ABA Accounting Principles

Question 1

What is the basic accounting equation?

Accepted Answer

Assets = Liabilities + Equity

Answer

Assets = Liabilities - Equity

Answer

Assets = Revenue + Expenses

Answer

Liabilities = Assets + Equity

Question 2

Which of the following represents the matching principle?

Accepted Answer

Record expenses when they are incurred, regardless of when cash is paid.

Answer

Record expenses when cash is paid.

Answer

Record revenue only when it is received in cash.

Answer

Record revenue when earned, irrespective of expenses.

Question 3

What is the primary purpose of financial accounting?

Accepted Answer

To provide financial information to external users.

Answer

To prepare tax returns.

Answer

To record internal financial transactions.

Answer

To determine the company's market value.

Question 4

Which of the following is considered an intangible asset?

Accepted Answer

Patent

Answer

Land

Answer

Building

Answer

Cash

Question 5

What does GAAP stand for?

Accepted Answer

Generally Accepted Accounting Principles

Answer

General Accepted Accounting Principles

Answer

Generally Accepted Accounting Practices

Answer

General Accounting and Auditing Practices

Question 6

Which of the following is an example of a current liability?

Accepted Answer

Accounts payable

Answer

Long-term debt

Answer

Equipment

Answer

Buildings

Question 7

What is the difference between accrual accounting and cash accounting?

Accepted Answer

Accrual accounting records transactions when earned or incurred.

Answer

Accrual accounting records transactions only at year-end.

Answer

Cash accounting records transactions when cash is received or paid.

Answer

Cash accounting records transactions after they are audited.

Question 8

What is the role of depreciation in accounting?

Accepted Answer

Depreciation reduces the value of an asset over time.

Answer

Depreciation increases asset value over time.

Answer

Depreciation is not recorded in financial statements.

Answer

Depreciation is added to the owner's equity.

Question 9

Which financial statement shows the profitability of a business over a period of time?

Accepted Answer

Income statement

Answer

Balance sheet

Answer

Cash flow statement

Answer

Equity statement