Question 1

Which of the following financial statements shows a company's profitability over a specific period of time?

Accepted Answer

Income statement

Answer

Balance sheet

Answer

Statement of changes in equity

Answer

Cash flow statement

Question 2

What is the accounting equation?

Accepted Answer

Assets = Liabilities + Equity

Answer

Assets x Liabilities = Equity

Answer

Assets + Liabilities = Equity

Answer

Assets - Liabilities = Equity

Question 3

What does the acronym GAAP stand for?

Accepted Answer

Generally Accepted Accounting Principles

Answer

Generally Acknowledged Accounting Policies

Answer

Generally Applied Accounting Procedures

Answer

Generally Agreed Accounting Principles

Question 4

What is the purpose of a journal entry in financial accounting?

Accepted Answer

To record a transaction in the general ledger

Answer

To calculate the balance of an account

Answer

To forecast future financial performance

Answer

To prepare financial statements

Question 5

Which of the following financial ratios measures a company's ability to pay off short-term debts?

Accepted Answer

Current ratio

Answer

Return on assets ratio

Answer

Debt-to-equity ratio

Answer

Profit margin ratio

Question 6

What is the purpose of the statement of cash flows?

Accepted Answer

To report on a company's cash inflows and outflows

Answer

To report on a company's long-term investments

Answer

To report on a company's assets, liabilities, and equity

Answer

To report on a company's revenue and expenses

Question 7

Which of the following is an example of an intangible asset?

Accepted Answer

Patent

Answer

Inventory

Answer

Land

Answer

Buildings

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