#1
Which accounting principle states that an entity should record its expenses in the period in which they are incurred?
Matching principle
Revenue recognition principle
Consistency principle
Materiality principle
#2
What is the purpose of the Generally Accepted Accounting Principles (GAAP)?
To provide a standardized framework for financial reporting
To promote unethical business practices
To enforce tax regulations
To facilitate international trade
#3
Which accounting principle emphasizes that financial statements should be based on verifiable evidence?
Materiality principle
Consistency principle
Objectivity principle
Matching principle
#4
What is the primary purpose of the International Financial Reporting Standards (IFRS)?
To provide a standardized framework for financial reporting globally
To promote unethical business practices
To enforce tax regulations in specific regions
To facilitate domestic trade
#5
What is the primary purpose of the balance sheet?
To report revenues and expenses
To provide information about the company's cash flows
To show the financial position at a specific point in time
To record day-to-day business transactions
#6
Which accounting method records revenue when it is earned, regardless of when the payment is received?
Cash basis accounting
Accrual basis accounting
Cost basis accounting
Expense basis accounting
#7
In financial accounting, what does the term 'depreciation' refer to?
Increase in the value of an asset
Decrease in the value of an asset over time
The amount of money owed by a company
The total revenue earned by a company
#8
What is the primary purpose of the income statement?
To show the financial position at a specific point in time
To report revenues and expenses over a period of time
To provide information about the company's cash flows
To record day-to-day business transactions
#9
What is the purpose of the Statement of Retained Earnings?
To show the financial position at a specific point in time
To report revenues and expenses over a period of time
To provide information about the company's cash flows
To explain changes in the retained earnings account
#10
What is the purpose of the statement of cash flows?
To provide information about the company's financial position
To report revenues and expenses
To show the company's cash inflows and outflows
To record day-to-day business transactions
#11
Under the double-entry accounting system, what happens when a company receives cash from a customer?
The revenue increases, and the cash decreases
The revenue and cash both increase
The revenue and cash both decrease
The revenue decreases, and the cash increases
#12
What is the formula for calculating the return on equity (ROE)?
Net Income / Total Assets
Net Income / Shareholder's Equity
Total Revenue / Total Expenses
Total Assets / Shareholder's Equity
#13
Under which financial statement would you find information about a company's dividends paid to shareholders?
Balance Sheet
Income Statement
Statement of Cash Flows
Statement of Retained Earnings
#14
What is the purpose of the trial balance in accounting?
To calculate net income
To identify errors in the accounting records
To prepare financial statements
To record day-to-day business transactions