SS2 first term financial accounting past Questions and Answers

SS2 first term financial accounting past Questions and Answers

Here are 20 financial accounting questions with options and answers:

Question: What is the accounting equation?

A) Assets = Liabilities

B) Assets = Owner's Equity

C) Assets + Liabilities = Owner's Equity

D) Liabilities = Owner's Equity

Answer: C) Assets + Liabilities = Owner's Equity

Question: Which financial statement represents the snapshot of a company's financial position at a specific point in time?

A) Income Statement

B) Balance Sheet

C) Statement of Cash Flows

D) Statement of Retained Earnings

Answer: B) Balance Sheet

Question: What is the primary purpose of the income statement?

A) To show the financial position of a company

B) To report changes in equity over a period

C) To summarize the revenues and expenses of a company

D) To detail the cash inflows and outflows

Answer: C) To summarize the revenues and expenses of a company

Question: In double-entry accounting, for every debit entry, there must be a corresponding:

A) Debit entry

B) Credit entry

C) Expense entry

D) Liability entry

Answer: B) Credit entry

Question: What is depreciation?

A) An increase in the value of an asset

B) A decrease in the value of an asset

C) The total revenue of a company

D) The amount of money owed to creditors

Answer: B) A decrease in the value of an asset

Question: Which accounting principle states that expenses should be recognized in the period in which they are incurred?

A) Matching Principle

B) Revenue Recognition Principle

C) Conservatism Principle

D) Time Period Principle

Answer: A) Matching Principle

Question: What does ROI stand for in financial accounting?

A) Return on Investment

B) Revenue on Investment

C) Rate of Income

D) Retained Ownership Interest

Answer: A) Return on Investment

Question: What is the purpose of the cash flow statement?

A) To show the profitability of a company

B) To disclose changes in equity

C) To provide information about a company's cash receipts and payments

D) To report on a company's financial position

Answer: C) To provide information about a company's cash receipts and payments

Question: Which of the following is a current liability?

A) Accounts Receivable

B) Long-term Debt

C) Prepaid Expenses

D) Accounts Payable

Answer: D) Accounts Payable

Question: How is the debt ratio calculated?

A) Total Debt / Total Assets

B) Total Assets / Total Debt

C) Net Income / Total Assets

D) Total Equity / Total Liabilities

Answer: A) Total Debt / Total Assets

Question: What is the formula for calculating net income?

A) Revenue - Expenses

B) Assets - Liabilities

C) Equity - Revenue

D) Liabilities - Expenses

Answer: A) Revenue - Expenses

Question: Which financial statement is also known as the statement of operations?

A) Income Statement

B) Balance Sheet

C) Statement of Cash Flows

D) Statement of Retained Earnings

Answer: A) Income Statement

Question: What is the purpose of the statement of cash flows?

A) To report changes in equity

B) To show the financial position of a company

C) To provide information about cash receipts and payments

D) To summarize revenues and expenses

Answer: C) To provide information about cash receipts and payments

Question: Which accounting principle assumes that an entity will continue to operate indefinitely?

A) Going Concern Principle

B) Matching Principle

C) Conservatism Principle

D) Revenue Recognition Principle

Answer: A) Going Concern Principle

Question: What is the purpose of the trial balance?

A) To show the final financial position of a company

B) To detect errors in accounting records

C) To report on cash flows

D) To summarize revenues and expenses

Answer: B) To detect errors in accounting records

Question: Which financial statement reports changes in equity over a period?

A) Income Statement

B) Balance Sheet

C) Statement of Cash Flows

D) Statement of Retained Earnings

Answer: D) Statement of Retained Earnings

Question: What is the purpose of the accrual basis of accounting?

A) To record transactions when cash is received or paid

B) To record transactions when they occur, regardless of when cash is exchanged

C) To recognize revenue only when cash is received

D) To recognize expenses only when cash is paid

Answer: B) To record transactions when they occur, regardless of when cash is exchanged

Question: Which financial statement reports the cash generated and used during a specific period?

A) Income Statement

B) Balance Sheet

C) Statement of Cash Flows

D) Statement of Retained Earnings

Answer: C) Statement of Cash Flows

Question: What is the purpose of the accounting cycle?

A) To create financial statements

B) To summarize financial transactions

C) To close temporary accounts

D) All of the above

Answer: D) All of the above

Question: According to the revenue recognition principle, when should revenue be recognized?

A) When cash is received

B) When goods or services are delivered

C) When an invoice is issued

D) At the end of the accounting period

Answer: B) When goods or services are delivered