Strayer University ACC 100 Final Exam (pdf) | 2026/2027 |
Accounting I Q&A | Accounting
1. Which of the following is the correct order in which financial statements
should be prepared?
A) Balance Sheet, Income Statement, Statement of Retained Earnings,
Statement of Cash Flows
B) Income Statement, Statement of Retained Earnings, Balance Sheet,
Statement of Cash Flows
C) Statement of Retained Earnings, Income Statement, Balance Sheet,
Statement of Cash Flows
D) Balance Sheet, Statement of Retained Earnings, Income Statement,
Statement of Cash Flows
Correct Answer: Income Statement, Statement of Retained Earnings, Balance
Sheet, Statement of Cash Flows
Rationale: Financial statements must be prepared in a specific order because
each statement uses information from the previous one. The Income
Statement is prepared first to determine net income. The Statement of
Retained Earnings uses net income to calculate ending retained earnings.
The Balance Sheet uses the ending retained earnings balance. The
Statement of Cash Flows is prepared last using information from all other
statements.
2. What does the Income Statement report?
A) Assets, liabilities, and equity at a specific point in time
B) Revenues and expenses for a specific period of time
C) Cash inflows and outflows over a period of time
D) Changes in retained earnings over a period of time
Correct Answer: Revenues and expenses for a specific period of time
,Rationale: The Income Statement reports revenues and expenses for a
specific period of time, indicating net income (profit) or net loss. It answers
the question: "Was the business profitable during this period?" and is the first
financial statement prepared in the accounting cycle.
3. Net income is defined as:
A) When expenses exceed revenues
B) When revenues exceed expenses
C) The total amount of cash collected from customers
D) The total amount of assets owned by the business
Correct Answer: When revenues exceed expenses
Rationale: Net income is the amount by which revenues exceed expenses. If
expenses exceed revenues, the result is a net loss. Net income represents
the profitability of a business over a specific period and flows into the
Statement of Retained Earnings.
4. Which of the following is NOT a revenue account?
A) Service Revenue
B) Sales Revenue
C) Dividend Revenue
D) Dividends Declared
Correct Answer: Dividends Declared
Rationale: Dividends Declared is not a revenue account; it is a distribution of
earnings to owners/shareholders and decreases retained earnings (equity).
,Service Revenue and Sales Revenue are revenue accounts. Dividend
Revenue is revenue earned from investments.
5. The Statement of Retained Earnings reports:
A) Assets, liabilities, and equity at a point in time
B) Revenues and expenses over a period of time
C) Amounts and causes of changes in retained earnings during the period
D) Cash inflows and outflows over a period of time
Correct Answer: Amounts and causes of changes in retained earnings during
the period
Rationale: The Statement of Retained Earnings shows the amounts and
causes of changes in retained earnings during the period. It begins with the
beginning retained earnings balance, adds net income (or subtracts net loss),
subtracts dividends, and ends with the ending retained earnings balance.
6. The Balance Sheet reports:
A) Revenues and expenses over a period of time
B) Assets, liabilities, and equity at a specific point in time
C) Cash inflows and outflows over a period of time
D) Amounts and causes of changes in retained earnings during the period
Correct Answer: Assets, liabilities, and equity at a specific point in time
Rationale: The Balance Sheet provides a snapshot of the company's financial
position at a specific point in time, usually at the end of the reporting period.
It shows what the company owns (assets), what it owes (liabilities), and the
owner's claim on the assets (equity).
, 7. The Balance Sheet equation is:
A) Assets = Liabilities - Equity
B) Assets = Liabilities + Equity
C) Assets + Liabilities = Equity
D) Equity = Assets + Liabilities
Correct Answer: Assets = Liabilities + Equity
Rationale: The fundamental accounting equation is Assets = Liabilities +
Equity. This equation must always remain in balance and forms the basis of
the Balance Sheet. It shows that all assets are financed either by creditors
(liabilities) or by owners (equity).
8. How are assets typically subdivided in the Balance Sheet?
A) Into current assets and fixed assets only
B) Into current assets, long-term assets, intangible assets, and other assets
C) Into operating assets and non-operating assets
D) Into tangible assets and intangible assets only
Correct Answer: Into current assets, long-term assets, intangible assets, and
other assets
Rationale: Assets on the Balance Sheet are typically subdivided into current
assets (expected to be converted to cash within one year), long-term assets
(used over a period longer than a year), intangible assets (lacking physical
substance, such as patents and goodwill), and other assets.
9. Which of the following is an example of a current asset?
Accounting I Q&A | Accounting
1. Which of the following is the correct order in which financial statements
should be prepared?
A) Balance Sheet, Income Statement, Statement of Retained Earnings,
Statement of Cash Flows
B) Income Statement, Statement of Retained Earnings, Balance Sheet,
Statement of Cash Flows
C) Statement of Retained Earnings, Income Statement, Balance Sheet,
Statement of Cash Flows
D) Balance Sheet, Statement of Retained Earnings, Income Statement,
Statement of Cash Flows
Correct Answer: Income Statement, Statement of Retained Earnings, Balance
Sheet, Statement of Cash Flows
Rationale: Financial statements must be prepared in a specific order because
each statement uses information from the previous one. The Income
Statement is prepared first to determine net income. The Statement of
Retained Earnings uses net income to calculate ending retained earnings.
The Balance Sheet uses the ending retained earnings balance. The
Statement of Cash Flows is prepared last using information from all other
statements.
2. What does the Income Statement report?
A) Assets, liabilities, and equity at a specific point in time
B) Revenues and expenses for a specific period of time
C) Cash inflows and outflows over a period of time
D) Changes in retained earnings over a period of time
Correct Answer: Revenues and expenses for a specific period of time
,Rationale: The Income Statement reports revenues and expenses for a
specific period of time, indicating net income (profit) or net loss. It answers
the question: "Was the business profitable during this period?" and is the first
financial statement prepared in the accounting cycle.
3. Net income is defined as:
A) When expenses exceed revenues
B) When revenues exceed expenses
C) The total amount of cash collected from customers
D) The total amount of assets owned by the business
Correct Answer: When revenues exceed expenses
Rationale: Net income is the amount by which revenues exceed expenses. If
expenses exceed revenues, the result is a net loss. Net income represents
the profitability of a business over a specific period and flows into the
Statement of Retained Earnings.
4. Which of the following is NOT a revenue account?
A) Service Revenue
B) Sales Revenue
C) Dividend Revenue
D) Dividends Declared
Correct Answer: Dividends Declared
Rationale: Dividends Declared is not a revenue account; it is a distribution of
earnings to owners/shareholders and decreases retained earnings (equity).
,Service Revenue and Sales Revenue are revenue accounts. Dividend
Revenue is revenue earned from investments.
5. The Statement of Retained Earnings reports:
A) Assets, liabilities, and equity at a point in time
B) Revenues and expenses over a period of time
C) Amounts and causes of changes in retained earnings during the period
D) Cash inflows and outflows over a period of time
Correct Answer: Amounts and causes of changes in retained earnings during
the period
Rationale: The Statement of Retained Earnings shows the amounts and
causes of changes in retained earnings during the period. It begins with the
beginning retained earnings balance, adds net income (or subtracts net loss),
subtracts dividends, and ends with the ending retained earnings balance.
6. The Balance Sheet reports:
A) Revenues and expenses over a period of time
B) Assets, liabilities, and equity at a specific point in time
C) Cash inflows and outflows over a period of time
D) Amounts and causes of changes in retained earnings during the period
Correct Answer: Assets, liabilities, and equity at a specific point in time
Rationale: The Balance Sheet provides a snapshot of the company's financial
position at a specific point in time, usually at the end of the reporting period.
It shows what the company owns (assets), what it owes (liabilities), and the
owner's claim on the assets (equity).
, 7. The Balance Sheet equation is:
A) Assets = Liabilities - Equity
B) Assets = Liabilities + Equity
C) Assets + Liabilities = Equity
D) Equity = Assets + Liabilities
Correct Answer: Assets = Liabilities + Equity
Rationale: The fundamental accounting equation is Assets = Liabilities +
Equity. This equation must always remain in balance and forms the basis of
the Balance Sheet. It shows that all assets are financed either by creditors
(liabilities) or by owners (equity).
8. How are assets typically subdivided in the Balance Sheet?
A) Into current assets and fixed assets only
B) Into current assets, long-term assets, intangible assets, and other assets
C) Into operating assets and non-operating assets
D) Into tangible assets and intangible assets only
Correct Answer: Into current assets, long-term assets, intangible assets, and
other assets
Rationale: Assets on the Balance Sheet are typically subdivided into current
assets (expected to be converted to cash within one year), long-term assets
(used over a period longer than a year), intangible assets (lacking physical
substance, such as patents and goodwill), and other assets.
9. Which of the following is an example of a current asset?
