Unlock hundreds more features
Save your Quiz to the Dashboard
View and Export Results
Use AI to Create Quizzes and Analyse Results

OR
Sign inSign in with Facebook
Sign inSign in with Google
Quizzes > Business & Finance

Online financial accounting quiz: check your skills

Quick, free accounting knowledge check with instant results

Editorial: Review CompletedCreated By: Saka MotoUpdated Aug 24, 2025
Difficulty: Moderate
2-5mins
Learning OutcomesCheat Sheet
Paper art style illustration of calculator coins graphs documents for free finance accounts quiz on dark blue background

This finance and accounting quiz helps you check what you know about statements, budgeting, and key terms, and spot gaps fast. After you submit, explore the accounting principles quiz, try a finance knowledge test, and practice with a financial management quiz to strengthen the basics and build speed.

What is the fundamental accounting equation?
Liabilities = Assets + Equity
Revenues = Expenses + Profit
Assets = Liabilities + Equity
Assets + Equity = Liabilities
The fundamental accounting equation states that a company's assets are financed by its liabilities and equity, ensuring the balance sheet balances. It underpins double-entry accounting by ensuring every transaction affects at least two accounts. This equation is foundational for financial reporting and analysis. .
Which financial statement reports a company's revenues and expenses over a period?
Income Statement
Statement of Changes in Equity
Statement of Cash Flows
Balance Sheet
The income statement (or profit and loss statement) summarizes revenues, expenses, and profits over a specific period. It shows how net income is derived by matching revenues against expenses. This report helps stakeholders assess operational performance. .
Which of the following best describes an asset?
An obligation to transfer economic benefits
The owner's residual interest
A revenue earned in advance
A present economic resource controlled by a company
Assets are resources controlled by an entity from which future economic benefits are expected. They appear on the balance sheet and can include cash, inventory, property, and receivables. Recognizing assets correctly is crucial for accurate financial reporting. .
Under which accounting basis are revenues recorded when cash is received?
Cash Basis
Accrual Basis
Deferral Basis
Modified Accrual Basis
Under the cash basis of accounting, revenues and expenses are recognized only when cash is exchanged. This method is simpler but may not reflect the true financial position for businesses with significant receivables or payables. Accrual basis, by contrast, records transactions when they are earned or incurred. .
True or False: Double-entry bookkeeping requires each transaction to be recorded in at least two accounts.
False
True
Double-entry bookkeeping means every transaction impacts at least two accounts, ensuring debits equal credits. This system provides a robust check against errors and enables accurate financial statements. It forms the backbone of modern accounting. .
Which depreciation method spreads an asset's cost evenly over its useful life?
Sum-of-the-Years'-Digits Method
Straight-Line Method
Declining Balance Method
Units-of-Production Method
The straight-line method allocates an equal depreciation expense each period over an asset's useful life. It's the simplest and most widely used technique due to its consistency. Other methods accelerate depreciation or vary with usage. .
Which of the following is classified as a current asset?
Property, Plant, and Equipment
Retained Earnings
Inventory
Patents
Current assets are expected to be converted into cash or used up within one year, including inventory, cash, and receivables. They help assess short-term liquidity. Non-current items like property and patents are classified separately. .
What is the primary purpose of a trial balance?
To calculate net income
To forecast future revenues
To verify that debits equal credits in the ledger
To prepare the cash flow statement
A trial balance lists all ledger accounts with their debit or credit balances to ensure total debits equal total credits. It's a vital check before preparing financial statements. Any discrepancy indicates posting errors that must be resolved. .
How is working capital calculated?
Current Liabilities - Current Assets
Current Assets - Current Liabilities
Total Assets - Total Liabilities
Total Equity - Noncurrent Liabilities
Working capital measures short-term liquidity and is computed as current assets minus current liabilities. It indicates a company's ability to meet its short-term obligations. Positive working capital suggests financial health. .
If a company has current assets of $150,000 and current liabilities of $75,000, what is its current ratio?
0.5
1.5
2.0
1.0
The current ratio equals current assets divided by current liabilities: $150,000 / $75,000 = 2.0. A ratio above 1 suggests the company can cover short-term debts. It's a key liquidity metric. .
How do you calculate the break-even point in units?
Total Costs ÷ Total Revenue
Variable Costs ÷ Selling Price per Unit
Fixed Costs ÷ Variable Cost Ratio
Fixed Costs ÷ Contribution Margin per Unit
The break-even point in units = fixed costs divided by contribution margin per unit (selling price minus variable cost). It shows the number of units needed to cover all costs. Managers use it to plan pricing and production. .
What does goodwill represent on an acquirer's balance sheet?
Accumulated depreciation on fixed assets
Excess of purchase price over fair value of net identifiable assets
Present value of future dividends
Cost of outstanding shares
Goodwill arises when an acquirer pays more than the fair value of net identifiable assets of the target company. It captures intangible factors like reputation and customer relationships. It's tested annually for impairment. .
What does EBITDA stand for?
Earnings Before Interest, Taxes, Depreciation, and Amortization
Earnings Before Income, Taxes, Depreciation, and Amortization
Expenditures Before Interest, Taxes, Depreciation, and Amortization
Earnings Before Inventory, Taxes, Depreciation, and Amortization
EBITDA measures operating performance by excluding the effects of financing, tax, and non-cash charges. It's used to compare profitability across companies and industries. However, it doesn't account for capital expenditures or working capital changes. .
According to the revenue recognition principle, when should revenue be recognized?
At the end of each quarter
When cash is received
When it is earned and realizable
When the invoice is issued
Under accrual accounting, revenue is recognized when it's earned and realizable, regardless of cash receipt. This aligns revenues with the period in which goods or services were delivered. The principle ensures consistency and comparability in financial reporting. .
What does ROI stand for in financial analysis?
Revenue on Investments
Return on Investment
Return on Income
Rate of Interest
ROI measures the gain or loss generated on an investment relative to its cost. It's expressed as a percentage and used to evaluate efficiency and compare returns across projects. A higher ROI indicates better investment performance. .
Which account is part of owners' equity on the balance sheet?
Retained Earnings
Prepaid Expenses
Inventory
Accounts Payable
Retained earnings represent cumulative net income retained in the business after dividends. It's a key component of owners' equity. Equity accounts reflect the residual interest in assets after liabilities are settled. .
How is net present value (NPV) defined?
Sum of future cash inflows
Internal rate of return minus cost of capital
Discount rate that makes NPV zero
Difference between present value of inflows and outflows
NPV equals the present value of future cash inflows minus the present value of cash outflows. A positive NPV indicates the project or investment should generate value above the cost of capital. It's a cornerstone of capital budgeting decisions. .
What is the internal rate of return (IRR)?
Return on equity from operations
Difference between cash inflows and outflows
Yield to maturity on debt
Discount rate making NPV zero
IRR is the discount rate at which the NPV of cash flows equals zero. It represents the expected annualized rate of return from a project. IRR is used to compare the profitability of different investments. .
Which formula represents the weighted average cost of capital (WACC)?
Debt ÷ Equity
(Cost of Debt + Cost of Equity) ÷ Total Assets
(E/V)*Re + (D/V)*Rd*(1?T)
Cost of Equity + Cost of Debt ÷ 2
WACC weights the cost of equity (Re) and after-tax cost of debt (Rd) by their market values (E and D) relative to total capital (V = E + D). The formula is (E/V)*Re + (D/V)*Rd*(1?T). It represents a company's blended financing cost. .
Which statement best describes a key difference between IFRS and US GAAP?
IFRS is principles-based; US GAAP is rules-based
IFRS uses historical cost only; US GAAP uses fair value only
IFRS prohibits LIFO; US GAAP prohibits FIFO
IFRS requires cash basis; US GAAP requires accrual basis
IFRS is considered principles-based, providing broad guidelines, while US GAAP is rules-based with detailed implementation requirements. This fundamental difference affects interpretation and application of standards. For example, IFRS prohibits LIFO inventory, whereas GAAP allows it. .
What gives rise to a deferred tax asset?
Permanent difference
Taxable temporary difference
Deductible temporary difference
Excess tax expense over tax payable
A deferred tax asset arises from deductible temporary differences, where expenses are recognized in accounting before tax. These differences create future tax benefits. They are recorded when it is probable that future taxable profits will be available. .
What does a qualified audit opinion indicate?
Financial statements are free of any misstatements
Statements are not reliable and contain pervasive issues
Auditor is independent and has no comments
Except for specific issues, statements are fairly presented
A qualified opinion means the auditor believes the financial statements are fairly presented except for certain issues that are not pervasive. It signals limited concern areas rather than overall misstatement. It's the second-best opinion after unqualified. .
How is the quick ratio calculated?
(Current Assets + Inventory) ÷ Current Liabilities
(Current Assets - Inventory) ÷ Current Liabilities
Current Assets - Current Liabilities
Current Assets ÷ Current Liabilities
The quick ratio (acid-test ratio) measures liquidity using the most liquid assets. It's calculated as (current assets minus inventory) divided by current liabilities. It excludes inventory because it may not be quickly convertible to cash. .
Under IFRS 9 hedge accounting, which requirement must be met to qualify as a hedge?
Proven prospective effectiveness of the hedge relationship
All of the above
Clear risk management objective and strategy
Formal designation and documentation at inception
IFRS 9 requires formal designation and documentation of the hedging relationship, a clear risk management objective, and evidence of prospective hedge effectiveness. All criteria ensure transparency and reliability in hedge accounting. Compliance allows hedge gains and losses to be accounted for in other comprehensive income. .
Under IFRS 16, how must a lessee account for nearly all leases?
Expense lease payments as incurred off balance sheet
Capitalize only finance leases and expense operating leases
Recognize a right-of-use asset and a lease liability
Record lease payments as prepayments
IFRS 16 requires lessees to recognize a right-of-use asset and corresponding lease liability for almost all leases, eliminating the operating lease/off-balance-sheet treatment. This enhances transparency of a company's lease obligations. Lease expenses are then split between depreciation and interest. .
0
{"name":"What is the fundamental accounting equation?", "url":"https://www.quiz-maker.com/QPREVIEW","txt":"What is the fundamental accounting equation?, Which financial statement reports a company's revenues and expenses over a period?, Which of the following best describes an asset?","img":"https://www.quiz-maker.com/3012/images/ogquiz.png"}

Study Outcomes

  1. Understand Financial Statements -

    Readers will identify the components of balance sheets, income statements, and cash flow statements to grasp how organizations report financial performance.

  2. Analyze Budgeting Techniques -

    Readers will differentiate between various budgeting methods and evaluate their effectiveness in planning and controlling financial resources.

  3. Apply Accounting Principles -

    Readers will use foundational accounting rules to solve real-world finance quiz questions and reinforce accurate financial record-keeping.

  4. Evaluate Financial Ratios -

    Readers will calculate and interpret key ratios to assess liquidity, profitability, and operational efficiency of a business.

  5. Identify Accounting Terminology -

    Readers will recall and define essential finance and accounting terms, enhancing their understanding of financial concepts.

  6. Solve Real-World Scenarios -

    Readers will tackle practical finance trivia questions to test their ability to apply knowledge under realistic conditions.

Cheat Sheet

  1. The Accounting Equation -

    The foundation of financial accounting is Assets = Liabilities + Equity, ensuring every transaction keeps the books balanced. Memorize "Aunt Liz Eats" as a quick mnemonic for Assets, Liabilities, and Equity. Consistently applying this equation helps you ace any finance quiz question about balance sheets.

  2. Cash Flow Statement Components -

    Understand the three sections: Operating, Investing, and Financing cash flows, which explain where cash comes from and how it's used. Use the phrase "OIF - Oh, I'm Funded!" to recall Order: Operations, Investing, Financing. Mastering this breakdown reveals a company's liquidity and solvency in real-world scenarios.

  3. Budget Variance Analysis -

    Calculate variance by subtracting the budgeted amount from the actual figure (Variance = Actual - Budget). Analyze favorable or unfavorable variances to improve forecasting accuracy and control costs. Regularly practicing these calculations in a finance and accounts quiz builds confidence in financial planning.

  4. Depreciation Methods -

    Compare the Straight-Line method [(Cost - Salvage Value) / Useful Life] with Accelerated methods like Double-Declining Balance for asset expense allocation. Knowing when to use each impacts net income and tax obligations. Reviewing examples from accounting standards such as IFRS and GAAP ensures accuracy in exam-style questions.

  5. Key Financial Ratios -

    Focus on liquidity ratios (Current Ratio = Current Assets / Current Liabilities) and leverage ratios (Debt-to-Equity = Total Liabilities / Shareholders' Equity). These metrics gauge financial health and risk, essential for interpreting financial statements. Practicing ratio calculations on platforms like Investopedia and university finance quiz banks solidifies your analytical skills.

Make a Quiz (FREE) Copy & Edit This Quiz Create a Quiz with AI

Finance & Economics Quizzes

Powered by: Quiz Maker