Accounting

1. Accounting is the systematic process of recording, analyzing, and reporting financial transactions for an individual or organization. It involves preparing financial statements, budgeting, auditing, and providing insight on financial performance. By maintaining accurate records of income, expenses, assets, and liabilities, accounting helps in tracking financial health, making informed decisions, and ensuring compliance with regulations. Ultimately, accounting plays a vital role in helping individuals and businesses manage their finances effectively and achieve their financial goals.

What is the accounting equation?

A) Revenues - Expenses = Net Income
B) Assets = Liabilities + Equity
C) Total Revenue - Total Expenses = Profit
D) Cash Flow from Operating Activities = Net Income

2. Which financial statement shows the revenues and expenses of a company over a period of time?

A) Balance sheet
B) Statement of cash flows
C) Statement of retained earnings
D) Income statement

3. Which of the following is classified as a current liability?

A) Common stock
B) Long-term debt
C) Property, plant, and equipment
D) Accounts payable

4. What does the acronym FIFO stand for in accounting?

A) Final In, Final Out
B) First In, Last Out
C) Funds In, Funds Out
D) First In, First Out

5. Which financial statement reports the changes in retained earnings for a specific period?

A) Statement of cash flows
B) Balance sheet
C) Statement of retained earnings
D) Income statement

6. What is the accounting term for the process of allocating the cost of an intangible asset over its useful life?

A) Depletion
B) Amortization
C) Capitalization
D) Depreciation

7. Which accounting principle requires that expenses are reported in the same period as the revenues they helped to earn?

A) Materiality principle
B) Prudence principle
C) Matching principle
D) Consistency principle

8. What does EBITDA stand for in accounting?

A) Earnings Before Income, Taxes, Depreciation, and Amortization
B) Earnings Before Income, Taxes, Dividends, and Amortization
C) Earnings Before Interest, Taxes, Depreciation, and Amortization
D) Earnings Before Interest, Taxes, Dividends, and Amortization

9. What is the formula for calculating the debt-to-equity ratio?

A) Total Assets / Total Equity
B) Assets / Liabilities
C) Total Debt / Total Equity
D) Net Income / Total Equity

10. What does the acronym COGS stand for in accounting?

A) Cost of Gross Sales
B) Consumption of Goods Sold
C) Cost of Goods Sold
D) Commission on Gross Sales

11. What is the formula for calculating working capital?

A) Current Assets - Current Liabilities
B) Total Assets - Total Liabilities
C) Total Revenue - Total Expenses
D) Total Equity + Net Income

12. Which of the following statements is true about a balance sheet?

A) It demonstrates the cash flows of a company
B) It summarizes the net income of a company
C) It shows the revenues and expenses over a period of time
D) It shows the financial position of a company at a specific point in time

13. What is the formula for calculating earnings per share (EPS)?

A) Net Income / Total equity
B) Revenue / Total assets
C) Net Income / Average number of outstanding shares
D) Dividends / Earnings before interest and taxes (EBIT)

14. How are assets generally listed on a balance sheet?

A) In order of age
B) In order of size
C) In order of profitability
D) In order of liquidity

15. What type of account is an accounts payable?

A) Asset
B) Equity
C) Liability
D) Revenue

16. Which financial ratio measures a company's ability to pay off its short-term liabilities with its current assets?

A) Profit margin
B) Debt to equity ratio
C) Return on equity
D) Current ratio

17. Which financial statement shows the cash inflows and outflows of a company during a period?

A) Statement of retained earnings
B) Balance sheet
C) Income statement
D) Statement of cash flows

18. What does GAAP stand for in accounting?

A) Global Association of Accounting Professionals.
B) Global Accounting and Auditing Principles.
C) Generally Accepted Accounting Principles.
D) General Accounting and Auditing Procedures.

19. What type of account is 'Accounts Receivable'?

A) Expense.
B) Asset.
C) Equity.
D) Liability.

20. Which financial statement reports a company's financial position at a specific point in time?

A) Income statement.
B) Retained earnings statement.
C) Balance sheet.
D) Statement of cash flows.

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