Financial Accounting Notes Terms

Question 1

What is the accounting equation?

Accepted Answer

Assets = Liabilities + Equity

Answer

Assets = Liabilities - Equity

Answer

Equity = Assets + Liabilities

Answer

Liabilities = Assets + Equity

Question 2

Which financial statement shows a company's financial position at a specific point in time?

Accepted Answer

Balance Sheet

Answer

Income Statement

Answer

Cash Flow Statement

Answer

Statement of Retained Earnings

Question 3

In accounting, what does GAAP stand for?

Accepted Answer

Generally Accepted Accounting Principles

Answer

General Accounting and Audit Principles

Answer

Global Accounting and Analysis Practices

Answer

General Agreement on Accounting Policies

Question 4

A decrease in an asset account is recorded as a:

Accepted Answer

Credit

Answer

Debit

Answer

Gain

Answer

Loss

Question 5

An increase in a liability account is recorded as a:

Accepted Answer

Credit

Answer

Debit

Answer

Expense

Answer

Revenue

Question 6

Revenue is recognized when it is:

Accepted Answer

Earned, regardless of when cash is received

Answer

Collected in cash

Answer

Billed to the customer

Answer

Deposited in the bank

Question 7

Which of the following is an intangible asset?

Accepted Answer

Goodwill

Answer

Machinery

Answer

Inventory

Answer

Accounts Receivable

Question 8

The process of allocating the cost of a tangible asset over its useful life is called:

Accepted Answer

Depreciation

Answer

Amortization

Answer

Depletion

Answer

Valuation

Question 9

What type of account is 'Accounts Payable'?

Accepted Answer

Liability

Answer

Asset

Answer

Equity

Answer

Expense

Question 10

Gross Profit is calculated as:

Accepted Answer

Revenue - Cost of Goods Sold

Answer

Revenue - Operating Expenses

Answer

Net Income - Taxes

Answer

Revenue - Total Expenses

Question 11

Which financial statement reports cash receipts and cash payments during a period?

Accepted Answer

Statement of Cash Flows

Answer

Income Statement

Answer

Balance Sheet

Answer

Statement of Equity

Question 12

Retained Earnings are classified as:

Accepted Answer

Equity

Answer

Assets

Answer

Liabilities

Answer

Revenues

Question 13

The 'matching principle' requires that:

Accepted Answer

Expenses be matched with the revenues they help generate in the same period

Answer

Assets must equal liabilities

Answer

Debits must equal credits

Answer

Cash inflows must match cash outflows

Question 14

Which of the following would be considered a current asset?

Accepted Answer

Inventory

Answer

Land

Answer

Building

Answer

Long-term investments

Question 15

Dividends paid to shareholders are recorded on which financial statement?

Accepted Answer

Statement of Retained Earnings

Answer

Income Statement

Answer

Balance Sheet

Answer

Both A and C

Question 16

Which basis of accounting records revenues when cash is received and expenses when cash is paid?

Accepted Answer

Cash basis

Answer

Accrual basis

Answer

Hybrid basis

Answer

GAAP basis

Question 17

What does 'COGS' stand for?

Accepted Answer

Cost of Goods Sold

Answer

Cash Over Gross Sales

Answer

Company Operating General Standard

Answer

Cost of General Services

Question 18

A trial balance is prepared to:

Accepted Answer

Prove that total debits equal total credits

Answer

Calculate net income

Answer

Determine tax liability

Answer

Prepare the audit report

Question 19

If a company receives cash in advance for services not yet performed, it records:

Accepted Answer

Unearned Revenue (Liability)

Answer

Service Revenue (Equity)

Answer

Accounts Receivable (Asset)

Answer

Prepaid Expense (Asset)

Question 20

The quick ratio (acid-test ratio) excludes which of the following current assets?

Accepted Answer

Inventory

Answer

Cash

Answer

Accounts Receivable

Answer

Short-term investments

Financial Accounting Notes Terms

What is the accounting equation?

Which financial statement shows a company's financial position at a specific point in time?

In accounting, what does GAAP stand for?

A decrease in an asset account is recorded as a:

An increase in a liability account is recorded as a:

Revenue is recognized when it is:

Which of the following is an intangible asset?

The process of allocating the cost of a tangible asset over its useful life is called:

What type of account is 'Accounts Payable'?

Gross Profit is calculated as:

Which financial statement reports cash receipts and cash payments during a period?

Retained Earnings are classified as:

The 'matching principle' requires that:

Which of the following would be considered a current asset?

Dividends paid to shareholders are recorded on which financial statement?

Which basis of accounting records revenues when cash is received and expenses when cash is paid?

What does 'COGS' stand for?

A trial balance is prepared to:

If a company receives cash in advance for services not yet performed, it records:

The quick ratio (acid-test ratio) excludes which of the following current assets?

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