Question 1

Which of the following best describes the primary purpose of accounting in a business context?

Accepted Answer

To manage information, track business transactions, convert data into financial reports, and share outcomes with decision-makers

Question 2

Which of the following is NOT a user of financial accounting information?

Accepted Answer

Managers inside the company

Question 3

A company has total assets of $$500,000 and total liabilities of 320$$,000. What is the amount of stockholders’ equity?

Accepted Answer

$180,000

Question 4

Which of the following best describes the historical cost principle?

Accepted Answer

Assets should be recorded at their actual cost on the date of purchase

Question 5

Which of the following is a key difference between financial accounting and managerial accounting?

Accepted Answer

Managerial accounting focuses on budgets and forecasts for internal managers, while financial accounting provides information to external users such as investors and creditors

Question 6

A corporation issues common stock for $100,000 cash. Which part of the accounting equation is directly affected?

Accepted Answer

Assets increase; Stockholders’ equity increases

Question 7

Which of the following is an example of a current asset?

Accepted Answer

Accounts receivable

Question 8

Which financial statement reports 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 $$50,000, net income of 20$$,000, and dividends declared of $5,000, what is the ending retained earnings?

Accepted Answer

$65,000

Question 10

Which of the following is NOT a component of stockholders’ equity on the balance sheet?

Accepted Answer

Accounts payable

Question 11

Which of the following activities would be classified as an investing activity on the statement of cash flows?

Accepted Answer

Purchasing new equipment for the business

Question 12

Which assumption states that the business will continue to operate for the foreseeable future?

Accepted Answer

Continuity (going-concern) assumption

Question 13

A company’s income statement shows total revenues of $$200,000 and total expenses of 150$$,000. What is the net income for the period?

Accepted Answer

$50,000

Question 14

Which of the following is a key ethical principle in the AICPA Code of Professional Conduct?

Accepted Answer

Objectivity and independence

Question 15

Which of the following is an example of an ESG (Environmental, Social, and Governance) measure that accountants may help report?

Accepted Answer

Gross global Scope 1 emissions

Question 16

Which of the following is a risk associated with improper use of technology in accounting?

Accepted Answer

Catastrophic decisions

Question 17

Which of the following best describes the role of artificial intelligence (AI) in accounting?

Accepted Answer

AI can help analyze data, classify transactions, and automate routine tasks

Question 18

A company has the following balances: Cash $$10,000; Accounts Receivable 5$$,000; Inventory $$7,000; Accounts Payable 4$$,000; Long-term Debt $6,000. What is the company’s total assets?

Accepted Answer

$22,000

Question 19

Which of the following is a professional accounting certification in the United States?

Accepted Answer

CPA (Certified Public Accountant)

Question 20

Which of the following best describes the stable-monetary-unit assumption?

Accepted Answer

The dollar’s purchasing power is assumed to be stable over time

Financial Accounting: Chapter 1 – Financial Statements and Foundations

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