IBA Accounting Fundamentals 2

Question 1

The going concern assumption in accounting means:

Accepted Answer

A company will continue to operate indefinitely into the future

Answer

A company will liquidate its assets in the near future

Answer

A company must report assets at current market value

Answer

A company's revenues must exceed its expenses

Question 2

What does the current ratio measure?

Accepted Answer

A company's ability to pay short-term obligations with current assets

Answer

A company's profitability relative to its revenue

Answer

The proportion of debt versus equity financing

Answer

The efficiency of inventory management

Question 3

Which of the following represents a non-cash expense?

Accepted Answer

Depreciation expense

Answer

Wages expense

Answer

Rent expense

Answer

Utilities expense

Question 4

Retained earnings represent:

Accepted Answer

Cumulative net income kept in the business after dividends are paid

Answer

The total cash held by the company

Answer

The par value of shares issued to investors

Answer

Total assets minus total liabilities

Question 5

Which accounting concept requires that expenses be recorded in the same period as the revenues they help generate?

Accepted Answer

Matching principle

Answer

Consistency principle

Answer

Materiality principle

Answer

Conservatism principle

Question 6

On the balance sheet, long-term assets are listed:

Accepted Answer

After current assets, in order of decreasing liquidity

Answer

Before current assets, in order of decreasing liquidity

Answer

In alphabetical order after all liabilities

Answer

Only when they exceed $1 million in value

Question 7

Which method of depreciation results in the highest depreciation expense in the early years of an asset's life?

Accepted Answer

Double-declining balance depreciation

Answer

Straight-line depreciation

Answer

Units-of-production depreciation

Answer

Sum-of-the-years'-digits only for intangibles