IBA Accounting Fundamentals

Question 1

Which accounting equation correctly represents the relationship between assets, liabilities, and equity?

Accepted Answer

Assets = Liabilities + Equity

Answer

Assets = Equity - Liabilities

Answer

Liabilities = Assets + Equity

Answer

Equity = Assets + Liabilities

Question 2

Which financial statement shows a company's revenues and expenses over a specific period?

Accepted Answer

Income Statement

Answer

Balance Sheet

Answer

Statement of Cash Flows

Answer

Statement of Retained Earnings

Question 3

Under accrual accounting, revenue is recognized when:

Accepted Answer

It is earned, regardless of when cash is received

Answer

Cash is received from the customer

Answer

The invoice is sent to the customer

Answer

The fiscal year ends

Question 4

Depreciation is best described as:

Accepted Answer

The allocation of an asset's cost over its useful life

Answer

A method to increase an asset's book value over time

Answer

A cash expense recorded when an asset is purchased

Answer

The market value decline of an asset

Question 5

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

Accepted Answer

LIFO (Last In, First Out)

Answer

FIFO (First In, First Out)

Answer

Weighted Average Cost

Answer

Specific Identification

Question 6

A debit entry to an asset account will:

Accepted Answer

Increase the asset balance

Answer

Decrease the asset balance

Answer

Have no effect on the asset balance

Answer

Transfer the balance to equity

Question 7

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

Accepted Answer

Accounts payable

Answer

Long-term bonds payable

Answer

Equipment

Answer

Common stock