Question 1

Which financial statement reports the changes in cash flows from operating, investing, and financing activities?

Accepted Answer

c) Statement of Cash Flows

Question 2

The purchase of inventory on credit would result in which of the following journal entries?

Accepted Answer

b) Debit Accounts Payable, Credit Inventory

Question 3

Which accounting principle requires that expenses should be recognized in the same period as the revenues they help to generate?

Accepted Answer

b) Matching Principle

Question 4

Which financial statement reports the revenues and expenses of a company over a specific period?

Accepted Answer

c) Income Statement

Question 5

When a company records an accrued revenue, which account is debited?

Accepted Answer

c) Accounts Receivable

Question 6

An expense that has been incurred but not yet paid is called:

Accepted Answer

a) Accrued Expense

Question 7

What is the formula for calculating Net Income on an Income Statement?

Accepted Answer

b) Net Income = Total Revenue - Total Expenses

Question 8

What is the purpose of the Consistency Principle in accounting?

Accepted Answer

d) To use the same accounting methods and principles from one period to another

Question 9

Which financial statement is prepared first in the accounting cycle?

Accepted Answer

d) Trial Balance

Question 10

When a company records an accrued expense, which account is debited?

Accepted Answer

a) Expense

Question 11

What is the purpose of the Materiality Principle in accounting?

Accepted Answer

c) To only report significant information that may influence users decisions

Question 12

What is the purpose of the Generally Accepted Accounting Principles (GAAP)?

Accepted Answer

c) To provide a framework for consistent and reliable financial reporting

Question 13

When revenue is recognized before it is received in cash, it results in:

Accepted Answer

c) An increase in equity

Question 14

What is the purpose of the Cost Principle in accounting?

Accepted Answer

b) To record the cost of an asset as its historical cost

Question 15

What is the purpose of the Accrual Principle in accounting?

Accepted Answer

b) To record expenses when they are incurred, regardless of when cash is paid

Question 16

Which of the following financial statements is typically prepared last in the accounting cycle?

Accepted Answer

b) Balance Sheet

Question 17

What is the purpose of the Going Concern Principle in accounting?

Accepted Answer

b) To assume that a company will continue to operate for the foreseeable future

Question 18

Which of the following accounts represents owners equity?

Accepted Answer

c) Common Stock

Question 19

What is the purpose of the Time Period Principle in accounting?

Accepted Answer

b) To match expenses with related revenues

Question 20

Which accounting principle requires that accounting records and methods remain consistent from one accounting period to another?

Accepted Answer

b) Consistency Principle

Principles of accounting — Question Paper