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

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

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

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

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

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

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

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

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

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

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

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

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

8. What does EBITDA stand for in accounting?

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

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

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

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

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

11. What is the formula for calculating working capital?

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

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

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

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

15. What type of account is an accounts payable?

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

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

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

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

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

18. What does GAAP stand for in accounting?

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

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

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

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

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

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