SS2 First Term Financial Account Past Questions And Answers
Here they are;
Question: What is the primary purpose of financial accounting?
A) Profit maximization
B) Decision-making
C) Cash management
D) Tax evasion
Question: Which accounting principle states that expenses should be recognized in the period they are incurred, not necessarily when they are paid?
A) Matching principle
B) Revenue recognition principle
C) Consistency principle
D) Materiality principle
Question: What is the formula for calculating net profit?
A) Revenue – Expenses
B) Assets – Liabilities
C) Revenue + Expenses
D) Liabilities – Assets
Question: In double-entry accounting, what happens when a liability is decreased?
A) Asset decreases
B) Asset increases
C) Equity decreases
D) Equity increases
Question: Which financial statement provides a snapshot of a company’s financial position at a specific point in time?
A) Income statement
B) Cash flow statement
C) Balance sheet
D) Statement of changes in equity
Question: What is the purpose of the trial balance?
A) To determine net income
B) To identify errors in the accounting records
C) To calculate cash flow
D) To record adjusting entries
Question: Which accounting principle states that transactions should be recorded at their original cost?
A) Historical cost principle
B) Conservatism principle
C) Going concern principle
D) Revenue recognition principle
Question: What does the term “depreciation” refer to in financial accounting?
A) Increase in value of assets
B) Distribution of profits to shareholders
C) Allocation of the cost of an asset over its useful life
D) Increase in liabilities
Question: What is the purpose of a cash flow statement?
A) To show the profitability of a business
B) To analyze changes in equity
C) To report the inflow and outflow of cash during a specific period
D) To calculate total assets
Question: Which financial statement represents the performance of a company over a specific period?
A) Balance sheet
B) Income statement
C) Cash flow statement
D) Statement of changes in equity
Question: What is the accounting equation?
A) Assets = Liabilities – Equity
B) Assets = Liabilities + Equity
C) Assets = Equity – Liabilities
D) Assets = Liabilities x Equity
Question: In the context of financial accounting, what does “GAAP” stand for?
A) Generally Accepted Accounting Principles
B) Generally Acknowledged Accounting Procedures
C) Generally Authorized Accounting Practices
D) General Accounting and Auditing Principles
Question: How are dividends treated in the accounting equation?
A) Decrease assets and decrease equity
B) Increase assets and increase equity
C) Increase liabilities and decrease equity
D) Decrease liabilities and increase equity
Question: What is the purpose of the statement of cash flows?
A) To show the financial position of a company
B) To detail the changes in equity
C) To provide information about cash receipts and payments
D) To calculate the return on investment
Question: According to the revenue recognition principle, when should revenue be recognized?
A) When cash is received
B) When goods are delivered or services are rendered
C) When expenses are incurred
D) When products are purchased
Question: What is the role of the auditor in financial accounting?
A) To prepare financial statements
B) To ensure compliance with tax regulations
C) To verify the accuracy and fairness of financial statements
D) To manage the company’s financial transactions
Question: Which financial statement provides a summary of a company’s revenues and expenses over a specific period?
A) Balance sheet
B) Income statement
C) Cash flow statement
D) Statement of changes in equity
Question: What is the purpose of adjusting entries in financial accounting?
A) To record routine transactions
B) To correct errors in the accounting records
C) To transfer assets between accounts
D) To close the books at the end of the fiscal year
Question: What is the significance of the accrual basis of accounting?
A) Transactions are recorded when cash is received or paid
B) Transactions are recorded when they occur, not necessarily when cash changes hands
C) Only cash transactions are recorded
D) Transactions are recorded at their historical cost
Question: How does a credit transaction affect the accounting equation?
A) Increases assets and increases liabilities
B) Increases assets and decreases equity
C) Decreases assets and decreases liabilities
D) Decreases assets and increases equity.
