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) Total Revenue - Total Expenses = Profit
B) Cash Flow from Operating Activities = Net Income
C) Assets = Liabilities + Equity
D) Revenues - Expenses = 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 retained earnings
C) Income statement
D) Statement of cash flows

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

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

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

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

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

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

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

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

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

9. 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

10. What is the formula for calculating working capital?

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

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

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

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

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

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

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

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

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

15. What type of account is an accounts payable?

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

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

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

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

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

18. What does GAAP stand for in accounting?

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

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

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

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

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

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