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Financial Statements (Practice Quiz)

Author:
Harold Averkamp, CPA, MBA

For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided.

If you have difficulty answering the following questions, read our In-Depth Explanation for this topic.


1.
Which accounting method will result in financial statements that report a more complete picture of a corporation’s financial position and a better measure of profitability during a recent accounting year?

Accrual Method

Right!

Cash Method

Wrong.
2.
Which type of journal entries are made at the end of each accounting period so that the financial statements better reflect the accrual method of accounting?

Adjusting

Right!

Closing

Wrong.

Reversing

Wrong.
3.
The generally accepted accounting principles used in the financial statements of U.S. corporations are researched and developed by which organization?

American Accounting Association (AAA)

Wrong.

Financial Accounting Standards Board (FASB)

Right!

Internal Revenue Service (IRS)

Wrong.
4.
Which financial statement will allow you to determine the gross margin for a retailer or manufacturer?

Balance Sheet

Wrong.

Income Statement

Right!

Statement Of Cash Flows

Wrong.

Statement Of Comprehensive Income

Wrong.

Statement Of Stockholders’ Equity

Wrong.
5.
Does the heading of a balance sheet indicate a period of time or a point in time?

Period Of Time

Wrong.

Point In Time

Right!
6.
A corporation's net income will cause a change in which component of stockholders' equity?

Accumulated Other Comprehensive Income

Wrong.

Paid-in Capital

Wrong.

Retained Earnings

Right!
7.
Which financial statement's structure is closest to that of the basic accounting equation?

Balance Sheet

Right!

Income Statement

Wrong.

Statement Of Cash Flows

Wrong.

Statement Of Comprehensive Income

Wrong.

Statement Of Stockholders’ Equity

Wrong.
8.
Is it true or false that a grocery store’s sale of its old delivery van to one of its employees for $2,000 should be recorded in the general ledger account Sales?

True

Wrong.

False

Right!
9.
Is it true or false that the total amount of stockholders’ equity reported on the balance sheet is intended to show the fair market value of the corporation?

True

Wrong.

False

Right!
10.
Comprehensive income is defined as _______________ plus other comprehensive income.

Extraordinary Items

Wrong.

Gains And Losses

Wrong.

Net Income

Right!
11.
Which financial statement reports the adjustments for foreign currency translation?

Statement Of Cash Flows

Wrong.

Statement Of Comprehensive Income

Right!

Statement Of Income

Wrong.
12.
Ten years ago, a corporation created a new brand name that is now considered to be its most valuable asset. On which financial statement and at what amount will you see the brand name reported?

Balance Sheet At Its Present Value

Wrong.

Statement Of Comprehensive Income With No Value

Wrong.

Not Reported On A Financial Statement

Right!
13.
A corporation's working capital is calculated using which amounts?

Total Assets And Total Liabilities

Wrong.

Total Assets And Current Liabilities

Wrong.

Current Assets And Current Liabilities

Right!
14.
The changes that occurred during a recent year in the accounts Retained Earnings and Treasury Stock will be presented in which financial statement?

Balance Sheet

Wrong.

Income Statement

Wrong.

Statement Of Cash Flows

Wrong.

Statement Of Comprehensive Income

Wrong.

Statement Of Stockholders' Equity

Right!
15.
The amount spent for capital expenditures will be reported in which section of the statement of cash flows?

Cash Provided/used In Financing Activities

Wrong.

Cash Provided/used In Investing Activities

Right!

Cash Provided/used In Operating Activities

Wrong.

Supplemental Information

Wrong.
16.
Which of the following will appear as a negative amount on a statement of cash flows that was prepared using the indirect method?

A Decrease In Inventory

Wrong.

An Increase In Accounts Payable

Wrong.

An Increase In Accounts Receivable

Right!

Depreciation Expense

Wrong.
17.
Which of the following will appear as a positive amount on a statement of cash flows that was prepared using the indirect method?

An Increase In Accounts Receivable

Wrong.

An Increase In Inventory

Wrong.

A Decrease In Accounts Payable

Wrong.

Depreciation Expense

Right!
18.
What is usually presented first in the notes to the financial statements?

Accumulated Other Comprehensive Income

Wrong.

Commitments And Contingencies

Wrong.

Significant Accounting Policies

Right!
19.
Which is the annual report to the SEC that contains the financial statements of a publicly-traded corporation?

Form 1040

Wrong.

Form 10-K

Right!

Form 10-Q

Wrong.

Schedule C

Wrong.
20.
Important disclosures regarding likely losses that could not be estimated are found where?

General Ledger Accounts

Wrong.

Income Statement

Wrong.

Notes To The Financial Statements

Right!
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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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