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Quizzes > Business & Finance > Finance & Economics

Accounting Quiz: Test Your Skills Now!

Ready to ace this ProProfs.com quiz? Show off your accounting know-how!

Difficulty: Moderate
2-5mins
Learning OutcomesCheat Sheet
Paper art illustration of quiz theme accounting skills with ledger charts coins and inventory boxes on coral background

This accounting quiz helps you see if accounting fits you by checking basics like period costs, inventory management, and simple rules. You'll get instant feedback to spot strengths and gaps before a class or a career move, and for extra practice, try the midterm practice and the management scenarios quiz .

Which financial statement shows a company's financial position at a specific point in time?
Balance Sheet
Income Statement
Statement of Cash Flows
Statement of Retained Earnings
The balance sheet reports assets, liabilities, and equity as of a specific date, providing a snapshot of financial position. It differs from the income statement, which covers performance over a period. The statement of cash flows tracks cash movements during a reporting period.
Which cost is classified as a period cost rather than a product cost?
Direct materials
Sales commission
Direct labor
Factory machine maintenance
Period costs are expensed in the period incurred and are not tied to production. Sales commissions are selling expenses and are recorded as period costs. Factory costs like maintenance are overhead and become part of product cost.
Under the FIFO inventory method, which layer of costs is allocated to cost of goods sold first?
Most recent purchases
Weighted average of all purchases
Oldest purchases
Specific batches selected by manager
FIFO stands for First-In, First-Out and assigns the oldest costs to goods sold first. This method generally produces lower cost of goods sold in inflationary periods. Ending inventory reflects the most recent costs.
Which accounting basis records revenue when earned and expenses when incurred regardless of cash flow?
Tax basis accounting
Accrual basis accounting
Cash basis accounting
Modified cash basis
Accrual accounting recognizes revenues when earned and matches expenses to those revenues, providing a more accurate measure of performance. Cash basis records transactions only when cash changes hands. Most public companies must use accrual basis under GAAP.
What distinguishes a direct cost from an indirect cost?
Direct costs are traceable to a cost object
Indirect costs are always period costs
Indirect costs are raw materials
Direct costs are fixed, indirect costs are variable
Direct costs can be directly traced to a specific product or department (e.g., direct labor). Indirect costs, like utilities, support multiple cost objects. Both direct and indirect costs can be fixed or variable.
Which type of account is increased by a debit entry?
Equity
Revenues
Assets
Liabilities
In double-entry accounting, assets and expenses increase with debits. Liabilities, equity, and revenues increase with credits. Recording a debit to an asset account shows acquisition or increase in value.
In a period of rising prices, which inventory method typically results in the highest taxable income?
LIFO
FIFO
Weighted Average
Specific Identification
FIFO assigns older, lower costs to cost of goods sold when prices rise, resulting in lower COGS and higher taxable income. LIFO does the opposite, reducing taxable income. Taxable income is higher under FIFO in inflationary periods.
Which three components make up total product cost in a manufacturing firm?
Direct materials, direct labor, manufacturing overhead
Direct labor, selling expenses, manufacturing overhead
Direct materials, selling expenses, administrative expenses
Direct materials, direct labor, administrative expenses
Product costs consist of direct materials, direct labor, and manufacturing overhead. These costs are inventoried until goods are sold. Period costs, like selling and administrative expenses, are expensed immediately.
What is the fundamental accounting equation?
Assets + Equity = Liabilities
Assets = Revenues + Expenses
Assets = Liabilities + Equity
Revenues - Expenses = Equity
The core accounting equation is Assets = Liabilities + Equity, showing that resources (assets) are financed by debt (liabilities) or owner's investment (equity). It underpins double-entry bookkeeping. Changes to one side must be matched by the other.
How is the predetermined manufacturing overhead rate calculated?
Actual overhead ÷ actual machine hours
Estimated overhead ÷ actual units produced
Estimated overhead ÷ estimated direct labor hours
Budgeted overhead ÷ budgeted direct materials cost
The predetermined overhead rate is based on estimates made at the start of the period: estimated manufacturing overhead divided by estimated activity (often direct labor hours). It is applied to jobs throughout the period.
Which cost is expensed as part of cost of goods sold when inventory is sold?
Advertising expense
Product cost
Administrative expense
Period cost
Product costs (direct materials, direct labor, and manufacturing overhead) are capitalized as inventory and expensed as COGS when units are sold. Period costs are expensed in the period incurred.
What journal entry records depreciation expense for the period?
Debit Accumulated Depreciation; Credit Depreciation Expense
Debit Depreciation Expense; Credit Accumulated Depreciation
Debit Equipment; Credit Depreciation Expense
Debit Depreciation Expense; Credit Equipment
Depreciation expense is debited to reflect cost allocation and credited to accumulated depreciation, a contra-asset account. This preserves the original cost of the asset on the balance sheet.
Which inventory costing method smooths out cost fluctuations by averaging costs?
LIFO
FIFO
Weighted average
Specific identification
The weighted average method computes an average cost per unit by dividing total cost by total units available. It smooths cost fluctuations over the period. COGS and ending inventory both use the same average cost.
Under a periodic inventory system, when is cost of goods sold determined?
When cash is received
Continuously as each sale occurs
At the end of the accounting period
When purchases are made
A periodic system records inventory changes only at period end by physical count; COGS is calculated then. In contrast, perpetual systems track COGS and inventory continuously.
Under absorption costing, which of the following costs is included in inventory valuation?
Selling and administrative costs
Both fixed and variable manufacturing overhead
Fixed manufacturing overhead only
Variable manufacturing overhead only
Absorption costing includes all manufacturing costs - direct materials, direct labor, variable and fixed manufacturing overhead - in product cost. Selling/administrative costs remain period expenses.
Which selling expense is classified as a period cost?
Sales salaries
Manufacturing overhead
Direct labor
Factory rent
Sales salaries are incurred to sell the product and are recorded as period costs in the selling expense category. Factory rent is part of manufacturing overhead and becomes a product cost.
What does the matching principle in accounting require?
Expenses be recognized when cash is paid
Revenues be recognized when cash is received
Expenses be recorded in the same period as related revenues
All liabilities be matched to assets
The matching principle dictates that expenses should be recognized in the period in which the related revenues are earned, ensuring accurate measurement of net income. It underpins accrual accounting.
A company has beginning inventory of 100 units at $10 and purchases 200 units at $12. If it sells 150 units, what is cost of goods sold using FIFO?
$1,800
$1,900
$1,700
$1,600
Under FIFO, the first 100 units at $10 and next 50 units at $12 are sold: (100×10)+(50×12)=1,000+600=1,600. The remaining 150 units remain at $12.
A job uses 200 machine hours. If the predetermined overhead rate is $5 per machine hour, what amount of overhead is applied?
$500
$1,000
$200
$2,000
Overhead applied equals machine hours multiplied by the predetermined rate: 200 hours×$5/hour=$1,000. This allocation spreads overhead based on usage.
What is the LIFO reserve?
Difference between FIFO and LIFO inventory costs
Accumulated depreciation under LIFO
Deferred tax liability under FIFO
Excess of ending inventory over beginning inventory
The LIFO reserve is the difference between inventory reported under FIFO and under LIFO. It indicates how much COGS and inventory value differ between the methods.
Which concept describes reporting inventory at the lower of cost or net realizable value?
Materiality
Full disclosure
Conservatism
Consistency
The conservatism principle requires that inventory be stated at the lower of cost or net realizable value to avoid overstating assets. This ensures losses are recognized promptly.
In a perpetual inventory system, how is cost of goods sold recorded?
At the end of period based on physical count
When purchases are recorded
Only when cash is received
Continuously with each sale
A perpetual system updates inventory and COGS at each sale by crediting Inventory and debiting COGS. This provides real-time inventory data.
Which ratio measures how many times a company sells and replaces its inventory in a period?
Quick ratio
Current ratio
Inventory turnover ratio
Debt-to-equity ratio
Inventory turnover ratio equals cost of goods sold divided by average inventory. It indicates how efficiently inventory is managed and sold. Higher turnover suggests strong sales or effective inventory control.
What major compliance requirement did the Sarbanes-Oxley Act introduce for companies?
Mandated LIFO inventory only
Eliminated quarterly reporting
Stricter internal controls over financial reporting
Expanded depreciation methods
The Sarbanes-Oxley Act of 2002 strengthened requirements for internal control and financial reporting to enhance corporate governance and reduce fraud. Public companies must assess and disclose control effectiveness.
Under variable costing, which cost is treated as a period expense rather than product cost?
Direct materials
Fixed manufacturing overhead
Direct labor
Variable manufacturing overhead
Variable costing includes only variable manufacturing costs in product cost; fixed manufacturing overhead is expensed in the period incurred. This method highlights cost behavior for decision making.
Which inventory valuation rule requires reporting at the lower of cost or net realizable value?
Specific identification rule
Lower of cost or net realizable value rule
Gross profit method
LIFO conformity rule
The lower of cost or net realizable value rule ensures inventory is not overstated by writing it down to its net realizable value if that is lower than cost. It applies under US GAAP for most inventories.
What does the LIFO conformity rule mandate?
Specific identification must be disclosed separately
FIFO must be used for inventory costing when prices are stable
If LIFO is used for tax purposes, it must also be used for financial reporting
Weighted average must match periodic system
The LIFO conformity rule in the U.S. requires that if a company uses LIFO for tax purposes, it must also apply LIFO for financial reporting under GAAP. This ensures consistency between tax and financial records.
In reconciling absorption costing net income to variable costing net income, which adjustment is made?
Subtract variable selling expenses
Subtract all manufacturing overhead
Add fixed manufacturing overhead deferred in inventory
Add period administrative costs
Absorption costing capitalizes fixed manufacturing overhead in inventory, whereas variable costing expenses it immediately. To reconcile, you add fixed overhead deferred in (or subtract released from) inventory under absorption costing.
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Study Outcomes

  1. Understand Fundamental Accounting Concepts -

    After taking the is accounting for me quiz on ProProfs, learners will be able to clearly define key terms such as period costs, direct labor, and inventory management.

  2. Analyze Cost Classification -

    Participants will be able to distinguish between period and product costs and categorize expenses accurately for financial reporting.

  3. Evaluate Inventory Management Techniques -

    Users will gain the ability to assess inventory valuation methods like FIFO and LIFO and understand their impact on financial statements.

  4. Apply Direct Labor Calculations -

    After engaging with the ProProfs.com quiz, learners can compute direct labor costs per unit and incorporate them into costing models.

  5. Assess Personal Accounting Aptitude -

    By completing the www.proprofs.com quiz, users will identify their strengths and areas for growth, helping them decide if accounting aligns with their career goals.

Cheat Sheet

  1. Understanding Period Costs vs Product Costs -

    Period costs, such as administrative and selling expenses, are expensed immediately, while product costs (direct materials, direct labor, and manufacturing overhead) are inventoried until sold (FASB ASC 330). Use the mnemonic "SAY goodbye to period costs" to remember they go straight to the income statement. Mastering this distinction will boost your score on the is accounting for me quiz.

  2. Direct Labor and Overhead Allocation Basics -

    Direct labor cost equals hours worked multiplied by the hourly wage rate, and factories allocate overhead using a predetermined rate: estimated overhead ÷ estimated activity (e.g., machine hours) (Institute of Management Accountants). Remember "Hourly rate × Time" for direct labor. Knowing this formula is key to answering allocation questions on www.proprofs.com quiz.

  3. Inventory Valuation Methods -

    Learn FIFO, LIFO, and Weighted Average to value ending inventory: FIFO assumes oldest costs sold first, LIFO the newest, and average takes a weighted mean (IFRS IAS 2). For example, FIFO gives higher ending inventory in rising-price environments. Practicing numerical examples helps you ace inventory questions on the www proprofs com quiz.

  4. Cost Behavior: Fixed vs Variable Costs -

    Fixed costs remain constant in total (e.g., rent), while variable costs change with activity (e.g., materials) (Harvard Business School course notes). Use the break-even formula Units = Fixed Costs ÷ (Price - Variable Cost) to find profitability thresholds. Solid grasp of cost behavior will give you confidence on proprofs.com quiz scenarios.

  5. Matching Principle and Accrual Accounting -

    The matching principle requires expenses to be recognized in the same period as the related revenues (IFRS Conceptual Framework). For example, record warranty expense in the period of sale, not when claims occur. Applying accrual concepts ensures you'll handle tricky questions on the is accounting for me quiz with ease.

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