Test Your Knowledge On Accounting
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Take this quiz to learn more Account.
- 1.The most useful financial statement for analyzing a company’s profitability is the:
- A.
Balance Sheet
- B.
Statement of Retained Earnings
- C.
Statement of Cash Flows
- D.
Income Statement
- 2.With accrual accounting, revenues should be recorded when:
- A.
Cash is collected from customers
- B.
It is probable that a sale will be made
- C.
The company decides it wants to
- D.
Earned
- 3.Which of the following is an inventory system?
- A.
LIFO
- B.
Perpetual
- C.
Weighted Average
- D.
Gross Profit
- 4.With accrual accounting, expenses should be recorded when:
- A.
Costs are incurred
- B.
An invoice is received
- C.
The company decides it wants to
- D.
Cash payments are made
- 5.A current liability is a liability that can reasonably be expected to be paid:
- A.
Within one year
- B.
Between six months and 18 months
- C.
Out of currently recognized revenues
- D.
Out of cash currently on hand
- 6.The two primary external users of financial accounting reports are
- A.
The federal government and management
- B.
The federal government and investors
- C.
Management and creditors
- D.
Investors and creditors
- 7.A measurement of an entity’s ability to pay its obligations due within the next year or operating cycle is called
- A.
Profitability
- B.
Long-term risk
- C.
Leverage
- D.
Liquidity
- 8.Which of the following is included in the computation of gross profit?
- A.
Income tax expense
- B.
Other income-other expense
- C.
Cost of Goods Sold
- D.
Operating Expenses
- 9.With accrual accounting, costs (expenses) need to be matched either to “specific accounting periods” or
- A.
To operating cycles
- B.
When paid for
- C.
To reporting entities
- D.
To the period when revenues are earned
- 10.On Oct. 1, 2014, the Landlord Corp. received $32,000 in advance for eight months of rent from Oct. 1 of 2014 through May 31 of 2015. Landlord closes its books once a year on Dec. 31. How much does Landlord want to report in “rent Income” on its 2014 Income Statement?
- A.
$4,000
- B.
$12,000
- C.
$20,000
- D.
$32,000
- 11.The financial statement that reports what a company owns, what it owes, and what the owners of the company currently have invested in the company is called:
- A.
A balance sheet
- B.
An income statement
- C.
A Statement of Stockholders' Equity
- D.
A Statement of Cash Flows
- 12.Most companies record revenue:
- A.
During the production process
- B.
When production is completed
- C.
At the point of sale
- D.
When cash is received for the sale
- 13.In performing a complete liquidation of a corporation, which of the following is the proper order of cash distributions?
- A.
Common shareholders, preferred shareholders, and creditors
- B.
Common shareholders, creditors, and preferred shareholders
- C.
Creditors, preferred shareholders, and common shareholders
- D.
Creditors, common shareholders, and preferred shareholders
- 14.In theory, the reason that depreciation is record on fixed assets is because of:
- A.
Revenue recognition
- B.
Consistency
- C.
Conservatism
- D.
Matching
- 15.What kind of adjusting entry would use a “Rent Payable” account?
- A.
Accrual
- B.
Depreciation
- C.
Transaction
- D.
Deferral
- 16.“Merchandise Inventory” is reported at lower-of-cost-market because of the accounting concept of:
- A.
Matching
- B.
Consistency
- C.
Conservatism
- D.
Materiality
- 17.All of the following requirements about internal controls were enacted under the Sarbanes Oxley Act of 2002 except:
- A.
Independent outside auditors must attest to the level of internal control
- B.
Companies must develop sound internal controls over financial reporting
- C.
Companies must continually assess the functionality of internal controls
- D.
Independent outside auditors must eliminate redundant internal control
- 18.Which one of the following represents the expanded basic accounting equation?
- A.
Assets = Liabilities + Common Stock + Dividends - Revenue - Expenses
- B.
Assets + Dividends + Expenses = Liabilities + Common Stock + Revenues
- C.
Assets - Liabilities - Dividends = Common Stock + Revenue - Expenses
- D.
Assets = Revenues + Expenses - Liabilities
- 19.If total liabilities decreased by $4,000, then:
- A.
Stockholders' equity must have decreased by $4,000
- B.
Assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000
- C.
Assets and stockholders' equity each increased by $2,000
- D.
Assets must have increased by $4,000
- 20.At October 1, 2014, Metz Industries had an Accounts Payable balance of $30,000. During the month, the company made purchases on account of $25,000 and made payments on account of $40,000. At October 31, 2014, the Accounts Payable balance is
- A.
$30,000 debit
- B.
$10,000 credit
- C.
$15,000 credit
- D.
$40,000 credit
- 21.Accounts receivable are valued and reported on the balance sheet
- A.
In the investment section
- B.
At gross amounts less sales returns and allowances
- C.
At cash realizable value
- D.
Only if they are not past due
- 22.On January 15, Nifty Company sells merchandise on account to Martinez Associates for $2,000 with terms 3/10, n/30. On January 20, Martinez returns merchandise worth $400 to Nifty. On January 24, payment is received from Martinez for the balance due. What is the amount of cash received?
- A.
$1,600
- B.
$1,552
- C.
$1,540
- D.
$1,120
- 23.Under the allowance method, writing off an uncollectible account
- A.
Affects only the balance sheet accounts
- B.
Affects both balance sheet and income statement accounts
- C.
Affects only income statement accounts
- D.
Is not an acceptable practice
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