Understanding Basic Accounting Concepts

Which of the following is not a component of a financial statement?

• Balance Sheet

• Income Statement

• Cash Flow Statement

• Budget Report

In double-entry accounting, which of the following is true?

• Every transaction affects only one account.

• Every transaction affects at least two accounts.

• Every transaction affects three accounts.

• Every transaction affects only the cash account.

Which accounting principle requires that expenses be matched with revenues?

• Revenue Recognition Principle

• Matching Principle

• Cost Principle

• Full Disclosure Principle

What is the accounting equation?

• Assets = Liabilities + Equity

• Assets = Liabilities - Equity

• Assets = Liabilities \times Equity

• Assets = Liabilities \div Equity

Which financial statement provides information about a company's financial performance over a specific accounting period?

• Balance Sheet

• Income Statement

• Statement of Cash Flows

• Statement of Retained Earnings

In double-entry accounting, if a company receives cash from a customer, which accounts are affected?

• Cash and Revenue

• Cash and Accounts Receivable

• Cash and Inventory

• Cash and Accounts Payable

Which accounting principle states that financial statements should be prepared with caution and high levels of verification?

• Conservatism Principle

• Consistency Principle

• Materiality Principle

• Economic Entity Principle

What does the double-entry system ensure in accounting?

• That all transactions are recorded twice.

• That the accounting equation remains balanced.

• That only cash transactions are recorded.

• That errors are completely eliminated.