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

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