FINANCIAL ACCOUNTING EXAMINATION QUESTIONS AND CORRECT ANSWER WITH EXPLANATION|GRADED A+ STUDY GUIDE

FINANCIAL ACCOUNTING EXAMINATION QUESTIONS
AND CORRECT ANSWER WITH EXPLANATION|GRADED
A+ STUDY GUIDE SOUTHERN NEW HAMPSHIRE
UNIVERSITY

1. Financial accounting primarily focuses on:

A. Internal management only
B. Reporting financial information to external users
C. Payroll processing only
D. Marketing activities only
Answer: B
Rationale: Financial accounting provides information to investors, creditors, and regulators.



2. The accounting equation is:

Assets = Liabilities + Equity
A. Revenue = Expenses
B. Assets = Liabilities + Equity
C. Cash = Revenue − Expenses
D. Profit = Assets − Liabilities
Answer: B
Rationale: Fundamental accounting relationship.



3. Assets are:

A. Obligations owed to outsiders
B. Resources owned by a business
C. Owner withdrawals only
D. Expenses only
Answer: B
Rationale: Assets provide future economic benefits.

,4. Liabilities represent:

A. Business resources
B. Obligations owed by a business
C. Revenue earned
D. Owner investments only
Answer: B
Rationale: Liabilities are debts or obligations.



5. Equity represents:

A. Amount owed to creditors
B. Owner’s residual interest in assets
C. Cash sales only
D. Inventory balances only
Answer: B
Rationale: Equity is ownership interest.



6. Revenues increase:

A. Expenses
B. Equity
C. Liabilities only
D. Withdrawals
Answer: B
Rationale: Revenues increase owner’s equity.



7. Expenses generally:

A. Increase equity
B. Decrease equity
C. Increase liabilities only
D. Have no financial effect
Answer: B
Rationale: Expenses reduce profits and equity.

, 8. Double-entry accounting requires:

A. One entry per transaction
B. Equal debits and credits
C. Only cash transactions
D. Only revenue accounts
Answer: B
Rationale: Maintains accounting equation balance.



9. A debit entry typically increases:

A. Revenue accounts
B. Asset accounts
C. Equity accounts
D. Liability accounts
Answer: B
Rationale: Assets normally carry debit balances.



10. Credits normally increase:

A. Assets
B. Expenses
C. Liabilities and equity
D. Withdrawals only
Answer: C
Rationale: Liabilities and equity have credit balances.



11. The general ledger contains:

A. Marketing plans only
B. All business accounts
C. Payroll checks only
D. Inventory counts only
Answer: B
Rationale: Central accounting record.