Accounting - Test

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) Total Revenue - Total Expenses = Profit
C) Assets = Liabilities + Equity
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) Statement of retained earnings
B) Income statement
C) Statement of cash flows
D) Balance sheet

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

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

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

A) First In, First Out
B) Final In, Final Out
C) First In, Last Out
D) Funds In, Funds 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) Amortization
B) Capitalization
C) Depreciation
D) Depletion

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

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

8. What does EBITDA stand for in accounting?

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

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

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

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

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

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

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

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

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

15. What type of account is an accounts payable?

A) Asset
B) Liability
C) Equity
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) Current ratio
D) Return on equity

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

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

18. What does GAAP stand for in accounting?

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

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

A) Expense.
B) Equity.
C) Asset.
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) Statement of cash flows.
D) Balance sheet.

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