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

Depreciation is the systematic allocation of a tangible asset's cost over its estimated useful life, not a measure of market value change.

Question 2

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

Accepted Answer

Going Concern Concept

Answer

The going concern concept assumes a business will remain in operation long enough to fulfill its objectives, which is why assets are recorded at cost rather than liquidation value.

Question 3

Accounts payable is classified on the balance sheet as a:

Accepted Answer

Current Liability

Answer

Accounts payable represents amounts owed to suppliers that are typically due within 30–90 days, making it a current (short-term) liability.

Question 4

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

Accepted Answer

Journalizing

Answer

Journalizing is the first step of the accounting cycle, where transactions are recorded chronologically in the general journal before being posted to the ledger.

Question 5

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

Accepted Answer

Retained Earnings

Answer

At period-end, net income increases retained earnings through the closing process, accumulating profits that have not been distributed as dividends.

Business Degree Practice Test

Business Degree Practice Test

Business Degree Accounting Principles 2