Introduction to Accounting quiz

Financial Accounting Quiz

On Mar 18, 2024

Introduction to Accounting

1 / 15

Which of the following statements about users of accounting information is incorrect ?

Regulatory authorities are internal users

Taxing authorities are external users

Management is an internal user

Present creditors are external users

2 / 15

The historical cost principle states that :

activities of an entity are to be kept separate and distinct from its owner

assets should be initially recorded at cost and adjusted when the fair value changes

assets should be recorded at their cost

only transaction data capable of being expressed in terms of money be included in the accounting records

3 / 15

Which of the following statements about basic assumptions is correct ?

Basic assumptions are the same as accounting principles

The economic entity assumption states that there should be a particular unit of accountability

The monetary unit assumption enables accounting to measure employee morale

Partnerships are not economic entities

4 / 15

Which of the following statements is false ?

An income statement presents the revenues, expenses, changes in owner’s equity, and resulting net income or net loss for a specif c period of time

A balance sheet reports the assets, liabilities, and owner’s equity at a specifc date

A statement of cash ﬂ ows summarizes information about the cash inﬂ ows (receipts) and outﬂ ows (payments) for a specif c period of time

An owner’s equity statement summarizes the changes in owner’s equity for a specif c period of time

5 / 15

Which of the following is not a step in the accounting process?

Identifcation

Recording

Communication

Verifcation

6 / 15

The three types of business entities are :

proprietorships, partnerships, and large businesses

proprietorships, partnerships, and corporations

fnancial, manufacturing, and service companies

proprietorships, small businesses, and partnerships

7 / 15

The financial statement that reports assets, liabilities, and owner’s equity is the :

income statement

balance sheet

statement of cash ﬂows

owner’s equity statement

8 / 15

Which of the following events is not recorded in the accounting records ?

An employee is terminated

The owner withdraws cash for personal use

Equipment is purchased on account

A cash investment is made into the business

9 / 15

During 2023, the Company’s assets decreased $50,000 and its liabilities decreased $90,000. Its owner’s equity therefore :

increased $140,000

decreased $140,000

decreased $40,000

increased $40,000

10 / 15

Net income will result during a time period when :

assets exceed liabilities

assets exceed revenues

expenses exceed revenues

revenues exceed expenses

11 / 15

Payment of an account payable affects the components of the accounting equation in the following way :

Decreases assets and decreases liabilities

Decreases assets and increases owner’s equity

Decreases owner’s equity and decreases liabilities

Increases assets and decreases liabilities

12 / 15

Services performed by a public accountant include :

auditing, taxation, and management consulting

auditing, budgeting, and cost accounting

internal auditing, budgeting, and management consulting

auditing, budgeting, and management consulting

13 / 15

As of December 31, 2023, the Company has assets of $3,500 and owner’s equity of $2,000. What are the liabilities for the Company as of December 31, 2023 ?

$2,000

$2,500

$1,000

$1,500

14 / 15

On the last day of the period, the Company buys a $900 machine on credit. This transaction will affect the:

income statement, owner’s equity statement, and balance sheet

income statement and owner’s equity statement only

balance sheet only

income statement only

15 / 15

Performing services on account will have the following effects on the components of the basic accounting equation :

increase assets and increase owner’s equity

increase assets and decrease owner’s equity

increase liabilities and increase owner’s equity

increase assets and increase liabilities

Your score is

Question topics

The Basic Accounting Equation : Assets, Liabilities, Owner’s equity

Financial Statements: Balance sheet, Income statement, Statement of cash, Owner’s equity statement.

users and uses of accounting: Internal users ,External users

monetary unit assumption and the economic entity assumption