117 Accounting Trivia Questions & Answers

Answer: higher return

One of the fundamental principles of Finance is the Risk-Return Trade Off. Risk is defined as the uncertainty to compensate the investors. Risk-seeker investors typically require a higher expected of return from risky investments. Different kinds of risks include credit or default risk, inflation, operational, foreign exchange etc.

Answer: collect data, organize and process data, and communicate information

Information processing is collecting data such as invoice or a canceled check; organizing and processing the data through transaction analysis, journalizing, posting and preparing the worksheet; and communicating the information to users through the financial statements.

Answer: Generally Accepted Accounting Principles

There are various generally accepted accounting principles that should always be followed by all businesses if they don't want the trouble of having auditors keep a close eye on their company.

Answer: Mixed cost

If the cost can never be zero, it has a fixed component. However, since it changes with the number of units produced, it also has a variable component. This is a mixed cost. Product and period costs refer to cost classifications rather than cost behaviors.

Answer: Purchases a/c

Many of you may have selected goods. However, when someone will review the accounts there may be confusion as to what is actually being done with the goods. To avoid confusion, whenever you buy goods, especially for resale, it is written as purchases.

Answer: 3

There are 3 rules of accounting-
Debit what comes in, credit what goes out.
Debit the receiver, credit the giver.
Debit all expenses and losses, credit all incomes and gains.

Answer: Assets

Assets are essential to any business. Some last for long periods of time and can assist in generating profits.

Answer: As an expenditure on the income statement

The supplies would be expensed when actually used.

Answer: Statement of Cash Flows

The primary purpose of a statement of cash flows is to provide financial information about the cash receipts and cash payments of an enterprise for a specific period of time. ("Accounting Principles, Canadian Edition", Volume 1, by Weygandt, Kieso, and Trenholm, p. 26.)

Answer: Subsidiary ledger

The subsidiary ledger frees the general ledger from the details of individual account balances. A subsidiary ledger is an addition to the general ledger. (Accounting Principles, Canadian Edition, volume 1, by Weygandt, Kieso, and Trenholm, page 244).

Answer: Debit

Expenses decrease the owner's capital.

Answer: left

The debit side of any account is the left side. The credit side of any account is the right side.

Answer: Preferred Shareholders only

Preferred shareholders are prioritized over common shareholders for the earnings and assets in the event of company's liquidation. However, they are rarely given voting rights as compared to the common shareholders. Preferred shares could be participating, non-participating, cumulative, non-cumulative, or even cumulative-participating.

Answer: safeguard assets and optimize the use of resources

Internal controls are the methods and procedures used by management to safeguard assets, prevent and detect fraud and error, optimize the use of resources and maintain reliable control systems.

Answer: proprietorship

A proprietorship generally has a single owner. A partnership is a business with two or more co-owners; each co-owner is a partner. A corporation is a legal entity separate from its owners. A corporation's owners are called shareholders.

Answer: Revenue

When a company does a service or sells something revenue is recorded on an income statement and raises the overall equity of the owner.

Answer: Product cost

While the behavior of manufacturing overhead is probably a mixture of fixed and variable costs, it is allocated to the product produced rather than the accounting period, making it a product cost.

Answer: Vans a/c

Vans are debited because they are an asset. You are not buying it for resale so it cannot be written as purchases.

Answer: Liabilities

Liabilities include all loans, outstanding expenses, creditors, and mortgages, etc.

Answer: As a fixed asset on her balance sheet

Equipment used for the production of goods and services should be recorded as a fixed asset on the balance sheet. Each month a portion of the cost should be recorded as depreciation expense over the useful life of the asset.

Answer: 1.5 to 1

The calculation for the current ratio is as follows: Current assets divided by Current liabilities. So, $1,500 divided by $1,000 = 1.5 (to 1). This ratio shows the difference between current assets and current liabilities, which is called working capital. ("Accounting Principles, Canadian Edition", Volume 1, by Weygandt, Kieso, and Trenholm, p. 156.)

Answer: 36.5 days

The collection period ratio is calculated as follows: Days in the Year divided by Receivables Turnover (Receivables Turnover = Net Credit Sales divided by Average Accounts Receivable) = the Average Collection Period. (Accounting Principles, Canadian Edition, volume 1, by Weygandt, Kieso, and Trenholm, page 351). So, Receivables Turnover = $50,000 divided by $5,000, which is equal to 10 times. Then, 365 divided by 10 = 36.5.

Answer: director

Taxing authorities, regulatory agencies, and labour unions are all considered to have an indirect financial interest in a business, so they are external users of accounting information. Directors have a direct financial interest in a business, so they are internal/primary users of accounting information. (Accounting Principles, Canadian Edition, volume 1, by Weygandt, Kieso, and Trenholm, page 3).

Answer: Posting

You JOURNALIZE an entry from the source, and POST the journal entry to the ledger.