FREE AFC Accounting Principles and Concepts Questions and Answers

0%

The accrual basis of accounting records revenues when they are:

Correct! Wrong!

Explanation:
The accrual basis of accounting recognizes revenues when they are earned, regardless of when the cash is actually received. This means that revenues are recorded at the time the goods are delivered or services are performed, aligning the recognition of revenues with the associated expenses. This method provides a more accurate picture of a company's financial position because it matches revenues generated during a period with the expenses related to generating those revenues, regardless of when cash transactions occur.

Which financial statement displays the revenues and expenses of a company for a period of time?

Correct! Wrong!

Explanation:
The income statement displays all revenues and expenses recorded in a period in a single report.

Which account is not a liability account?

Correct! Wrong!

Explanation:
Liabilities include resources owned by creditors such as accounts payable, accrued expenses, and notes payable. Cash is an asset.

The account format that displays debits, credits, balances, and headings:

Correct! Wrong!

Explanation :
A T-account is a way to format accounting transactions that display debits on the left and credits on the right.

What is the main purpose of financial accounting?

Correct! Wrong!

Explanation:
The purpose of financial accounting is to provide useful information for outside investors, creditors, and others.

A ___________ is used to record a business event as they occur throughout the year.

Correct! Wrong!

Explanation:
A journal entry is used to record a business event as they occur throughout the year. It is a chronological record of all the financial transactions of a business, including the date, description, and amount of each transaction. Journal entries are an important part of the accounting process as they provide a detailed and organized record of all the financial activities of a business, which can be used to prepare financial statements and analyze the financial performance of the business.

Asset accounts have what type of balance?

Correct! Wrong!

Explanation:
Asset accounts have a debit balance. Debit is the side of an account that shows increases in assets and decreases in liabilities and equity. In accounting, assets are recorded on the debit side of the balance sheet, indicating that they have a positive value. Therefore, the correct answer is debit.

The __________ summarizes the accounting equation in report format.

Correct! Wrong!

Explanation:
The balance sheet summarizes the accounting equation in report format. It provides a snapshot of a company's financial position at a specific point in time by showing its assets, liabilities, and shareholders' equity. The balance sheet is an essential financial statement that helps stakeholders understand the company's financial health and its ability to meet its obligations. Unlike the trial balance, journal, and ledger, which are used for recording and organizing transactions, the balance sheet presents a summary of these transactions in a clear and concise format.

Which of these is not included as a separate item in the basic accounting equation?

Correct! Wrong!

Explanation:
Revenues are not included in the basic accounting equation:
Assets = Liabilities + Owner’s Equity.

Which accounting method, recognizes revenue when the cash is received?

Correct! Wrong!

Explanation:
Cash accounting recognizes revenue when cash is received and expenses when cash is paid. This method does not consider when the revenue is earned or when the expenses are incurred, making it simpler but less accurate for measuring a company's financial performance compared to accrual accounting, which recognizes revenue when it is earned and expenses when they are incurred.

Which trial balance is prepared after the closure of temporary accounts?

Correct! Wrong!

Explanation:
The post-closing trial balance is prepared after the closure of temporary accounts, such as revenue, expense, and dividend accounts. These accounts are closed out at the end of the accounting period to prepare for the next period. The post-closing trial balance lists all remaining permanent accounts (assets, liabilities, and equity) after the closing entries have been made. It ensures that the accounting equation remains in balance and that only permanent accounts are reflected.

Lifetime Ad-Free Access @ $4.99

$4.99

Premium Tests $49/mo
FREE June-2024