ACCT 5312 EXAM 1 LATEST 2026 UPDATE 100
QUESTIONS AND DETAILED VERIFIED ANSWERS
FROM ACTUAL EXAMS TEST GRADE A+
1. Which financial statement shows a company’s financial position at a point in
time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Retained Earnings
Answer: C. BALANCE SHEET
Rationale: The balance sheet reports assets, liabilities, and equity at a specific
point in time.
2. The accounting equation is:
A. Assets = Revenue − Expenses
B. Assets = Liabilities + Equity
C. Liabilities = Assets + Equity
D. Equity = Assets + Liabilities
Answer: B. ASSETS = LIABILITIES + EQUITY
Rationale: This fundamental equation ensures the balance of financial records.
3. Revenues are recognized when:
A. Cash is received
B. Goods are ordered
,C. Earned and realizable
D. Expenses are paid
Answer: C. EARNED AND REALIZABLE
Rationale: Revenue recognition follows accrual accounting principles.
4. Which of the following is a current asset?
A. Equipment
B. Accounts Receivable
C. Long-term Investments
D. Land
Answer: B. ACCOUNTS RECEIVABLE
Rationale: It is expected to be collected within one year.
5. Depreciation affects:
A. Only assets
B. Only liabilities
C. Assets and net income
D. Cash flow only
Answer: C. ASSETS AND NET INCOME
Rationale: Depreciation allocates cost of assets over time and reduces income.
6. The matching principle states that:
A. Expenses are matched with revenues in the same period
B. Cash equals revenue
C. Assets equal liabilities
D. Expenses are ignored until paid
,Answer: A. EXPENSES ARE MATCHED WITH REVENUES IN THE SAME PERIOD
Rationale: Ensures accurate profit reporting.
7. Which statement reports performance over a period of time?
A. Balance Sheet
B. Income Statement
C. Statement of Equity
D. Statement of Cash Position
Answer: B. INCOME STATEMENT
Rationale: It summarizes revenues and expenses over a period.
8. Unearned revenue is classified as:
A. Asset
B. Expense
C. Liability
D. Equity
Answer: C. LIABILITY
Rationale: It represents obligations to deliver goods/services.
9. The normal balance of an asset account is:
A. Credit
B. Debit
C. Zero
D. Either debit or credit
Answer: B. DEBIT
Rationale: Assets increase with debits.
, 10. Retained earnings are affected by:
A. Only revenues
B. Dividends and net income
C. Only liabilities
D. Cash transactions only
Answer: B. DIVIDENDS AND NET INCOME
Rationale: Retained earnings accumulate profits minus dividends.
11. Accrual accounting records transactions when:
A. Cash is exchanged
B. Revenue is earned or expense incurred
C. Bank confirms payment
D. Year-end only
Answer: B. REVENUE IS EARNED OR EXPENSE INCURRED
Rationale: Timing is based on economic events, not cash.
12. A trial balance is used to:
A. Determine profit
B. Detect arithmetic errors
C. Prepare tax returns
D. Calculate cash flow
Answer: B. DETECT ARITHMETIC ERRORS
Rationale: Ensures debits equal credits.
13. Which of the following increases equity?
A. Expenses
B. Dividends
QUESTIONS AND DETAILED VERIFIED ANSWERS
FROM ACTUAL EXAMS TEST GRADE A+
1. Which financial statement shows a company’s financial position at a point in
time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Retained Earnings
Answer: C. BALANCE SHEET
Rationale: The balance sheet reports assets, liabilities, and equity at a specific
point in time.
2. The accounting equation is:
A. Assets = Revenue − Expenses
B. Assets = Liabilities + Equity
C. Liabilities = Assets + Equity
D. Equity = Assets + Liabilities
Answer: B. ASSETS = LIABILITIES + EQUITY
Rationale: This fundamental equation ensures the balance of financial records.
3. Revenues are recognized when:
A. Cash is received
B. Goods are ordered
,C. Earned and realizable
D. Expenses are paid
Answer: C. EARNED AND REALIZABLE
Rationale: Revenue recognition follows accrual accounting principles.
4. Which of the following is a current asset?
A. Equipment
B. Accounts Receivable
C. Long-term Investments
D. Land
Answer: B. ACCOUNTS RECEIVABLE
Rationale: It is expected to be collected within one year.
5. Depreciation affects:
A. Only assets
B. Only liabilities
C. Assets and net income
D. Cash flow only
Answer: C. ASSETS AND NET INCOME
Rationale: Depreciation allocates cost of assets over time and reduces income.
6. The matching principle states that:
A. Expenses are matched with revenues in the same period
B. Cash equals revenue
C. Assets equal liabilities
D. Expenses are ignored until paid
,Answer: A. EXPENSES ARE MATCHED WITH REVENUES IN THE SAME PERIOD
Rationale: Ensures accurate profit reporting.
7. Which statement reports performance over a period of time?
A. Balance Sheet
B. Income Statement
C. Statement of Equity
D. Statement of Cash Position
Answer: B. INCOME STATEMENT
Rationale: It summarizes revenues and expenses over a period.
8. Unearned revenue is classified as:
A. Asset
B. Expense
C. Liability
D. Equity
Answer: C. LIABILITY
Rationale: It represents obligations to deliver goods/services.
9. The normal balance of an asset account is:
A. Credit
B. Debit
C. Zero
D. Either debit or credit
Answer: B. DEBIT
Rationale: Assets increase with debits.
, 10. Retained earnings are affected by:
A. Only revenues
B. Dividends and net income
C. Only liabilities
D. Cash transactions only
Answer: B. DIVIDENDS AND NET INCOME
Rationale: Retained earnings accumulate profits minus dividends.
11. Accrual accounting records transactions when:
A. Cash is exchanged
B. Revenue is earned or expense incurred
C. Bank confirms payment
D. Year-end only
Answer: B. REVENUE IS EARNED OR EXPENSE INCURRED
Rationale: Timing is based on economic events, not cash.
12. A trial balance is used to:
A. Determine profit
B. Detect arithmetic errors
C. Prepare tax returns
D. Calculate cash flow
Answer: B. DETECT ARITHMETIC ERRORS
Rationale: Ensures debits equal credits.
13. Which of the following increases equity?
A. Expenses
B. Dividends
