Small Business Accounting Trivia Questions Quiz!

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Quizzes Created: 948 | Total Attempts: 930,435

Questions: 10 | Attempts: 221 | Updated: Mar 22, 2023

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Small Business Accounting Trivia Questions Quiz! - Quiz

Small-business owners make decisions every day that impact the economics of the venture. Having proper accounting procedures in place makes it easy to track the money as it comes and goes and to have an up-to-date view of the company's financial health. Take this quiz to know more.

Questions and Answers

1.

Amongst the following, who is considered an external user of accounting?
- A.
  
  Supervisors of a business
- B.
  
  Customers
- C.
  
  Employees
- D.
  
  Managers of a corporation
Correct Answer
B. Customers

Explanation
Customers are considered external users of accounting because they are individuals or entities outside of the business who utilize the financial information provided by the company. They are interested in the financial statements to assess the financial health of the business, make purchasing decisions, and evaluate the company's credibility. Unlike supervisors, employees, and managers who are internal users, customers do not have direct access to the company's financial records and rely on the financial statements to make informed decisions.

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2.

For accounting and financial reporting purposes, smaller businesses...
- A.
  
  Generally require complex, expensive accounting software systems
- B.
  
  Only need to generate financial reports when requesting business financing
- C.
  
  Can generally perform accounting and financial reporting manually or with a small accounting system
- D.
  
  Do not normally have any accounting and financial reporting processes
Correct Answer
C. Can generally perform accounting and financial reporting manually or with a small accounting system

Explanation
Smaller businesses can generally perform accounting and financial reporting manually or with a small accounting system because they typically have fewer transactions and financial complexities compared to larger businesses. This allows them to manage their finances effectively without the need for complex and expensive accounting software systems. However, as their business grows, they may need to consider investing in more advanced accounting software to handle the increased volume of transactions and reporting requirements.

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3.

Which one of the following scenarios would most likely describe the accounting personnel for a small business?
- A.
  
  An accounting department that consists of 50 employees, 10 of whom are senior managers
- B.
  
  An accounting department made up of 4 employees there is one person for each function including accounts receivable, accounts payable, general ledger, and financial reporting
- C.
  
  An accounting department for each division consisting of 25 employees each
- D.
  
  An accounting manager for each line of service the company offers
Correct Answer
B. An accounting department made up of 4 employees there is one person for each function including accounts receivable, accounts payable, general ledger, and financial reporting

Explanation
The most likely scenario for the accounting personnel in a small business would be an accounting department made up of 4 employees, with each person responsible for a specific function such as accounts receivable, accounts payable, general ledger, and financial reporting. This scenario suggests a small business with a lean accounting team that handles all the necessary accounting tasks efficiently and effectively.

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4.

What are the primary purpose of internal controls in accounting and financial reporting?
- A.
  
  To ensure timely reporting of financial data
- B.
  
  To mitigate the reporting of inaccurate financial data and fraud
- C.
  
  To make sure each employee performs the tasks they have been assigned, without deviation
- D.
  
  To make the accounting manager's job easier
Correct Answer
A. To ensure timely reporting of financial data

Explanation
Internal controls in accounting and financial reporting are implemented to ensure the timely reporting of financial data. These controls are put in place to establish a systematic and reliable process for recording, summarizing, and reporting financial information. By having effective internal controls, organizations can ensure that financial data is accurately and promptly recorded, reducing the risk of errors and fraud. This allows stakeholders to make informed decisions based on timely and reliable financial information.

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5.

What is double entry accounting?
- A.
  
  Where two people enter in the account books
- B.
  
  Where one person writes down entries and another review
- C.
  
  System of accounting that records each business transaction as two components (one as a debit and one as a credit)
- D.
  
  None of the above
Correct Answer
C. System of accounting that records each business transaction as two components (one as a debit and one as a credit)

Explanation
Double entry accounting is a system of accounting that records each business transaction as two components, one as a debit and one as a credit. This means that for every transaction, there will be at least two accounts affected, with one account being debited and another account being credited. This system ensures that the accounting equation (assets = liabilities + equity) remains in balance and provides a detailed and accurate record of financial transactions.

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6.

In the basic accounting equation, Assets= Liabilities +?
- A.
  
  Long term investments
- B.
  
  Current assets
- C.
  
  Retained earnings
- D.
  
  Stockholders’ Equity
Correct Answer
D. Stockholders’ Equity

Explanation
In the basic accounting equation, Assets = Liabilities + Stockholders' Equity. Stockholders' Equity represents the residual interest in the assets of the entity after deducting liabilities. It includes the initial investments made by the stockholders, as well as any retained earnings or profits generated by the company. Therefore, Stockholders' Equity is the correct answer to complete the equation.

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7.

Which term describes an amount owed by a business?
- A.
  
  An asset
- B.
  
  Loss
- C.
  
  A liability
- D.
  
  Debt
Correct Answer
C. A liability

Explanation
A liability refers to an amount owed by a business. This can include debts or obligations that the business has to pay in the future. It represents the company's financial obligations and is recorded on its balance sheet.

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8.

Which of the following refers to organized summaries of business's financial activities?
- A.
  
  Accounting Records
- B.
  
  Financial Statements
- C.
  
  Banking Worksheets
- D.
  
  Balance Sheet
Correct Answer
B. Financial Statements

Explanation
Financial statements are organized summaries of a business's financial activities. They provide a comprehensive overview of the company's financial position, performance, and cash flows. These statements include the income statement, balance sheet, statement of cash flows, and statement of changes in equity. They are prepared in accordance with generally accepted accounting principles (GAAP) and are used by stakeholders such as investors, creditors, and management to assess the financial health and performance of the business.

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9.

Which of the following is a financial statement used to indicate how successfully the business performed during a period of time?
- A.
  
  Income Statement
- B.
  
  Statement of Cash flows
- C.
  
  Retained Earnings Statement
- D.
  
  Balance Sheet
Correct Answer
A. Income Statement

Explanation
The income statement is a financial statement that shows the profitability of a business during a specific period of time. It provides information on the revenues, expenses, and net income of the business. This statement helps in assessing the financial performance of the business and determining its profitability. The statement of cash flows, retained earnings statement, and balance sheet provide different types of financial information but do not specifically indicate the business's performance during a period of time.

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10.

What is the method used to determine the minimum sales volume needed to cover all costs?
- A.
  
  Sherman Act
- B.
  
  Stamp Act
- C.
  
  BreakEven Analysis
- D.
  
  Budget
Correct Answer
C. BreakEven Analysis

Explanation
BreakEven Analysis is the method used to determine the minimum sales volume needed to cover all costs. It helps in calculating the point at which total revenue equals total costs, resulting in neither profit nor loss. By analyzing fixed costs, variable costs, and selling price per unit, a business can identify the break-even point and make informed decisions about pricing, production levels, and cost management. This analysis is crucial for businesses to understand their financial viability and make strategic decisions to achieve profitability.

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Small Business Accounting Trivia Questions Quiz!

Amongst the following, who is considered an external user of accounting?

For accounting and financial reporting purposes, smaller businesses...

Which one of the following scenarios would most likely describe the accounting personnel for a small business?

What are the primary purpose of internal controls in accounting and financial reporting?

What is double entry accounting?

In the basic accounting equation, Assets= Liabilities +?

Which term describes an amount owed by a business?

Which of the following refers to organized summaries of business's financial activities?

Which of the following is a financial statement used to indicate how successfully the business performed during a period of time?

What is the method used to determine the minimum sales volume needed to cover all costs?