SS2 First Term Financial Account Past Questions And Answers

Here they are;

Question: What is the primary purpose of financial accounting?

 

A) Profit maximization

B) Decision-making

C) Cost control

D) External reporting

Answer: D) External reporting

Question: Which accounting principle states that expenses should be recognized in the period in which they are incurred, regardless of when the cash is paid?

 

A) Matching principle

B) Revenue recognition principle

C) Historical cost principle

D) Going concern principle

Answer: A) Matching principle

Question: What type of account is “Accumulated Depreciation”?

 

A) Revenue account

B) Contra asset account

C) Liability account

D) Equity account

Answer: B) Contra asset account

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

 

A) Total debt/Total equity

B) Total equity/Total debt

C) Long-term debt/Shareholders’ equity

D) Current liabilities/Total equity

Answer: A) Total debt/Total equity

Question: What is the purpose of a trial balance in financial accounting?

 

A) To ensure the accounting equation is balanced

B) To calculate net income

C) To prepare financial statements

D) To determine cash flow

Answer: A) To ensure the accounting equation is balanced

Question: Which financial statement represents a snapshot of a company’s financial position at a specific point in time?

 

A) Income statement

B) Statement of cash flows

C) Balance sheet

D) Retained earnings statement

Answer: C) Balance sheet

Question: According to the revenue recognition principle, when should revenue be recognized?

 

A) When cash is received

B) When goods or services are delivered

C) When an invoice is issued

D) At the end of the fiscal year

Answer: B) When goods or services are delivered

Question: What is the formula for calculating net income?

 

A) Revenue – Expenses

B) Assets – Liabilities

C) Cash inflows – Cash outflows

D) Beginning equity + Investments – Withdrawals

Answer: A) Revenue – Expenses

Question: Which financial statement reports the changes in a company’s retained earnings over a specific period?

 

A) Balance sheet

B) Income statement

C) Statement of retained earnings

D) Cash flow statement

Answer: C) Statement of retained earnings

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

 

A) To show the financial position of a company

B) To report the company’s profitability

C) To disclose the cash inflows and outflows during a specific period

D) To calculate the return on investment

Answer: C) To disclose the cash inflows and outflows during a specific period

Question: How does an increase in prepaid expenses affect the accounting equation?

 

A) Increases assets; decreases equity

B) Increases assets; increases equity

C) Decreases assets; increases equity

D) Decreases assets; decreases equity

Answer: B) Increases assets; increases equity

Question: What is the formula for calculating earnings per share (EPS)?

 

A) Net income / Total assets

B) Net income / Average shareholders’ equity

C) Revenue / Number of shares outstanding

D) Total assets / Total liabilities

Answer: C) Revenue / Number of shares outstanding

Question: According to the conservatism principle, how should potential losses be treated?

 

A) Recognized immediately

B) Ignored until realized

C) Amortized over time

D) Disclosed only in footnotes

Answer: A) Recognized immediately

Question: Which accounting method records revenues and expenses when they are earned or incurred, regardless of when the cash is exchanged?

 

A) Cash basis accounting

B) Accrual basis accounting

C) Double-entry accounting

D) Single-entry accounting

Answer: B) Accrual basis accounting

Question: How is the return on equity (ROE) calculated?

 

A) Net income / Total assets

B) Net income / Average shareholders’ equity

C) Total assets / Total liabilities

D) Dividends / Earnings

Answer: B) Net income / Average shareholders’ equity

Question: What does the term “amortization” refer to in financial accounting?

 

A) Allocation of the cost of intangible assets over time

B) Depreciation of tangible assets

C) Recognition of revenue from long-term contracts

D) Recording changes in fair value of investments

Answer: A) Allocation of the cost of intangible assets over time

Question: Which financial statement provides a summary of a company’s revenues and expenses over a specific period?

 

A) Balance sheet

B) Income statement

C) Cash flow statement

D) Statement of retained earnings

Answer: B) Income statement

Question: In the context of financial accounting, what does the term “going concern” mean?

 

A) The company will continue its operations for the foreseeable future

B) The company is on the verge of bankruptcy

C) The company is undergoing a restructuring process

D) The company is planning to merge with another entity

Answer: A) The company will continue its operations for the foreseeable future

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

 

A) To report the financial position of a company

B) To disclose the changes in equity over a specific period

C) To provide information about cash inflows and outflows

D) To calculate the return on investment

Answer: C) To provide information about cash inflows and outflows

Question: How does the straight-line depreciation method calculate depreciation expense?

 

A) Based on the asset’s market value

B) Based on the asset’s remaining useful life

C) Based on the

asset’s salvage value

D) Based on the asset’s historical cost

Answer: B) Based on the asset’s remaining useful life