Fundamentals of Accounting

What is the basic accounting equation?

Assets = Liabilities + Equity

Assets = Revenue - Expenses

Assets = Equity - Liabilities

Assets = Liabilities - Equity

Which of the following is an example of a current asset?

Cash

Accounts Payable

Inventory

Buildings

What is the purpose of the income statement?

Which of the following is a contra account?

Accumulated Depreciation

Accounts Receivable

Prepaid Expenses

Common Stock

What is the formula for calculating return on investment (ROI)?

Net Income / Total Assets

Net Income / Shareholders' Equity

Net Income / Sales

Net Income / Average Total Assets

Which of the following is an example of a long-term liability?

Bonds Payable

Accounts Payable

Notes Payable

Salaries Payable

What is the purpose of the statement of cash flows?

Which accounting principle requires expenses to be recognized when incurred, regardless of when payment is made?

Matching Principle

Revenue Recognition Principle

Historical Cost Principle

Expense Recognition Principle

What is the formula for calculating the current ratio?

Current Assets / Current Liabilities

Total Assets / Total Liabilities

Net Income / Total Equity

Gross Profit / Sales

Which financial statement reports the financial position of a company at a specific point in time?

Balance Sheet

Income Statement

Statement of Cash Flows

Statement of Retained Earnings

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