What Is The Primary Purpose Of Financial Accounting? Exam Quiz

50 Questions | Total Attempts: 87

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Financial Accounting Quizzes & Trivia

Questions and Answers
  • 1. 
    Which financial accounting number impacts stock prices more than any other single piece of information?
    • A. 

      Retained Earnings

    • B. 

      Net Income

    • C. 

      Common Stock

    • D. 

      Total Assets

  • 2. 
    A list of all accounts and their balances after updating account balances for adjusting entries is referred to as:
    • A. 

      A trial balance

    • B. 

      An adjusted trial balance

    • C. 

      A post-closing trial balance

    • D. 

      An accounting trial balance

  • 3. 
    Which of the following is not part of measuring external transactions?
    • A. 

      Using source documents to analyze accounts affected

    • B. 

      Recording transactions

    • C. 

      Making payments on all amounts owed

    • D. 

      Analyzing transactions for their effect on the accounting equation

  • 4. 
    The primary difference between accrual-basis and cash-basis accounting is:
    • A. 

      The timing of when revenues and expenses are recorded

    • B. 

      Cash-basis accounting is allowed for financial reporting purposes but not accrual-basis accounting

    • C. 

      Accrual-basis accounting violates both the revenue recognition and matching principles

    • D. 

      Adjusting entries are only a necessary part of cash-basis accounting

  • 5. 
    External events include all of the following except:
    • A. 

      Paying employee salaries

    • B. 

      Purchasing equipment

    • C. 

      Using office supplies

    • D. 

      Collecting and account receivable

  • 6. 
    Receiving assets from customers before services are performed results in:
    • A. 

      Prepaid assets

    • B. 

      Service revenue

    • C. 

      Unearned revenue

    • D. 

      Accounts receivable

  • 7. 
    What is the primary purpose of financial accounting?
    • A. 

      Determine the amount of tax liability owed to the government

    • B. 

      Communicate business transactions to internal management

    • C. 

      Measure business transactions and communicate those measures to external users to make decisions

    • D. 

      Measure the profitability of the company in order to assist in employees with making decisions

  • 8. 
    Receiving cash from an account receivable:
    • A. 

      Increases a revenue and decreases an asset

    • B. 

      Decreases a liability and increases an asset

    • C. 

      Increases an asset and increases a revenue

    • D. 

      Increases one asset and decreases another asset

  • 9. 
    The form of business organization that is legally separate from its owners is a: 
    • A. 

      Partnership

    • B. 

      Sole Proprietership

    • C. 

      Corporation

    • D. 

      Separate Entity

  • 10. 
    When a payment is made on an account payable:
    • A. 

      Assets and stockholders' equity decrease

    • B. 

      Assets and liabilities decrease

    • C. 

      Liabilities and revenues decrease

    • D. 

      Assets and expenses decrease

  • 11. 
    Liabilities normally carry a____balance and are shown in the____
    • A. 

      Debit; Statement of Stockholders' Equity

    • B. 

      Debit; Income Statement

    • C. 

      Credit; Balance Sheet

    • D. 

      Debit; Balance Sheet

  • 12. 
    On April 1, a $4,800 premium on a one year insurance policy on equipment was paid and charged to Prepaid Insurance. At the end of the year, the financial statements would report:
    • A. 

      Insurance Expense $4800; Prepaid Insurance $0

    • B. 

      Insurance Expense $3600; Prepaid Insurance $1200

    • C. 

      Insurance Expense $3650; Prepaid Insurance $4800

    • D. 

      Insurance Expense $1200; Prepaid Insurance $3600

  • 13. 
    Net income can best be describes as:
    • A. 

      Net cash received by a company during the year

    • B. 

      Revenues minus expenses

    • C. 

      The amount of profits retained in a company for the year

    • D. 

      Resources owned by a company

  • 14. 
    The retained earnings account had a beginning credit balance of $26000. During the period, the business had a net loss $12000 and the company paid dividends of $8000. The ending balance in the retained earnings account is:
    • A. 

      $6000

    • B. 

      $30000

    • C. 

      $22000

    • D. 

      $14000

  • 15. 
    Childers Service Company provides services to customers totaling $3000, for which it billed customers. How would the transaction be recorded?
    • A. 

      Debit Cash $3000, Credit Service Revenue $3000

    • B. 

      Debit Accounts Receivable $3000, Credit Service Revenue $3000

    • C. 

      Debit Accounts Receivable $3000, Credit Cash $3000

    • D. 

      Debit Service Revenue $3000, Credit Accounts Receivable $3000

  • 16. 
    At the beginning of December, Global Corporation had $2000 in supplies on hand. During the month, supplies purchased amounted to $3000, but by the end of the month the supplies balance was only $800. What is the appropriate month-end adjusting entry?
    • A. 

      Debit Cash $4200, Credit Supplies $4200

    • B. 

      Debit Supplies $4200, Credit Supplies Expense $4200

    • C. 

      Debit Supplies Expense $4200, Credit Supplies $4200

    • D. 

      Debit Cash $800, Credit Supplies $800

  • 17. 
    Assume that cash is paid for rent to cover the next year. The appropriate debit and credit are:
    • A. 

      Debit Rent Expense, Credit Cash

    • B. 

      Debit Prepaid Rent, Credit Rent Expense

    • C. 

      Debit Prepaid Rent, Credit Cash

    • D. 

      Debit Cash, Credit Prepaid Rent

  • 18. 
    The two categories of stockholders' equity usually found in the balance sheet of a corporation are: 
    • A. 

      Common Stock

    • B. 

      Assets and Liabilities

    • C. 

      Common Stock and Retained Earnings

    • D. 

      Revenues and Expenses

  • 19. 
    When a company makes and end-of-period adjusting entry which includes a credit to Prepaid Rent, the debit is usually made to:
    • A. 

      Cash

    • B. 

      Rent Expense

    • C. 

      Rent Payable

    • D. 

      Rent Receivable

  • 20. 
    When a company pays $2500 dividends to its stockholders, the transaction should be recorded as:
    • A. 

      Debit Cash; Credit Dividends

    • B. 

      Debit Retained Earnings; Credit Dividends

    • C. 

      Debit Dividends; Credit Cash

    • D. 

      Debit Dividends; Credit Accounts Payable

  • 21. 
    On July 7, 2012, Saints Inc. received $10,000 in cash from a customer for services to be provided on October 10, 2012. Which of the following describes how the transaction should be recorded on July 7, 2012?
    • A. 

      Debit Cash $10,000; Credit Service Revenue $10,000

    • B. 

      Debit Accounts Receivable $10,000; Credit Service Revenue $10,000

    • C. 

      Debit Cash $10,000, Credit Unearned Revenue $10,000

    • D. 

      Debit Unearned Revenue $10,000, Credit Cash $10,000

  • 22. 
    Transactions of a company that include the purchase and sale of long-term productive assets are referred to as: 
    • A. 

      Investing activities

    • B. 

      Financing activities

    • C. 

      Expenditure activities

    • D. 

      Operating activities

  • 23. 
    Which of the following accounting principles states that expenses are recognized in the same period as the revenues they help to generate?
    • A. 

      Accounting equation

    • B. 

      Revenue recognition

    • C. 

      Matching principle

    • D. 

      Conservatism

  • 24. 
    Pawn Shops Unlimited recorded the following four transactions during April. Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?
    • A. 

      Received $600 from customers for services to be provided in May

    • B. 

      Paid $1800 for a six-month insurance policy covering the period July 1--December 31

    • C. 

      Paid $700 for an advertisement that appeared in the April 17 edition of the Las Vegas Sun newspaper

    • D. 

      Received $300 from customers for services performed in March.

  • 25. 
    On July 31, ALOE Inc. received $5000 cash from a customer who previously purchased ALOE's products on account. What should ALOE Inc. record at the time it receives cash?
    • A. 

      Debit Accounts Receivable, $5000; Credit Cash $5000

    • B. 

      Debit Cash $5000; Credit Accounts Receivable $5000

    • C. 

      Debit Cash $5000; Credit Accounts Payable $5000

    • D. 

      Debit Cash $5000; Credit Service Revenue $5000

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