SS1 Second Term Financial Account Past Questions And Answers
Financial accounting questions for the second term:
Question: What is the purpose of the statement of cash flows?
A. To report changes in equity over a period
B. To provide information about the company’s cash receipts and payments
C. To calculate net income
D. To summarize the company’s revenues and expenses
Answer: B. To provide information about the company’s cash receipts and payments
Question: What is the difference between current assets and fixed assets?
A. Current assets are tangible, while fixed assets are intangible
B. Current assets can be easily converted to cash within a year, while fixed assets have a longer life span
C. Current assets are long-term, while fixed assets are short-term
D. Current assets represent liabilities, while fixed assets represent equity
Answer: B. Current assets can be easily converted to cash within a year, while fixed assets have a longer life span
Question: How does the FIFO (First-In-First-Out) method impact the calculation of cost of goods sold?
A. It assigns the most recent costs to inventory
B. It assigns the oldest costs to inventory
C. It averages the cost of inventory
D. It has no effect on the cost of goods sold
Answer: B. It assigns the oldest costs to inventory
Question: What is the formula for calculating gross profit?
A. Net Sales – Cost of Goods Sold
B. Net Income – Operating Expenses
C. Gross Profit Margin / Net Sales
D. Net Income + Other Revenues
Answer: A. Net Sales – Cost of Goods Sold
Question: According to the cash basis of accounting, when are revenues recognized?
A. When the sale is made
B. When cash is received
C. When goods or services are delivered
D. At the end of the fiscal year
Answer: B. When cash is received
Question: What is the purpose of the accounting cycle?
A. To repeat financial transactions
B. To record transactions in chronological order
C. To ensure accurate financial reporting through a series of steps
D. To calculate total assets
Answer: C. To ensure accurate financial reporting through a series of steps
Question: How does a debit transaction affect accounts in the accounting equation?
A. Increases assets and increases liabilities
B. Increases assets and decreases liabilities
C. Decreases assets and increases liabilities
D. Decreases assets and decreases liabilities
Answer: B. Increases assets and decreases liabilities
Question: What is the role of a journal entry in accounting?
A. To record only cash transactions
B. To summarize financial transactions
C. To record transactions in the order they occur
D. To calculate net income
Answer: C. To record transactions in the order they occur
Question: How does the acid-test ratio differ from the current ratio?
A. The acid-test ratio includes inventory, while the current ratio does not
B. The current ratio is a liquidity ratio, while the acid-test ratio is a profitability ratio
C. The acid-test ratio includes long-term liabilities, while the current ratio does not
D. The current ratio includes only cash, while the acid-test ratio includes all current assets
Answer: A. The acid-test ratio includes inventory, while the current ratio does not
Question: What is the purpose of the operating activities section in the statement of cash flows?
A. To report cash flows related to the purchase and sale of long-term assets
B. To report cash flows related to day-to-day business operations
C. To calculate net income
D. To summarize the company’s revenues and expenses
Answer: B. To report cash flows related to day-to-day business operations.
