SS1 Third Term Financial Account Past Questions And Answers

 

Financial accounting questions for the third term:

 

Question: How does the double-entry system contribute to the accuracy of financial records?

 

A. It ensures that every transaction affects at least two accounts

B. It limits the number of transactions recorded

C. It prevents errors in financial statements

D. It is only used for large corporations

Answer: A. It ensures that every transaction affects at least two accounts

Question: What is the purpose of the statement of comprehensive income?

 

A. To report changes in equity over a period

B. To summarize the company’s revenues and expenses

C. To provide a comprehensive view of all income and expenses, including non-operating items

D. To calculate net income

Answer: C. To provide a comprehensive view of all income and expenses, including non-operating items

Question: How does the LIFO (Last-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: A. It assigns the most recent costs to inventory

Question: What is the difference between an expense and a capital expenditure?

 

A. Expenses increase assets, while capital expenditures decrease assets

B. Expenses are long-term, while capital expenditures are short-term

C. Expenses are recorded on the income statement, while capital expenditures are recorded on the balance sheet

D. Expenses are related to day-to-day operations, while capital expenditures are investments in long-term assets

Answer: D. Expenses are related to day-to-day operations, while capital expenditures are investments in long-term assets

Question: What is the purpose of the statement of changes in equity?

 

A. To summarize the company’s revenues and expenses

B. To provide information about the company’s cash receipts and payments

C. To explain changes in the owner’s equity over a period

D. To calculate net income

Answer: C. To explain changes in the owner’s equity over a period

Question: How does the straight-line method impact the calculation of depreciation?

 

A. It allocates a fixed amount of depreciation each year

B. It accelerates depreciation in the early years of an asset’s life

C. It assigns the most recent costs to depreciation

D. It has no effect on the calculation of depreciation

Answer: A. It allocates a fixed amount of depreciation each year

Question: What is the purpose of the retained earnings statement?

 

A. To show the company’s assets and liabilities

B. To explain changes in the owner’s equity over a period

C. To calculate net income

D. To report cash flows from operating, investing, and financing activities

Answer: B. To explain changes in the owner’s equity over a period

Question: How does a contra account differ from a regular account in accounting?

 

A. Contra accounts increase the balance of regular accounts

B. Contra accounts decrease the balance of regular accounts

C. Contra accounts have no impact on financial statements

D. Contra accounts are used only in the cash flow statement

Answer: B. Contra accounts decrease the balance of regular accounts

Question: What is the role of financial ratios in financial analysis?

 

A. To record day-to-day transactions

B. To provide a summary of financial transactions

C. To evaluate a company’s financial performance and position

D. To calculate net income

Answer: C. To evaluate a company’s financial performance and position

Question: According to the conservatism principle, how should uncertain events be treated in financial reporting?

 

A. Recognize potential gains and losses immediately

B. Recognize potential gains and delay recognizing losses

C. Recognize potential losses immediately and delay recognizing gains

D. Delay recognizing both potential gains and losses

Answer: C. Recognize potential losses immediately and delay recognizing gains.