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Accounting - Test
Contributed by: Baker
  • 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) Total Revenue - Total Expenses = Profit
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) Statement of cash flows
B) Balance sheet
C) Statement of retained earnings
D) Income statement
  • 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) Income statement
B) Balance sheet
C) Statement of cash flows
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) Depreciation
B) Depletion
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, Depreciation, and Amortization
D) Earnings Before Income, Taxes, Dividends, and Amortization
  • 9. 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.
  • 10. Which of the following statements is true about a balance sheet?
A) It demonstrates the cash flows of a company
B) It shows the financial position of a company at a specific point in time
C) It shows the revenues and expenses over a period of time
D) It summarizes the net income of a company
  • 11. What is the formula for calculating earnings per share (EPS)?
A) Net Income / Average number of outstanding shares
B) Dividends / Earnings before interest and taxes (EBIT)
C) Net Income / Total equity
D) Revenue / Total assets
  • 12. Which financial statement shows the cash inflows and outflows of a company during a period?
A) Balance sheet
B) Statement of retained earnings
C) Statement of cash flows
D) Income statement
  • 13. What type of account is 'Accounts Receivable'?
A) Asset.
B) Expense.
C) Equity.
D) Liability.
  • 14. What is the formula for calculating working capital?
A) Current Assets - Current Liabilities
B) Total Equity + Net Income
C) Total Assets - Total Liabilities
D) Total Revenue - Total Expenses
  • 15. What type of account is an accounts payable?
A) Asset
B) Equity
C) Revenue
D) Liability
  • 16. Which financial ratio measures a company's ability to pay off its short-term liabilities with its current assets?
A) Debt to equity ratio
B) Profit margin
C) Return on equity
D) Current ratio
  • 17. How are assets generally listed on a balance sheet?
A) In order of profitability
B) In order of size
C) In order of liquidity
D) In order of age
  • 18. What does the acronym COGS stand for in accounting?
A) Commission on Gross Sales
B) Consumption of Goods Sold
C) Cost of Goods Sold
D) Cost of Gross Sales
  • 19. What is the formula for calculating the debt-to-equity ratio?
A) Total Debt / Total Equity
B) Assets / Liabilities
C) Net Income / Total Equity
D) Total Assets / Total Equity
  • 20. Which financial statement reports a company's financial position at a specific point in time?
A) Balance sheet.
B) Statement of cash flows.
C) Retained earnings statement.
D) Income statement.
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