NYC ACCOUNTANT EXAM
1.
What is the primary purpose of financial accounting?
A. To predict future stock prices
B. To provide information to external users for decision-making
C. To calculate employee performance
D. To manage internal company operations
Correct answer: B. To provide information to external users
for decision-making
Rationale: Financial accounting focuses on preparing
standardized financial statements that communicate a
company’s financial position and performance to external
stakeholders such as investors, creditors, and regulators.
2.
Which financial statement shows a company’s financial position
at a specific point in time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Retained Earnings Statement
Correct answer: C. Balance Sheet
Rationale: The balance sheet presents assets, liabilities, and
equity at a single point in time, reflecting the accounting
equation.
3.
,Which of the following is an example of an asset?
A. Accounts Payable
B. Revenue
C. Equipment
D. Owner’s Drawings
Correct answer: C. Equipment
Rationale: Equipment is a resource owned by a business that
provides future economic benefit, making it an asset.
4.
What does the accrual basis of accounting recognize?
A. Cash only when received or paid
B. Revenues when earned and expenses when incurred
C. Only large transactions
D. Only year-end adjustments
Correct answer: B. Revenues when earned and expenses when
incurred
Rationale: Accrual accounting records financial events when
they occur, regardless of cash movement.
5.
Which principle states that expenses should be matched with
the revenues they help generate?
A. Revenue Recognition Principle
B. Matching Principle
C. Cost Principle
D. Full Disclosure Principle
Correct answer: B. Matching Principle
,Rationale: The matching principle ensures expenses are
recorded in the same period as the related revenues.
6.
Which account is increased with a credit entry?
A. Assets
B. Expenses
C. Liabilities
D. Dividends
Correct answer: C. Liabilities
Rationale: Liabilities normally carry a credit balance and
increase with credits.
7.
What is the accounting equation?
A. Assets = Liabilities + Equity
B. Revenue = Expenses + Assets
C. Assets = Revenue + Liabilities
D. Equity = Assets + Expenses
Correct answer: A. Assets = Liabilities + Equity
Rationale: This equation reflects the relationship between what
a company owns and owes.
8.
Which financial statement reports revenues and expenses?
A. Balance Sheet
B. Income Statement
C. Statement of Cash Flows
D. Statement of Equity
, Correct answer: B. Income Statement
Rationale: The income statement shows profitability over a
period of time.
9.
Depreciation is best described as:
A. Cash payment for an asset
B. Allocation of an asset’s cost over its useful life
C. Increase in asset value
D. Immediate expensing of all assets
Correct answer: B. Allocation of an asset’s cost over its useful
life
Rationale: Depreciation spreads the cost of long-term assets
over time.
10.
Which accounting method records transactions only when cash
is exchanged?
A. Accrual basis
B. Cash basis
C. Modified accrual
D. Cost basis
Correct answer: B. Cash basis
Rationale: Cash basis accounting recognizes revenues and
expenses only when cash changes hands.
11.
Which account is considered a temporary account?
A. Cash
1.
What is the primary purpose of financial accounting?
A. To predict future stock prices
B. To provide information to external users for decision-making
C. To calculate employee performance
D. To manage internal company operations
Correct answer: B. To provide information to external users
for decision-making
Rationale: Financial accounting focuses on preparing
standardized financial statements that communicate a
company’s financial position and performance to external
stakeholders such as investors, creditors, and regulators.
2.
Which financial statement shows a company’s financial position
at a specific point in time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Retained Earnings Statement
Correct answer: C. Balance Sheet
Rationale: The balance sheet presents assets, liabilities, and
equity at a single point in time, reflecting the accounting
equation.
3.
,Which of the following is an example of an asset?
A. Accounts Payable
B. Revenue
C. Equipment
D. Owner’s Drawings
Correct answer: C. Equipment
Rationale: Equipment is a resource owned by a business that
provides future economic benefit, making it an asset.
4.
What does the accrual basis of accounting recognize?
A. Cash only when received or paid
B. Revenues when earned and expenses when incurred
C. Only large transactions
D. Only year-end adjustments
Correct answer: B. Revenues when earned and expenses when
incurred
Rationale: Accrual accounting records financial events when
they occur, regardless of cash movement.
5.
Which principle states that expenses should be matched with
the revenues they help generate?
A. Revenue Recognition Principle
B. Matching Principle
C. Cost Principle
D. Full Disclosure Principle
Correct answer: B. Matching Principle
,Rationale: The matching principle ensures expenses are
recorded in the same period as the related revenues.
6.
Which account is increased with a credit entry?
A. Assets
B. Expenses
C. Liabilities
D. Dividends
Correct answer: C. Liabilities
Rationale: Liabilities normally carry a credit balance and
increase with credits.
7.
What is the accounting equation?
A. Assets = Liabilities + Equity
B. Revenue = Expenses + Assets
C. Assets = Revenue + Liabilities
D. Equity = Assets + Expenses
Correct answer: A. Assets = Liabilities + Equity
Rationale: This equation reflects the relationship between what
a company owns and owes.
8.
Which financial statement reports revenues and expenses?
A. Balance Sheet
B. Income Statement
C. Statement of Cash Flows
D. Statement of Equity
, Correct answer: B. Income Statement
Rationale: The income statement shows profitability over a
period of time.
9.
Depreciation is best described as:
A. Cash payment for an asset
B. Allocation of an asset’s cost over its useful life
C. Increase in asset value
D. Immediate expensing of all assets
Correct answer: B. Allocation of an asset’s cost over its useful
life
Rationale: Depreciation spreads the cost of long-term assets
over time.
10.
Which accounting method records transactions only when cash
is exchanged?
A. Accrual basis
B. Cash basis
C. Modified accrual
D. Cost basis
Correct answer: B. Cash basis
Rationale: Cash basis accounting recognizes revenues and
expenses only when cash changes hands.
11.
Which account is considered a temporary account?
A. Cash
