Accounting 101 - Financial Accounting » Spring 2021 » Chapter 1 Quiz

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Question #1
Which of the following equations correctly represents the fundamental accounting equation?
A.   Assets + Stockholders’ Equity = Liabilities.
B.   Assets + Liabilities = Stockholders’ Equity.
C.   Assets = Liabilities + Stockholders’ Equity.
D.   Liabilities – Assets = Stockholders’ Equity.
Question #2
In which financial statement does a company report its revenues?
A.   Statement of Stockholders’ Equity.
B.   Income Statement.
C.   Statement of Cash Flows.
D.   Balance Sheet.
Question #3
Public accounting firms refer to:
A.   Firms that have stocks listed on an exchange.
B.   Professional service firms that traditionally focus on auditing and tax preparation.
C.   Companies that sell merchandise to customers.
D.   Government-controlled companies.
Question #4
Expenses represent:
A.   Costs of providing products or services to customers.
B.   Sales of products or services to customers.
C.   Cash paid for the purchase of the company’s long-term resources.
D.   Cash paid to investors.
Question #5
The term GAAP stands for:
A.   Generally Accepted Accounting Principles.
B.   Generally Accepted Auditing Principles.
C.   General Accounting and Audit Principles.
D.   General Accounting Accountability Principles.
Question #6
In which financial statement does a company report its expenses?
A.   Statement of Cash Flows.
B.   Balance Sheet.
C.   Statement of Stockholders’ Equity.
D.   Income Statement.
Question #7
The fundamental qualitative characteristics of accounting information identified by the FASB are:
A.   Relevance, comparability.
B.   Relevance, faithful representation.
C.   Truthfulness, clearness.
D.   Relevance, truthfulness.
Question #8
The financial statement that shows the financial position of a company at a specific point in time is called the:
A.   Balance Sheet.
B.   Statement of Stockholders’ Equity.
C.   Income Statement.
D.   Statement of Cash Flows.
Question #9
Which of the following represents an obligation of the company?
A.   Dividends.
B.   Expenses.
C.   Assets.
D.   Liabilities.
Question #10
Which single piece of information best explains most companies’ stock price performance?
A.   Total sales to customers.
B.   Geographic location.
C.   Net income
D.   Total number of employees.
Question #11
Who ultimately is responsible for properly applying GAAP? The company’s:
A.   Creditors.
B.   Management.
C.   Stockholders.
D.   Auditors.
Question #12
A component/aspect of relevant accounting information includes:
A.   Comparability.
B.   Predictive value.
C.   Consistency.
D.   Faithful representation.
Question #13
Which financial statement reports a company’s assets and liabilities?
A.   Statement of Cash Flows.
B.   Statement of Stockholders’ Equity.
C.   Balance Sheet.
D.   Income Statement.
Question #14
Which financial statement shows a company’s revenues and expenses?
A.   Balance Sheet.
B.   Statement of Cash Flows.
C.   Income Statement.
D.   Statement of Stockholders’ Equity.
Question #15
The most lucrative activity of public accountants typically is:
A.   Audit of financial statements.
B.   Evaluation of internal controls.
C.   Business consulting.
D.   Tax preparation.
Question #16
Amounts owed to creditors are reported as:
A.   Stockholders’ equity.
B.   Revenues.
C.   Liabilities.
D.   Assets.
Question #17
Traditional careers in public accounting include:
A.   Auditors.
B.   Business consultants.
C.   Auditors, Business consultants and Tax preparers/planners
D.   Tax preparers/planners.
Question #18
Which of the following best describes financial accounting?
A.   Information measurement/communication process.
B.   Behavioral psychology.
C.   Artistic presentation.
D.   Mathematical procedure.
Question #19
Which of the following best describes an important function of financial accounting?
A.   To provide managers with useful information related to human resources.
B.   To support the efficient distribution of society’s resources.
C.   To increase the number of customers for a company.
D.     
E.   To support government initiatives through taxation of company profits.
Question #20
Financial accounting provides information primarily to:
A.   Suppliers and customers.
B.   Investors and creditors.
C.   Government officials.
D.   Tax regulators.
E.     
Question #21
Which of the following represents a resource of the company?
A.   Dividend.
B.   Expense.
C.   Asset.
D.   Liability.
Question #22
Which of the following describes the cost of selling to customers?
A.   Assets.
B.   Expenses.
C.   Dividends.
D.   Liabilities.
Question #23
Financial accounting information is essential to:
A.   Making good business decisions.
B.   Marketing the company’s products to customers.
C.   Quality of the work environment for employees.
D.   Paying the appropriate amount of taxes.
Question #24
The underlying foundation for the development of accounting standards and interpretation of accounting information is referred to as the:
A.   Conceptual framework.
B.   Auditor’s report.
C.   Generally accepted rules.
D.   Securities and Exchange Commission.
Question #25
Financial accounting is often referred to as a:
A.   Internal reporting structure.
B.   Tax allocation system.
C.   Language of business.
D.   Mathematical system of equations.
Question #26
Which body has the primary responsibility for the establishment of Generally Accepted Accounting Principles?
A.   Financial Accounting Standards Board (FASB).
B.   International Accounting Standards Board (IASB).
C.   Securities and Exchange Commission (SEC).
D.   American Institute of Certified Public Accountants (AICPA).
Question #27
Which definition best describes financial accounting?
A.   Measuring a company’s business activities and communicating those measurements to external parties.
B.   Procedures designed to enhance the company’s image to potential investors.
C.   A system of maintaining communication with a company’s customers and suppliers.
D.   A process of measuring income taxes owed to the government.
Question #28
The balance in retained earnings represents:
A.   The amount of income earned by the company over its life.
B.   The amount of income earned over the company’s life minus the dividends paid to shareholders over the company’s life.
C.   Income earned during the current period minus dividends distributed to stockholders’ during the current period.
D.   Income earned during the current period.
Question #29
Financial accounting helps with:
A.   Exchange of goods and services among individuals.
B.   Maintaining records of multiple business transactions, development of more complex societies and exchange of goods and services among individuals.
C.   Development of more complex societies.
D.   Maintaining records of multiple business transactions.

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