DSST Principles of Financial Accounting 1

Question 1

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

Accepted Answer

Income Statement

Answer

The income statement summarizes a company's revenues and expenses to show net income or loss for a given period.

Question 2

In double-entry bookkeeping, every transaction affects at least how many accounts?

Accepted Answer

Two

Answer

Double-entry bookkeeping requires every transaction to be recorded as a debit in one account and a credit in another.

Question 3

Which accounting principle states that revenue should be recognized when earned, regardless of when cash is received?

Accepted Answer

Revenue Recognition Principle

Answer

The revenue recognition principle under accrual accounting requires revenue to be recorded when it is earned, not when cash is collected.

Question 4

What is the accounting equation?

Accepted Answer

Assets = Liabilities + Owner's Equity

Answer

The fundamental accounting equation, Assets = Liabilities + Owner's Equity, must always remain in balance.

Question 5

Which inventory valuation method assumes the most recently purchased goods are sold first?

Accepted Answer

LIFO

Answer

LIFO (Last-In, First-Out) assumes the last units purchased are the first units sold.

DSST - DANTES Subject Standardized Tests Practice Test