UTME Financial Accounting Questions and Answers

UTME Financial Accounting Questions and Answers

Here are 20 UTME (Unified Tertiary Matriculation Examination) Financial Accounting questions, each followed by four options. The correct answer for each question is indicated in bold.

Which of the following is an example of an intangible asset?

a) Land

b) Buildings

c) Inventory

d) Goodwill

The formula for calculating the debt-to-equity ratio is:

a) Total liabilities / Total assets

b) Total assets / Total equity

c) Total equity / Total liabilities

d) Total assets - Total liabilities

Which of the following financial statements shows the financial position of a company at a specific point in time?

a) Income statement

b) Statement of cash flows

c) Balance sheet

d) Statement of retained earnings

A company purchased new machinery for $50,000 with an estimated useful life of 10 years and no residual value. What would be the annual depreciation expense using the straight-line method?

a) $5,000

b) $4,000

c) $500

d) $50

In financial accounting, the term "double-entry" refers to:

a) Recording transactions in two different journals

b) Preparing financial statements twice

c) Posting entries twice in the general ledger

d) Recording each transaction with two equal and opposite effects

Which of the following is NOT considered a current liability?

a) Accounts payable

b) Long-term debt

c) Accrued expenses

d) Income tax payable

The equation Assets = Liabilities + Equity represents:

a) The basic accounting equation

b) The income statement equation

c) The cash flow statement equation

d) The balance sheet equation

Which of the following is an example of a long-term investment?

a) Inventory

b) Accounts receivable

c) Marketable securities

d) Prepaid expenses

A company's net income is calculated by subtracting __________ from revenue.

a) Expenses

b) Liabilities

c) Assets

d) Equity

Which of the following is a contra account to accounts receivable?

a) Accumulated depreciation

b) Allowance for doubtful accounts

c) Prepaid expenses

d) Retained earnings

A company's current ratio is calculated by dividing:

a) Current assets by current liabilities

b) Current liabilities by current assets

c) Total assets by total liabilities

d) Total liabilities by total assets

Which of the following statements is true regarding the accounting equation?

a) It only applies to corporations, not sole proprietorships or partnerships.

b) It must always balance, with assets equaling liabilities.

c) It is not affected by revenue or expenses.

d) It represents the relationship between assets and liabilities only.

Which of the following is an example of an operating expense?

a) Interest expense

b) Sales revenue

c) Cost of goods sold

d) Dividend income

The term "LIFO" stands for:

a) Last-in, first-out

b) First-in, first-out

c) Lower of cost or market

d) Last-in, last-out

A company purchased inventory worth $10,000 on credit. How would this transaction affect the accounting equation?

a) Increase assets and increase liabilities

b) Increase assets and decrease liabilities

c) Decrease assets and increase liabilities

d) Decrease assets and decrease liabilities

Which of the following is an example of an external user of financial information?

a) Employees of the company

b) Shareholders of the company

c) Managers of the company

d) Suppliers of the company

The process of allocating the cost of an intangible asset over its useful life is known as:

a) Depreciation

b) Amortization

c) Accrual

d) Capitalization

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

a) Balance sheet

b) Income statement

c) Statement of retained earnings

d) Statement of cash flows

A company's gross profit is calculated by subtracting __________ from net sales.

a) Cost of goods sold

b) Operating expenses

c) Net income

d) Dividends

Which of the following is an example of a long-term liability?

a) Accounts payable

b) Salaries payable

c) Notes payable (due in 5 years)

d) Income tax payable