SS3 second Term book keeping past questions and answers

SS3 second Term book keeping past questions and answers

SS3 Bookkeeping questions with options and answers:

Question: What is the purpose of a trial balance?

A) Summarize financial transactions

B) Identify errors in the accounts

C) Prepare financial statements

D) Record daily transactions

Answer: B) Identify errors in the accounts

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

A) Balance sheet

B) Income statement

C) Cash flow statement

D) Statement of retained earnings

Answer: D) Statement of retained earnings

Question: The accounting concept that assumes a company will continue operating indefinitely is known as:

A) Going concern

B) Matching principle

C) Historical cost principle

D) Materiality concept

Answer: A) Going concern

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

A) Show the financial position at a point in time

B) Detail the cash inflows and outflows over a period

C) Summarize revenue and expenses

D) Record transactions in chronological order

Answer: B) Detail the cash inflows and outflows over a period

Question: In double-entry bookkeeping, what is the effect of a credit entry on a liability account?

A) Increases the liability

B) Decreases the liability

C) Has no effect on the liability

D) Converts the liability into an asset

Answer: A) Increases the liability

Question: What does the term "contra account" mean in accounting?

A) An account with a balance opposite to the normal balance

B) An account that always has a credit balance

C) An account that records only expenses

D) An account that records only revenue

Answer: A) An account with a balance opposite to the normal balance

Question: What is the purpose of the income statement?

A) Show the financial position at a point in time

B) Detail the cash inflows and outflows over a period

C) Summarize revenue and expenses

D) Record transactions in chronological order

Answer: C) Summarize revenue and expenses

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

A) Total debt / Total equity

B) Total equity / Total debt

C) Net income / Total equity

D) Total debt / Net income

Answer: A) Total debt / Total equity

Question: What is the purpose of the general journal?

A) Summarize financial transactions

B) Record transactions in a chronological order

C) Calculate total revenue

D) Prepare the balance sheet

Answer: B) Record transactions in a chronological order

Question: Which financial statement reports a company's cash inflows and outflows from its operating, investing, and financing activities?

A) Income statement

B) Balance sheet

C) Cash flow statement

D) Statement of retained earnings

Answer: C) Cash flow statement

Question: The accounting equation must always balance, meaning:

A) Assets must equal liabilities only

B) Assets must equal equity only

C) Assets must equal liabilities plus equity

D) Liabilities must equal equity only

Answer: C) Assets must equal liabilities plus equity

Question: What does the term "book value" represent in accounting?

A) The value of an asset recorded on the balance sheet

B) The market value of an asset

C) The accumulated depreciation of an asset

D) The selling price of an asset

Answer: A) The value of an asset recorded on the balance sheet

Question: Which of the following is a contra account to an asset account?

A) Accumulated depreciation

B) Prepaid expenses

C) Accounts payable

D) Common stock

Answer: A) Accumulated depreciation

Question: What is the purpose of a cash discount in accounting?

A) Encourage early payment from customers

B) Penalize late payment from customers

C) Record cash transactions

D) Calculate net profit

Answer: A) Encourage early payment from customers

Question: The concept of materiality in accounting suggests:

A) Ignoring small amounts in financial statements

B) Focusing only on large transactions

C) Matching revenue and expenses

D) Consistently applying accounting principles

Answer: A) Ignoring small amounts in financial statements

Question: Which financial statement shows 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: The formula for calculating the return on equity (ROE) is:

A) Net income / Total assets

B) Net income / Total equity

C) Total equity / Net income

D) Total assets / Net income

Answer: B) Net income / Total equity

Question: What is the purpose of the general ledger?

A) Record daily transactions

B) Prepare financial statements

C) Summarize financial transactions by account

D) Calculate total revenue

Answer: C) Summarize financial transactions by account

Question: Which of the following is considered an intangible asset?

A) Buildings

B) Land

C) Patents

D) Inventory

Answer: C) Patents

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

A) Recognize revenue and expenses when incurred

B) Recognize revenue and expenses when paid or received

C) Prepare financial statements

D) Calculate net profit

Answer: B) Recognize revenue and expenses when paid or received