Financial Fluency: Small Business Accounting Quiz
Dive into the world of numbers and financial acumen with the "Financial Fluency: Small Business Accounting Quiz." This quiz is your ticket to mastering the essential principles and practices that drive the financial success of small businesses. Challenge yourself with questions that unravel the intricacies of bookkeeping, budgeting, and financial reporting, vital for small business owners and aspiring entrepreneurs.
Whether you're navigating the financial landscape of your own venture or seeking to boost your financial literacy, this quiz provides an engaging and informative exploration. From understanding cash flow dynamics to decoding profit and loss statements, "Financial Fluency" is designed to Read moresharpen your skills and enhance your grasp of small business accounting. Immerse yourself in the quiz adventure and elevate your financial fluency, gaining insights that will empower you on your entrepreneurial journey.
- 1.
Which of the following is considered an external user of accounting?
- A.
Managers of a corporation
- B.
Employees
- C.
Customers
- D.
Supervisors of a business
Correct Answer
C. CustomersExplanation
Customers are external users of the accounting practices of an organization or business.Rate this question:
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- 2.
In the basic accounting equation, Assets= Liabilities + ________?
- A.
Long - term investments
- B.
Current assets
- C.
Stockholders’ Equity
- D.
Retained Earnings
Correct Answer
C. Stockholders’ EquityExplanation
In the basic accounting equation, Assets= Liabilities + Stockholders’ EquityRate this question:
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- 3.
Joe is a manager of a local business. He is faced with an ethical dilemma in the accounting department. According to the three steps to follow when facing ethical dilemmas, which of the following is NOT a step he should follow to analyze the situation?
- A.
Recognize the ethical situation and the issues involved
- B.
Contact the head supervisor and ask for help
- C.
Identify the principal elements in the situation
- D.
Identify all alternatives and how they affect stakeholders
Correct Answer
B. Contact the head supervisor and ask for helpExplanation
While this may be a solution at some point for Joe, he should first recognize the situation, identify the elements, and identify the alternatives when analyzing the ethical dilemma.Rate this question:
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- 4.
Which of the following is a financial statement used to indicate how successfully the business performed during a period of time?
- A.
Income Statement
- B.
Retained Earnings Statement
- C.
Statement of Cash flows
- D.
Balance Sheet
Correct Answer
A. Income StatementExplanation
Income statements are used to indicate how successfully the business performed during a specific point in time.Rate this question:
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- 5.
Which of the following is NOT one of the 3 main business activities?
- A.
Financing
- B.
Investing
- C.
Advertising
- D.
Operating
Correct Answer
C. AdvertisingExplanation
While this may be an important part of marketing for a business, it is not considered one of the 3 main business activities.Rate this question:
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- 6.
During 2011, Softball Kingdom had its assets decrease $50,000. Which of the following transactions would ensure that the basic account equation would balance?
- A.
A decrease in liabilities of $40,000
- B.
An increase in assets of $50,000
- C.
A decrease of assets of $50,000
- D.
An increase in liabilities of $30,000
Correct Answer
B. An increase in assets of $50,000Explanation
If an asset decreases, another asset must increase.Rate this question:
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- 7.
In 2013, XYZ Inc had sales revenues of $400,000, costs of goods sold: $310,000, and operating expenses of $60,000. What is the gross profit?
- A.
$30,000
- B.
$340,000
- C.
$90,000
- D.
$400,000
Correct Answer
C. $90,000Explanation
In order to find gross profit, we take the sales revenue and subtract cost of goods sold ($400,000 - $310,000)Rate this question:
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- 8.
Which of the following is NOT a measure of liquidity?
- A.
Debt to total assets ratio
- B.
Working Capital
- C.
Current Ratio
- D.
Current cash debt coverage
Correct Answer
A. Debt to total assets ratioExplanation
This is a ratio frequently used when measuring liquidity.Rate this question:
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- 9.
Which of the following is a characteristic of a corporation?
- A.
Easy to start - up
- B.
Owned by 1 individual, or a small group of individuals
- C.
Separate legal existence
- D.
Liability is tied to a single individual or small group of individuals
Correct Answer
C. Separate legal existenceExplanation
A characteristic of a corporation is its separate legal existence. This means that a corporation is considered a legal entity separate from its owners. It has its own rights and obligations, can enter into contracts, and can be held liable for its actions. This characteristic provides the advantage of limited liability, as the owners' personal assets are generally protected from the corporation's debts and liabilities. Additionally, a corporation can continue to exist even if the ownership or management changes, ensuring its continuity and stability.Rate this question:
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- 10.
Which of the following is a liabilities account?
- A.
Current Assets
- B.
Long - term investments
- C.
Property, plant, equipment
- D.
Mortgages Payable
Correct Answer
D. Mortgages PayableExplanation
This is a liabilities account.Rate this question:
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- 11.
Which of the following is NOT a function of a journal entry?
- A.
Journal entries show the complete effect of a transaction
- B.
Journal entries show profitability of the company as an overall unit
- C.
Journal entries provide a chronological order of transactions
- D.
Journal entries prevent all accounting errors
Correct Answer
B. Journal entries show profitability of the company as an overall unitExplanation
Journal entries show individual transactions-not the profitability of the company as an overall unit.Rate this question:
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- 12.
Which of the following is an expense account?
- A.
Common Stock
- B.
Retained Earnings
- C.
Rent
- D.
Dividends
Correct Answer
C. RentExplanation
Rent is considered an expense account because it represents the cost incurred by a business for utilizing a property or space. It is a regular expenditure that a company needs to pay in order to operate its business activities. Rent is categorized as an expense on the income statement and is deducted from the revenue to calculate the net income or profit of the business. Unlike common stock, retained earnings, and dividends, which are not expenses, rent directly impacts the profitability of a company and is therefore classified as an expense account.Rate this question:
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- 13.
Which of the following is included in the content for reports for Managerial Accounting?
- A.
Relevant data for each sub-unit of the company
- B.
GAAP Accounting
- C.
Double entry accounting and costs
- D.
Condensed financial information for the company as a whole
Correct Answer
A. Relevant data for each sub-unit of the companyExplanation
In managerial accounting, managers want only the relevant data and reports for a specific sub-unit of a company.Rate this question:
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- 14.
Which of the following is NOT considered a primary management function?
- A.
Financing
- B.
Planning
- C.
Directing
- D.
Controlling
Correct Answer
A. FinancingExplanation
The primary management functions are planning, directing, and controlling.Rate this question:
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- 15.
What are the three components of manufacturing costs?
- A.
Direct Labor, Direct Materials, Building Rental
- B.
Direct Materials, Direct Labor, Manufacturing Overhead
- C.
Manufacturing Overhead, Direct Labor, Works in Process
- D.
Direct Materials, Cost of Goods Sold, Direct Labor
Correct Answer
B. Direct Materials, Direct Labor, Manufacturing OverheadExplanation
These are the three components of manufacturing costs.Rate this question:
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- 16.
Which of the following is a period cost?
- A.
Selling Expenses
- B.
Direct Materials
- C.
Direct Labor
- D.
Manufacturing Overhead
Correct Answer
A. Selling ExpensesExplanation
Selling expenses are included in the list of period cost.Rate this question:
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- 17.
Which of the following is NOT a type of cost?
- A.
Fixed
- B.
Mixed
- C.
Variable
- D.
Percentage
Correct Answer
D. PercentageExplanation
The types of costs are fixed, mixed, and variable.
Percentage is not a type of cost.Rate this question:
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- 18.
Which of the following is typically the budget that is prepared first?
- A.
Production Budget
- B.
Sales Budget
- C.
Direct Materials Budget
- D.
Manufacturing Overhead Budget
Correct Answer
B. Sales BudgetExplanation
This is typically the budget that is prepared first since all other budgets depends on the sales budget.Rate this question:
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- 19.
Which of the following is NOT a reason a company would hold Treasury Stock for future use?
- A.
To reissue the shares to officers and employees
- B.
To have additional shares available in order to acquire another company
- C.
To increase trading of the company’s stock
- D.
To decrease earnings per share
Correct Answer
D. To decrease earnings per shareExplanation
Holding onto Treasury Stock will actually reduce the number of shares outstanding, thus increasing earnings per share.Rate this question:
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- 20.
There are three requirements necessary for a company to pay out dividends. They are:
- A.
Retained Earnings, Adequate Cash, Declared Dividends
- B.
Retained Earnings, Adequate Cash, Stockholders’ Equity
- C.
Adequate Cash, High Liquidity, Low Liabilities
- D.
Stockholders’ Equity, Low Liquidities, Retained Earnings
Correct Answer
A. Retained Earnings, Adequate Cash, Declared DividendsExplanation
A company must have retained earnings, adequate cash, and declared dividends for the period in order to pay our dividends.Rate this question:
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- 21.
How often are reports created in managerial accounting?
- A.
Quarterly
- B.
As needed by management
- C.
Annually
- D.
Weekly
Correct Answer
B. As needed by managementExplanation
In managerial accounting, managers determine the
frequency and types of reports to be created.Rate this question:
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- 22.
Company XYZ Inc has variable costs associated with delivering widgets to customers. In December, delivery driving went up 30%. Total variable costs for December increased by:
- A.
10%
- B.
20%
- C.
30%
- D.
Nothing
Correct Answer
C. 30%Explanation
Variable costs are costs that are proportionate with the changes in an activity level.Rate this question:
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- 23.
All of the following are benefits of budgeting EXCEPT:
- A.
It creates incentives for managers to be rewarded
- B.
It requires management to plan ahead
- C.
It gives definite objectives for all levels in the company
- D.
It creates an early warning system to prevent potential problems
Correct Answer
A. It creates incentives for managers to be rewardedExplanation
Creating incentives for managers to be rewarded is not a benefit or budgeting and can potentially lead to unethical behavior.Rate this question:
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Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.
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Current Version
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Nov 22, 2023Quiz Edited by
ProProfs Editorial Team -
Oct 13, 2015Quiz Created by
Cay1117
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