Financial Accounting Quiz Questions And Answers

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Financial Accounting Quiz Questions And Answers - Quiz


Understanding the nitty-gritty of financial accounting can be tricky! We are here to help! This 'Financial Accounting Quiz Questions And Answers' will test your basic knowledge of the subject. Make sure to pick the correct option from the options given below for a good score. Let's see how well you perform! You can take this quiz for excellent test preparation! We wish you all the very best and hope you keep studying hard. Share the quiz with your friends for knowledge!


Questions and Answers
  • 1. 

    These are economic resources with the ability or potential to provide future benefits?

    • A.

      Assets

    • B.

      Liabilities

    • C.

      Shareholder's Equity

    • D.

      Retained Earnings

    Correct Answer
    A. Assets
    Explanation
    Assets are economic resources that have the ability or potential to provide future benefits. They can be tangible, such as buildings or equipment, or intangible, such as patents or trademarks. Assets are recorded on a company's balance sheet and are essential for the operation and growth of a business. They can generate revenue, be sold or used to reduce liabilities. Overall, assets represent the value and potential of a company's resources.

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  • 2. 

    When revenue generated is greater than overall expenses, you have a ___?

    • A.

      Net Loss

    • B.

      Net Income

    • C.

      Contributed Capital

    • D.

      Historical Valuation

    Correct Answer
    B. Net Income
    Explanation
    When revenue generated is greater than overall expenses, it indicates that the company has made a profit. This profit is known as net income, which represents the amount of money that remains after deducting all expenses from the total revenue. Net income is a measure of the company's profitability and is often used to assess its financial performance.

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  • 3. 

    Assets - Liabilities = ____?

    • A.

      Net Income

    • B.

      Revenue

    • C.

      Net Loss

    • D.

      Shareholder's Equity

    Correct Answer
    D. Shareholder's Equity
    Explanation
    The equation Assets - Liabilities = Shareholder's Equity represents the fundamental accounting equation, also known as the balance sheet equation. It shows the relationship between a company's assets (what it owns) and its liabilities (what it owes) to determine the residual claim of the owners, which is the shareholder's equity. This represents the net worth of the company and is calculated by subtracting the total liabilities from the total assets. Therefore, Shareholder's Equity is the correct answer.

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  • 4. 

    Which financial statement shows the results of the operating activities of a firm for a specific period of time?

    • A.

      Trial Balance

    • B.

      Balance Sheet

    • C.

      Income Statement

    • D.

      Statement Of Cash Flows

    Correct Answer
    C. Income Statement
    Explanation
    The income statement shows the results of the operating activities of a firm for a specific period of time. It provides information on the revenues, expenses, and net income or loss generated by the company during that period. The income statement is important for assessing the profitability and financial performance of a business. It helps stakeholders understand how well the company is generating revenues and managing its expenses.

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  • 5. 

    This statement reports the net cash flows relating to operating, investing, and financing activities for a period of time?

    • A.

      Income Statement

    • B.

      Unadjusted Trial Balance

    • C.

      Statement Of Cash Flows

    • D.

      Comparative Balance Sheet

    Correct Answer
    C. Statement Of Cash Flows
    Explanation
    The correct answer is Statement Of Cash Flows. The Statement of Cash Flows is a financial statement that reports the net cash flows from operating, investing, and financing activities for a specific period of time. It provides valuable information about the cash generated or used by a company during the period and is crucial for assessing a company's liquidity and cash flow management. The Income Statement reports the revenues, expenses, and net income or loss for a period, the Unadjusted Trial Balance is a list of all the accounts and their balances before any adjustments, and the Comparative Balance Sheet compares the balances of assets, liabilities, and equity between two periods.

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  • 6. 

    The government agency that has full authority to set working accounting methods in the U.S is?

    • A.

      FAA

    • B.

      FASB

    • C.

      SEC

    • D.

      EEOC

    Correct Answer
    B. FASB
    Explanation
    The government agency that has full authority to set working accounting methods in the U.S. is the Financial Accounting Standards Board (FASB). This organization establishes and improves accounting standards through its generally accepted accounting principles (GAAP), ensuring consistency and transparency in financial reporting across industries and sectors.

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  • 7. 

    The amount of cash paid in acquiring an asset is called what?

    • A.

      Present Value

    • B.

      Historical Value

    • C.

      Net Realizable Value

    • D.

      Current Replacement Cost

    Correct Answer
    B. Historical Value
    Explanation
    Historical Value refers to the amount of cash paid in acquiring an asset. It represents the original cost incurred to acquire the asset, including any additional costs such as transportation or installation. This value is important for accounting purposes as it helps determine the initial value of an asset and is used in calculating depreciation and asset valuation.

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  • 8. 

    Which is an example of an intangible asset?

    • A.

      Cash

    • B.

      Tools & Equipment

    • C.

      Supplies

    • D.

      Patent

    Correct Answer
    D. Patent
    Explanation
    A patent is an example of an intangible asset because it represents exclusive rights granted by a government to an inventor for a certain period of time. It is not a physical object like cash, tools & equipment, or supplies, but rather a legal protection for an invention or innovation. Patents have value and can be bought, sold, or licensed, making them an intangible asset that can contribute to a company's competitive advantage and financial worth.

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  • 9. 

    Earnings that a firm realizes in excess of dividends are called what?

    • A.

      Income Statement

    • B.

      Revenues

    • C.

      Retained Earnings

    • D.

      Expenses

    Correct Answer
    C. Retained Earnings
    Explanation
    Retained earnings refer to the profits that a company has earned and kept within the business rather than distributing them to shareholders as dividends. It represents the accumulated earnings over time that have not been paid out to shareholders. Retained earnings are an important measure of a company's financial health and can be used for reinvestment in the business, paying off debts, or distributing dividends in the future.

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  • 10. 

    A ____ lists each of the accounts in the general ledger with its balance as of a particular date. What is it?

    • A.

      Statement Of Retained Earnings

    • B.

      Balance Sheet

    • C.

      Trial Balance

    • D.

      General Journal

    Correct Answer
    C. Trial Balance
    Explanation
    A Trial Balance is a statement that lists each of the accounts in the general ledger with their respective balances as of a specific date. It is used to ensure that the total debits equal the total credits in the accounting system and to identify any errors or discrepancies in the financial records. The Trial Balance helps in preparing accurate financial statements like the Balance Sheet and the Statement of Retained Earnings. It is an essential tool for accountants to verify the accuracy of the accounting records before finalizing the financial statements.

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Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 18, 2024
    Quiz Edited by
    ProProfs Editorial Team
  • Dec 06, 2011
    Quiz Created by
    Zsinmakkah
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