A Quick Accounting Knowledge Quiz!

1.

What is stockholders' equity?
- A.
  
  Sales of products or services
- B.
  
  Owners' claims to resources
- C.
  
  Resources owned
- D.
  
  Costs of selling products or services
- E.
  
  Amounts owed
Correct Answer
B. Owners' claims to resources

Explanation
Stockholders' equity refers to the ownership interest of the shareholders in a company. It represents the residual interest in the company's assets after deducting liabilities. In other words, it is the amount of resources that belong to the owners of the company. This includes the initial investment made by the shareholders, as well as any retained earnings or additional capital contributed over time. Stockholders' equity represents the claims that the owners have on the company's resources and is an important measure of the company's financial health and value.

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2.

What's revenue?
- A.
  
  Costs of selling products or services
- B.
  
  Expense to run business
- C.
  
  Sales of products or services
- D.
  
  Distributions to stockholders
- E.
  
  Assets purchased to run business
Correct Answer
C. Sales of products or services

Explanation
Revenue refers to the total amount of money generated by a company through the sales of its products or services. It represents the income received from customers in exchange for the goods or services provided. Revenue is a crucial financial metric as it directly impacts a company's profitability and growth potential. By understanding the revenue generated, businesses can assess their sales performance, make informed decisions, and plan for future growth strategies.

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3.

What are expenses?
- A.
  
  Costs of selling products or services
- B.
  
  Sales of products or services
- C.
  
  Amounts owed
- D.
  
  Distributions to stockholders
- E.
  
  Owners' claims to resources
Correct Answer
A. Costs of selling products or services

Explanation
Expenses refer to the costs incurred in the process of selling products or services. These costs can include various items such as advertising expenses, employee salaries, rent, utilities, and other overhead costs. By deducting expenses from the revenue generated by selling products or services, a company can determine its profitability. Therefore, the correct answer for this question is "costs of selling products or services".

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4.

What is the accounting equation?
- A.
  
  Assets - liabilities = stockholders' equity
- B.
  
  Assets + liabilities = stockholders' equity
- C.
  
  Liabilities - stockholders' equity = assets
- D.
  
  All of the above
Correct Answer
A. Assets - liabilities = stockholders' equity

Explanation
The accounting equation states that assets minus liabilities equals stockholders' equity. This equation represents the fundamental relationship between a company's resources (assets), its debts and obligations (liabilities), and the amount of ownership or investment held by the shareholders (stockholders' equity). By subtracting the company's liabilities from its assets, we can determine the amount of equity that belongs to the shareholders. This equation is essential in financial accounting as it helps in understanding the financial position and performance of a company.

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5.

What is an example of an expense?
- A.
  
  Bank loan
- B.
  
  Interest paid to a credit union
- C.
  
  Principle paid to Lehman bank
- D.
  
  Monthly rent on office space
Correct Answer
D. Monthly rent on office space

Explanation
An example of an expense is the monthly rent on office space. This is because rent is a recurring payment that a business or individual makes in order to use a physical space for their operations. It is considered an expense because it is a cost that is incurred regularly and is necessary for the business to continue its operations.

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6.

What is the statement called that measures activities involving cash receipts and cash payments over an interval of time?
- A.
  
  Income Statement
- B.
  
  Balance Sheet
- C.
  
  The Statement of Stockholders' Equity
- D.
  
  The Statement of Cash Flows
Correct Answer
D. The Statement of Cash Flows

Explanation
The statement called "The Statement of Cash Flows" measures activities involving cash receipts and cash payments over an interval of time. This statement provides information about the cash generated and used by a company during a specific period, categorizing the cash flows into operating, investing, and financing activities. It helps users understand the company's liquidity, cash position, and ability to generate future cash flows.

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7.

What piece of company information better explains companies' stock price performance?
- A.
  
  Balance Statement
- B.
  
  Financial accounting net income
- C.
  
  Revenues
- D.
  
  Expenses
Correct Answer
B. Financial accounting net income

Explanation
Financial accounting net income is a better piece of company information to explain stock price performance because it represents the company's profitability. Net income is the amount of profit or loss a company generates after deducting all expenses and taxes from its revenues. A higher net income indicates that the company is making more profit, which can positively impact its stock price. Investors often look at net income as an indicator of a company's financial health and potential for future growth, making it a significant factor in determining stock price performance.

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8.

Bookkeeping is a systematic method of recording credit transactions in the books of accounts.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
Bookkeeping is indeed a systematic method of recording credit transactions in the books of accounts. This process involves accurately and consistently recording financial transactions, such as sales, purchases, and expenses, in order to maintain an organized and reliable record of a company's financial activities. By keeping track of these transactions, bookkeeping helps businesses monitor their financial health, make informed decisions, and fulfill their reporting obligations. Therefore, the statement "Bookkeeping is a systematic method of recording credit transactions in the books of accounts" is true.

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9.

Which of the following reports the revenues and expenses for a specific period of time?
- A.
  
  Income Statement
- B.
  
  Balance Sheet
- C.
  
  Statement Of Cash Flows
- D.
  
  None of the above
Correct Answer
A. Income Statement

Explanation
The income statement is a financial statement that reports the revenues and expenses of a company for a specific period of time, typically a month, quarter, or year. It provides information on the company's profitability by showing the net income or loss for the period. The balance sheet, on the other hand, reports the company's assets, liabilities, and shareholders' equity at a specific point in time. The statement of cash flows reports the cash inflows and outflows during a specific period, categorizing them into operating, investing, and financing activities. Therefore, the income statement is the correct answer as it specifically reports the revenues and expenses for a specific period of time.

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10.

At which amount are the assets usually reported on the balance sheet?
- A.
  
  Current Market Value
- B.
  
  Expected Selling Price
- C.
  
  Cost
- D.
  
  Profit Rate
Correct Answer
C. Cost

Explanation
Assets are usually reported on the balance sheet at their cost. Cost refers to the original amount paid to acquire the asset, including any additional costs incurred to bring the asset to its present condition and location. Reporting assets at cost provides a reliable and objective measure of their value, as it reflects the actual amount invested in acquiring the asset. This allows stakeholders to assess the financial position and performance of the company accurately.

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A Quick Accounting Knowledge Quiz!

What is stockholders' equity?

What's revenue?

What are expenses?

What is the accounting equation?

What is an example of an expense?

What is the statement called that measures activities involving cash receipts and cash payments over an interval of time?

What piece of company information better explains companies' stock price performance?

Bookkeeping is a systematic method of recording credit transactions in the books of accounts.

Which of the following reports the revenues and expenses for a specific period of time?

At which amount are the assets usually reported on the balance sheet?