FBLA Accounting 4

Question 1

Which of the following best describes 'owner's equity' in a sole proprietorship?

Accepted Answer

Total assets minus total liabilities

Answer

Owner's equity represents the residual interest in the assets of the business after deducting all liabilities.

Question 2

Which inventory costing method results in the highest net income during a period of rising prices?

Accepted Answer

FIFO

Answer

FIFO assigns lower (older) costs to cost of goods sold during rising prices, resulting in higher gross profit and net income.

Question 3

An adjusting entry for accrued salaries would include:

Accepted Answer

Debit Salaries Expense; Credit Salaries Payable

Answer

Accrued salaries are recorded by debiting Salaries Expense and crediting Salaries Payable to recognize the obligation.

Question 4

The debt-to-equity ratio is used to measure a company's:

Accepted Answer

Financial leverage and use of debt financing

Answer

The debt-to-equity ratio compares total liabilities to shareholders' equity, indicating how much debt is used relative to equity.

Question 5

Which of the following is NOT one of the four financial statements?

Accepted Answer

General Ledger

Answer

The general ledger is an accounting record, not one of the four primary financial statements.

FBLA - Future Business Leaders of America Practice Test