43 Lecture

1. Which of the following is NOT a financial statement? a) Balance sheet b) Income statement c) Cash flow statement d) Sales report

Answer: d) Sales report

2. What is the purpose of a balance sheet? a) To show the profitability of a company b) To provide information about cash inflows and outflows c) To show the financial position of a company at a specific point in time d) To report the revenues and expenses of a company over a period of time

Answer: c) To show the financial position of a company at a specific point in time

3. Which accounting principle requires that expenses be recorded in the same period as the related revenues? a) Matching principle b) Revenue recognition principle c) Cost principle d) Conservatism principle

Answer: a) Matching principle

4. Which of the following is an example of a current liability? a) Mortgage payable b) Accounts receivable c) Accounts payable d) Long-term notes payable

Answer: c) Accounts payable

5. What is the purpose of an income statement? a) To show the financial position of a company at a specific point in time b) To provide information about cash inflows and outflows c) To report the revenues and expenses of a company over a period of time d) To show the profitability of a company

Answer: d) To show the profitability of a company

6. What is the purpose of a cash flow statement? a) To show the financial position of a company at a specific point in time b) To provide information about cash inflows and outflows c) To report the revenues and expenses of a company over a period of time d) To show the profitability of a company

Answer: b) To provide information about cash inflows and outflows

7. Which of the following is an example of a fixed asset? a) Inventory b) Accounts receivable c) Land d) Prepaid expenses

Answer: c) Land

8. What is the purpose of a trial balance? a) To ensure that the total debits equal the total credits b) To prepare financial statements c) To record adjusting entries d) To calculate the net income of a company

Answer: a) To ensure that the total debits equal the total credits

9. What is the purpose of adjusting entries? a) To record transactions in the general ledger b) To calculate the net income of a company c) To bring accounts up to date and match revenues and expenses d) To close temporary accounts at the end of the accounting period

Answer: c) To bring accounts up to date and match revenues and expenses

10. What is the purpose of a general journal? a) To record transactions in the general ledger b) To prepare financial statements c) To record adjusting entries d) To calculate the net income of a company

Answer: a) To record transactions in the general ledger

1. What is meant by the term "double-entry accounting"? Answer: Double-entry accounting is a system of bookkeeping in which every transaction is recorded in at least two different accounts, which helps ensure accuracy and completeness of financial records.

2. Explain the purpose of an income statement. Answer: An income statement is used to show the revenue and expenses of a company over a specific period of time, typically a month or a year. Its purpose is to provide an overview of the company's profitability and financial performance during that period.

3. What is the difference between accounts payable and accounts receivable? Answer: Accounts payable are amounts owed by a company to its vendors or suppliers for goods or services that have been received but not yet paid for. Accounts receivable, on the other hand, are amounts owed to a company by its customers for goods or services that have been delivered but not yet paid for.

4. What is the purpose of the balance sheet? Answer: The purpose of the balance sheet is to provide a snapshot of a company's financial position at a specific point in time. It lists the company's assets, liabilities, and equity, and shows the relationship between them.

5. Explain the concept of depreciation. Answer: Depreciation is a method of allocating the cost of a long-term asset over its useful life. It is used to reflect the decline in value of the asset over time, and to spread out the cost of the asset over its useful life for accounting and tax purposes.

6. What is the difference between a general ledger and a subsidiary ledger? Answer: A general ledger is the main accounting record for a company, where all transactions are recorded and summarized into specific accounts. A subsidiary ledger is a separate record for a specific type of account, such as accounts payable or accounts receivable, which provides more detail on individual transactions.

7. What is a trial balance and what is its purpose? Answer: A trial balance is a list of all the accounts in the general ledger with their balances, used to verify that the total debits and credits are equal. Its purpose is to identify errors or discrepancies in the accounting records before the financial statements are prepared.

8. What is the difference between cash accounting and accrual accounting? Answer: Cash accounting records transactions when cash is received or paid out, while accrual accounting records transactions when they occur, regardless of when the cash is received or paid out. Accrual accounting provides a more accurate picture of a company's financial performance over a specific period of time.

9. Explain the purpose of the statement of cash flows. Answer: The purpose of the statement of cash flows is to provide information about a company's cash inflows and outflows over a specific period of time, typically a month or a year. It shows how the company generates and uses cash, and is used to assess a company's liquidity and financial health.

10. What is the difference between a debit and a credit in accounting? Answer: In accounting, a debit is an entry on the left side of an account, representing an increase in assets or a decrease in liabilities or equity. A credit is an entry on the right side of an account, representing an increase in liabilities or equity, or a decrease in assets.

Accounting is the process of recording, classifying, summarizing, and interpreting financial transactions to provide information that is useful in making business decisions. It involves the measurement and communication of financial information about economic entities to stakeholders such as investors, creditors, and regulators. Accounting includes activities such as bookkeeping, financial reporting, tax preparation, and auditing. Bookkeeping involves recording financial transactions in journals and ledgers, while financial reporting involves the preparation of financial statements such as the balance sheet, income statement, and statement of cash flows. Tax preparation involves calculating and filing taxes based on financial information, and auditing involves reviewing financial information to ensure its accuracy and compliance with relevant laws and regulations. There are several branches of accounting, including financial accounting, managerial accounting, tax accounting, and auditing. Financial accounting focuses on providing information to external stakeholders, while managerial accounting focuses on providing information to internal stakeholders such as managers and executives. Tax accounting involves calculating and preparing taxes for individuals and businesses, while auditing involves reviewing financial information to ensure its accuracy and compliance with relevant laws and regulations. Accounting plays a critical role in business decision-making, as it provides financial information that is used to evaluate the financial health of a business, make investment decisions, and prepare financial statements. It is also an important tool for ensuring compliance with laws and regulations, as well as for managing taxes and other financial obligations. As such, accounting is an essential function in any organization and is a key part of the financial management of a business.