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

A company purchases 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 3

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

Accepted Answer

Profitability

Question 4

A company made a sale on account for $10,000. Which of the following best describes the impact on the accounting equation?

Accepted Answer

Assets increase by $10,000; Equity increases by $10,000

Question 5

Which of the following best describes the matching principle in accrual accounting?

Accepted Answer

Expenses are recognized in the same period as the related revenues.

Question 6

A company pays $12,000 for a one-year insurance policy on July 1. What amount of insurance expense should be reported on the income statement for the year ended December 31?

Accepted Answer

$6,000

Question 7

Which of the following transactions would NOT affect the total assets of a company?

Accepted Answer

Paying off a supplier with cash

Question 8

A company has the following balances: Assets $200,000; Liabilities $80,000. What is the amount of equity?

Accepted Answer

$120,000

Question 9

Which of the following best describes the purpose of adjusting entries?

Accepted Answer

To record transactions that have not yet been recorded at the end of the period.

Question 10

A company receives a $5,000 advance payment from a customer for services to be performed next month. How should this be recorded at the time of receipt?

Accepted Answer

Debit Cash $5,000; Credit Unearned Revenue $5,000

Question 11

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

Accepted Answer

$Net\ Income = Revenues - Expenses$

Question 12

A company’s trial balance shows total debits of $150,000 and total credits of $145,000. What does this indicate?

Accepted Answer

There is an error in the trial balance.

Question 13

Which of the following accounts would NOT appear on a balance sheet?

Accepted Answer

Service Revenue

Question 14

A company’s beginning retained earnings are $40,000. Net income for the year is $25,000, and dividends paid are $10,000. What are the ending retained earnings?

Accepted Answer

$55,000

Question 15

Which of the following best describes the accrual basis of accounting?

Accepted Answer

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

Question 16

A company purchased supplies costing $2,000. At year-end, $500 of supplies remain unused. What is the amount of supplies expense for the year?

Accepted Answer

$1,500

Question 17

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

Accepted Answer

$Assets = Liabilities + Equity$

Question 18

A company issues common stock for $20,000 cash. What is the effect on the accounting equation?

Accepted Answer

Assets increase by $20,000; Equity increases by $20,000

Question 19

Which of the following best describes the purpose of closing entries at the end of an accounting period?

Accepted Answer

To transfer the balances of temporary accounts to retained earnings.

Question 20

A company’s income statement shows revenues of $100,000 and expenses of $70,000. If the company paid $10,000 in dividends, what is the change in retained earnings for the period?

Accepted Answer

$20,000$ increase

Fall 2025 Syllabus: MAT135HSF – Differential Calculus (NOT Financial Accounting)

Study Guide - Practice Questions

Study Guide - Flashcards