Accounting

1. Accounting is the systematic process of recording, analyzing, and reporting financial transactions for an individual or organization. It involves preparing financial statements, budgeting, auditing, and providing insight on financial performance. By maintaining accurate records of income, expenses, assets, and liabilities, accounting helps in tracking financial health, making informed decisions, and ensuring compliance with regulations. Ultimately, accounting plays a vital role in helping individuals and businesses manage their finances effectively and achieve their financial goals.

What is the accounting equation?

A) Assets = Liabilities + Equity
B) Cash Flow from Operating Activities = Net Income
C) Total Revenue - Total Expenses = Profit
D) Revenues - Expenses = Net Income

2. Which financial statement shows the revenues and expenses of a company over a period of time?

A) Income statement
B) Statement of cash flows
C) Balance sheet
D) Statement of retained earnings

3. Which of the following is classified as a current liability?

A) Long-term debt
B) Common stock
C) Accounts payable
D) Property, plant, and equipment

4. What does the acronym FIFO stand for in accounting?

A) Funds In, Funds Out
B) First In, Last Out
C) Final In, Final Out
D) First In, First Out

5. Which financial statement reports the changes in retained earnings for a specific period?

A) Balance sheet
B) Statement of retained earnings
C) Statement of cash flows
D) Income statement

6. What is the accounting term for the process of allocating the cost of an intangible asset over its useful life?

A) Depreciation
B) Amortization
C) Capitalization
D) Depletion

7. Which accounting principle requires that expenses are reported in the same period as the revenues they helped to earn?

A) Materiality principle
B) Matching principle
C) Consistency principle
D) Prudence principle

8. What does EBITDA stand for in accounting?

A) Earnings Before Income, Taxes, Depreciation, and Amortization
B) Earnings Before Interest, Taxes, Dividends, and Amortization
C) Earnings Before Income, Taxes, Dividends, and Amortization
D) Earnings Before Interest, Taxes, Depreciation, and Amortization

9. Which of the following statements is true about a balance sheet?

A) It demonstrates the cash flows of a company
B) It shows the financial position of a company at a specific point in time
C) It shows the revenues and expenses over a period of time
D) It summarizes the net income of a company

10. What is the formula for calculating working capital?

A) Total Assets - Total Liabilities
B) Total Revenue - Total Expenses
C) Total Equity + Net Income
D) Current Assets - Current Liabilities

11. Which financial statement shows the cash inflows and outflows of a company during a period?

A) Income statement
B) Balance sheet
C) Statement of retained earnings
D) Statement of cash flows

12. How are assets generally listed on a balance sheet?

A) In order of liquidity
B) In order of age
C) In order of profitability
D) In order of size

13. Which financial ratio measures a company's ability to pay off its short-term liabilities with its current assets?

A) Return on equity
B) Current ratio
C) Profit margin
D) Debt to equity ratio

14. What is the formula for calculating earnings per share (EPS)?

A) Dividends / Earnings before interest and taxes (EBIT)
B) Revenue / Total assets
C) Net Income / Total equity
D) Net Income / Average number of outstanding shares

15. What type of account is an accounts payable?

A) Equity
B) Revenue
C) Asset
D) Liability

16. What is the formula for calculating the debt-to-equity ratio?

A) Assets / Liabilities
B) Net Income / Total Equity
C) Total Assets / Total Equity
D) Total Debt / Total Equity

17. What does the acronym COGS stand for in accounting?

A) Cost of Gross Sales
B) Cost of Goods Sold
C) Consumption of Goods Sold
D) Commission on Gross Sales

18. What does GAAP stand for in accounting?

A) Global Accounting and Auditing Principles.
B) Global Association of Accounting Professionals.
C) General Accounting and Auditing Procedures.
D) Generally Accepted Accounting Principles.

19. What type of account is 'Accounts Receivable'?

A) Equity.
B) Asset.
C) Expense.
D) Liability.

20. Which financial statement reports a company's financial position at a specific point in time?

A) Balance sheet.
B) Retained earnings statement.
C) Income statement.
D) Statement of cash flows.

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