CS CS Financial & Accounting Basics 2 — Questions and Answers
Question 1: What is a purchase order (PO)?
- A receipt confirming goods were received
- A document authorizing a vendor to supply goods at an agreed price (Correct answer)
- A bank deposit slip
- An employee expense report
Correct answer: A document authorizing a vendor to supply goods at an agreed price
A purchase order is a formal document issued by a buyer to a seller authorizing a specific purchase.
Question 2: Which term describes the process of recording financial transactions in the order they occur?
- Auditing
- Budgeting
- Journalizing (Correct answer)
- Reconciling
Correct answer: Journalizing
Journalizing is the first step in the accounting cycle — entering transactions chronologically into a journal.
Question 3: A budget variance occurs when:
- Actual spending equals budgeted spending
- Actual spending differs from the budgeted amount (Correct answer)
- A new budget is created
- Petty cash is replenished
Correct answer: Actual spending differs from the budgeted amount
A budget variance is the difference, positive or negative, between the budgeted amount and the actual amount spent.
Question 4: What is the purpose of an expense report?
- To track inventory levels
- To document employee business-related expenditures for reimbursement (Correct answer)
- To record client payments
- To list office equipment purchases
Correct answer: To document employee business-related expenditures for reimbursement
An expense report allows employees to submit documentation of business expenses so they can be reimbursed by the company.
Question 5: Which accounting principle states that revenue should be recorded when earned, not when cash is received?
- Cash basis accounting
- Accrual accounting (Correct answer)
- Double-entry accounting
- Cost accounting
Correct answer: Accrual accounting
Accrual accounting recognizes revenue when it is earned and expenses when they are incurred, regardless of cash flow timing.
Question 6: What does 'net pay' mean on a paycheck?
- Gross wages before deductions
- Total hours worked
- Wages after all deductions have been subtracted (Correct answer)
- The employer's payroll tax contribution
Correct answer: Wages after all deductions have been subtracted
Net pay is the amount an employee actually receives after taxes, insurance, and other deductions are taken from gross pay.
CS CS Financial & Accounting Basics 2
What is a purchase order (PO)?