Financial Accounting Quiz Questions And Answers

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.