CB Accounting Principles and Financial Statements

Question 1

What is the fundamental accounting equation?

Accepted Answer

Assets = Liabilities + Owner’s Equity

Answer

Assets = Liabilities - Owner’s Equity

Answer

Revenue = Expenses + Owner’s Equity

Answer

Liabilities = Assets + Owner’s Equity

Question 2

Which financial statement provides a snapshot of a company's financial position at a specific point in time?

Accepted Answer

Balance Sheet

Answer

Income Statement

Answer

Statement of Cash Flows

Answer

Statement of Retained Earnings

Question 3

What does an income statement show?

Accepted Answer

A report on the company's net income or loss

Answer

A summary of cash transactions

Answer

A listing of all assets and liabilities

Answer

Changes in owner's equity

Question 4

What is the purpose of double-entry accounting?

Accepted Answer

To maintain accurate financial records by recording transactions in at least two accounts

Answer

To minimize tax liabilities

Answer

To ensure all transactions are cash-based

Answer

To keep track of payroll expenses

Question 5

What is the purpose of adjusting entries?

Accepted Answer

To align financial records with the accrual basis of accounting

Answer

To correct errors in financial statements

Answer

To eliminate accounts payable

Answer

To create financial projections

Question 6

Which financial statement explains changes in cash flow from operating, investing, and financing activities?

Accepted Answer

Statement of Cash Flows

Answer

Income Statement

Answer

Balance Sheet

Answer

Statement of Retained Earnings