SS3 first term financial accounting past Questions and Answers

SS3 first term financial accounting past Questions and Answers

Here are 20 financial accounting questions for SS3 with options and answers:

Question: What is the primary purpose of financial accounting?

A. Management decision-making

B. External reporting

C. Cost control

D. Production planning

Answer: B. External reporting

Question: Which financial statement reports a company's revenues and expenses over a specific period?

A. Balance sheet

B. Income statement

C. Cash flow statement

D. Statement of retained earnings

Answer: B. Income statement

Question: What does the term "depreciation" refer to in financial accounting?

A. Increase in asset value

B. Allocation of the cost of an asset over its useful life

C. Decrease in liabilities

D. Increase in shareholders' equity

Answer: B. Allocation of the cost of an asset over its useful life

Question: Which accounting principle states that expenses should be recorded in the same period as the revenues they help to generate?

A. Matching principle

B. Revenue recognition principle

C. Historical cost principle

D. Conservatism principle

Answer: A. Matching principle

Question: In which section of the cash flow statement would the payment of dividends be classified?

A. Operating activities

B. Investing activities

C. Financing activities

D. Non-cash activities

Answer: C. Financing activities

Question: What is the formula for calculating the current ratio?

A. Current Assets / Current Liabilities

B. Total Assets / Total Liabilities

C. Net Income / Average Total Assets

D. Gross Profit / Operating Expenses

Answer: A. Current Assets / Current Liabilities

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

A. Income statement

B. Cash flow statement

C. Balance sheet

D. Statement of retained earnings

Answer: C. Balance sheet

Question: What is the purpose of the adjusting entries in the accounting cycle?

A. To correct errors in the financial statements

B. To record transactions that have occurred but are not yet in the ledger

C. To update account balances to reflect accrual accounting principles

D. To calculate the depreciation of fixed assets

Answer: C. To update account balances to reflect accrual accounting principles

Question: What is the basic accounting equation?

A. Assets = Liabilities - Equity

B. Assets = Liabilities + Equity

C. Assets + Liabilities = Equity

D. Assets - Liabilities = Equity

Answer: B. Assets = Liabilities + Equity

Question: What does the term "EBITDA" stand for in financial accounting?

A. Earnings Before Interest and Taxes Deductions and Amortization

B. Earnings Before Interest, Taxes, Depreciation, and Amortization

C. Expenses Before Interest, Taxes, Depreciation, and Amortization

D. Earnings Before Income, Taxes, and Depreciation Adjustments

Answer: B. Earnings Before Interest, Taxes, Depreciation, and Amortization

Question: How is the return on equity (ROE) calculated?

A. Net Income / Average Total Assets

B. Net Income / Average Shareholders' Equity

C. Gross Profit / Operating Expenses

D. Current Assets / Current Liabilities

Answer: B. Net Income / Average Shareholders' Equity

Question: Which accounting principle assumes that a business will continue operating indefinitely?

A. Matching principle

B. Going concern principle

C. Conservatism principle

D. Revenue recognition principle

Answer: B. Going concern principle

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

A. To report the financial position of a company at a specific point in time

B. To disclose changes in equity over a period

C. To show the sources and uses of cash during a specific period

D. To summarize revenues and expenses over a specific period

Answer: C. To show the sources and uses of cash during a specific period

Question: Which type of account increases with a credit entry?

A. Asset

B. Liability

C. Revenue

D. Expense

Answer: C. Revenue

Question: What is the purpose of the trial balance in accounting?

A. To prepare financial statements

B. To ensure that debits equal credits

C. To record adjusting entries

D. To calculate depreciation

Answer: B. To ensure that debits equal credits

Question: What is the role of the Securities and Exchange Commission (SEC) in financial reporting?

A. Setting accounting standards

B. Enforcing tax regulations

C. Regulating the issuance and trading of securities

D. Auditing financial statements

Answer: C. Regulating the issuance and trading of securities

Question: How does a company calculate earnings per share (EPS)?

A. Net Income / Average Total Assets

B. Net Income / Average Shareholders' Equity

C. Net Income / Weighted Average Number of Common Shares Outstanding

D. Gross Profit / Operating Expenses

Answer: C. Net Income / Weighted Average Number of Common Shares Outstanding

Question: What is the purpose of the Sarbanes-Oxley Act in the United States?

A. Regulating international financial reporting

B. Enhancing corporate governance and financial disclosures

C. Establishing accounting principles for small businesses

D. Setting standards for ethical behavior in accounting

Answer: B. Enhancing corporate governance and financial disclosures

Question: How does the double-entry accounting system work?

A. It records each transaction as a single entry in the ledger

B. It requires two entries for each transaction, a debit, and a credit

C. It only records cash transactions

D. It is used exclusively for small businesses

Answer: B. It requires two entries for each transaction, a debit, and a credit

Question: What is the purpose of the statement of retained earnings?

A. To report the financial position of a company at a specific point in time

B. To show the sources and uses of cash during a specific period

C. To disclose changes in equity over a period

D. To summarize revenues and expenses over a specific period

Answer: C