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.

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

Sales Revenue

Accounts Receivable

Cash

Inventory

2.

What does "FIFO" stand for in inventory management?

Funds in Financial Obligations

Financial Information Follow-Up

Fixed Income for Operations

First In, First Out

3.

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

Long-term Investments

Accounts Receivable

Machinery

Building

4.

What is the purpose of a trial balance?

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

To calculate net income for the period.

To prepare the company for an audit.

To test the accuracy of the financial statements.

5.

What is the purpose of adjusting entries?

To reconcile the bank statement with the ledger.

To update accounts before preparing the financial statements.

To record sales transactions.

To correct errors found in the trial balance.

6.

What is depreciation?

The increase in the value of an asset over time.

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

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

The process of writing off bad debts.

7.

What is the accounting equation?

Assets = Liabilities + Equity

Profit = Revenue - Expenses

Revenue = Assets + Liabilities

Equity = Assets - Liabilities

8.

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

Accounts Payable

Cash

Inventory

Retained Earnings

9.

What is the matching principle in accounting?

Matching dividends with retained earnings.

Recording expenses when they are paid.

Matching liabilities with assets.

Matching revenue with the expenses incurred to generate that revenue.

10.

What does the term "accrual" mean in accounting?

Recording revenue when cash is received.

Deferring expenses to a later period.

Capitalizing on large purchases.

Matching revenue with expenses in the period they are incurred.

11.

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

Inventory

Accounts Receivable

Equipment

Trademark

12.

What is double-entry accounting?

A system where every transaction affects at least two accounts.

A method of budgeting where income and expenses are balanced.

An accounting system that records each transaction twice.

An accounting technique used only in large corporations.

13.

What type of account is “prepaid expenses”?

Equity

Asset

Liability

Expense

14.

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

The ease with which assets can be converted into cash.

The company's profitability.

The ability to manage debt levels.

The amount of long-term investments a company holds.

15.

What is the primary purpose of a balance sheet?

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

To summarize the company’s cash inflows and outflows.

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

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

16.

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

Income Statement

Statement of Retained Earnings

Statement of Cash Flows

Balance Sheet

17.

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

Statement of Retained Earnings

Income Statement

Statement of Cash Flows

Balance Sheet

18.

What is a chart of accounts?

A detailed schedule of all invoices.

A statement that tracks company expenses.

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

A document showing company ownership.

19.

Which of the following is a liability?

Inventory

Owner’s Equity

Retained Earnings

Accounts Payable

20.

What does GAAP stand for?

General Asset and Allocation Protocol

Global Accounting and Auditing Procedures

Governmental Accounting and Auditing Practices

Generally Accepted Accounting Principles