Financial Fluency: Small Business Accounting Quiz

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| By Cay1117
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Quizzes Created: 5 | Total Attempts: 48,955
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Financial Fluency: Small Business Accounting Quiz - Quiz

Dive into the world of numbers and financial acumen with the "Financial Fluency: Small Business Accounting Quiz." This quiz is your ticket to mastering the essential principles and practices that drive the financial success of small businesses. Challenge yourself with questions that unravel the intricacies of bookkeeping, budgeting, and financial reporting, vital for small business owners and aspiring entrepreneurs.

Whether you're navigating the financial landscape of your own venture or seeking to boost your financial literacy, this quiz provides an engaging and informative exploration. From understanding cash flow dynamics to decoding profit and loss statements, "Financial Fluency" is designed to Read moresharpen your skills and enhance your grasp of small business accounting. Immerse yourself in the quiz adventure and elevate your financial fluency, gaining insights that will empower you on your entrepreneurial journey.


Questions and Answers
  • 1. 

    Which of the following is considered an external user of accounting?

    • A.

      Managers of a corporation

    • B.

      Employees

    • C.

      Customers

    • D.

      Supervisors of a business

    Correct Answer
    C. Customers
    Explanation
    Customers are external users of the accounting practices of an organization or business.

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  • 2. 

    In the basic accounting equation, Assets= Liabilities + ________?

    • A.

      Long - term investments

    • B.

      Current assets

    • C.

      Stockholders’ Equity

    • D.

      Retained Earnings

    Correct Answer
    C. Stockholders’ Equity
    Explanation
    In the basic accounting equation, Assets= Liabilities + Stockholders’ Equity

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  • 3. 

    Joe is a manager of a local business. He is faced with an ethical dilemma in the accounting department. According to the three steps to follow when facing ethical dilemmas, which of the following is NOT a step he should follow to analyze the situation?

    • A.

      Recognize the ethical situation and the issues involved

    • B.

      Contact the head supervisor and ask for help

    • C.

      Identify the principal elements in the situation

    • D.

      Identify all alternatives and how they affect stakeholders

    Correct Answer
    B. Contact the head supervisor and ask for help
    Explanation
    While this may be a solution at some point for Joe, he should first recognize the situation, identify the elements, and identify the alternatives when analyzing the ethical dilemma.

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  • 4. 

    Which of the following is a financial statement used to indicate how successfully the business performed during a period of time?

    • A.

      Income Statement

    • B.

      Retained Earnings Statement

    • C.

      Statement of Cash flows

    • D.

      Balance Sheet

    Correct Answer
    A. Income Statement
    Explanation
    Income statements are used to indicate how successfully the business performed during a specific point in time.

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  • 5. 

    Which of the following is NOT one of the 3 main business activities?

    • A.

      Financing

    • B.

      Investing

    • C.

      Advertising

    • D.

      Operating

    Correct Answer
    C. Advertising
    Explanation
    While this may be an important part of marketing for a business, it is not considered one of the 3 main business activities.

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  • 6. 

    During 2011, Softball Kingdom had its assets decrease $50,000. Which of the following transactions would ensure that the basic account equation would balance?

    • A.

      A decrease in liabilities of $40,000

    • B.

      An increase in assets of $50,000

    • C.

      A decrease of assets of $50,000

    • D.

      An increase in liabilities of $30,000

    Correct Answer
    B. An increase in assets of $50,000
    Explanation
    If an asset decreases, another asset must increase.

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  • 7. 

    In 2013, XYZ Inc had sales revenues of $400,000, costs of goods sold: $310,000, and operating expenses of $60,000. What is the gross profit?

    • A.

      $30,000

    • B.

      $340,000

    • C.

      $90,000

    • D.

      $400,000

    Correct Answer
    C. $90,000
    Explanation
    In order to find gross profit, we take the sales revenue and subtract cost of goods sold ($400,000 - $310,000)

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  • 8. 

    Which of the following is NOT a measure of liquidity?

    • A.

      Debt to total assets ratio

    • B.

      Working Capital

    • C.

      Current Ratio

    • D.

      Current cash debt coverage

    Correct Answer
    A. Debt to total assets ratio
    Explanation
    This is a ratio frequently used when measuring liquidity.

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  • 9. 

    Which of the following is a characteristic of a corporation?

    • A.

      Easy to start - up

    • B.

      Owned by 1 individual, or a small group of individuals

    • C.

      Separate legal existence

    • D.

      Liability is tied to a single individual or small group of individuals

    Correct Answer
    C. Separate legal existence
    Explanation
    A characteristic of a corporation is its separate legal existence. This means that a corporation is considered a legal entity separate from its owners. It has its own rights and obligations, can enter into contracts, and can be held liable for its actions. This characteristic provides the advantage of limited liability, as the owners' personal assets are generally protected from the corporation's debts and liabilities. Additionally, a corporation can continue to exist even if the ownership or management changes, ensuring its continuity and stability.

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  • 10. 

    Which of the following is a liabilities account?

    • A.

      Current Assets

    • B.

      Long - term investments

    • C.

      Property, plant, equipment

    • D.

      Mortgages Payable

    Correct Answer
    D. Mortgages Payable
    Explanation
    This is a liabilities account.

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  • 11. 

    Which of the following is NOT a function of a journal entry?

    • A.

      Journal entries show the complete effect of a transaction

    • B.

      Journal entries show profitability of the company as an overall unit

    • C.

      Journal entries provide a chronological order of transactions

    • D.

      Journal entries prevent all accounting errors

    Correct Answer
    B. Journal entries show profitability of the company as an overall unit
    Explanation
    Journal entries show individual transactions-not the profitability of the company as an overall unit.

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  • 12. 

    Which of the following is an expense account?

    • A.

      Common Stock

    • B.

      Retained Earnings

    • C.

      Rent

    • D.

      Dividends

    Correct Answer
    C. Rent
    Explanation
    Rent is considered an expense account because it represents the cost incurred by a business for utilizing a property or space. It is a regular expenditure that a company needs to pay in order to operate its business activities. Rent is categorized as an expense on the income statement and is deducted from the revenue to calculate the net income or profit of the business. Unlike common stock, retained earnings, and dividends, which are not expenses, rent directly impacts the profitability of a company and is therefore classified as an expense account.

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  • 13. 

    Which of the following is included in the content for reports for Managerial Accounting?

    • A.

      Relevant data for each sub-unit of the company

    • B.

      GAAP Accounting

    • C.

      Double entry accounting and costs

    • D.

      Condensed financial information for the company as a whole

    Correct Answer
    A. Relevant data for each sub-unit of the company
    Explanation
    In managerial accounting, managers want only the relevant data and reports for a specific sub-unit of a company.

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  • 14. 

    Which of the following is NOT considered a primary management function?

    • A.

      Financing

    • B.

      Planning

    • C.

      Directing

    • D.

      Controlling

    Correct Answer
    A. Financing
    Explanation
    The primary management functions are planning, directing, and controlling.

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  • 15. 

    What are the three components of manufacturing costs?

    • A.

      Direct Labor, Direct Materials, Building Rental

    • B.

      Direct Materials, Direct Labor, Manufacturing Overhead

    • C.

      Manufacturing Overhead, Direct Labor, Works in Process

    • D.

      Direct Materials, Cost of Goods Sold, Direct Labor

    Correct Answer
    B. Direct Materials, Direct Labor, Manufacturing Overhead
    Explanation
    These are the three components of manufacturing costs.

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  • 16. 

    Which of the following is a period cost?

    • A.

      Selling Expenses

    • B.

      Direct Materials

    • C.

      Direct Labor

    • D.

      Manufacturing Overhead

    Correct Answer
    A. Selling Expenses
    Explanation
    Selling expenses are included in the list of period cost.

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  • 17. 

    Which of the following is NOT a type of cost?

    • A.

      Fixed

    • B.

      Mixed

    • C.

      Variable

    • D.

      Percentage

    Correct Answer
    D. Percentage
    Explanation
    The types of costs are fixed, mixed, and variable.
    Percentage is not a type of cost.

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  • 18. 

    Which of the following is typically the budget that is prepared first?

    • A.

      Production Budget

    • B.

      Sales Budget

    • C.

      Direct Materials Budget

    • D.

      Manufacturing Overhead Budget

    Correct Answer
    B. Sales Budget
    Explanation
    This is typically the budget that is prepared first since all other budgets depends on the sales budget.

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  • 19. 

    Which of the following is NOT a reason a company would hold Treasury Stock for future use?

    • A.

      To reissue the shares to officers and employees

    • B.

      To have additional shares available in order to acquire another company

    • C.

      To increase trading of the company’s stock

    • D.

      To decrease earnings per share

    Correct Answer
    D. To decrease earnings per share
    Explanation
    Holding onto Treasury Stock will actually reduce the number of shares outstanding, thus increasing earnings per share.

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  • 20. 

    There are three requirements necessary for a company to pay out dividends. They are:

    • A.

      Retained Earnings, Adequate Cash, Declared Dividends

    • B.

      Retained Earnings, Adequate Cash, Stockholders’ Equity

    • C.

      Adequate Cash, High Liquidity, Low Liabilities

    • D.

      Stockholders’ Equity, Low Liquidities, Retained Earnings

    Correct Answer
    A. Retained Earnings, Adequate Cash, Declared Dividends
    Explanation
    A company must have retained earnings, adequate cash, and declared dividends for the period in order to pay our dividends.

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  • 21. 

    How often are reports created in managerial accounting?

    • A.

      Quarterly

    • B.

      As needed by management

    • C.

      Annually

    • D.

      Weekly

    Correct Answer
    B. As needed by management
    Explanation
    In managerial accounting, managers determine the
    frequency and types of reports to be created.

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  • 22. 

    Company XYZ Inc has variable costs associated with delivering widgets to customers. In December, delivery driving went up 30%. Total variable costs for December increased by:

    • A.

      10%

    • B.

      20%

    • C.

      30%

    • D.

      Nothing

    Correct Answer
    C. 30%
    Explanation
    Variable costs are costs that are proportionate with the changes in an activity level.

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  • 23. 

    All of the following are benefits of budgeting EXCEPT:

    • A.

      It creates incentives for managers to be rewarded

    • B.

      It requires management to plan ahead

    • C.

      It gives definite objectives for all levels in the company

    • D.

      It creates an early warning system to prevent potential problems

    Correct Answer
    A. It creates incentives for managers to be rewarded
    Explanation
    Creating incentives for managers to be rewarded is not a benefit or budgeting and can potentially lead to unethical behavior.

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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
  • Nov 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Oct 13, 2015
    Quiz Created by
    Cay1117
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