SS2 third Term financial accounting past Questions and Answers

SS2 third Term financial accounting past Questions and Answers

Here are 20 financial accounting questions with options and answers:

Question: What does the term "amortization" refer to in accounting?

A) Decreasing the value of an intangible asset over time

B) Increasing the value of a tangible asset over time

C) Recording revenue when it is earned

D) Calculating the present value of future cash flows

Answer: A) Decreasing the value of an intangible asset over time

Question: What is the primary purpose of the Statement of Cash Flows?

A) To report changes in equity

B) To summarize revenue and expenses

C) To provide information about a company's cash inflows and outflows

D) To disclose changes in long-term liabilities

Answer: C) To provide information about a company's cash inflows and outflows

Question: How is the debt-to-assets ratio calculated?

A) Total Debt / Total Equity

B) Total Assets / Total Debt

C) Total Liabilities / Total Assets

D) Total Assets / Total Equity

Answer: C) Total Liabilities / Total Assets

Question: What is the purpose of the Statement of Comprehensive Income?

A) To report changes in equity

B) To disclose the overall financial performance of a company

C) To detail cash inflows and outflows

D) To provide information about retained earnings

Answer: B) To disclose the overall financial performance of a company

Question: Which accounting principle emphasizes reporting the most conservative estimates when faced with uncertainty?

A) Matching Principle

B) Revenue Recognition Principle

C) Conservatism Principle

D) Time Period Principle

Answer: C) Conservatism Principle

Question: How is the return on assets (ROA) calculated?

A) Net Income / Average Total Assets

B) Net Income / Average Equity

C) Total Revenue / Average Total Assets

D) Total Revenue / Average Equity

Answer: A) Net Income / Average Total Assets

Question: What is the purpose of the general ledger in accounting?

A) To record daily transactions

B) To calculate depreciation

C) To prepare financial statements

D) To reconcile bank statements

Answer: A) To record daily transactions

Question: Which financial statement is also known as the "statement of financial position"?

A) Income Statement

B) Balance Sheet

C) Statement of Cash Flows

D) Statement of Retained Earnings

Answer: B) Balance Sheet

Question: In accounting, what does the term "accrual" mean?

A) Recognizing revenue before it is earned

B) Recognizing expenses before they are paid

C) Recognizing revenue when it is received in cash

D) Recognizing expenses when they are incurred

Answer: B) Recognizing expenses before they are paid

Question: What is the purpose of the statement of owner's equity?

A) To provide information about cash flows

B) To disclose changes in equity accounts

C) To report on changes in long-term liabilities

D) To summarize revenue and expenses

Answer: B) To disclose changes in equity accounts

Question: What is the role of the Financial Accounting Standards Board (FASB) in accounting standards?

A) To enforce accounting regulations

B) To audit financial statements

C) To establish and improve accounting standards

D) To regulate tax reporting

Answer: C) To establish and improve accounting standards

Question: How is the acid-test (quick) ratio calculated?

A) (Current Assets - Inventory) / Current Liabilities

B) Current Assets / (Current Liabilities - Inventory)

C) Current Assets / Quick Liabilities

D) (Current Assets + Inventory) / Current Liabilities

Answer: C) Current Assets / Quick Liabilities

Question: What is the purpose of the Statement of Changes in Equity?

A) To summarize cash transactions

B) To report changes in assets and liabilities

C) To disclose changes in equity accounts

D) To calculate the return on investment

Answer: C) To disclose changes in equity accounts

Question: How is the working capital calculated?

A) Current Assets - Current Liabilities

B) Current Liabilities - Current Assets

C) Total Assets - Total Liabilities

D) Total Liabilities - Total Assets

Answer: A) Current Assets - Current Liabilities

Question: What is the purpose of the statement of cash flows?

A) To provide information about cash receipts and payments

B) To summarize the financial position of a company

C) To report changes in equity

D) To calculate earnings per share

Answer: A) To provide information about cash receipts and payments

Question: How is the net present value (NPV) used in financial accounting?

A) To calculate return on investment

B) To assess the profitability of a project

C) To determine cash flows from operating activities

D) To record depreciation expenses

Answer: B) To assess the profitability of a project

Question: What is the purpose of the chart of accounts in accounting?

A) To summarize financial transactions

B) To calculate depreciation

C) To classify and organize all accounts

D) To reconcile bank statements

Answer: C) To classify and organize all accounts

Question: What is the role of auditors in financial accounting?

A) To prepare financial statements

B) To enforce tax regulations

C) To independently examine and verify financial records

D) To set accounting standards

Answer: C) To independently examine and verify financial records

Question: How is the times interest earned ratio calculated?

A) Net Income / Total Assets

B) Earnings Before Interest and Taxes (EBIT) / Interest Expense

C) Total Revenue / Interest Expense

D) Net Income / Average Equity

Answer: B) Earnings Before Interest and Taxes (EBIT) / Interest Expense