SS2 Third Term Financial Account Past Questions And Answers
SS2 third term financial account questions:
Question: What is the purpose of the budget in financial accounting?
A) To show the company’s financial position at a specific point in time
B) To plan and control the financial activities of the business over a specific period
C) To detail changes in equity components
D) To calculate the return on investment
Question: How does an increase in accounts payable 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
Question: What is the role of financial ratios in financial analysis?
A) To prepare financial statements
B) To ensure compliance with tax regulations
C) To evaluate a company’s financial performance and position
D) To verify the accuracy and fairness of financial statements
Question: According to the conservatism principle, how should uncertainties be handled in financial accounting?
A) Record the more optimistic option
B) Record the more pessimistic option
C) Record both options equally
D) Ignore uncertainties in financial reporting
Question: What is the purpose of the operating activities section in the cash flow statement?
A) To detail changes in equity components
B) To provide information about cash receipts and payments during investing activities
C) To report cash transactions related to the core business operations
D) To calculate the return on investment
Question: How does the accrual basis of accounting differ from the cash basis?
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: What is the purpose of the retained earnings statement?
A) To show the company’s financial position at a specific point in time
B) To detail changes in equity components
C) To explain the changes in equity components over a specific period
D) To calculate the return on investment
Question: How does an increase in accounts receivable 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
Question: What is the purpose of the internal control system in financial accounting?
A) To prepare financial statements
B) To manage the company’s financial transactions
C) To plan and control the financial activities of the business over a specific period
D) To safeguard assets and ensure the reliability of financial information
Question: How does the acid-test ratio differ from the current ratio in financial analysis?
A) Acid-test ratio includes inventory; current ratio does not
B) Acid-test ratio excludes inventory; current ratio includes it
C) Both ratios measure liquidity in the same way
D) Acid-test ratio measures profitability; current ratio measures liquidity.
