Free Accounting Basics Quiz

Enhance your understanding of essential accounting principles by taking our comprehensive Free Accounting Basics Quiz, designed to challenge your knowledge and help you master the fundamentals.

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1.

What does the term "accrual" mean in accounting?

Deferring expenses to a later period.

Matching revenue with expenses in the period they are incurred.

Capitalizing on large purchases.

Recording revenue when cash is received.

2.

What is the accounting equation?

Revenue = Assets + Liabilities

Assets = Liabilities + Equity

Equity = Assets - Liabilities

Profit = Revenue - Expenses

3.

Which account is typically credited when recording a sale on credit?

Inventory

Sales Revenue

Accounts Receivable

Cash

4.

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

Machinery

Accounts Receivable

Long-term Investments

Building

5.

Which financial statement details the company’s cash inflows and outflows?

Statement of Retained Earnings

Statement of Cash Flows

Income Statement

Balance Sheet

6.

Which financial statement shows a company’s profitability over a period of time?

Income Statement

Balance Sheet

Statement of Cash Flows

Statement of Retained Earnings

7.

Which of the following accounts would be found in the equity section of a balance sheet?

Cash

Inventory

Retained Earnings

Accounts Payable

8.

What does GAAP stand for?

Global Accounting and Auditing Procedures

General Asset and Allocation Protocol

Generally Accepted Accounting Principles

Governmental Accounting and Auditing Practices

9.

What is the purpose of adjusting entries?

To reconcile the bank statement with the ledger.

To record sales transactions.

To correct errors found in the trial balance.

To update accounts before preparing the financial statements.

10.

What does "FIFO" stand for in inventory management?

Financial Information Follow-Up

Funds in Financial Obligations

First In, First Out

Fixed Income for Operations

11.

Which of the following is an example of an intangible asset?

Trademark

Inventory

Accounts Receivable

Equipment

12.

What type of account is “prepaid expenses”?

Asset

Liability

Equity

Expense

13.

What is the matching principle in accounting?

Matching revenue with the expenses incurred to generate that revenue.

Matching dividends with retained earnings.

Matching liabilities with assets.

Recording expenses when they are paid.

14.

What does the term "liquidity" refer to in accounting?

The amount of long-term investments a company holds.

The company's profitability.

The ease with which assets can be converted into cash.

The ability to manage debt levels.

15.

What is the purpose of a trial balance?

To test the accuracy of the financial statements.

To calculate net income for the period.

To prepare the company for an audit.

To ensure that total debits equal total credits in the ledger.

16.

What is double-entry accounting?

A system where every transaction affects at least two accounts.

An accounting technique used only in large corporations.

An accounting system that records each transaction twice.

A method of budgeting where income and expenses are balanced.

17.

Which of the following is a liability?

Owner’s Equity

Retained Earnings

Inventory

Accounts Payable

18.

What is depreciation?

The process of writing off bad debts.

The increase in the value of an asset over time.

The allocation of the cost of a tangible asset over its useful life.

The sale of an asset for less than its book value.

19.

What is a chart of accounts?

A statement that tracks company expenses.

A detailed schedule of all invoices.

A document showing company ownership.

A list of all accounts used in a company's accounting system.

20.

What is the primary purpose of a balance sheet?

To show the company’s revenue and expenses over a specific period.

To provide a list of all company transactions during a specific period.

To display the company’s assets, liabilities, and equity at a specific point in time.

To summarize the company’s cash inflows and outflows.