Accounting Vocabulary Quiz

What is a General Ledger?

• A record of all financial transactions

• A visual representation of an account

• A system where every transaction affects two accounts

• A specific time frame for financial reporting.

Answer explanation

A General Ledger is a comprehensive record of all financial transactions within an organization, making 'A record of all financial transactions' the correct choice. It serves as the foundation for financial reporting.

Match the following accounting terms with their definitions:

• Total revenue equals total costs.

• Break-Even Point

• Measures profitability

• Profit Margin

• Measures short-term financial health

• Liquidity

• Ability to meet short-term obligations

• Current Ratio

Revenue is recorded when (a)   , not necessarily when cash is received.

• earned

• spent

• saved

• invested

Answer explanation

Revenue is recognized when it is earned, meaning the goods or services have been provided, regardless of when cash is actually received. This aligns with the accrual basis of accounting.

Expenses are recorded in the same period as the (a)   they help generate.

• costs

• revenues

• profits

• losses

Answer explanation

Expenses are matched with the revenues they help generate, following the matching principle in accounting. This ensures that financial statements accurately reflect the performance of a business during a specific period.

The direct cost of producing goods sold during a period is known as (a)   . A) Revenue B) Expenses C) Cost of Goods Sold (COGS) D) Payroll.

• Revenue

• Expenses

• Cost of Goods Sold (COGS)

• Payroll

Answer explanation

The direct cost of producing goods sold is referred to as Cost of Goods Sold (COGS). It represents the expenses directly tied to the production of goods, making COGS the correct choice over the other options.

What is the method of depreciation where an equal amount is allocated each year?

• Declining Balance

• Straight-Line Depreciation

• FIFO

• LIFO

Answer explanation

The method of depreciation that allocates an equal amount each year is called Straight-Line Depreciation. This approach evenly spreads the cost of an asset over its useful life, making it straightforward and easy to calculate.

Match the following inventory methods with their descriptions:

• C

• LIFO

• D

• FIFO

• A

• Perpetual Inventory

• B

• Periodic Inventory

The net movement of cash into and out of a business is known as (a)   .

• Petty Cash

• Bank Reconciliation

• Cash Flow

• Budget

Answer explanation

The net movement of cash into and out of a business is referred to as 'Cash Flow'. It represents the liquidity position of a business, unlike petty cash, bank reconciliation, or budget, which serve different financial purposes.

A financial plan outlining expected revenues and expenses over a period is called a (a)   .

• Variance

• Forecasting

• Budget

• Operating Margin

Answer explanation

A financial plan that outlines expected revenues and expenses over a period is called a budget. It helps organizations plan their financial activities and manage resources effectively.

What are the costs that remain constant regardless of production levels?

• Variable Costs

• Fixed Costs

• Operating Margin

• Variance

Answer explanation

Fixed costs are expenses that do not change with production levels, such as rent and salaries. In contrast, variable costs fluctuate with production volume, making fixed costs the correct answer.