Fundamentals Of Accounting Test Quiz!

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Fundamentals Of Accounting Test Quiz! - Quiz

Accounting is a tool to record and analyze the financial condition and performance of the business. Some people simply can’t understand the stats and figures. But some possess deep knowledge and concepts about accounting principles. This quiz has been created to test your knowledge about the fundamental rules and principles of accounting. So, let's try out the quiz. All the best!


Questions and Answers
  • 1. 

    Which financial statement displays the revenues and expenses of a company for a period of time?

    • A.

      Income Statement 

    • B.

      Balance Sheet 

    • C.

      Cash Flow Statement

    • D.

      Statement of Stockholder's Equity

    Correct Answer
    A. Income Statement 
    Explanation
    The income statement displays all revenues and expenses recorded in a period in a single report.

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  • 2. 

    What is the main purpose of financial accounting?

    • A.

      Organize Financial Information 

    • B.

      Provide Useful, Financial Information to Outsiders

    • C.

      Keep Track of Company Expenses

    • D.

      Minimize Company Taxes 

    Correct Answer
    B. Provide Useful, Financial Information to Outsiders
    Explanation
    The purpose of financial accounting is to provide useful information for outside investors, creditors, and others.

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  • 3. 

    Which of these is not included as a separate item in the basic accounting equation?

    • A.

      Assets

    • B.

      Revenues 

    • C.

      Liabilities

    • D.

      Stockholder's Equity 

    Correct Answer
    B. Revenues 
    Explanation
    Revenues are not included in the basic accounting equation.
    Assets = Liabilities + Owner’s Equity.

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  • 4. 

    Entries to revenues accounts such as Service Revenues are usually

    • A.

      Debit

    • B.

      Credit

    Correct Answer
    B. Credit
    Explanation
    Entries to revenue accounts like Service Revenues are typically recorded as credit entries in accounting. When a business provides services to customers, it earns revenue, which increases the balance in the Service Revenues (or similar) account. In double-entry accounting, for every credit entry to the Service Revenues account, there would typically be a corresponding debit entry in another account, such as an asset account like Cash or an account receivable account, to balance the transaction. This follows the fundamental accounting equation: Assets = Liabilities + Equity.

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  • 5. 

    The accrual basis of accounting records revenues when they are:

    • A.

      Collected

    • B.

      Earned

    • C.

      Contracted

    • D.

      Readily Available for use 

    Correct Answer
    B. Earned
    Explanation
    The accrual basis of accounting only records income when it is earned.

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  • 6. 

    The account format that displays debits, credits, balances, and headings.

    • A.

      General Journal

    • B.

      General Ledger 

    • C.

      T- Account

    • D.

      Ledger Account 

    Correct Answer
    C. T- Account
    Explanation
    A T-account is a way to format accounting transactions that displays debits on the left and credits on the right.

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  • 7. 

    Asset accounts have what type of balance?

    • A.

      Debit

    • B.

      Credit 

    • C.

      Contra 

    • D.

      All of the above 

    Correct Answer
    A. Debit
    Explanation
    Asset accounts have a debit balance. Debit is the side of an account that shows increases in assets and decreases in liabilities and equity. In accounting, assets are recorded on the debit side of the balance sheet, indicating that they have a positive value. Therefore, the correct answer is debit.

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  • 8. 

    Which account is not a liability account?

    • A.

      Accounts payable 

    • B.

      Accrued Expenses 

    • C.

      Cash 

    • D.

      Notes Payable 

    Correct Answer
    C. Cash 
    Explanation
    Liabilities include resources owned to creditors such as accounts payable, accrued expenses, and notes payable. Cash is an asset.

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  • 9. 

    A ___________ is used to record a business event as they occur throughout the year.

    • A.

      Journal Entry

    • B.

      Ledger

    • C.

      Trial Balance 

    • D.

      Bank Reconciliation Statement 

    Correct Answer
    A. Journal Entry
    Explanation
    A journal entry is used to record a business event as they occur throughout the year. It is a chronological record of all the financial transactions of a business, including the date, description, and amount of each transaction. Journal entries are an important part of the accounting process as they provide a detailed and organized record of all the financial activities of a business, which can be used to prepare financial statements and analyze the financial performance of the business.

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  • 10. 

    The __________ summarizes the accounting equation in report format.

    • A.

      Trial Balance

    • B.

      Balance Sheet

    • C.

      Journal

    • D.

      Ledger

    Correct Answer
    B. Balance Sheet
    Explanation
    The balance sheet summarizes the accounting equation in report format. It provides a snapshot of a company's financial position at a specific point in time by showing its assets, liabilities, and shareholders' equity. The balance sheet is an essential financial statement that helps stakeholders understand the company's financial health and its ability to meet its obligations. Unlike the trial balance, journal, and ledger, which are used for recording and organizing transactions, the balance sheet presents a summary of these transactions in a clear and concise format.

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  • Current Version
  • Sep 08, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Sep 06, 2007
    Quiz Created by
    Rsahiwal
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