Recording and Documenting Business Transactions Quiz

Test your knowledge on principles, statements, and concepts of accounting with these questions on recording business transactions.

Practice Learn Test

Which of the following is a primary purpose of recording business transactions?

To provide entertainment to stakeholders

To maintain a historical record of the business's activities

To increase taxes

To confuse competitors

Which accounting principle states that every transaction should be recorded in monetary terms?

Materiality principle

Conservatism principle

Monetary unit principle

Consistency principle

What does the acronym GAAP stand for in accounting?

Generally Accepted Accounting Procedures

Generally Accepted Auditing Principles

Generally Accepted Accounting Principles

Generally Acknowledged Accounting Procedures

What is the purpose of a ledger in accounting?

To record transactions in chronological order

To summarize the financial position of a business at a specific point in time

To calculate taxes owed by the business

To record transactions by account in a systematic manner

Which of the following is an example of a non-current liability?

Accounts payable

Short-term loans

Salaries payable

Long-term loans

What is the double-entry system in accounting?

Recording each transaction twice to ensure accuracy

Recording each transaction once

Recording transactions only for double the amount

Recording transactions with double the tax amount

Which financial statement is prepared first in the accounting cycle?

Income statement

Balance sheet

Statement of cash flows

Statement of retained earnings

Which of the following is an example of a contra account?

Accounts receivable

Accumulated depreciation

Inventory

Prepaid expenses

Which of the following is a characteristic of accrual accounting?

Transactions are recorded when cash is received or paid

Transactions are recorded only when cash is received

Transactions are recorded when they occur, regardless of when cash is received or paid

Transactions are recorded only when cash is paid

#10

Which of the following financial ratios measures a company's ability to pay its short-term obligations?

Debt-to-equity ratio

Current ratio

Return on investment ratio

Asset turnover ratio

#11

What is the purpose of a journal entry in accounting?

To summarize financial information for external stakeholders

To record the daily transactions of a business in chronological order

To calculate the taxes owed by the business

To prepare financial statements