Fundamental Principles and Practices in Accounting Quiz

Volatility is not an accounting principle.

Assets equal liabilities plus equity in the basic accounting equation.

Double-entry accounting ensures every financial transaction is recorded twice for accuracy.

The primary objective of financial accounting is to provide information for external decision-making.

The Income Statement reports a company's revenues and expenses over a period.

The balance sheet provides a snapshot of a company's financial position at a specific time.

The Matching Principle dictates recognizing expenses in the period incurred, irrespective of cash payment timing.

Accumulated Depreciation is a contra account.

Adjusting Activities is not a component of the Statement of Cash Flows.

Working capital equals current assets minus current liabilities.

ROE is calculated as net income divided by average shareholders' equity, multiplied by 100.

Conservatism entails understating assets and overstating liabilities.