Principles of Financial Accounting Flashcards

Which of the following is a current asset?

Answer: Accounts Receivable

Accounts receivable is a current asset because it is expected to be converted to cash within one year.

Under the straight-line depreciation method, how is annual depreciation calculated?

Answer: (Cost − Salvage Value) ÷ Useful Life

Straight-line depreciation spreads the depreciable cost evenly over the asset's useful life using (Cost − Salvage Value) ÷ Useful Life.

When a company pays a previously recorded account payable, which accounts are affected?

Answer: Debit Accounts Payable; Credit Cash

Paying an account payable reduces the liability (debit Accounts Payable) and reduces cash (credit Cash).

Which accounting concept requires that expenses be recorded in the same period as the revenues they helped generate?

Answer: Matching Principle

The matching principle ensures expenses are recognized in the period they help generate revenue, enabling accurate profit measurement.

A trial balance is prepared primarily to verify what?

Answer: That total debits equal total credits

A trial balance lists all ledger accounts and their balances to confirm that total debits equal total credits before financial statements are prepared.

Which financial statement shows the inflows and outflows of cash during a period?

Answer: Statement of Cash Flows

The statement of cash flows categorizes cash transactions into operating, investing, and financing activities.