Bcom Bachelor of Commerce Bachelor of Commerce: Financial Accounting 2

Question 1

Under the accrual basis of accounting, revenue is recognized when:

Accepted Answer

It is earned, regardless of when cash is received

Answer

Accrual accounting recognizes revenue when earned (goods/services delivered), not when cash changes hands.

Question 2

Which depreciation method results in the highest depreciation expense in the early years of an asset's life?

Accepted Answer

Double declining balance method

Answer

Double declining balance applies double the straight-line rate to the book value, front-loading depreciation in early years.

Question 3

A company purchases $10,000 of inventory on credit. Which journal entry is correct?

Accepted Answer

Debit Inventory $10,000; Credit Accounts Payable $10,000

Answer

Buying inventory on credit increases the asset Inventory (debit) and creates a liability Accounts Payable (credit).

Question 4

The allowance for doubtful accounts is classified on the balance sheet as:

Accepted Answer

A contra-asset account

Answer

The allowance for doubtful accounts offsets Accounts Receivable, making it a contra-asset that reduces the net receivable balance.

Question 5

Which financial statement shows a company's revenues and expenses over a period of time?

Accepted Answer

Income statement

Answer

The income statement (profit and loss statement) summarizes revenues, expenses, and net income for a specific accounting period.

Bcom Bachelor of Commerce Practice Test