CAT Accounting Technician Financial Reporting & Bookkeeping 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 it is earned (goods/services delivered), not when cash changes hands.

Question 2

Which financial statement shows a company's assets, liabilities, and equity at a specific point in time?

Accepted Answer

Balance sheet

Answer

The balance sheet (statement of financial position) presents the accounting equation at a single date.

Question 3

A company purchases office supplies for $500 on credit. Which entry correctly records this transaction?

Accepted Answer

Debit Supplies $500; Credit Accounts Payable $500

Answer

Purchasing supplies on credit increases the Supplies asset (debit) and creates a liability in Accounts Payable (credit).

Question 4

What is the normal balance for an expense account?

Accepted Answer

Debit

Answer

Expense accounts have a normal debit balance because expenses reduce owner's equity, which has a normal credit balance.

Question 5

The going concern assumption means that:

Accepted Answer

Financial statements are prepared assuming the entity will continue operating indefinitely

Answer

Going concern assumes the entity will remain in operation long enough to fulfill its obligations and business plans.

(CAT) Certified Accounting Technician Practice Test