Diagnostic Exam
1. Which of the following is not an
appropriate description of accounting?
a. Accounting is an information system.
b. Accounting is an exact science rather that
an art.
c. Accounting is the language of business.
d. Accounting is a service activity.
1. Which of the following is not an
appropriate description of accounting?
a. Accounting is an information system.
b. Accounting is an exact science rather
that an art.
c. Accounting is the language of business.
d. Accounting is a service activity.
2. Which of the following accounting
processes comes first ahead of the others?
a. Interpreting
b. Recording
c. Communicating
d. Identifying
2. Which of the following accounting
processes comes first ahead of the others?
a. Interpreting
b. Recording
c. Communicating
d. Identifying
3. What is the primary purpose of
accounting?
a) To prepare taxes for the government
b) To provide financial information for
decision-making
c) To ensure compliance with laws
d) To track inventory
3. What is the primary purpose of
accounting?
a) To prepare taxes for the government
b) To provide financial information for
decision-making
c) To ensure compliance with laws
d) To track inventory
[Link] of the following is an
example of an asset?
a) Accounts Payable
b) Office Equipment
c) Owner's Equity
d) Revenue
[Link] of the following is an
example of an asset?
a) Accounts Payable
b) Office Equipment
c) Owner's Equity
d) Revenue
5. What does the accounting
equation represent?
a) Assets = Liabilities + Revenue
b) Assets = Liabilities + Equity
c) Assets = Equity - Liabilities
d) Assets = Expenses + Revenue
5. What does the accounting
equation represent?
a) Assets = Liabilities + Revenue
b) Assets = Liabilities + Equity
c) Assets = Equity - Liabilities
d) Assets = Expenses + Revenue
6. What type of account is
"Accounts Receivable"?
a) Asset
b) Liability
c) Equity
d) Expense
6. What type of account is
"Accounts Receivable"?
a) Asset
b) Liability
c) Equity
d) Expense
7. Which financial statement
shows a company’s profitability
over a period of time?
a) Balance Sheet
b) Income Statement
c) Statement of Cash Flows
d) Statement of Changes in Equity
7. Which financial statement
shows a company’s profitability
over a period of time?
a) Balance Sheet
b) Income Statement
c) Statement of Cash Flows
d) Statement of Changes in Equity
8. Which of the following is NOT
an example of a liability?
a) Bank Loan
b) Accounts Payable
c) Salaries Payable
d) Prepaid Rent
8. Which of the following is NOT
an example of a liability?
a) Bank Loan
b) Accounts Payable
c) Salaries Payable
d) Prepaid Rent
9. Double-entry accounting means:
a) Recording every transaction twice
b) Recording every transaction in two
different currencies
c) Recording both debit and credit for
every transaction
d) Keeping two sets of financial records
9. Double-entry accounting means:
a) Recording every transaction twice
b) Recording every transaction in two
different currencies
c) Recording both debit and credit
for every transaction
d) Keeping two sets of financial records
10. What is the normal balance of
an expense account?
a) Debit
b) Credit
c) It can be either
d) Neither
10. What is the normal balance of
an expense account?
a) Debit
b) Credit
c) It can be either
d) Neither
[Link] is depreciation?
a) The increase in the value of an asset
b) The allocation of an asset’s cost over
its useful life
c) An expense incurred in selling goods
d) The total revenue generated by an
asset
[Link] is depreciation?
a) The increase in the value of an asset
b) The allocation of an asset’s cost over
its useful life
c) An expense incurred in selling goods
d) The total revenue generated by an
asset
12. Who is considered the "Father
of Accounting"?
a) Adam Smith
b) Luca Pacioli
c) Benjamin Franklin
d) Charles Babbage
12. Who is considered the "Father
of Accounting"?
a) Adam Smith
b) Luca Pacioli
c) Benjamin Franklin
d) Charles Babbage
[Link] system of accounting did
Luca Pacioli describe in his book?
a) Cash accounting
b) Accrual accounting
c) Double-entry bookkeeping
d) Single-entry bookkeeping
[Link] system of accounting did
Luca Pacioli describe in his book?
a) Cash accounting
b) Accrual accounting
c) Double-entry bookkeeping
d) Single-entry bookkeeping
14. Which of the following is an
example of an internal user of
accounting information?
a) Investors
b) Government agencies
c) Management
d) Creditors
14. Which of the following is an
example of an internal user of
accounting information?
a) Investors
b) Government agencies
c) Management
d) Creditors
15. Who are external users of
accounting information?
a) Employees and managers
b) Investors, creditors, and regulators
c) Shareholders and board members
d) Internal auditors
15. Who are external users of
accounting information?
a) Employees and managers
b) Investors, creditors, and
regulators
c) Shareholders and board members
d) Internal auditors
16. Which group of internal users
primarily uses accounting
information to make financial
decisions within a company?
a) Suppliers
b) Managers
c) Competitors
d) Tax authorities
16. Which group of internal users
primarily uses accounting
information to make financial
decisions within a company?
a) Suppliers
b) Managers
c) Competitors
d) Tax authorities
17. External users of accounting
information primarily rely on
which financial statements?
a) Internal budget reports
b) Balance sheet, income statement,
and cash flow statement
c) Managerial reports
d) Payroll summaries
17. External users of accounting
information primarily rely on
which financial statements?
a) Internal budget reports
b) Balance sheet, income statement,
and cash flow statement
c) Managerial reports
d) Payroll summaries
[Link] do creditors use accounting
information?
a) To assess the company's profitability
b) To evaluate whether the company
can repay its debts
c) To prepare internal budgets
d) To measure employee performance
[Link] do creditors use accounting
information?
a) To assess the company's profitability
b) To evaluate whether the company
can repay its debts
c) To prepare internal budgets
d) To measure employee performance
[Link] use accounting
information to:
a) Plan marketing strategies
b) Assess the financial health and
performance of a company
c) Decide on employee bonuses
d) Review internal audit reports
[Link] use accounting
information to:
a) Plan marketing strategies
b) Assess the financial health and
performance of a company
c) Decide on employee bonuses
d) Review internal audit reports
[Link] user group is primarily
concerned with a company's
compliance with tax laws?
a) Internal auditors
b) Shareholders
c) Government agencies
d) Creditors
[Link] user group is primarily
concerned with a company's
compliance with tax laws?
a) Internal auditors
b) Shareholders
c) Government agencies
d) Creditors
[Link] a business buys goods for
resale, the transaction is recorded
as:
a) Sales
b) Purchases
c) Expenses
d) Revenue
[Link] a business buys goods for
resale, the transaction is recorded
as:
a) Sales
b) Purchases
c) Expenses
d) Revenue
[Link] account is credited when
goods are sold to customers on
credit?
a) Cash
b) Accounts Receivable
c) Sales
d) Inventory
[Link] account is credited when
goods are sold to customers on
credit?
a) Cash
b) Accounts Receivable
c) Sales
d) Inventory
[Link] is a "purchase return"?
a) Goods returned by the customer to
the seller
b) Goods returned by the business to
the supplier
c) Discounts given by the supplier
d) Goods exchanged between
customers
[Link] is a "purchase return"?
a) Goods returned by the customer to
the seller
b) Goods returned by the business
to the supplier
c) Discounts given by the supplier
d) Goods exchanged between
customers
[Link] is the primary purpose of
maintaining an inventory account?
a) To track operating expenses
b) To monitor goods available for
sale
c) To calculate employee wages
d) To record cash transactions
[Link] is the primary purpose of
maintaining an inventory account?
a) To track operating expenses
b) To monitor goods available for
sale
c) To calculate employee wages
d) To record cash transactions
[Link] is the term for discounts
given by the seller to encourage
early payment?
a) Trade discount
b) Purchase return
c) Sales discount
d) Credit allowance
[Link] is the term for discounts
given by the seller to encourage
early payment?
a) Trade discount
b) Purchase return
c) Sales discount
d) Credit allowance
[Link] goods are purchased on
credit, which account is credited?
a) Inventory
b) Accounts Payable
c) Sales
d) Cash
[Link] goods are purchased on
credit, which account is credited?
a) Inventory
b) Accounts Payable
c) Sales
d) Cash
[Link] of the following is NOT
one of the five major accounts in
accounting?
a) Assets
b) Liabilities
c) Inventory
d) Equity
[Link] of the following is NOT
one of the five major accounts in
accounting?
a) Assets
b) Liabilities
c) Inventory
d) Equity
[Link] account type represents
obligations or debts a company
owes to others?
a) Assets
b) Liabilities
c) Revenue
d) Expenses
[Link] account type represents
obligations or debts a company
owes to others?
a) Assets
b) Liabilities
c) Revenue
d) Expenses
[Link] of the following is an
example of an expense?
a) Accounts Receivable
b) Salaries paid to employees
c) Loan from a bank
d) Cash received from customers
[Link] of the following is an
example of an expense?
a) Accounts Receivable
b) Salaries paid to employees
c) Loan from a bank
d) Cash received from customers
[Link] type of account is
"Accounts Payable"?
a) Asset
b) Liability
c) Equity
d) Revenue
[Link] type of account is
"Accounts Payable"?
a) Asset
b) Liability
c) Equity
d) Revenue
