WYRNKAA - Chapter 3 Review Questions

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Wyrnkaa - Chapter 3 Review Questions - Quiz

This quiz will test your understanding of the material covered in the third chapter of "What You Really Need to Know About Accounting". Visit https://www. Notforaccountants. Com/learning-tools. Php for more quizzes.

Questions and Answers

1.

What are the three sections of the Balance Sheet?
- A.
  
  Assets, Expenses, and Equity
- B.
  
  Assets, Equity, and Net Cash
- C.
  
  Assets, Accounts Payable, and Retained Earnings
- D.
  
  Assets, Liabilities, and Equity
Correct Answer
D. Assets, Liabilities, and Equity

Explanation
The three sections of the Balance Sheet are Assets, Liabilities, and Equity. These are also the three components of the Accounting Equation: Assets - Liabilities = Equity

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2.

What is an Asset, in simple terms?
- A.
  
  Something your business owns
- B.
  
  Something your business owes
- C.
  
  Both a & b
- D.
  
  Neither a nor b
Correct Answer
A. Something your business owns

Explanation
Assets are what a business OWNS. What a business OWES is a liability.

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3.

Net Income is shown on the:
- A.
  
  Balance Sheet
- B.
  
  Income Statement
- C.
  
  Net Cash Statement
- D.
  
  Net Accrual Statement
Correct Answer
B. Income Statement

Explanation
Revenues, Expenses, and Net Income are shown on the Income Statement.

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4.

The "statement of what you've got" is the:
- A.
  
  Balance Sheet
- B.
  
  Income Statement
- C.
  
  Statement of Cash Flows
- D.
  
  Statement of Retained Earnings
Correct Answer
A. Balance Sheet

Explanation
The Balance Sheet can be considered a statement of what you've got because it shows what your company owns (assets), owes (liabilities), and the net value to the owners (equity).

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5.

The "statement of what you've earned" is the:
- A.
  
  Balance Sheet
- B.
  
  Income Statement
- C.
  
  Statement of Cash Flows
- D.
  
  Statement of Retained Earnings
Correct Answer
B. Income Statement

Explanation
The Income Statement can be considered a statement of what you've earned because it shows your revenue, expenses, and net income/earnings over a period of time.

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6.

The Income Statement is made up primarily of:
- A.
  
  Cash and Expenses
- B.
  
  Revenue and Expenses
- C.
  
  Gains and Expenses
- D.
  
  Losses and Expenses
Correct Answer
B. Revenue and Expenses

Explanation
The Income Statement is made up primarily of Revenues and Expenses. The Income Statement can also include Gains and Losses, but the primary categories are Revenues and Expenses.

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7.

The Income Statement and Balance Sheet utilize:
- A.
  
  The Cash basis of accounting
- B.
  
  The Net Receipts basis of accounting
- C.
  
  The Gross Income basis of accounting
- D.
  
  The Accrual basis of accounting
Correct Answer
D. The Accrual basis of accounting

Explanation
The accrual basis of accounting is required by GAAP in most cases.

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8.

Accrual basis accounting seeks to match:
- A.
  
  Revenues with the Expenses used to generate those Revenues
- B.
  
  Cash inflows with Cash outflows
- C.
  
  Revenues with Cash inflows
- D.
  
  Expenses with Cash Outflows
Correct Answer
A. Revenues with the Expenses used to generate those Revenues

Explanation
Accrual basis accounting seeks to match revenues with the expenses used to generate those revenues. This means that revenues are recognized when they are earned, regardless of when the cash is received, and expenses are recognized when they are incurred, regardless of when the cash is paid out. This method provides a more accurate representation of a company's financial performance and allows for better decision-making based on the matching principle.

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9.

The Statement of Cash Flows shows:
- A.
  
  How much operating income a business has earned
- B.
  
  How well a business is managing its overhead
- C.
  
  How a business generated and used cash
- D.
  
  How many assets a business has
Correct Answer
C. How a business generated and used cash

Explanation
The statement of cash flows is concerned with how a company generated and used cash during a given period.

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10.

The Statement of Cash Flows shows cash from:
- A.
  
  Current Activities, Discontinued Activities, and Future Activities
- B.
  
  Primary Activities, Secondary Activities, and Discontinued Activities
- C.
  
  Financing Activities, Net Income, and Net Liabilities
- D.
  
  Operating Activities, Investing Activities, and Financing Activities
Correct Answer
D. Operating Activities, Investing Activities, and Financing Activities

Explanation
The three sections of a cash flow statement are Cash from Operating Activities, Cash from Investing Activities, and Cash from Financing Activities.

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Current Version
Feb 05, 2024

Quiz Edited by
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Mar 26, 2011

Quiz Created by
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Wyrnkaa - Chapter 3 Review Questions

What are the three sections of the Balance Sheet?

What is an Asset, in simple terms?

Net Income is shown on the:

The "statement of what you've got" is the:

The "statement of what you've earned" is the:

The Income Statement is made up primarily of:

The Income Statement and Balance Sheet utilize:

Accrual basis accounting seeks to match:

The Statement of Cash Flows shows:

The Statement of Cash Flows shows cash from: