Business Degree Accounting Principles 2

Question 1

Depreciation in accounting is best described as:

Accepted Answer

The allocation of an asset's cost over its useful life

Answer

The decline in market value of an asset

Answer

The cash paid to acquire an asset

Answer

The increase in an asset's value over time

Question 2

Which accounting concept assumes that a business will continue to operate indefinitely into the future?

Accepted Answer

Going Concern Concept

Answer

Consistency Principle

Answer

Materiality Principle

Answer

Conservatism Principle

Question 3

Accounts payable is classified on the balance sheet as a:

Accepted Answer

Current Liability

Answer

Current Asset

Answer

Long-term Asset

Answer

Long-term Liability

Question 4

The process of recording financial transactions in a journal in chronological order is called:

Accepted Answer

Journalizing

Answer

Posting

Answer

Adjusting

Answer

Closing

Question 5

At the end of an accounting period, net income is transferred to which account?

Accepted Answer

Retained Earnings

Answer

Revenue

Answer

Cash

Answer

Capital Stock

Question 6

Which financial ratio measures a company's ability to pay its short-term obligations with its current assets?

Accepted Answer

Current ratio

Answer

Debt-to-equity ratio

Answer

Return on equity

Answer

Gross profit margin

Question 7

Under Generally Accepted Accounting Principles (GAAP), assets are primarily recorded at:

Accepted Answer

Historical cost

Answer

Market value

Answer

Replacement cost

Answer

Fair value