Accounting is more than just working with numbers. It's what keeps a business running, as those debits and credits need to be tracked to come up with the bottom line. Is a business successful or is it failing? Ask the accountant, as they know what the books look like.
That is why more than accountants should know accounting practices. You should be balancing your checking account on a weekly or daily basis, depending on how OCD you are! The more you know about your balances in your accounts, the more likely you are to not overspend on a daily basis.
So, you take money out of your account to pay a bill. Are you debiting or crediting your checking account? Assets minus liabilities equals what? Revenue minus expenses equals what? These questions and more will be addressed in this accounting quiz.
Time to prepare yourself and see what kind of accountant you can be. Are you C.P.A. material? Or should you be paying someone to do your books on a monthly basis? Get your balance sheets ready, as this quiz is going to test you!
Assets minus liabilities equals what?
Owner's equity is sometimes referred to as the book value of a company. This is the case in a sole proprietorship. If the company is a corporation, it would be referred to as Stockholders' Equity.
What is the initial investment by an owner of a sole proprietorship called?
That initial investment by the owner of a company is called the capital. This can be done in the form of machines, goods or cash.
When making an accounting entry, it involves a minimum of how many accounts?
When transactions are recorded, it is called double-entry bookkeeping. That is because each transaction involves at least two different accounts.
When you take money out to pay a bill, what happens to your Cash account?
When a bill is paid, you are taking money out of the company. When removing money from an account, it is called a credit.
In the ledger, a debit would be posted on which side?
The general ledger in accounting has two sides to it. The right side is for credits and the left side is for debits.
What type of balance does an asset account have?
Assets are things you own. They are a positive thing on the company, which would explain whey they are debits on a balance sheet.
Revenue minus expenses equals what?
Any revenue minus expenses is equal to the net income for the company. If revenue is greater than expenses, then the company has a profit. If the revenue is less than the expenses, then the company has a net loss.
What are the rules and regulations that a company must follow when reporting all financial data?
The common set of U.S. accounting principles is referred to as the generally accepted accounting principles, or GAAP. To remain a publicly traded company, they must report their financial statements to GAAP.
Which financial statement gives us the expanded accounting equation?
The balance sheet is used to show the assets, liabilities and equity all in a report format. It's a way of showing outsiders what the company owes and owns at a given time.
What is the standard accounting period?
Most businesses have a standard accounting period of one year. This can consist of a calendar year, which begins on Jan. 1, or a fiscal year, which begins any time of the year, like July 1 through June 30.
Which of the following accounts would not be considered a liability account?
Liabilities are money you owe to other companies or people. All of these accounts are what we owe except for accounts receivable, which would include accounts owed to us.
Which one defines what accounts receivable are?
Accounts receivables are money owed to a company, not by the company. This is money owed to the company by its debtors.
What financial statement tells you how profitable a company is?
An income statement shows the revenues, expenses and profits/losses generated by a company during a specific period. It's often considered the most important of the financial statements, as it shows how well the company is doing.
During the last fiscal year, the assets of a company increased by $20,000 and the liabilities increased by $11,000. That means the equity in the business did what during this time?
The equity in a company is the assets minus liabilities. To figure this one out, you would take the increase in assets minus the increase in liabilities, so $20,000 minus $11,000, so the overall answer would be an increase in equity of $9,000.
What is the account format that shows debits, credits, balances and headings?
The T-Account is a way of formatting accounting transactions. This format shows debits on the left and credits on the right.
What would not be included on a balance sheet?
On a balance sheet, assets, liabilities and equity are listed. This includes cash, accounts payables and receivables, but not sales.
What is the independent review of an organization's accounting systems and records?
An audit is done for an organization by an independent agency. Not only does this ensure that the books are being taken care of properly, but it adds credibility to the financial statements.
Which one is not an example of an asset?
Assets are an economic resource that can be owned and is expected to provide future economic benefits. For this one, cash, trademarks and an office building are all assets. Income tax payables are things we owe, so a liability.
Using the accrual method of accounting, when would expenses be recorded?
The accrual method of accounting measures when revenues and expenses are incurred and not when cash is exchanged. So, that would mean expenses are reported when they happen and not when the money goes out for them.
What is an exchange between two parties of economic consideration, such as money, services, goods or the right to collect money called?
A transaction is an instance of buying or selling something; a business deal. Since this is two parties for your business, it would be called a business transaction.
What is the name given to an individual or organization that owes money to a business?
When you owe money to someone, you are in debt to them. Since you are the person owning that debt, you would be considered the debtor.
On a bank reconciliation, how would you mark outstanding checks?
An outstanding check is a check that you have written, but has not been cashed yet by the recipient. Since that money will eventually come out of your bank balance, it should be deducted from the bank balance now.
What is the main purpose of financial accounting?
If you aren't working for the company, then you don't know how well or badly the company is doing. Financial accounting is a way to share that information with the public using spreadsheets and statements.
What is the financial statement that shows where the company's cash came from and where it went during that period?
A statement of cash fows is also known as the cash flow statement. This statement shows the changes in the balance sheet accounts and income and what activities caused those changes.
A business uses equipment in its normal operation. That equipment is sold for a loss. In which section on the statement of cash flows would this be reported?
This is referred to as the operating cash flow of the business. In other words, this is the amount of cash generated (or lost) by the regular operating activities of a business, so the loss on the sale of the equipment would fit into this category.
For liabilities, they often contain what word?
Any account that is owed money on is a payable, which liabilities are. Any account owed money to us is considered a receivable.
Of the following, which is an example of working capital?
For working capital, it fits into that category if it is a current asset or current liability. Accounts receivable would be considered a current liability.
The accounting profession can be divided into public accounting, private accounting and governmental accounting. What is a unique and important service of public accountants?
The major services for public accountants is income tax and management advisory activities, as well as auditing. Financial accounting is part of a public accountant's job, but it's considered more of a concept and not a "service."
Which accounting principle requires that all goods and services purchased be recorded at cost?
This is one of the underlying guidelines in accounting. This means that assets should be recorded at the cost when you got the asset. It should always remain this price, even as time goes by.
If the assets of a company are $175,000 and the equity of a company is $37,000, what would the amount of liabilities be?
The equity of a company is equal to assets minus liabilities. Since liabilities are not known, you would subtract out the equity from the assets to determine the liabilities, which would be $138,000.
Which of the following examples would show a negative impact on cash?
The proceeds from selling equipment would be a positive impact on cash. The dividends would have a negative impact, as you are paying out that cash.
What is the listing of account names and account codes called?
The chart of accounts shows every account listed in the general ledger of a company. This chart breaks the accounts down into subcategories.
What is the primary private sector agency that oversees the external financial reporting standards?
The FASB is the private sector oversight group for accounting standards. The General Accounting Office and IRS are both government agencies, but not in charge of external reporting standards. The FBI has little to do with accounting rule development.
Which one is not an example of a liability?
A liability is a legal obligation owed to a third party. Most liabilities include the word payable, like the interest, payroll taxes and sales taxes payable. That means patents are an asset.
In the ledger, a credit would be posted on which side?
In a general ledger, there are two sides to post on. The left side is for debits and the right side is for credits.
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