1 Lecture

1. Which of the following is the fundamental equation of accounting? a) Assets = Liabilities b) Assets = Liabilities + Equity c) Revenue = Expenses d) None of the above

Answer: b) Assets = Liabilities + Equity

2. Which accounting concept requires that expenses be recognized when incurred, regardless of when payment is made? a) Going concern concept b) Matching concept c) Accrual concept d) None of the above

Answer: c) Accrual concept

3. Which type of accounting records the flow of money in and out of a business? a) Financial accounting b) Management accounting c) Cost accounting d) None of the above

Answer: a) Financial accounting

4. What is the purpose of double-entry accounting? a) To record every transaction twice b) To prevent errors and ensure accuracy c) To calculate net income d) None of the above

Answer: b) To prevent errors and ensure accuracy

5. Which financial statement shows a company's revenues and expenses over a period of time? a) Balance sheet b) Income statement c) Statement of cash flows d) None of the above

Answer: b) Income statement

6. Which accounting concept assumes that a business will continue to operate into the foreseeable future? a) Going concern concept b) Matching concept c) Accrual concept d) None of the above

Answer: a) Going concern concept

7. Which account represents a company's obligations to pay for goods or services received? a) Accounts receivable b) Accounts payable c) Inventory d) None of the above

Answer: b) Accounts payable

8. Which of the following is a current asset? a) Property, plant, and equipment b) Accounts receivable c) Patents d) None of the above

Answer: b) Accounts receivable

9. Which financial statement shows a company's assets, liabilities, and equity at a specific point in time? a) Balance sheet b) Income statement c) Statement of cash flows d) None of the above

Answer: a) Balance sheet

10. Which account represents a company's ownership interest in its assets? a) Liabilities b) Equity c) Revenue d) None of the above

Answer: b) Equity

1. Define the accounting equation. Answer: The accounting equation states that assets must always equal liabilities plus equity. This equation is fundamental to double-entry accounting and ensures that every financial transaction is recorded accurately and completely.

2. What is the purpose of a chart of accounts? Answer: The chart of accounts organizes transactions into specific categories for easier analysis and reporting. Each account is assigned a unique number or code and is used to classify transactions according to their type.

3. Explain the concept of double-entry accounting. Answer: Double-entry accounting involves recording two entries for every transaction - a debit and a credit - to ensure accuracy and completeness. Debits represent an increase in assets or a decrease in liabilities or equity, while credits represent the opposite.

4. What is the difference between financial accounting and management accounting? Answer: Financial accounting focuses on recording and reporting financial transactions to external stakeholders, while management accounting focuses on using financial information to make strategic decisions within the organization.

5. What is the difference between assets and liabilities? Answer: Assets are resources owned by a company that have value and can be used to generate revenue, while liabilities are obligations to pay for goods or services received.

6. What is the purpose of adjusting entries? Answer: Adjusting entries are made at the end of an accounting period to ensure that financial statements accurately reflect a company's financial position. They may include accruals, deferrals, and estimates.

7. What is the difference between net income and net loss? Answer: Net income is the difference between a company's revenues and expenses, while net loss is the opposite - when expenses exceed revenues.

8. What is the purpose of the income statement? Answer: The income statement shows a company's revenues and expenses over a period of time and calculates its net income or net loss. It is an important tool for assessing a company's profitability.

9. What is the purpose of the statement of cash flows? Answer: The statement of cash flows shows a company's inflows and outflows of cash over a period of time. It is an important tool for assessing a company's liquidity and cash management.

10. What is the difference between a current asset and a fixed asset? Answer: Current assets are those that can be converted into cash within a year, while fixed assets are long-term assets that are used to generate revenue, such as property, plant, and equipment.

Basic Concepts of Accounting refer to the fundamental principles and practices that underpin the discipline of accounting. These concepts provide a framework for recording, analyzing, and reporting financial transactions, and are essential for any individual or organization that seeks to maintain accurate and reliable financial records. The accounting equation is a central concept in accounting. It states that assets must always equal liabilities plus equity. This equation is fundamental to double-entry accounting, which involves recording two entries for every transaction - a debit and a credit - to ensure accuracy and completeness. Other important concepts include the chart of accounts, which organizes transactions into specific categories for easier analysis and reporting, and the concept of accrual accounting, which requires that expenses be recognized when incurred, regardless of when payment is made. Financial statements are also essential to accounting. The income statement shows a company's revenues and expenses over a period of time and calculates its net income or net loss. The balance sheet shows a company's assets, liabilities, and equity at a specific point in time, while the statement of cash flows shows a company's inflows and outflows of cash over a period of time. Finally, accounting involves a set of ethical principles and standards that guide the behavior of professionals in the field. These include honesty, objectivity, confidentiality, and professional competence, among others. In summary, Basic Concepts of Accounting provide a foundation for understanding and applying the principles and practices of accounting. Whether one is an individual or an organization, understanding these concepts is essential for making informed financial decisions, maintaining accurate financial records, and complying with legal and regulatory requirements.