Accounting Final Exam Questions and Answers: Multiple Choice

Summary

Accounting is the process of recording, reporting and analysing financial information. It is used to track income and expenses, to report on the financial health of a business, and to make decisions about its future. The document is a set of multiple-choice questions and answers for an accounting exam. A student can use it to test their knowledge of accounting principles and practices.

Accounting users and terms

Internal and external users of accounting data are named. Assets, liabilities, equity, revenues and expenses are defined. The income statement and balance sheet are described.

Accounting principles and ratios

Comparability, reliability and relevance are explained. The current ratio, working capital and the debt to total assets ratio are calculated.

Transactions and trial balances

The effects of transactions on accounts are described. A trial balance is used to detect errors. The normal balance of accounts is named.

Inventory, cash flows and costing

The specific identification method of costing inventory is used. The statement of cash flows is prepared. Activity-based costing is described.

Key terms

Assets

Resources owned by a business.

Current ratio

A liquidity ratio that measures a company's ability to pay short-term obligations.

Generally accepted accounting principles

The standards and rules that are recognized as a general guide for financial reporting.

Internal control

The policies and procedures managers use to protect a company's resources.

Trial balance

A list of all the accounts in the general ledger with their balances.

Working capital

The difference between current assets and current liabilities.

Questions this document helps with

• What are the main financial statements used in accounting?
• How do you calculate the current ratio?
• What is the purpose of a trial balance?

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