Accounting Initial Assessment Revision Quiz

Briefly explain cash basis accounting.

• Recording income and expenses when they are earned

• Recording income and expenses when cash is received or paid

• Recording only large transactions

• Recording income and expenses when invoices are issued

Briefly explain accrual basis accounting.

• Recording transactions only when cash is involved

• Ignoring non-cash transactions

• Recording income and expenses when they are earned or incurred, regardless of when cash is exchanged

• Recording transactions only at year-end

Define Accounts Payable.

• Money that a company owes to its suppliers

• Money that a company is owed by its customers

• The total amount of a company's sales

• The total amount of a company's profits

Define Depreciation.

• The increase in value of an asset over time

• The process of allocating the cost of a tangible asset over its useful life

• The total value of a company's liabilities

• The process of writing off bad debts

Define Inventory.

• The total value of a company's fixed assets

• Goods available for sale and raw materials used to produce goods

• The total amount of cash a company has

• The total value of a company's equity

John owns a small shop. He purchased office supplies for £200 on credit. How would this transaction be recorded in double-entry bookkeeping?

• Debit Office Supplies £200, Credit Cash £200

• Debit Accounts Receivable £200, Credit Office Supplies £200

• Debit Office Supplies £200, Credit Accounts Payable £200

• Debit Cash £200, Credit Accounts Payable £200

Why is it important to understand accounting principles for a business?

• To ensure compliance with tax laws

• To avoid paying taxes

• To keep track of personal expenses

• To ensure that financial statements are accurate and reliable

What is the basic accounting equation?

What is an Inventory account?

• An account that records the value of a company's raw materials

• An account that records the value of a company's cash

• An account that records the value of a company's finished goods

• An account that records the value of a company's equity