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level: Level 1

Questions and Answers List

level questions: Level 1

Question	Answer
Two common areas of accounting that respectively provide information to internal and external users are ________________________ Select one alternative: A financial accounting and tax accounting B management accounting and environmental accounting C management accounting and financial accounting D forensic accounting and financial accounting	C management accounting and financial accounting
What are assets? Select one alternative: A Resources owned by the business B Money borrowed from external parties that have to be paid back later C Shares sold to external parties D Money owed to others	A Resources owned by the business
What is "Owner's Equity"? Select one alternative: A Money owed to the business or company B The worth of a business or company C Revenue minus expenses D Money owed to creditors	B The worth of a business or company
Which of the following is not a role of accounting in business? Select one alternative: A to provide information to external users to determine the economic performance and condition of the business B to provide reports to users about the economic activities and condition of a business C to assess the various informational needs of users and design an accounting system to meet those needs D to personally guarantee loans of the business	D to personally guarantee loans of the business
Debts owed by a business to someone else are referred to as: Select one alternative: A expenses B liabilities C accounts receivable D owner's equity	B liabilities
When a business owner takes out cash from their business for personal use, it is called ______________. Select one alternative: A liabilities B drawings C revenue D expenses	B drawings
Assume you are starting a business for the first time. When a transaction occurs, what is the first step in the accounting cycle? ( Select one alternative: A Write the t-accounts for the transaction B Prepare the balance sheet C Prepare the income statment D Write the journal entry for the transaction	D Write the journal entry for the transaction
If you wanted to know how cash was received or spent during an accounting year for a business, you would look in the ___________________ Select one alternative: A income statement B personal bank account of the business owner C balance sheet D cash flow statement	D cash flow statement
What do the terms "Debit" and "Credit" mean? Select one alternative: A Debit is the left side and Credit is the right side of a t-account B Debit means increase and Credit means decrease C Debit means add to the income statement while Credit means minus from the income statement D Debit means minus and credit means plus	A Debit is the left side and Credit is the right side of a t-account
Owner's equity will be decreased by all of the following except ______________ . Select one alternative: A revenues B expenses C drawings D All of the above	A revenues
Which of the following groups of accounts have a normal debit balance? Select one alternative: A revenues, liabilities and capital B assets and expenses C liabilities and capital D capital and assets	B assets and expenses
What is the structure of a balance sheet? Select one alternative: A Assets = Liabilities + Equity B Assets + Liabilities = Equity C Assets + Equity = Liabilities D Assets = Liabilities - Equity	A Assets = Liabilities + Equity
Small businesses can usually prepare their Income Statements and Balance Sheet on a cash basis. On what basis do large businesses prepare their Income Statements and Balance Sheets? Select one alternative: A Share price basis B Accrual basis C Cash flow statement basis D Cash basis	B Accrual basis
The following are reasons we need a Statement of Cash Flow except: Select one alternative: A The survival of a business depends on its ability to pay its debts B The Statement of Cash Flow can detect fraud C The statement of cash flow gives users important information about the business’ ability to generate cash and its needs. D There is less scope to manipulate the Statement of Cash Flow	D There is less scope to manipulate the Statement of Cash Flow
Which of the following is not a section in the Statement of Cash Flow? Select one alternative: A Investing B Expensing C Financing D Operating	B Expensing
An owner withdraws cash from the business bank account and uses it for a personal holiday. In which section of the Statement of Cash Flow will you see this cash amount reported? Select one alternative: A Operating B Financing C Expensing D Investing	B Financing
How will a decrease in inventory be reported in the Statement of Cash Flow? Select one alternative: A The amount will be added (i.e. a positive number) to the Investing section of the Statement of Cash Flow B The amount will be added (i.e. a positive number) to the Operating section of the Statement of Cash Flow C The amount will be deducted (i.e. a negative or bracket number) in the Investing section of the Statement of Cash Flow D The amount will be deducted (i.e. a negative or bracket number) in the Operating section of the Statement of Cash Flow	B The amount will be added (i.e. a positive number) to the Operating section of the Statement of Cash Flow
Which of the following is not true about companies or corporations (the words companies and corporations mean the same in this question)? Select one alternative: A A company is owned by shareholders B Shareholders of a company have limited liability C The most common form of a business is a sole proprietor D A company can be private or public	C The most common form of a business is a sole proprietor
What is "Issued share capital"? Select one alternative: A the number of shares a company is authorised to sell B the total par value of shares that has actually been sold to shareholders C the total par value of shares that has actually been paid by the shareholders D the company has issued shares but has only asked for payments in instalments	B. The total par value of shares that has actually been sold to shareholders
What is a "dividend"? Select one alternative: A Extra shares that a company gives to its shareholders from dividing its current shares B Extra shares that a company gives to its shareholders due to good performance C A sum of cash received by a company from its shareholders returning their shares to the company D A sum of cash paid by a company to its shareholders out of its profits	D A sum of cash paid by a company to its shareholders out of its profits
Which of the following is not true about Retained Earnings? Select one alternative: A Retained earnings is decreased by cash dividends paid to the company's shareholders B Retained earnings is the same as Share Capital C Retained earnings is increased by net income D Retained earnings is decreased by net loss	B Retained earnings is the same as Share Capital
Which of the following is correct about Ordinary Shares? Select one alternative: A Ordinary shares are also known as equity shares B Ordinary shares do not carry voting rights C The annual dividend for ordinary shares is fixed D Ordinary shareholders get paid before preference shareholders get paid	A Ordinary shares are also known as equity shares
What is an "unearned revenue"? Select one alternative: A An expense which has been paid in advance, the benefits from which will be received in the next period B A revenue received in advance which creates a liability C A revenue has been earned but has not yet been recorded D An expense has been incurred but has not yet been recorded	B A revenue received in advance which creates a liability