FAR — Financial Accounting & Reporting — Quiz 6

Questions in this quiz (10)

1. Which of the following transactions would increase both assets and equity?

   • Receiving cash from customers for services performed
   • Borrowing money from a bank
   • Paying accounts payable
   • Purchasing equipment on credit

2. Which of the following transactions would increase assets and liabilities?

   • Purchasing inventory on credit
   • Issuing stock for cash
   • Paying dividends
   • Recording depreciation expense

3. Which accounting principle requires companies to recognize potential losses earlier than gains?

   • Matching principle
   • Conservatism principle
   • Revenue recognition principle
   • Consistency principle

4. Which financial statement is most useful for evaluating a company's long-term financial position?

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

5. Which characteristic of financial information requires companies to apply the same accounting methods over time?

   • Relevance
   • Consistency
   • Verifiability
   • Comparability

6. Which financial statement reports cash flows from operating, investing, and financing activities?

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

7. Which of the following transactions decreases equity?

   • Paying dividends
   • Issuing stock
   • Earning revenue
   • Receiving owner investment

8. Which financial statement element represents increases in equity from primary operations?

   • Gain
   • Liability
   • Revenue
   • Expense

9. Which accounting concept requires transactions to be recorded based on economic substance?

   • Matching principle
   • Substance over form
   • Cost principle
   • Monetary unit assumption

10. A company receives cash from issuing stock. What is the effect on the accounting equation?

    • Assets increase and equity increases
    • Assets increase and liabilities increase
    • Assets decrease and equity increases
    • Liabilities increase and equity decreases