Basic Financial Accounting Concepts! Quiz

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| By Terri3jones

Terri3jones

Community Contributor

Quizzes Created: 1 | Total Attempts: 3,249

Questions: 10 | Attempts: 3,251 | Updated: Mar 21, 2023

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Basic Financial Accounting Concepts! Quiz - Quiz

Financial Accounting means to analyze, summarize, and record financial transactions as well as to show an accurate picture of the financial affairs of the company. This basic quiz has been developed to test your knowledge of Financial Accounting Concepts and principles. So, let's try out the quiz. All the best!

Questions and Answers

1.

How is the income statement affected when a company issues stock?
- A.
  
  Income is greatly effected.
- B.
  
  No income statement effect. Purely balance sheet.
- C.
  
  Balance sheet is not effected
- D.
  
  One thru three are all correct
- E.
  
  None of the above
Correct Answer
B. No income statement effect. Purely balance sheet.

Explanation
When a company issues stock, it does not have a direct impact on the income statement. The income statement reflects the company's revenues, expenses, and net income, which are not directly affected by stock issuance. Instead, the issuance of stock affects the balance sheet by increasing the company's equity and cash or other assets, depending on the terms of the stock issuance. Therefore, the correct answer is that there is no income statement effect, and the impact is purely on the balance sheet.

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2.

What financial statement lists assets from current to long term?
- A.
  
  Balance Sheet
- B.
  
  Income Statement
- C.
  
  Cash Flow Statement
- D.
  
  Statement of retained earnings
Correct Answer
A. Balance Sheet

Explanation
The balance sheet is a financial statement that lists assets from current to long term. It provides a snapshot of a company's financial position at a specific point in time by showing its assets, liabilities, and shareholders' equity. Assets are typically listed in order of liquidity, with current assets such as cash and accounts receivable listed first, followed by long-term assets such as property, plant, and equipment. Therefore, the balance sheet is the correct answer for this question.

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3.

The income statement shows which of the following?
- A.
  
  Assets and liabilities
- B.
  
  Income and expenses
- C.
  
  Receipts and payments
- D.
  
  Bank Reconciliation Statement
Correct Answer
B. Income and expenses

Explanation
The income statement is a financial statement that shows a company's revenue, expenses, and net income or loss over a specific period of time. It provides information about the company's ability to generate profit by comparing its income (revenue) with its expenses. Therefore, the correct answer is "Income and expenses."

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4.

Equity is shown on which financial statement?
- A.
  
  Balance sheet
- B.
  
  Income statement
- C.
  
  Cash Flow
Correct Answer
A. Balance sheet

Explanation
Equity is shown on the balance sheet. The balance sheet provides a snapshot of a company's financial position at a specific point in time. It includes assets, liabilities, and equity. Equity represents the ownership interest in a company and is calculated as the difference between the company's assets and liabilities. It is an important component of the balance sheet as it reflects the shareholders' claims on the company's assets after all liabilities have been settled. Therefore, equity is reported on the balance sheet.

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5.

Gross profit is equal to revenue less which item?
- A.
  
  Taxation
- B.
  
  Cost of goods sold
- C.
  
  Operating expenses
Correct Answer
B. Cost of goods sold

Explanation
Gross profit is a measure of a company's profitability and is calculated by subtracting the cost of goods sold from revenue. It represents the amount of money a company has left after deducting the direct costs associated with producing or purchasing the goods it sells. Therefore, the correct answer is "Cost of goods sold" because it is subtracted from revenue to calculate gross profit.

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6.

Are inventory and accounts receivable are classified in the balance sheet as?
- A.
  
  Long-term assets
- B.
  
  Current liabilities
- C.
  
  Current assets
Correct Answer
C. Current assets

Explanation
Inventory and accounts receivable are classified in the balance sheet as current assets because they are expected to be converted into cash or used up within one year or the operating cycle of the business, whichever is longer. Current assets are important for assessing a company's liquidity and ability to meet short-term obligations. They include assets that are readily convertible into cash, such as inventory that will be sold and accounts receivable that will be collected from customers.

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7.

The terms operating, financing and investing as used to categorize what type of item?
- A.
  
  Assets
- B.
  
  Revenue
- C.
  
  Cash flow
Correct Answer
C. Cash flow

Explanation
The terms operating, financing, and investing are used to categorize the different types of cash flows. Operating cash flow refers to the cash generated or used in the normal course of business operations. Financing cash flow represents the cash generated or used from activities related to raising or repaying capital, such as issuing or buying back stocks or bonds. Investing cash flow represents the cash generated or used from activities related to acquiring or selling long-term assets, such as property, equipment, or investments. Therefore, the correct answer is cash flow.

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8.

A double entry bookkeeping posting requires a minimum of how many accounts?
- A.
  
  2
- B.
  
  1
- C.
  
  3
Correct Answer
A. 2

Explanation
A double entry bookkeeping posting requires a minimum of two accounts because this system follows the principle that every transaction has two equal and opposite effects. Each transaction is recorded in two accounts - one account is debited and the other account is credited. This ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced. Therefore, at least two accounts are needed to record the dual effects of each transaction.

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9.

A listing of the account names and account codes is called what?
- A.
  
  Trial balance
- B.
  
  Chart of accounts
- C.
  
  Balance sheet
Correct Answer
B. Chart of accounts

Explanation
A listing of the account names and account codes is called a chart of accounts. This document provides a systematic and organized overview of all the accounts used by a company or organization. It helps in categorizing and classifying financial transactions, making it easier to track and analyze financial data. The chart of accounts is an essential tool for financial reporting and ensuring accuracy in the recording of financial information.

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10.

A listing of the balances on all accounts is called what?
- A.
  
  Trial balance
- B.
  
  Chart of accounts
- C.
  
  Balance sheet
Correct Answer
A. Trial balance

Explanation
A listing of the balances on all accounts is called a trial balance. This is a financial statement that summarizes the closing balances of all accounts in the general ledger. It is used to ensure that the total debit balances equal the total credit balances, thus verifying the accuracy of the recorded transactions. The trial balance helps in identifying any errors or discrepancies in the accounting records before preparing the final financial statements.

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Current Version
Mar 21, 2023

Quiz Edited by
ProProfs Editorial Team
Apr 16, 2008

Quiz Created by
Terri3jones

Basic Financial Accounting Concepts! Quiz

How is the income statement affected when a company issues stock?

What financial statement lists assets from current to long term?

The income statement shows which of the following?

Equity is shown on which financial statement?

Gross profit is equal to revenue less which item?

Are inventory and accounts receivable are classified in the balance sheet as?

The terms operating, financing and investing as used to categorize what type of item?

A double entry bookkeeping posting requires a minimum of how many accounts?

A listing of the account names and account codes is called what?

A listing of the balances on all accounts is called what?