FAR — Financial Accounting & Reporting — Quiz 66

Questions in this quiz (10)

1. Which formula is used to calculate gross profit margin?

   • Gross Profit ÷ Net Sales
   • Net Income ÷ Assets
   • Revenue − Expenses
   • Assets ÷ Liabilities

2. Which of the following best describes additional paid-in capital?

   • Earnings accumulated over time
   • Amount received above par value from shareholders
   • Dividends paid to investors
   • Revenue earned during operations

3. Which account reflects cumulative earnings not distributed as dividends?

   • Common stock
   • Retained earnings
   • Treasury stock
   • Notes payable

4. Why is stockholders' equity analysis important?

   • It determines company expenses
   • It helps assess ownership value and financial health
   • It eliminates liabilities
   • It increases revenue

5. Which of the following best defines revenue?

   • Owner investment
   • Inflows from business operations
   • Payments to creditors
   • Operating expenses

6. Which principle determines when revenue should be recorded?

   • Matching principle
   • Revenue recognition principle
   • Conservatism principle
   • Cost principle

7. Revenue is recognized when:

   • Cash is received
   • Performance obligations are satisfied
   • Inventory is purchased
   • Expenses are paid

8. Which financial statement shows company revenues and expenses?

   • Balance sheet
   • Income statement
   • Statement of retained earnings
   • Statement of cash flows

9. When revenue is earned but not yet collected, which account increases?

   • Accounts receivable
   • Cash
   • Inventory
   • Expense

10. When revenue is earned, which account is credited?

    • Accounts receivable
    • Revenue
    • Cash
    • Expense