Free AFC Basic Accounting Questions and Answers

Question 1

Which activity is covered in accounting information?

Accepted Answer

All of these

Answer

Explanation:
The accounting function encompasses all three activities: reporting information (preparing financial statements), identifying information (recognizing relevant transactions and events), and recording information (entering transactions into the accounting system). Each of these activities is integral to the overall accounting process.

Question 2

Earnings Per Share (EPS) is calculated by:

Accepted Answer

Net Profit / No. of Ordinary Shares Outstanding

Answer

Explanation:
Earnings Per Share (EPS) is a measure of a company's profitability and is calculated by dividing the net profit (or net income) by the number of ordinary shares outstanding. This ratio provides insight into how much profit is attributable to each share of stock. The other options incorrectly use gross profit or the number of equity shareholders, which are not part of the standard EPS calculation.

Question 3

Which of the following accounting practice, is the accounting practice of reporting less revenue and a lower asset amount:

Accepted Answer

Conservatism

Answer

Explanation:
The accounting practice of conservatism involves reporting less revenue and lower asset amounts to ensure that potential expenses and liabilities are not understated. This principle aims to provide a cautious approach to financial reporting, prioritizing reliability and prudence by recognizing expenses and liabilities as soon as possible, but only recognizing revenues and assets when they are assured of being received.

Question 4

What is the benefit of the accounting standards?

Accepted Answer

All of these

Answer

Explanation:
Accounting standards provide multiple benefits, including:

Facilitate comparison of financial statements across companies.
Eliminate confusing variations in accounting practices.
Require additional disclosures beyond legal requirements.

Question 5

Where do the financial transactions are first recorded?

Accepted Answer

Journals

Answer

Explanation:
Financial transactions are first recorded in journals, which are also known as the books of original entries. This is where transactions are initially documented before being posted to the ledgers.

AFC - Accounting Fundamentals Certification Practice Test

AFC - Accounting Fundamentals Certification Practice Test

Free AFC Basic Accounting Questions and Answers