Sample Test for Financial Accounting
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
__D__ 1. In the annual report, where would a financial statement reader find out if the company’s financial statements
give a fair depiction of its financial position and operating results? a. Notes to the financial statements
b. Management discussion and analysis section
c. Balance sheet
d. Auditor’s report
e. None of the options listed
_D___ 2. Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its
existing objectives and commitments? a. Monetary unit assumption
b. Economic entity assumption
c. Time period assumption
d. Going concern assumption
e. None of the options listed
Johnny’s Car Repair Shop started the year with total assets of $60,000 and total liabilities of $40,000. During
the year the business recorded $100,000 in car repair revenues, $55,000 in expenses, and dividends of
$10,000.
__B__ 3. The net income reported by Johnny’s Car Repair Shop for the year was
a. $35,000.
b. $45,000.
c. $20,000.
d. $90,000.
e. none of the options listed
__D__ 4. The purchase of an office building by issuing long-term notes payable should be reported as a
a. cash outflow in the financing section of the statement of cash flows.
b. cash outflow in the investing section of the statement of cash flows.
c. cash outflow in the operating section of the statement of cash flows.
d. noncash investing and financing activity.
e. none of the options listed
__B__ 5. If beginning capital was $25,000, ending capital is $37,000, and the owner's withdrawals were $23,000,
the amount of net income or net loss for the period was: a. net loss of $35,000
b. net income of $35,000
c. net income of $14,000
d. net loss of $14,000
e. none of the options listed
__A__ 6. The deferred income tax liability:
a. Represents income tax payments that are deferred until future years because of temporary differences
between GAAP rules and tax accounting rules.
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
__D__ 1. In the annual report, where would a financial statement reader find out if the company’s financial statements
give a fair depiction of its financial position and operating results? a. Notes to the financial statements
b. Management discussion and analysis section
c. Balance sheet
d. Auditor’s report
e. None of the options listed
_D___ 2. Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its
existing objectives and commitments? a. Monetary unit assumption
b. Economic entity assumption
c. Time period assumption
d. Going concern assumption
e. None of the options listed
Johnny’s Car Repair Shop started the year with total assets of $60,000 and total liabilities of $40,000. During
the year the business recorded $100,000 in car repair revenues, $55,000 in expenses, and dividends of
$10,000.
__B__ 3. The net income reported by Johnny’s Car Repair Shop for the year was
a. $35,000.
b. $45,000.
c. $20,000.
d. $90,000.
e. none of the options listed
__D__ 4. The purchase of an office building by issuing long-term notes payable should be reported as a
a. cash outflow in the financing section of the statement of cash flows.
b. cash outflow in the investing section of the statement of cash flows.
c. cash outflow in the operating section of the statement of cash flows.
d. noncash investing and financing activity.
e. none of the options listed
__B__ 5. If beginning capital was $25,000, ending capital is $37,000, and the owner's withdrawals were $23,000,
the amount of net income or net loss for the period was: a. net loss of $35,000
b. net income of $35,000
c. net income of $14,000
d. net loss of $14,000
e. none of the options listed
__A__ 6. The deferred income tax liability:
a. Represents income tax payments that are deferred until future years because of temporary differences
between GAAP rules and tax accounting rules.
