SS2 Second Term Financial Account Past Questions And Answers

Here they are;

 

Question: Which financial statement provides a detailed breakdown of a company’s equity, showing the changes over a specific period?

 

A) Income statement

B) Balance sheet

C) Statement of retained earnings

D) Cash flow statement

Answer: C) Statement of retained earnings

Question: What is the purpose of the Generally Accepted Accounting Principles (GAAP)?

 

A) To ensure ethical behavior in accounting

B) To provide a standardized framework for financial reporting

C) To maximize profits for shareholders

D) To determine tax liabilities

Answer: B) To provide a standardized framework for financial reporting

Question: How is the current ratio 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: According to the matching principle, how should prepaid expenses be treated in financial accounting?

 

A) Recognized immediately

B) Amortized over time

C) Ignored until realized

D) Disclosed only in footnotes

Answer: B) Amortized over time

Question: What does the term “double-entry accounting” mean?

 

A) Recording every transaction in two different journals

B) Using two different accounting methods for the same transaction

C) Ensuring that every transaction affects at least two accounts

D) Keeping two separate sets of financial records

Answer: C) Ensuring that every transaction affects at least two accounts

Question: How does the acid-test ratio differ from the current ratio?

 

A) The acid-test ratio includes inventory, while the current ratio does not

B) The acid-test ratio excludes cash, while the current ratio includes it

C) The acid-test ratio focuses on long-term liabilities, while the current ratio does not

D) The acid-test ratio and the current ratio are synonymous terms

Answer: A) The acid-test ratio includes inventory, while the current ratio does not

Question: What is the purpose of the statement of comprehensive income?

 

A) To report changes in equity

B) To disclose cash flows from operating activities

C) To provide a detailed breakdown of revenues and expenses

D) To show all items of income and expense recognized during a specific period

Answer: D) To show all items of income and expense recognized during a specific period

Question: How is the quick ratio calculated?

 

A) (Current assets – Inventory) / Current liabilities

B) Current assets / Current liabilities

C) Current liabilities / (Current assets – Inventory)

D) (Current assets + Inventory) / Current liabilities

Answer: A) (Current assets – Inventory) / Current liabilities

Question: What is the purpose of the Sarbanes-Oxley Act in the United States?

 

A) To regulate international financial reporting

B) To establish accounting standards for private companies

C) To enhance corporate governance and financial transparency

D) To determine tax rates for corporations

Answer: C) To enhance corporate governance and financial transparency

Question: How does the straight-line depreciation method allocate depreciation expense over an asset’s useful life?

 

A) Equal amounts each period

B) Increasing amounts each period

C) Decreasing amounts each period

D) Randomly throughout the useful life

Answer: A) Equal amounts each period

Question: What is the purpose of the Financial Accounting Standards Board (FASB)?

 

A) To regulate international financial reporting

B) To set accounting standards for public companies in the United States

C) To determine tax rates for corporations

D) To enforce ethical conduct in accounting

Answer: B) To set accounting standards for public companies in the United States

Question: According to the revenue recognition principle, when should revenue be recognized for services rendered over time?

 

A) At the beginning of the service period

B) At the end of the service period

C) Throughout the service period

D) Only upon receiving cash payment

Answer: C) Throughout the service period

Question: What is the purpose of the International Financial Reporting Standards (IFRS)?

 

A) To provide guidelines for ethical conduct in accounting

B) To regulate financial reporting for private companies

C) To harmonize accounting standards globally

D) To determine tax liabilities

Answer: C) To harmonize accounting standards globally

Question: How does a credit entry affect an asset account?

 

A) Increases the asset account

B) Decreases the asset account

C) Leaves the asset account unchanged

D) Converts the asset account to a liability

Answer: B) Decreases the asset account

Question: What is the purpose of the Internal Revenue Service (IRS) in the United States?

 

A) To set accounting standards

B) To enforce ethical conduct in accounting

C) To regulate international financial reporting

D) To administer tax laws and collect taxes

Answer: D) To administer tax laws and collect taxes

Question: How is the debt ratio calculated?

 

A) Total debt / Total assets

B) Total assets / Total debt

C) Long-term debt / Shareholders’ equity

D) Current liabilities / Total equity

Answer: A) Total debt / Total assets

Question: What is the purpose of the cash basis of accounting?

 

A) To recognize revenues and expenses when cash is received or paid

B) To match revenues and expenses in the period they are incurred

C) To provide a comprehensive view of a company’s financial position

D) To calculate the return on equity

Answer: A) To recognize revenues and expenses when cash is received or paid

Question: How does the purchase of inventory on credit impact the accounting equation?

 

A) Increases assets and liabilities

B) Increases assets and decreases liabilities

C) Decreases assets and liabilities

D) Decreases assets and increases liabilities

Answer: A) Increases assets and liabilities

Question: According to the materiality concept, what should be the focus when presenting financial information?

 

A) Only significant information that influences users’ decisions

B) All information, regardless of significance

C) Information that supports optimistic forecasts

D) Information related to future events only

Answer: A) Only significant information that influences users’ decisions.