#1
What does the term 'GAAP' stand for in accounting?
Generally Accepted Accounting Principles
ExplanationGuidelines for financial accounting and reporting.
#2
Which financial statement provides a snapshot of a company's financial position at a specific point in time?
Balance sheet
ExplanationSummarizes assets, liabilities, and equity.
#3
What does the acronym FIFO stand for in inventory valuation?
First-In, First-Out
ExplanationMethod valuing oldest inventory first.
#4
Which financial statement reports a company's revenues and expenses over a specific period of time?
Income statement
ExplanationShows profitability over a period.
#5
Which financial statement summarizes a company's cash inflows and outflows over a period of time?
Statement of cash flows
ExplanationDetails cash movements.
#6
What is the accounting equation?
Assets = Liabilities + Owner's Equity
ExplanationFundamental balance in accounting.
#7
What does the term 'depreciation' refer to in accounting?
The allocation of the cost of a tangible asset over its useful life
ExplanationSpreading asset cost over its useful life.
#8
Which of the following is NOT an example of a current asset?
Buildings
ExplanationLong-term assets not easily converted to cash.
#9
What is the accounting principle that requires revenue to be recognized when it is earned, regardless of when payment is received?
Revenue recognition principle
ExplanationRecognizing revenue when earned.
#10
Which of the following is a contra account to accounts receivable?
Allowance for doubtful accounts
ExplanationEstimation of uncollectible accounts.
#11
Which accounting principle states that assets should be recorded at their original purchase price, rather than at current market value?
Historical cost principle
ExplanationRecording assets at original cost.
#12
What is the formula to calculate gross profit?
Net Sales - Cost of Goods Sold
ExplanationProfit after deducting the cost of goods.
#13
What is the formula to calculate Return on Investment (ROI)?
(Net Profit / Total Assets) * 100
ExplanationMeasures profitability relative to investments.
#14
In double-entry accounting, if a company records a debit to an asset account, what type of account will the corresponding credit be recorded in?
Equity account
ExplanationMaintaining balance between assets and equity.