Question 1

Which of the following best describes the primary purpose of financial accounting?

Accepted Answer

To communicate financial information about a business to external users such as investors and creditors.

Question 2

Which of the following is NOT considered an external user of financial statements?

Accepted Answer

Company manager

Question 3

A company purchased equipment for $50,000 cash. Which of the following journal entries correctly records this transaction?

Accepted Answer

Debit Equipment $$50,000; Credit Cash 50$$,000

Question 4

Which accounting principle requires that expenses be matched with revenues in the period in which they are incurred?

Accepted Answer

Matching Principle

Question 5

If a company has assets of $$120,000 and liabilities of 45$$,000, what is the amount of owner's equity?

Accepted Answer

$75,000

Question 6

Which of the following transactions would increase both assets and liabilities?

Accepted Answer

Purchasing inventory on account

Question 7

A company earned $$10,000 in service revenue and received 6$$,000 in cash, with the remainder to be received later. What is the correct journal entry?

Accepted Answer

Debit Cash $$6,000; Debit Accounts Receivable 4$$,000; Credit Service Revenue $10,000

Question 8

Which financial statement shows a company's financial position at a specific point in time?

Accepted Answer

Balance Sheet

Question 9

If a company has beginning retained earnings of $$20,000, net income of 8$$,000, and dividends of $3,000, what is the ending retained earnings?

Accepted Answer

$25,000

Question 10

Which of the following is the correct formula for the accounting equation?

Accepted Answer

$$Assets = Liabilities + Owner's\ Equity$$

Question 11

A company paid $2,000 for a one-year insurance policy on January 1. What is the correct adjusting entry at March 31?

Accepted Answer

Debit Insurance Expense $$500; Credit Prepaid Insurance 500$$

Question 12

Which of the following best describes accrual accounting?

Accepted Answer

Revenues and expenses are recorded when they are earned or incurred, regardless of cash flow.

Question 13

A company purchased supplies for $$1,200. At year-end, 400 of $$supplies remain unused. What is the supplies expense for the year?

Accepted Answer

$800

Question 14

Which of the following is NOT a characteristic of useful financial information according to the conceptual framework?

Accepted Answer

Obscurity

Question 15

A company issues common stock for $25,000 cash. How does this transaction affect the accounting equation?

Accepted Answer

Increase assets and increase owner's equity by $25,000

Question 16

Which of the following is the correct formula for calculating net income?

Accepted Answer

$$Net\ Income = Revenues - Expenses$$

Question 17

A company made a sale on account for $5,000. Which of the following is the correct journal entry?

Accepted Answer

Debit Accounts Receivable $$5,000; Credit Sales Revenue 5$$,000

Question 18

Which of the following is an example of a liability account?

Accepted Answer

Accounts Payable

Question 19

A company has total revenues of $$60,000 and total expenses of 45$$,000. What is the net income?

Accepted Answer

$15,000

Question 20

Which of the following best describes the role of the Financial Accounting Standards Board (FASB)?

Accepted Answer

To set accounting standards for public and private companies in the United States.

BUS 214 – Financial Accounting: Syllabus and Course Structure Overview

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