#1
Which of the following is a primary purpose of recording business transactions?
To maintain a historical record of the business's activities
ExplanationRecording transactions provides a chronological history of the business's financial activities.
#2
Which accounting principle states that every transaction should be recorded in monetary terms?
Monetary unit principle
ExplanationThe monetary unit principle requires all transactions to be expressed in a common currency.
#3
What does the acronym GAAP stand for in accounting?
Generally Accepted Accounting Principles
ExplanationGAAP represents the widely accepted standards for financial accounting.
#4
What is the purpose of a ledger in accounting?
To record transactions by account in a systematic manner
ExplanationLedger organizes and categorizes transactions by account for systematic record-keeping.
#5
Which of the following is an example of a non-current liability?
Long-term loans
ExplanationNon-current liabilities, like long-term loans, are obligations not due within one year.
#6
What is the double-entry system in accounting?
Recording each transaction twice to ensure accuracy
ExplanationDouble-entry involves recording a transaction with equal and opposite entries to maintain balance.
#7
Which financial statement is prepared first in the accounting cycle?
Income statement
ExplanationThe income statement is typically the first financial statement prepared, showing revenues and expenses.
#8
Which of the following is an example of a contra account?
Accumulated depreciation
ExplanationAccumulated depreciation is a contra account offsetting the asset's carrying amount.
#9
Which of the following is a characteristic of accrual accounting?
Transactions are recorded when they occur, regardless of when cash is received or paid
ExplanationAccrual accounting records transactions when they happen, not just when cash is exchanged.
#10
Which of the following financial ratios measures a company's ability to pay its short-term obligations?
Current ratio
ExplanationThe current ratio assesses a company's capacity to meet short-term liabilities with current assets.
#11
What is the purpose of a journal entry in accounting?
To record the daily transactions of a business in chronological order
ExplanationJournal entries document daily transactions in the order they occur.