Business Degree Accounting Principles 3

Question 1

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

Accepted Answer

Income Statement

Answer

The income statement (also called the profit and loss statement) summarizes revenues earned and expenses incurred over an accounting period to show net income or loss.

Question 2

A trial balance is prepared primarily to:

Accepted Answer

Verify that total debits equal total credits

Answer

A trial balance lists all ledger account balances to confirm that total debits equal total credits, catching arithmetic and posting errors before financial statements are prepared.

Question 3

Which of the following is NOT one of the three sections of the Statement of Cash Flows?

Accepted Answer

Manufacturing Activities

Answer

The cash flow statement is divided into operating, investing, and financing activities; manufacturing activities are not a separate section of this statement.

Question 4

Goodwill recorded on a company's balance sheet is an example of a(n):

Accepted Answer

Intangible Asset

Answer

Goodwill is an intangible asset that arises when a company acquires another for more than the fair value of its net identifiable assets, representing brand value and reputation.

Question 5

The allowance for doubtful accounts is used to:

Accepted Answer

Estimate uncollectible accounts receivable in advance

Answer

The allowance for doubtful accounts is a contra-asset account that estimates the portion of accounts receivable unlikely to be collected, matching the bad debt expense to the period of the sale.

Business Degree Practice Test

Business Degree Practice Test

Business Degree Accounting Principles 3