Question 1

Which principle requires that expenses be recorded in the same period as the revenues they help generate, ensuring accurate measurement of profit?

Accepted Answer

Matching Principle

Question 2

A company purchases a machine for $$50,000. After 3 years, the accumulated depreciation is 15$$,000. What is the book value of the machine?

Accepted Answer

$35,000

Question 3

Which of the following best describes the business entity assumption?

Accepted Answer

A business is accounted for separately from its owner(s)

Question 4

A company earned $$120,000 in net income and had average total assets of 800$$,000. What is its Return on Assets (ROA)?

$$	ext{ROA} = \frac{	ext{Net income}}{	ext{Average total assets}}$$

Accepted Answer

15%

Question 5

Which statement is true about the cost-benefit constraint in financial accounting?

Accepted Answer

Information should be disclosed only if the benefits outweigh the costs

Question 6

A company reports total liabilities of $$300,000 and total assets of 750$$,000. What is its debt ratio?

$$	ext{Debt Ratio} = \frac{	ext{Total liabilities}}{	ext{Total assets}}$$

Accepted Answer

0.40

Question 7

Which of the following is NOT a characteristic of a corporation?

Accepted Answer

Shareholders have unlimited liability

Question 8

Under accrual basis accounting, when is revenue recognized?

Accepted Answer

When it is earned, regardless of when cash is received

Question 9

A company has net sales of $$500,000 and net income of 75$$,000. What is its profit margin?

$$	ext{Profit Margin} = \frac{	ext{Net income}}{	ext{Net sales}}$$

Accepted Answer

15%

Question 10

Which of the following best describes the purpose of the balance sheet?

Accepted Answer

To show a company's financial position at a specific point in time

Question 11

A company pays $12,000 for a one-year insurance policy on January 1. What is the adjusting entry for prepaid expenses at March 31?

Accepted Answer

Insurance Expense $$3,000; Prepaid Insurance 3$$,000

Question 12

Which principle requires that all information that could influence a user’s decision be included in the financial statements or notes?

Accepted Answer

Full Disclosure Principle

Question 13

A company uses straight-line depreciation for a $$24,000 asset with a useful life of 6 years. What is the annual depreciation expense?

$$	ext{Annual Depreciation} = \frac{	ext{Asset Cost}}{	ext{Useful Life}}$

Accepted Answer

$4,000

Question 14

Which of the following is an example of an accrued expense?

Accepted Answer

Wages payable

Question 15

What is the main purpose of the statement of cash flows?

Accepted Answer

To report cash inflows and outflows from operating, investing, and financing activities

Question 16

Which accounting assumption allows financial performance to be reported in shorter intervals such as months, quarters, or years?

Accepted Answer

Time Period Assumption

Question 17

A company has assets of $$400,000, liabilities of 150$$,000, and equity of $$250,000. Which equation is satisfied?

$$	ext{Assets} = 	ext{Liabilities} + 	ext{Equity}$

Accepted Answer

Accounting Equation

Question 18

Which of the following is NOT a feature of a Limited Liability Company (LLC)?

Accepted Answer

Unlimited liability for members

Question 19

Which principle requires that accounting information be based on actual, verifiable cost?

Accepted Answer

Measurement Principle

Question 20

A company provides services worth $5,000 in March but does not bill the client until April. Under accrual accounting, when should the revenue be recognized?

Accepted Answer

March

Fundamental Concepts and Principles in Financial Accounting: Glossary and Deep Dives

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