Analysis And Reporting Of Financial Accounting Quiz
Financial Accounting 1
Questions and Answers
- 1.
What are assets?
- A.
Sales of products or services
- B.
Amounts owed
- C.
Distributions to stockholders
- D.
Resources owned
- E.
Owners' claims to resources
Correct Answer
D. Resources ownedExplanation
Assets are resources owned by a company or individual that have economic value and can be used to generate future benefits. These can include physical assets such as property, equipment, and inventory, as well as intangible assets like patents, trademarks, and goodwill. By classifying assets, individuals and businesses can better understand their financial position and make informed decisions regarding investments, financing, and overall financial management.Rate this question:
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- 2.
What are liabilities?
- A.
Costs of selling products or services
- B.
Distributions to stockholders
- C.
Owners' claims to resources
- D.
Expense to run business
- E.
Amounts owed
Correct Answer
E. Amounts owedExplanation
Liabilities refer to the amounts owed by a company to its creditors or other entities. These can include debts, loans, or any other financial obligations that the company is liable to pay. Liabilities represent the company's obligations and are recorded on the balance sheet. They are distinct from expenses, which are costs incurred in the process of running a business.Rate this question:
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- 3.
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 resourcesExplanation
Stockholders' equity refers to the ownership interest in a company's assets after deducting its liabilities. It represents the claims that the owners have on the company's resources. This includes the initial investment made by stockholders, as well as any additional contributions and retained earnings. Stockholders' equity is an important measure of a company's financial health and represents the residual interest in the company's assets that remains after all liabilities have been settled.Rate this question:
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- 4.
What are dividends?
- A.
Sales of products or services
- B.
Owners' claims to resources
- C.
Distributions to stockholders
- D.
Amounts owed
- E.
Expense to run business
Correct Answer
C. Distributions to stockholdersExplanation
Dividends are distributions of profits made by a company to its shareholders. These distributions are a way for the company to share its earnings with its owners, the stockholders. Dividends are typically paid out in cash, but can also be in the form of additional shares of stock or other assets. By receiving dividends, stockholders can benefit from the company's financial success and generate income from their investment. Therefore, the correct answer is "distributions to stockholders".Rate this question:
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- 5.
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 servicesExplanation
Revenue refers to the total sales generated by a company from selling its products or services. It represents the income earned by the company before deducting any expenses or costs. Revenue is a crucial financial metric as it indicates the company's ability to generate sales and is a key factor in determining its financial performance and profitability.Rate this question:
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- 6.
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 servicesExplanation
Expenses refer to the costs incurred in the process of selling products or services. These costs can include various elements such as production costs, marketing expenses, employee salaries, rent, utilities, and any other expenses directly related to the sale of products or services. By deducting these expenses from the revenue generated, a business can determine its profitability and financial performance.Rate this question:
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- 7.
What is the accounting equation?
- A.
Assets - liabilities = stockholders' equity
- B.
Assets + liabilities = stockholders' equity
- C.
Liabilities - stockholders' equity = assets
Correct Answer
A. Assets - liabilities = stockholders' equityExplanation
The accounting equation states that assets minus liabilities equals stockholders' equity. This equation represents the fundamental relationship between a company's resources (assets), its obligations (liabilities), and the residual interest of the owners (stockholders' equity). It shows that the total value of a company's assets is equal to the sum of its liabilities and stockholders' equity. This equation is crucial in double-entry bookkeeping as it ensures that the books remain balanced and provides a framework for analyzing a company's financial position.Rate this question:
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- 8.
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 spaceExplanation
An example of an expense is the monthly rent on office space. Expenses are costs incurred by a business or individual in order to generate revenue or maintain operations. Rent is a recurring payment made by a business for the use of a physical space, such as an office, and it is considered an expense because it reduces the business's profit. In contrast, a bank loan, interest paid to a credit union, and principle paid to Lehman bank are not examples of expenses, as they are related to borrowing money or repaying a loan rather than regular operational costs.Rate this question:
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- 9.
What is the statement called that measures activities involving cash recipts 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 FlowsExplanation
The statement called the Statement of Cash Flows measures activities involving cash receipts and cash payments over a specific period of time. It provides information about how cash is generated and used by a company, including operating activities, investing activities, and financing activities. This statement is important for understanding a company's liquidity and cash flow position.Rate this question:
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- 10.
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 incomeExplanation
Financial accounting net income is a crucial piece of company information that better explains a company's stock price performance. Net income represents the profit earned by a company after deducting all expenses and taxes from its total revenues. It reflects the company's financial health and profitability, which directly impacts its stock price. Higher net income indicates strong financial performance and potential for future growth, making the company's stock more attractive to investors. Conversely, lower net income may lead to a decline in stock price as it suggests weaker financial performance and potential risks. Therefore, financial accounting net income is a key factor that investors consider when evaluating a company's stock.Rate this question:
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Current Version
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Mar 22, 2023Quiz Edited by
ProProfs Editorial Team -
Sep 19, 2012Quiz Created by
Manoj2288
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