#1
Which of the following is an example of a financial transaction?
Buying groceries with cash
Reading a book
Taking a walk in the park
Watching a movie
#2
Which of the following is NOT an example of an asset?
Cash
Inventory
Accounts Payable
Land
#3
Which of the following is an example of an expense?
Sale of goods
Purchase of equipment
Payment of dividends
Payment of rent
#4
Which financial statement reports a company's financial position at a specific point in time?
Income statement
Balance sheet
Statement of cash flows
Statement of retained earnings
#5
Which of the following is NOT a component of the statement of cash flows?
Operating activities
Investing activities
Financing activities
Accrual activities
#6
In accounting, what does the term 'debit' represent?
Increase in assets or expenses
Decrease in liabilities or equity
Decrease in assets or expenses
Increase in liabilities or equity
#7
Which financial statement summarizes a company's revenues and expenses over a period of time?
Balance sheet
Income statement
Statement of cash flows
Statement of retained earnings
#8
Which of the following is a characteristic of a liability in accounting?
It represents ownership in the company
It decreases with time
It is an obligation to transfer economic benefits
It is recorded on the income statement
#9
What is the formula to calculate net income?
Revenue - Expenses
Assets - Liabilities
Assets + Liabilities
Revenue / Expenses
#10
What is the accounting equation?
Assets = Liabilities - Equity
Assets = Liabilities + Equity
Assets = Liabilities / Equity
Assets = Liabilities * Equity
#11
Which of the following financial ratios measures a company's ability to pay its short-term debts?
Debt-to-Equity ratio
Current ratio
Return on Investment (ROI)
Earnings per Share (EPS)
#12
Which of the following is considered a long-term liability?
Accounts payable
Notes payable due within one year
Bonds payable
Salaries payable
#13
What is the purpose of the chart of accounts in accounting?
To summarize financial transactions
To record daily transactions
To classify and organize accounts
To prepare financial statements
#14
What is the purpose of a journal entry in accounting?
To record transactions in chronological order
To prepare financial statements
To calculate taxes
To approve financial transactions
#15
Which accounting principle requires that assets and liabilities should be recorded at their original cost?
Matching principle
Materiality principle
Consistency principle
Cost principle
#16
What is the primary function of a general ledger?
To record daily financial transactions
To prepare financial statements
To calculate taxes
To approve financial transactions
#17
What is the term used for the process of matching transactions in a company's records with those in a bank statement?
Reconciliation
Amortization
Depreciation
Accrual
#18
What is the purpose of double-entry accounting?
To prevent fraud in financial statements
To ensure every transaction is recorded twice
To simplify the recording process
To eliminate the need for financial statements
#19
Which accounting principle states that revenue should be recognized when it is earned, regardless of when payment is received?
Matching principle
Revenue recognition principle
Consistency principle
Materiality principle
#20
What is the purpose of the accrual basis of accounting?
To record transactions only when cash is received or paid
To record transactions when they occur, regardless of when cash is exchanged
To record transactions at their market value
To record transactions based on historical cost
#21
Which financial statement shows the changes in equity over a period?
Income statement
Balance sheet
Statement of retained earnings
Cash flow statement
#22
What does the term 'GAAP' stand for in accounting?
General Asset Accumulation Principle
Generally Accepted Accounting Principles
General Asset Allocation Policy
Generally Agreed Accounting Practices
#23
Which of the following is an example of a contra account?
Accounts receivable
Accumulated depreciation
Inventory
Prepaid expenses
#24
What is the formula to calculate return on equity (ROE)?
Net Income / Total Assets
Net Income / Equity
Total Assets / Equity
Total Revenue / Equity
#25
What is the purpose of the 'closing entries' process in accounting?
To close temporary accounts and transfer their balances to permanent accounts
To open new accounts for the upcoming accounting period
To adjust entries for errors made in previous accounting periods
To reconcile discrepancies between financial statements