IAB Financial Accounting & Reporting 2

Question 1

Under the accrual basis of accounting, revenue is recognized when:

Accepted Answer

It is earned and realizable, regardless of when cash is received

Answer

Accrual accounting requires revenue to be recognized when earned and realizable, not when cash changes hands.

Question 2

Which financial statement shows a company's financial position at a specific point in time?

Accepted Answer

Balance Sheet

Answer

The Balance Sheet (Statement of Financial Position) reports assets, liabilities, and equity as of a specific date.

Question 3

If a company has total assets of $500,000 and total liabilities of $180,000, what is the owner's equity?

Accepted Answer

$320,000

Answer

Using the accounting equation: Equity = Assets − Liabilities = $500,000 − $180,000 = $320,000.

Question 4

What does the term 'contra account' mean?

Accepted Answer

An account with a balance opposite to its paired account, reducing its net value

Answer

A contra account carries a balance opposite to its related account to reduce the carrying value (e.g., Accumulated Depreciation reduces Equipment).

Question 5

Which inventory costing method assumes the most recently purchased items are sold first?

Accepted Answer

LIFO

Answer

LIFO (Last-In, First-Out) assumes the most recently acquired inventory units are the first to be sold.

(IAB) International Association of Bookkeepers Certification Practice Test