Financial Statements (Practice Quiz)

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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, learn more about this topic by reading our Financial Statements (Explanation).

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

Cash method

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

Closing

Reversing

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)

Financial Accounting Standards Board (FASB)

Internal Revenue Service (IRS)

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

Balance sheet

Income statement

Statement of cash flows

Statement of comprehensive income

Statement of stockholders’ equity

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

Period of time

Point in time

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

Accumulated other comprehensive income

Paid-in capital

Retained earnings

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

Balance sheet

Income statement

Statement of cash flows

Statement of comprehensive income

Statement of stockholders’ equity

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

False

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

False

10.

Comprehensive income is defined as _______________ plus other comprehensive income.

extraordinary items

gains and losses

net income

11.

Which financial statement reports the adjustments for foreign currency translation?

Statement of cash flows

Statement of comprehensive income

Statement of income

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

Statement of comprehensive income with no value

Not reported on a financial statement

13.

A corporation's working capital is calculated using which amounts?

Total assets and total liabilities

Total assets and current liabilities

Current assets and current liabilities

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

Income statement

Statement of cash flows

Statement of comprehensive income

Statement of stockholders' equity

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

Cash provided/used in investing activities

Cash provided/used in operating activities

Supplemental information

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

An increase in accounts payable

An increase in accounts receivable

Depreciation expense

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

An increase in inventory

A decrease in accounts payable

Depreciation expense

18.

What is usually presented first in the notes to the financial statements?

Accumulated other comprehensive income

Commitments and contingencies

Significant accounting policies

19.

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

Form 1040

Form 10-K

Form 10-Q

Schedule C

20.

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

General ledger accounts

Income statement

Notes to the financial statements

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