Do You Know Accounting?

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| By Mickykumar

Mickykumar

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Quizzes Created: 1 | Total Attempts: 517

Questions: 10 | Attempts: 517 | Updated: Nov 16, 2023

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Accounting is one of the most needed and well-sought-after careers. Are you excited about accounting? Do you think you know accounting? Take this quiz and find out. Every business, be it small or large, needs an accountant. The quiz below determines your knowledge of some basic accounting practices. Why not play this quiz with some of your friends for a fun learning time together; you can even compare scores! Wouldn't that be super fun? Give it a try, and all the best in your studies.

Questions and Answers

1.

Trade discounts are generally not used to
- A.
  
  Avoid frequent changes in catalogues.
- B.
  
  Quote different prices for different quantities purchased.
- C.
  
  Encourage faster payment.
- D.
  
  Hide the true invoice price from competitors.
Correct Answer
A. Avoid frequent changes in catalogues.

Explanation
Trade discounts are generally not used to avoid frequent changes in catalogues. This is because trade discounts are typically offered to customers as a reduction in the list price of a product, and they are used to encourage larger purchases or to reward customer loyalty. The purpose of trade discounts is not related to catalogues or pricing strategies, but rather to incentivize customers to buy more or to buy more frequently. Therefore, the correct answer is avoid frequent changes in catalogues.

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2.

The purpose of accounting is to get information on :
- A.
  
  Cost and income of the employees
- B.
  
  Company's tax records
- C.
  
  Financial condition of an institution
- D.
  
  All of the above
Correct Answer
A. Cost and income of the employees

Explanation
The purpose of accounting is to provide information on the cost and income of the employees, as well as the company's tax records and the financial condition of the institution. Accounting involves recording, summarizing, and analyzing financial transactions to provide accurate and relevant information for decision-making purposes. By tracking the cost and income of employees, the company can assess their performance and make informed decisions regarding compensation and benefits. Additionally, accounting helps in maintaining accurate tax records and assessing the financial health of the institution by analyzing its financial statements and reports.

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3.

Bank overdrafts are generally reported as
- A.
  
  A current asset.
- B.
  
  A contra account.
- C.
  
  A non-current asset.
- D.
  
  A current liability.
Correct Answer
D. A current liability.

Explanation
Bank overdrafts are generally reported as a current liability because they represent funds that a company has borrowed from a bank and must repay within a short period, usually within a year. As a liability, bank overdrafts indicate the company's obligation to the bank and are typically included in the current liabilities section of the balance sheet. This classification reflects the fact that the company owes the bank money and is expected to settle the debt in the near future.

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4.

The portion of any demand deposit that a customer keeps as support for its existing or maturing obligations is called a(n)
- A.
  
  Account receivable.
- B.
  
  Bank overdraft.
- C.
  
  Compensating balance.
- D.
  
  Restricted cash.
Correct Answer
C. Compensating balance.

Explanation
A compensating balance refers to the portion of a demand deposit that a customer maintains as a support for its existing or maturing obligations. It is a minimum balance that a customer is required to maintain in their account with a bank, usually as a condition for obtaining a loan or other banking services. This balance acts as collateral or security for the bank, ensuring that the customer has sufficient funds to cover their obligations. Therefore, compensating balance is the correct answer in this context.

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5.

Which of the following actions would not be considered good management of accounts receivable?
- A.
  
  Assessing creditworthiness of new or potential customers
- B.
  
  Very loose or flexible credit terms to encourage sales
- C.
  
  Offering discounts to encourage faster payment
- D.
  
  Regular aged receivables analysis
Correct Answer
B. Very loose or flexible credit terms to encourage sales

Explanation
Offering very loose or flexible credit terms to encourage sales would not be considered good management of accounts receivable. This is because it increases the risk of late or non-payment from customers, leading to a higher level of bad debts. Good management of accounts receivable involves assessing the creditworthiness of new or potential customers, offering discounts to encourage faster payment, and conducting regular aged receivables analysis to monitor and control the outstanding balances.

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6.

Dividends and interest receivable would be classified as
- A.
  
  Loans receivable.
- B.
  
  Trade receivables.
- C.
  
  Notes receivable.
- D.
  
  Nontrade receivables.
Correct Answer
D. Nontrade receivables.

Explanation
Dividends and interest receivable would be classified as nontrade receivables because they are not related to the normal operations of a business. Trade receivables typically refer to amounts owed by customers for the sale of goods or services, while notes receivable are formal written promises to pay a specific amount at a future date. Dividends and interest receivable, on the other hand, are usually related to investments or financial instruments and are not directly tied to the business's core operations. Therefore, they would be classified as nontrade receivables.

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7.

Which of the following is considered as “cash” for reporting purposes?
- A.
  
  Money market chequing accounts
- B.
  
  Certificates of deposit (CDs)
- C.
  
  Travel advances to employees
- D.
  
  Postdated cheques
Correct Answer
A. Money market chequing accounts

Explanation
Money market chequing accounts are considered as "cash" for reporting purposes because they are highly liquid and can be readily converted into cash. These accounts typically offer a low risk and provide a higher interest rate compared to regular chequing accounts. They are easily accessible and can be used for daily transactions, making them a reliable form of cash for reporting purposes.

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8.

The written evidence that supports a business transaction is called what?
- A.
  
  Journal
- B.
  
  Nominal accounts
- C.
  
  Voucher
- D.
  
  A ledger
Correct Answer
C. Voucher

Explanation
A voucher is the written evidence that supports a business transaction. It is a document that provides proof of the transaction and includes details such as the amount, date, and purpose of the transaction. Vouchers are used to maintain accurate records and to ensure accountability in financial transactions. They are typically attached to the relevant documents, such as invoices or receipts, and are kept as supporting evidence for auditing and verification purposes.

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9.

____________ is the process of entering the transaction from journal to the ledger.
- A.
  
  Entry
- B.
  
  Writing
- C.
  
  Posting
- D.
  
  All of the above
Correct Answer
C. Posting

Explanation
Posting is the process of entering the transaction from the journal to the ledger. It involves transferring the information from the journal, where transactions are initially recorded, to the appropriate accounts in the ledger. This step ensures that all transactions are accurately recorded and organized in the ledger, making it easier to track and analyze financial information. By posting the transactions, the ledger becomes a comprehensive and up-to-date record of all financial activities within an organization.

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10.

__________ is the measure of how the assets resources are employed efficiently by the firm
- A.
  
  Profitability ratios
- B.
  
  Activity ratios
- C.
  
  Leverage ratios
- D.
  
  None of the above
Correct Answer
B. Activity ratios

Explanation
Activity ratios are the correct answer because they measure how efficiently a firm is utilizing its assets and resources. These ratios assess the company's ability to generate sales and manage its inventory, receivables, and payables. By analyzing activity ratios such as inventory turnover, accounts receivable turnover, and asset turnover, investors and analysts can evaluate the effectiveness of a company's operations and its ability to generate profits. Therefore, activity ratios provide insight into how well a firm is employing its assets to generate revenue and can help assess its overall efficiency.

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Current Version
Nov 16, 2023

Quiz Edited by
ProProfs Editorial Team
Mar 15, 2015

Quiz Created by
Mickykumar

Do You Know Accounting?

Trade discounts are generally not used to

The purpose of accounting is to get information on :

Bank overdrafts are generally reported as

The portion of any demand deposit that a customer keeps as support for its existing or maturing obligations is called a(n)

Which of the following actions would not be considered good management of accounts receivable?

Dividends and interest receivable would be classified as

Which of the following is considered as “cash” for reporting purposes?

The written evidence that supports a business transaction is called what?

____________ is the process of entering the transaction from journal to the ledger.

__________ is the measure of how the assets resources are employed efficiently by the firm