Fundamentals Of Accounting Test Quiz!

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Questions: 10 | Attempts: 26,635 | Updated: Apr 29, 2024

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Fundamentals Of Accounting Test Quiz! - Quiz

Accounting is a tool to record and analyze the financial condition and performance of the business. Some people simply can’t understand the stats and figures. But some possess deep knowledge and concepts about accounting principles. This quiz has been created to test your knowledge about the fundamental rules and principles of accounting. So, let's try out the quiz. All the best!

Questions and Answers

1.

Which financial statement displays the revenues and expenses of a company for a period of time?
- A.
  
  Income Statement
- B.
  
  Balance Sheet
- C.
  
  Cash Flow Statement
- D.
  
  Statement of Stockholder's Equity
Correct Answer
A. Income Statement

Explanation
The income statement displays all revenues and expenses recorded in a period in a single report.

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2.

What is the main purpose of financial accounting?
- A.
  
  Organize Financial Information
- B.
  
  Provide Useful, Financial Information to Outsiders
- C.
  
  Keep Track of Company Expenses
- D.
  
  Minimize Company Taxes
Correct Answer
B. Provide Useful, Financial Information to Outsiders

Explanation
The purpose of financial accounting is to provide useful information for outside investors, creditors, and others.

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3.

Which of these is not included as a separate item in the basic accounting equation?
- A.
  
  Assets
- B.
  
  Revenues
- C.
  
  Liabilities
- D.
  
  Stockholder's Equity
Correct Answer
B. Revenues

Explanation
Revenues are not included in the basic accounting equation.
Assets = Liabilities + Owner’s Equity.

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4.

Entries to revenues accounts such as Service Revenues are usually
- A.
  
  Debit
- B.
  
  Credit
Correct Answer
B. Credit

Explanation
Entries to revenue accounts like Service Revenues are typically recorded as credit entries in accounting. When a business provides services to customers, it earns revenue, which increases the balance in the Service Revenues (or similar) account. In double-entry accounting, for every credit entry to the Service Revenues account, there would typically be a corresponding debit entry in another account, such as an asset account like Cash or an account receivable account, to balance the transaction. This follows the fundamental accounting equation: Assets = Liabilities + Equity.

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5.

The accrual basis of accounting records revenues when they are:
- A.
  
  Collected
- B.
  
  Earned
- C.
  
  Contracted
- D.
  
  Readily Available for use
Correct Answer
B. Earned

Explanation
The accrual basis of accounting recognizes revenues when they are earned, regardless of when the cash is actually received. This means that revenues are recorded at the time the goods are delivered or services are performed, aligning the recognition of revenues with the associated expenses. This method provides a more accurate picture of a company's financial position because it matches revenues generated during a period with the expenses related to generating those revenues, regardless of when cash transactions occur.

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6.

The account format that displays debits, credits, balances, and headings.
- A.
  
  General Journal
- B.
  
  General Ledger
- C.
  
  T- Account
- D.
  
  Ledger Account
Correct Answer
C. T- Account

Explanation
A T-account is a way to format accounting transactions that displays debits on the left and credits on the right.

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7.

Asset accounts have what type of balance?
- A.
  
  Debit
- B.
  
  Credit
- C.
  
  Contra
- D.
  
  All of the above
Correct Answer
A. Debit

Explanation
Asset accounts have a debit balance. Debit is the side of an account that shows increases in assets and decreases in liabilities and equity. In accounting, assets are recorded on the debit side of the balance sheet, indicating that they have a positive value. Therefore, the correct answer is debit.

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8.

Which account is not a liability account?
- A.
  
  Accounts payable
- B.
  
  Accrued Expenses
- C.
  
  Cash
- D.
  
  Notes Payable
Correct Answer
C. Cash

Explanation
Liabilities include resources owned to creditors such as accounts payable, accrued expenses, and notes payable. Cash is an asset.

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9.

A ___________ is used to record a business event as they occur throughout the year.
- A.
  
  Journal Entry
- B.
  
  Ledger
- C.
  
  Trial Balance
- D.
  
  Bank Reconciliation Statement
Correct Answer
A. Journal Entry

Explanation
A journal entry is used to record a business event as they occur throughout the year. It is a chronological record of all the financial transactions of a business, including the date, description, and amount of each transaction. Journal entries are an important part of the accounting process as they provide a detailed and organized record of all the financial activities of a business, which can be used to prepare financial statements and analyze the financial performance of the business.

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10.

The __________ summarizes the accounting equation in report format.
- A.
  
  Trial Balance
- B.
  
  Balance Sheet
- C.
  
  Journal
- D.
  
  Ledger
Correct Answer
B. Balance Sheet

Explanation
The balance sheet summarizes the accounting equation in report format. It provides a snapshot of a company's financial position at a specific point in time by showing its assets, liabilities, and shareholders' equity. The balance sheet is an essential financial statement that helps stakeholders understand the company's financial health and its ability to meet its obligations. Unlike the trial balance, journal, and ledger, which are used for recording and organizing transactions, the balance sheet presents a summary of these transactions in a clear and concise format.

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Current Version
Apr 29, 2024

Quiz Edited by
ProProfs Editorial Team
Sep 06, 2007

Quiz Created by
Rsahiwal

Fundamentals Of Accounting Test Quiz!

Which financial statement displays the revenues and expenses of a company for a period of time?

What is the main purpose of financial accounting?

Which of these is not included as a separate item in the basic accounting equation?

Entries to revenues accounts such as Service Revenues are usually

The accrual basis of accounting records revenues when they are:

The account format that displays debits, credits, balances, and headings.

Asset accounts have what type of balance?

Which account is not a liability account?

A ___________ is used to record a business event as they occur throughout the year.

The __________ summarizes the accounting equation in report format.