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.   Statement of Cash Flows.
B.   Balance Sheet.
C.   Income Statement.
D.   Statement of Stockholders’ Equity.
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.   Costs of providing products or services to customers.
B.   Cash paid to investors.
C.   Sales of products or services to customers.
D.   Cash paid for the purchase of the company’s long-term resources.
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.   Income Statement.
B.   Statement of Stockholders’ Equity.
C.   Balance Sheet.
D.   Statement of Cash Flows.
Question #7
The fundamental qualitative characteristics of accounting information identified by the FASB are:
A.   Relevance, faithful representation.
B.   Relevance, comparability.
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.   Income Statement.
B.   Statement of Stockholders’ Equity.
C.   Statement of Cash Flows.
D.   Balance Sheet.
Question #9
Which of the following represents an obligation of the company?
A.   Liabilities.
B.   Dividends.
C.   Assets.
D.   Expenses.
Question #10
Which single piece of information best explains most companies’ stock price performance?
A.   Geographic location.
B.   Total number of employees.
C.   Net income
D.   Total sales to customers.
Question #11
Who ultimately is responsible for properly applying GAAP? The company’s:
A.   Management.
B.   Creditors.
C.   Stockholders.
D.   Auditors.
Question #12
A component/aspect of relevant accounting information includes:
A.   Faithful representation.
B.   Predictive value.
C.   Consistency.
D.   Comparability.
Question #13
Which financial statement reports a company’s assets and liabilities?
A.   Statement of Stockholders’ Equity.
B.   Income Statement.
C.   Statement of Cash Flows.
D.   Balance Sheet.
Question #14
Which financial statement shows a company’s revenues and expenses?
A.   Balance Sheet.
B.   Income Statement.
C.   Statement of Cash Flows.
D.   Statement of Stockholders’ Equity.
Question #15
The most lucrative activity of public accountants typically is:
A.   Business consulting.
B.   Evaluation of internal controls.
C.   Audit of financial statements.
D.   Tax preparation.
Question #16
Amounts owed to creditors are reported as:
A.   Liabilities.
B.   Assets.
C.   Revenues.
D.   Stockholders’ equity.
Question #17
Traditional careers in public accounting include:
A.   Business consultants.
B.   Tax preparers/planners.
C.   Auditors, Business consultants and Tax preparers/planners
D.   Auditors.
Question #18
Which of the following best describes financial accounting?
A.   Artistic presentation.
B.   Information measurement/communication process.
C.   Mathematical procedure.
D.   Behavioral psychology.
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.   To support the efficient distribution of society’s resources.
C.   To provide managers with useful information related to human resources.
D.   To increase the number of customers for a company.
E.     
Question #20
Financial accounting provides information primarily to:
A.   Tax regulators.
B.   Suppliers and customers.
C.     
D.   Investors and creditors.
E.   Government officials.
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.   Expenses.
B.   Dividends.
C.   Assets.
D.   Liabilities.
Question #23
Financial accounting information is essential to:
A.   Quality of the work environment for employees.
B.   Paying the appropriate amount of taxes.
C.   Making good business decisions.
D.   Marketing the company’s products to customers.
Question #24
The underlying foundation for the development of accounting standards and interpretation of accounting information is referred to as the:
A.   Generally accepted rules.
B.   Auditor’s report.
C.   Securities and Exchange Commission.
D.   Conceptual framework.
Question #25
Financial accounting is often referred to as a:
A.   Language of business.
B.   Mathematical system of equations.
C.   Tax allocation system.
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.   Securities and Exchange Commission (SEC).
C.   American Institute of Certified Public Accountants (AICPA).
D.   Financial Accounting Standards Board (FASB).
Question #27
Which definition best describes financial accounting?
A.   Procedures designed to enhance the company’s image to potential investors.
B.   Measuring a company’s business activities and communicating those measurements to external parties.
C.   A process of measuring income taxes owed to the government.
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.
B.   Income earned during the current period minus dividends distributed to stockholders’ during the current period.
C.   The amount of income earned over the company’s life minus the dividends paid to shareholders over the company’s life.
D.   The amount of income earned by the company over its life.
Question #29
Financial accounting helps with:
A.   Maintaining records of multiple business transactions.
B.   Exchange of goods and services among individuals.
C.   Maintaining records of multiple business transactions, development of more complex societies and exchange of goods and services among individuals.
D.   Development of more complex societies.

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