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.

Name

Email

Business

Phone

1.

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.

2.

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

Inventory

Accounts Receivable

Equipment

Trademark

3.

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

Statement of Retained Earnings

Balance Sheet

Income Statement

Statement of Cash Flows

4.

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

Building

Long-term Investments

Machinery

Accounts Receivable

5.

Which of the following is a liability?

Retained Earnings

Accounts Payable

Owner’s Equity

Inventory

6.

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

Retained Earnings

Inventory

Cash

Accounts Payable

7.

What type of account is “prepaid expenses”?

Liability

Expense

Asset

Equity

8.

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.

9.

What is a chart of accounts?

A statement that tracks company expenses.

A document showing company ownership.

A detailed schedule of all invoices.

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

10.

What does GAAP stand for?

Global Accounting and Auditing Procedures

Governmental Accounting and Auditing Practices

Generally Accepted Accounting Principles

General Asset and Allocation Protocol

11.

What is depreciation?

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

The process of writing off bad debts.

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

The increase in the value of an asset over time.

12.

What is the purpose of a trial balance?

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

To prepare the company for an audit.

To calculate net income for the period.

To test the accuracy of the financial statements.

13.

What is double-entry accounting?

A method of budgeting where income and expenses are balanced.

An accounting technique used only in large corporations.

A system where every transaction affects at least two accounts.

An accounting system that records each transaction twice.

14.

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

Statement of Retained Earnings

Statement of Cash Flows

Income Statement

Balance Sheet

15.

What is the primary purpose of a balance sheet?

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

To summarize the company’s cash inflows and outflows.

16.

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

The ease with which assets can be converted into cash.

The company's profitability.

The amount of long-term investments a company holds.

The ability to manage debt levels.

17.

What is the matching principle in accounting?

Matching liabilities with assets.

Matching revenue with the expenses incurred to generate that revenue.

Recording expenses when they are paid.

Matching dividends with retained earnings.

18.

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

Sales Revenue

Inventory

Cash

Accounts Receivable

19.

What is the accounting equation?

Equity = Assets - Liabilities

Assets = Liabilities + Equity

Revenue = Assets + Liabilities

Profit = Revenue - Expenses

20.

What does "FIFO" stand for in inventory management?

First In, First Out

Fixed Income for Operations

Funds in Financial Obligations

Financial Information Follow-Up