SS3 Second Term Financial Account Past Questions And Answers
Financial Accounting questions for SS3 Second Term:
Question: What is the purpose of a bank reconciliation statement?
A) To record interest income
B) To compare the bank balance with the company’s cash balance
C) To calculate depreciation
D) To assess financial leverage
Answer: B) To compare the bank balance with the company’s cash balance
Question: What is the accounting equation?
A) Assets = Liabilities – Equity
B) Assets + Liabilities = Equity
C) Assets – Liabilities = Equity
D) Assets = Liabilities + Equity
Answer: D) Assets = Liabilities + Equity
Question: When recording a sale on credit, which accounts are affected?
A) Cash and Revenue
B) Accounts Receivable and Revenue
C) Accounts Payable and Expense
D) Cash and Expense
Answer: B) Accounts Receivable and Revenue
Question: What is the purpose of the Sarbanes-Oxley Act in the field of financial accounting?
A) To regulate international trade
B) To enhance corporate governance and financial disclosures
C) To establish accounting principles for small businesses
D) To set standards for environmental accounting
Answer: B) To enhance corporate governance and financial disclosures
Question: How does the straight-line method calculate depreciation?
A) By deducting the salvage value from the cost of the asset
B) By allocating an equal amount of depreciation each year
C) By estimating the asset’s future market value
D) By using the units-of-production approach
Answer: B) By allocating an equal amount of depreciation each year
Question: What does the term “contra account” mean in accounting?
A) An account with a balance opposite to the normal balance
B) An account used only for expenses
C) An account with a credit balance
D) An account that doesn’t affect financial statements
Answer: A) An account with a balance opposite to the normal balance
Question: In the context of financial accounting, what does FIFO stand for?
A) First In, First Out
B) Financial Information and Operations
C) First Income, First Outcome
D) Fixed Input, Fixed Output
Answer: A) First In, First Out
Question: What is the purpose of the statement of comprehensive income?
A) To report changes in equity over time
B) To show the financial position at a specific date
C) To present the overall financial performance of a business
D) To disclose the company’s cash flow activities
Answer: C) To present the overall financial performance of a business
Question: Which financial statement is prepared first during the accounting cycle?
A) Income statement
B) Balance sheet
C) Cash flow statement
D) Trial balance
Answer: D) Trial balance
Question: What is the purpose of the budget in financial accounting?
A) To track historical financial data
B) To control and plan for future financial activities
C) To report the company’s cash position
D) To calculate the debt-to-equity ratio
Answer: B) To control and plan for future financial activities
Question: What is the difference between a current asset and a fixed asset?
A) Current assets can be easily converted to cash, while fixed assets are long-term investments
B) Current assets are owned by shareholders, while fixed assets are owned by creditors
C) Current assets have a longer useful life than fixed assets
D) Current assets represent a company’s debts, while fixed assets represent its equity
Answer: A) Current assets can be easily converted to cash, while fixed assets are long-term investments
Question: How does the cash flow statement categorize cash flows?
A) Operating, financing, and investing activities
B) Revenue, expenses, and net income
C) Assets, liabilities, and equity
D) Debits, credits, and trial balance
Answer: A) Operating, financing, and investing activities
Question: What is the purpose of the accounting cycle?
A) To calculate the return on investment
B) To record financial transactions in chronological order
C) To create financial statements for external reporting
D) To calculate depreciation on assets
Answer: C) To create financial statements for external reporting
Question: How does the acid-test ratio differ from the current ratio?
A) The acid-test ratio excludes inventory from current assets
B) The acid-test ratio includes long-term liabilities
C) The acid-test ratio measures long-term solvency
D) The acid-test ratio considers only cash and accounts receivable
Answer: A) The acid-test ratio excludes inventory from current assets
Question: What is the purpose of the internal control system in accounting?
A) To prepare financial statements
B) To ensure compliance with tax regulations
C) To safeguard assets and prevent fraud
D) To calculate the company’s return on equity
Answer: C) To safeguard assets and prevent fraud
Question: Which accounting principle emphasizes that expenses should be matched with the revenues they generate?
A) Consistency principle
B) Materiality principle
C) Revenue recognition principle
D) Matching principle
Answer: D) Matching principle
Question: What is the purpose of the perpetual inventory system?
A) To calculate the cost of goods sold at the end of the accounting period
B) To update inventory balances continuously after each sale or purchase
C) To determine the salvage value of fixed assets
D) To reconcile bank statements
Answer: B) To update inventory balances continuously after each sale or purchase
Question: How does the quick ratio differ from the current ratio?
A) The quick ratio includes inventory, while the current ratio does not
B) The quick ratio excludes prepaid expenses
C) The quick ratio considers only cash, marketable securities, and accounts receivable
D) The quick ratio includes both short-term and long-term liabilities
Answer: C) The quick ratio considers only cash, marketable securities, and accounts receivable
Question: What is the purpose of the statement of changes in equity?
A) To report changes in the company’s cash position
B) To calculate net profit
C) To disclose changes in the ownership structure of the business
D) To present the overall financial performance of a business.
