#1
Which of the following is a fundamental accounting principle?
Matching principle
ExplanationExpense should be matched with related revenue.
#2
Which financial statement reports a company's revenues and expenses for a period of time?
Income statement
ExplanationSummarizes a company's financial performance over a specific period.
#3
Which financial statement shows the changes in a company's retained earnings over a period of time?
Statement of retained earnings
ExplanationDetails how retained earnings have changed during a specific period.
#4
Which financial statement is prepared first?
Balance sheet
ExplanationSummarizes a company's financial position at a specific point in time.
#5
Which financial statement shows a company's assets, liabilities, and equity at a specific point in time?
Balance sheet
ExplanationProvides a snapshot of a company's financial position.
#6
What does the accrual principle state?
Revenue should be recognized when earned
ExplanationRecognize revenue when it's earned, not necessarily when cash is received.
#7
What is the purpose of the accounting equation (Assets = Liabilities + Equity)?
To show the relationship between assets, liabilities, and equity
ExplanationIllustrates the balance between a company's resources and how they are financed.
#8
What is the purpose of the cash flow statement?
To provide information about a company's cash receipts and cash payments
ExplanationShows how cash moves in and out of a business.
#9
Which accounting principle requires that assets be recorded at the amount paid to acquire them?
Cost principle
ExplanationAssets should be recorded at their historical cost.
#10
What is the purpose of the adjusting entries in accounting?
To update account balances to reflect the accrual basis of accounting
ExplanationEnsures financial records are accurate by adjusting for non-cash transactions.
#11
Which of the following is an example of a contra account?
Accumulated depreciation
ExplanationReduces the value of a related account, typically an asset.
#12
What is the purpose of the trial balance?
To ensure that total debits equal total credits
ExplanationChecks the accuracy of a company's accounting records.
#13
Which of the following is a qualitative characteristic of financial information according to the IFRS?
Relevance
ExplanationInformation is pertinent and useful for decision-making.
#14
What is the formula for calculating the current ratio?
Current assets / Current liabilities
ExplanationMeasures a company's ability to pay short-term obligations with short-term assets.
#15
What is the formula for calculating return on assets (ROA)?
ROA = Net income / Total assets
ExplanationMeasures a company's profitability relative to its total assets.