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Quizzes > Business & Finance

Fundamentals of Accounting Quiz: Check Your Core Knowledge

Quick, free basic accounting quiz. Instant results and clear study tips.

Editorial: Review CompletedCreated By: Beatriz GenerosoUpdated Aug 23, 2025
Difficulty: Moderate
Questions: 15
Study OutcomesAdditional Reading
3D voxel art depicting the course Fundamentals of Accounting

This quiz helps you check your understanding of the fundamentals of accounting, including financial statements, journal entries, and core terms. Answer 15 quick questions and get instant feedback with study tips. For extra practice, try our debits and credits quiz, take a journal entry quiz, or review the basics with an accounting principles quiz.

Which equation must always balance in double-entry accounting? Explanation: The basic accounting equation is Assets = Liabilities + Equity.
Assets = Revenue - Expenses
Assets = Liabilities + Equity
Assets = Equity - Liabilities
Assets + Liabilities = Equity
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In a journal entry, which side do asset increases normally appear on? Explanation: Asset increases are debits.
Neither side
Debit
Either side
Credit
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Revenue is recognized when earned, not necessarily when cash is received. Explanation: This is the revenue recognition principle under accrual accounting.
False
True
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Which financial statement shows a companys financial position at a specific date? Explanation: The balance sheet is a snapshot at a point in time.
Income statement
Statement of cash flows
Statement of changes in equity
Balance sheet
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The matching principle requires expenses be recorded in the same period as the related revenues. Explanation: Expenses are matched to revenues they help generate.
False
True
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Which ratio measures short-term liquidity using only quick assets? Explanation: The quick ratio excludes inventory and prepaid items.
Debt-to-equity
Current ratio
Return on assets
Quick ratio
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Closing entries transfer net income and dividends into retained earnings. Explanation: Temporary accounts are closed to retained earnings.
True
False
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Which side of a T-account decreases a revenue account? Explanation: Revenues normally have credit balances, so debits decrease them.
Neither side
Credit side
Either side
Debit side
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FOB shipping point means the buyer takes ownership when goods leave the sellers dock. Explanation: Title transfers at shipment under FOB shipping point.
True
False
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Which method estimates bad debts by analyzing the age of receivables? Explanation: The aging method applies higher rates to older balances.
Percentage of sales
Units-of-production
Direct write-off
Aging of accounts receivable
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Recognizing impairment reduces the carrying amount of an asset to its recoverable amount. Explanation: Impairment losses write down assets when not recoverable.
True
False
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Which inventory system records purchases in a Purchases account and calculates COGS at period-end? Explanation: The periodic system defers COGS computation.
Periodic inventory system
Perpetual inventory system
Consignment system
Just-in-time system
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Contingent liabilities that are probable and reasonably estimable should be accrued. Explanation: GAAP requires recognition in this case.
True
False
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Which entry records the write-off of a specific uncollectible account under the allowance method? Explanation: Write-off debits Allowance for Doubtful Accounts and credits Accounts Receivable.
Dr Allowance for Doubtful Accounts; Cr Accounts Receivable
Dr Accounts Receivable; Cr Allowance for Doubtful Accounts
Dr Cash; Cr Allowance for Doubtful Accounts
Dr Bad Debt Expense; Cr Accounts Receivable
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A multi-step income statement shows gross profit and operating income separately. Explanation: It classifies revenues and expenses into sections.
False
True
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Accumulated other comprehensive income is a component of equity separate from retained earnings. Explanation: AOCI accumulates OCI items in equity.
True
False
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Which impairment test approach compares carrying amount to the sum of undiscounted future cash flows under US GAAP for long-lived assets held and used? Explanation: The recoverability test uses undiscounted cash flows.
Replacement cost ceiling test
Recoverability test using undiscounted cash flows
Discounted cash flow internal rate of return test
Fair value less costs to sell test only
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Capital leases are always classified as operating leases under current US GAAP. Explanation: This is false; GAAP now uses finance lease criteria distinct from operating leases.
False
True
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Which measurement attribute reflects the price to sell an asset in an orderly transaction at the measurement date? Explanation: Fair value is an exit price.
Historical cost
Fair value
Replacement cost
Net realizable value
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Under the indirect method, an increase in accounts receivable is deducted from net income to compute operating cash flows. Explanation: It represents revenue not collected in cash.
False
True
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Study Outcomes

  1. Understand fundamental accounting principles and concepts.
  2. Apply the double-entry bookkeeping system to record transactions.
  3. Analyze financial statements to interpret business performance.
  4. Synthesize accounting data to support decision-making.

Fundamentals Of Accounting Additional Reading

Ready to dive into the world of accounting? Here are some top-notch resources to guide you through the fundamentals:

  1. This Coursera course offers a comprehensive introduction to accounting principles, covering topics like financial statements, accounting cycles, and data management. It's perfect for beginners aiming to build a solid foundation in accounting. ([coursera.org](https://www.coursera.org/learn/accounting-and-reporting-fundamentals?utm_source=openai))
  2. Offered by the University of Illinois Urbana-Champaign, this specialization delves into accounting basics for managers and entrepreneurs, focusing on interpreting financial statements and making informed business decisions. ([coursera.org](https://www.coursera.org/specializations/accounting-fundamentals?utm_source=openai))
  3. Yale University's resource provides insights into double-entry bookkeeping, explaining essential concepts like assets, liabilities, revenues, and expenses. It's a great starting point for understanding the power of accounting systems. ([learning-accounting.yale.edu](https://learning-accounting.yale.edu/basics-accounting?utm_source=openai))
  4. This course from the University of Virginia covers the use of journal entries, preparation of financial statements, and analysis of a company's financial health, making it ideal for those looking to grasp the essentials of financial accounting. ([coursera.org](https://www.coursera.org/learn/uva-darden-financial-accounting?utm_source=openai))
  5. The Open University's free course introduces the basics of accounting, including financial statements and the role of accounting in business, suitable for learners seeking a flexible study option. ([open.edu](https://www.open.edu/openlearn/money-business/fundamentals-accounting/content-section-overview?utm_source=openai))
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