Principles Of Financial Accounting Quiz!

1. The branch of accounting that generates reports and information for the use of internal management is known as

Tax accounting

Managerial or Management Accounting

Auditing

International Accounting

Managerial or Management Accounting is the branch of accounting that generates reports and information for the use of internal management. It involves the preparation of financial statements, budgeting, cost analysis, and performance evaluation to assist managers in making informed decisions and planning for the future. Unlike financial accounting, which focuses on providing information to external stakeholders, managerial accounting is primarily concerned with providing information to internal users within an organization to support their decision-making processes.

Explanation

Managerial or Management Accounting is the branch of accounting that generates reports and information for the use of internal management. It involves the preparation of financial statements, budgeting, cost analysis, and performance evaluation to assist managers in making informed decisions and planning for the future. Unlike financial accounting, which focuses on providing information to external stakeholders, managerial accounting is primarily concerned with providing information to internal users within an organization to support their decision-making processes.

2. The type or branch of accounting that generates reports for the use of external parties such as creditors, investors and government agencies is known as:

Financial accounting

Managerial accounting

Tax accounting

Forensic accounting

Financial accounting is the branch of accounting that generates reports for external parties such as creditors, investors, and government agencies. These reports provide information about the financial performance and position of a company, including its income statement, balance sheet, and cash flow statement. The purpose of financial accounting is to provide accurate and reliable financial information to external users to make informed decisions about the company. It involves recording, summarizing, and reporting financial transactions in accordance with generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS).

Explanation

Financial accounting is the branch of accounting that generates reports for external parties such as creditors, investors, and government agencies. These reports provide information about the financial performance and position of a company, including its income statement, balance sheet, and cash flow statement. The purpose of financial accounting is to provide accurate and reliable financial information to external users to make informed decisions about the company. It involves recording, summarizing, and reporting financial transactions in accordance with generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS).

3. Which of the following is correct?

Owner’s Equity = Liabilities + Assets

Liabilities = Assets + Owner’s Equity

Assets = Liabilities + Owner’s Equity

Assets = Owner’s Equity

The correct answer is Assets = Liabilities + Owner's Equity. This equation represents the fundamental accounting equation, which states that the total assets of a company are equal to the sum of its liabilities and owner's equity. This equation is the basis for double-entry bookkeeping and helps to ensure that the accounting equation remains balanced.

Explanation

The correct answer is Assets = Liabilities + Owner's Equity. This equation represents the fundamental accounting equation, which states that the total assets of a company are equal to the sum of its liabilities and owner's equity. This equation is the basis for double-entry bookkeeping and helps to ensure that the accounting equation remains balanced.

4. Which one of the following is not an external user of accounting information?

Investor

Creditor

Manager

Customer

The manager is not an external user of accounting information because they are an internal user. Managers use accounting information to make decisions and manage the operations of the company. External users, on the other hand, include investors, creditors, and customers who rely on accounting information to make decisions about investing, lending, or purchasing from the company.

Explanation

The manager is not an external user of accounting information because they are an internal user. Managers use accounting information to make decisions and manage the operations of the company. External users, on the other hand, include investors, creditors, and customers who rely on accounting information to make decisions about investing, lending, or purchasing from the company.

5. The stock is attractive to investors because stockholders are not liable for the corporation's actions and debts and because the stock is easily transferred.

True

False

Stockholders are not liable for the corporation's actions and debts, which means that their personal assets are protected in case of any legal or financial issues faced by the corporation. Additionally, the ease of transferring stock allows investors to buy and sell their shares easily, providing liquidity and flexibility. These factors make the stock attractive to investors, as it offers limited liability and ease of ownership transfer.

Explanation

Stockholders are not liable for the corporation's actions and debts, which means that their personal assets are protected in case of any legal or financial issues faced by the corporation. Additionally, the ease of transferring stock allows investors to buy and sell their shares easily, providing liquidity and flexibility. These factors make the stock attractive to investors, as it offers limited liability and ease of ownership transfer.

6. Who is known as the father of accounting?

Leonardo da Vinci

Fra Luca Pacioli

Al Khawarizmy

Al Mazendarany

Fra Luca Pacioli is known as the father of accounting because he is credited with writing the first comprehensive book on double-entry bookkeeping, titled "Summa de Arithmetica, Geometria, Proportioni et Proportionalità." This book laid the foundation for modern accounting practices and introduced the concept of debits and credits, which are fundamental principles in accounting. Pacioli's work greatly influenced the development of accounting as a profession and his contributions are still recognized and studied in the field today.

Explanation

Fra Luca Pacioli is known as the father of accounting because he is credited with writing the first comprehensive book on double-entry bookkeeping, titled "Summa de Arithmetica, Geometria, Proportioni et Proportionalità." This book laid the foundation for modern accounting practices and introduced the concept of debits and credits, which are fundamental principles in accounting. Pacioli's work greatly influenced the development of accounting as a profession and his contributions are still recognized and studied in the field today.

7. When all of the authorized shares have the same rights and characteristics, the stock is called:

Preferred stock

Common stock

Par value stock

Stated value stock

No-par value stock

Common stock is the correct answer because it represents ownership in a company and typically carries voting rights. Common stockholders have the potential to receive dividends, but they are not guaranteed. Unlike preferred stock, common stock does not have any special preferences or priority when it comes to dividend payments or liquidation. Par value stock, stated value stock, and no-par value stock refer to the face value or assigned value of a stock, but they do not necessarily imply that all authorized shares have the same rights and characteristics.

Explanation

Common stock is the correct answer because it represents ownership in a company and typically carries voting rights. Common stockholders have the potential to receive dividends, but they are not guaranteed. Unlike preferred stock, common stock does not have any special preferences or priority when it comes to dividend payments or liquidation. Par value stock, stated value stock, and no-par value stock refer to the face value or assigned value of a stock, but they do not necessarily imply that all authorized shares have the same rights and characteristics.

8. A company had a beginning balance in Retained Earnings of $43,000. It had net income of $6,000 and paid cash dividends of $5,625 in the current period. The ending balance in Retained Earnings equals:

$108,625

$(12,625)

$11,375

$43,375

$(11,375)

$43,000 beginning retained earnings + $6,000 net income - $5,625 dividends = $43,375 ending retained earnings.

Explanation

$43,000 beginning retained earnings + $6,000 net income - $5,625 dividends = $43,375 ending retained earnings.

9. An authorized stock is the total number of shares outstanding.

True

False

An authorized stock is the total number of shares a corporation is legally permitted to issue. The number of outstanding shares may be the same as the number of authorized shares, but quite often is less.

Explanation

An authorized stock is the total number of shares a corporation is legally permitted to issue. The number of outstanding shares may be the same as the number of authorized shares, but quite often is less.

10. Owners of preferred stock often do not have:

Ownership rights to the assets of the corporation

Voting rights

Preference to dividends

The rights to sell their stock on the open market

Preference to assets at liquidation

Preferred stockholders often do not have voting rights. This means that they do not have the ability to vote on matters related to the corporation, such as the election of board members or major decisions. While preferred stockholders may have other rights, such as preference to dividends or assets at liquidation, they are typically not granted the right to vote.

Explanation

Preferred stockholders often do not have voting rights. This means that they do not have the ability to vote on matters related to the corporation, such as the election of board members or major decisions. While preferred stockholders may have other rights, such as preference to dividends or assets at liquidation, they are typically not granted the right to vote.