statement of Cash Flows?
Operating Activities
Investing Activities
Financing Activities
Adjusting Activities
#10
What is the formula for calculating Working Capital?
Current Assets - Current Liabilities
Total Assets - Total Liabilities
Current Assets / Current Liabilities
Total Assets / Total Liabilities
#11
What is the formula for calculating Return on Equity (ROE)?
(Net Income / Average Total Assets) * 100
(Net Income / Average Shareholders' Equity) * 100
(Net Income / Average Liabilities) * 100
(Total Revenue / Total Assets) * 100
#12
What does the accounting concept of 'conservatism' entail?
Overstating assets and understating liabilities
Understating assets and overstating liabilities
Recognizing revenue when earned and expenses when incurred
Treating similar items consistently across accounting periods
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