Free Practice Quiz Question List

1 Foundations of Financial Accounting Online Quiz Questions

Use this free practice quiz with 20 questions to review 1 Foundations of Financial Accounting, test your knowledge, and prepare for your next test or exam.

20 questions

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1 point

A business owner contributes $10,000 in cash to a new business. Which change keeps the accounting equation in balance?

A
Cash increases and liabilities increase by $10,000.
B
Cash and equity each increase by $10,000.
C
Cash increases by $10,000 and equity decreases by $10,000.
D
Cash increases by $10,000 while total equity stays unchanged.

Choose all

1 point

Select all the items that are assets of a business.

A
Cash held by the business
B
A loan the business must repay
C
Equipment controlled by the business
D
An unpaid bill owed by the business
E
An amount a customer owes the business

Written response

1 point

A business earns $3,000 in service revenue and pays $500 in rent expense. What is its net income in dollars?

Choose one

1 point

A reader wants to know a business’s financial position on one specific date. Which statement should the reader consult?

A
The income statement, which reports activity over a period.
B
The statement of cash flows, which reports cash activity over a period.
C
The balance sheet, which reports financial position on a particular date.
D
The statement of changes in equity, which explains how owners’ claims changed during a period.

Choose all

1 point

Select all the items that the material identifies as components of a corporation’s equity.

A
Shareholders’ contributions
B
Loans the corporation must repay
C
Unpaid bills owed to suppliers
D
Accumulated results retained in the business

True or false

1 point

True or false: An economic event that cannot be measured can still qualify as a business transaction.

A
True
B
False

Choose one

1 point

A business buys $3,000 of equipment and pays cash immediately. What is the effect of this transaction on total assets and equity?

A
Total assets increase by $3,000, and equity decreases by $3,000.
B
Total assets and equity remain unchanged, although the mix of assets changes.
C
Total assets decrease by $3,000, and liabilities increase by $3,000.
D
Total assets remain unchanged, and equity increases by $3,000.

Choose one

1 point

A business pays cash to buy equipment. How is this cash flow classified?

A
An operating cash inflow
B
An investing cash outflow
C
A financing cash inflow
D
A financing cash outflow

Written response

1 point

A business begins with a $10,000 owner contribution, earns $2,500 in net income, and has no owner withdrawals or dividends. What is its ending equity in dollars?

Fill in the blank

1 point

Complete the accounting equation: $\text{Assets} =$ $+$ .

True or false

1 point

True or false: If a business earns $3,000 in service revenue and $1,000 remains receivable, the full $3,000 contributes to revenue even though only $2,000 has been collected in cash.

A
True
B
False

True or false

1 point

True or false: The statement of changes in equity explains only a business’s cash inflows and outflows during a period.

A
True
B
False

Open ended

1 point

Explain why financial accounting uses established reporting rules and conventions, and how its reports help investors or lenders make decisions.

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1 point

Why does financial accounting use established reporting rules and conventions?

A
To ensure every organization has the same amount of revenue
B
To provide structured, comparable information that helps users make decisions
C
To guarantee that a business will earn a profit
D
To replace the need for organizations to track transactions

Choose one

1 point

Which statement correctly distinguishes financial statements that report activity over a period from one that reports financial position at a particular date?

A
The balance sheet reports activity over a period, while the income statement reports position on one date.
B
All financial statements report activity over the same period.
C
The income statement and statement of cash flows report activity over a period; the balance sheet reports position on a particular date.
D
The statement of changes in equity reports only cash received and paid.

Choose one

1 point

A business has assets financed partly by creditors and partly by owners. Which description best explains the owners’ equity?

A
Equity is the owners’ residual claim on the business after liabilities are subtracted from assets.
B
Equity is the total amount the business owes to lenders and suppliers.
C
Equity is the cash collected from customers during a period.
D
Equity is the value of resources the business controls before considering obligations.

Choose one

1 point

An owner contributes $10,000 cash to a new business. Which effect does this contribution have on the business?

A
Cash increases and liabilities increase by the contribution amount.
B
Cash decreases and equity increases by the contribution amount.
C
Cash and revenue increase by the contribution amount.
D
Cash and equity increase by the contribution amount.

Written response

1 point

A business earns $3,000 in service revenue and pays $500 in rent expense during a period. What is its net income for that period? Enter the amount in dollars as a number without a currency symbol.

Written response

1 point

A business begins with no equity, receives a $10,000 owner contribution, and earns $2,500 in net income. It has no owner withdrawals or dividends. What is its ending equity? Enter the amount in dollars as a number without a currency symbol.

Fill in the blank

1 point

A business pays rent in cash. In the statement of cash flows, this payment is classified as an .