Question 1

Double-entry bookkeeping is based on:&#10;A) Surpluses and deficits&#10;B) Credits and debits&#10;C) Profits and losses&#10;D) Imports and exports

Accepted Answer

Double-entry bookkeeping is based on the principle that every financial transaction has equal and opposite effects in at least two different accounts. It is represented through credits and debits.

Question 2

Accounting allows us to understand companies':&#10;A) Financial positions&#10;B) Future profit potential&#10;C) Shareholder value&#10;D) Product sales

Accepted Answer

Accounting provides a snapshot of a company's financial position through financial statements, which include the balance sheet, income statement, and cash flow statement.

Question 3

Debits and credits must be:&#10;A) Close to each other&#10;B) Approximately equal&#10;C) Equal on average&#10;D) Balanced

Accepted Answer

In accounting, for every transaction, the total debits must equal the total credits to maintain the balance in the accounts, reflecting the double-entry bookkeeping system.

Question 4

Assets and expenses are:&#10;A) Credits&#10;B) Revenue&#10;C) Debits&#10;D) Surpluses

Accepted Answer

Assets and expenses are both increased by debits in accounting. Assets represent resources owned by a company, and expenses represent costs incurred in the process of earning revenue. Both are increased on the debit side of their respective accounts.

Question 5

Liabilities and revenue are:&#10;A) Credits&#10;B) Profits&#10;C) Debits&#10;D) Surpluses

Accepted Answer

Liabilities and revenue are recorded as credits in accounting. Liabilities represent what a company owes, and revenue is the income a company generates from its operations. Both increase on the credit side of their respective accounts.

Question 6

T-accounts are used to:&#10;A) Determine where businesses need to grow&#10;B) Make hiring and firing decisions for companies&#10;C) Gain an overview on firms' financial transactions&#10;D) Make forecasts of future earnings

Accepted Answer

T-accounts are a visual aid used in accounting to represent the debit and credit sides of a ledger, helping to gain an overview of a firm's financial transactions.

Question 7

Income statements are also known as:&#10;A) Profit and loss statements&#10;B) Earnings statements&#10;C) Balance statements&#10;D) Liability statements

Accepted Answer

Income statements are also known as profit and loss statements.

Question 8

Balance statements are also known as:&#10;A) Profit and loss statements&#10;B) Earnings statements&#10;C) Statements of financial positions&#10;D) Liability statements

Accepted Answer

Balance statements are also known as Statements of Financial Position because they provide a snapshot of what a company owns and owes at a specific point in time.

Question 9

Which is the least desirable characteristic of money:&#10;A) Portability&#10;B) Colorfulness&#10;C) Scarcity&#10;D) Durability

Accepted Answer

Colorfulness is the least desirable characteristic of money when considering its functionality and practicality. Money's primary attributes include portability, scarcity, and durability, which directly contribute to its effectiveness in facilitating transactions, retaining value, and withstanding physical wear and tear. Colorfulness does not impact the utility of money in economic transactions.

Deck 2: Basic Accounting and Financial Statements