SS3 Third Term Financial Account Past Questions And Answers
Financial Accounting questions for SS3 Third Term:
Question: What is the purpose of the cost of goods sold (COGS) in financial accounting?
A) To calculate net profit
B) To determine the value of inventory
C) To record sales revenue
D) To allocate indirect expenses
Answer: A) To calculate net profit
Question: In double-entry accounting, what happens when an expense is incurred?
A) Assets increase
B) Liabilities decrease
C) Equity decreases
D) Another account is credited
Answer: D) Another account is credited
Question: What does the term “amortization” refer to in accounting?
A) Allocating the cost of an intangible asset over its useful life
B) Recording interest on a loan
C) Reducing the book value of a fixed asset
D) Adjusting entries at the end of the accounting period
Answer: A) Allocating the cost of an intangible asset over its useful life
Question: What is the purpose of the Financial Accounting Standards Board (FASB)?
A) To regulate tax laws
B) To establish international accounting standards
C) To set accounting principles and standards in the U.S.
D) To audit financial statements
Answer: C) To set accounting principles and standards in the U.S.
Question: How does the straight-line method differ from the declining balance method in calculating depreciation?
A) Straight-line allocates an equal amount each year, while declining balance allocates more in the early years.
B) Straight-line method is only applicable to tangible assets.
C) Declining balance method is used for land and buildings.
D) Straight-line method is based on the asset’s market value.
Answer: A) Straight-line allocates an equal amount each year, while declining balance allocates more in the early years.
Question: What is the purpose of the cash conversion cycle?
A) To calculate the return on equity
B) To assess a company’s ability to convert cash into inventory and back into cash
C) To reconcile bank statements
D) To determine the straight-line depreciation rate
Answer: B) To assess a company’s ability to convert cash into inventory and back into cash
Question: What is the role of the International Financial Reporting Standards (IFRS) in accounting?
A) To regulate internal controls
B) To harmonize accounting standards globally
C) To determine the straight-line depreciation rate
D) To establish tax regulations
Answer: B) To harmonize accounting standards globally
Question: What is the formula for calculating earnings per share (EPS)?
A) Net Income / Average Total Assets
B) Net Income / Average Shareholders’ Equity
C) Net Income / Weighted Average Number of Shares Outstanding
D) Gross Profit / Sales
Answer: C) Net Income / Weighted Average Number of Shares Outstanding
Question: What is the purpose of the statement of cash flows?
A) To report changes in equity over time
B) To disclose changes in the ownership structure of the business
C) To present the overall financial performance of a business
D) To show the sources and uses of cash during a specific period
Answer: D) To show the sources and uses of cash during a specific period
Question: What is the significance of the debt ratio in financial analysis?
A) To evaluate a company’s liquidity
B) To assess a company’s long-term solvency
C) To measure profitability
D) To calculate the return on investment
Answer: B) To assess a company’s long-term solvency
Question: What is the purpose of the statement of retained earnings?
A) To report changes in equity over time
B) To disclose changes in the ownership structure of the business
C) To calculate net profit
D) To show the financial position at a specific date
Answer: A) To report changes in equity over time
Question: How does the accounting equation stay balanced after recording a sale on credit?
A) Assets decrease, and liabilities increase
B) Assets increase, and equity decreases
C) Assets increase, and liabilities also increase
D) Assets decrease, and equity increases
Answer: C) Assets increase, and liabilities also increase
Question: What is the purpose of the cost accounting system?
A) To report financial performance to external stakeholders
B) To track and control costs within a company
C) To calculate earnings per share
D) To prepare tax returns
Answer: B) To track and control costs within a company
Question: How does the revenue recognition principle guide the recognition of sales in accounting?
A) Recognize revenue when cash is received
B) Recognize revenue when goods are delivered or services are performed
C) Recognize revenue when goods are produced
D) Recognize revenue when expenses are incurred
Answer: B) Recognize revenue when goods are delivered or services are performed
Question: What is the purpose of the cash budget in financial planning?
A) To report cash flows during a specific period
B) To control and plan for future cash activities
C) To calculate net profit
D) To assess a company’s long-term solvency
Answer: B) To control and plan for future cash activities
Question: How does the dividend yield ratio help investors analyze a company’s performance?
A) It measures the company’s ability to pay its current liabilities
B) It assesses the company’s profitability
C) It calculates the return on equity
D) It indicates the return on investment through dividends
Answer: D) It indicates the return on investment through dividends
Question: What is the role of financial ratios in analyzing a company’s financial performance?
A) To calculate tax liabilities
B) To assess liquidity, solvency, and profitability
C) To reconcile bank statements
D) To record adjusting entries
Answer: B) To assess liquidity, solvency, and profitability.
