MGT 6201 Accounting: Final Exam Practice Questions
(2026-2027)
Instructions: This exam practice bank consists of 220 multiple-choice questions covering key concepts in
financial and managerial accounting. Choose the best answer for each question.
Part 1: Foundational Concepts & Financial Statements (Questions 1-25)
1. Which of the following is the primary objective of financial accounting?
A) To provide information for internal decision-making.
B) To provide information to external users for investment and credit decisions.
C) To minimize the company's tax liability.
D) To ensure the company complies with all SEC regulations.
Answer: B
Rationale: The primary goal of financial accounting is to furnish external stakeholders with relevant financial
info.
2. The accounting equation is best represented as:
A) Assets + Liabilities = Equity
B) Assets = Liabilities - Equity
C) Assets = Liabilities + Equity
D) Equity = Assets + Liabilities
Answer: C
Rationale: Assets = Liabilities + Equity always forms the basis of double-entry accounting.
3. Which financial statement reports a company's financial position at a specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Retained Earnings
Answer: C
Rationale: The Balance Sheet provides a snapshot at a single specific date.
,4. Revenues and expenses are reported on which financial statement?
A) Balance Sheet
B) Income Statement
C) Statement of Cash Flows
D) Statement of Retained Earnings
Answer: B
Rationale: The Income Statement reports revenues and expenses over a period.
5. Under the accrual basis of accounting, revenue is recognized when:
A) Cash is received from the customer.
B) The performance obligation is satisfied.
C) The contract is signed.
D) The customer places an order.
Answer: B
Rationale: Accrual basis recognizes revenue when performance obligations are satisfied.
6. A company provides services on account. This transaction will:
A) Increase assets and increase liabilities.
B) Increase assets and increase equity.
C) Increase liabilities and decrease equity.
D) Decrease assets and increase equity.
Answer: B
Rationale: It increases Accounts Receivable (asset) and Revenue which increases Equity.
7. Which of the following is a contra-asset account?
A) Accumulated Depreciation
B) Sales Revenue
C) Unearned Revenue
D) Retained Earnings
Answer: A
Rationale: Accumulated Depreciation reduces the asset balance.
,8. The primary purpose of the Statement of Cash Flows is to:
A) Show the profitability of a company.
B) Reconcile the beginning and ending balances of cash.
C) Report the company's assets and liabilities.
D) Determine the company's tax obligation.
Answer: B
Rationale: It explains the change in cash over a specific period.
9. The qualitative characteristic of accounting information that allows users to identify similarities and
differences between two companies is:
A) Relevance
B) Faithful Representation
C) Comparability
D) Timeliness
Answer: C
Rationale: Comparability lets users analyze and benchmark different firms.
10. Which of the following would be reported as an operating activity on the Statement of Cash Flows?
A) Purchase of equipment.
B) Issuance of common stock.
C) Payment of cash dividends.
D) Payment of salaries to employees.
Answer: D
Rationale: Salaries are a core operational transaction that affects net income.
11. A list of all accounts and their balances used to prove the equality of debits and credits is a:
A) General Journal
B) General Ledger
C) Trial Balance
D) Chart of Accounts
Answer: C
Rationale: A trial balance ensures total debits equal total credits.
, 12. The principle that requires expenses to be recognized in the same period as the revenues they helped to
generate is the:
A) Revenue Recognition Principle
B) Matching Principle
C) Historical Cost Principle
D) Full Disclosure Principle
Answer: B
Rationale: The matching principle pairs expense outlays with revenue generated.
13. A company collects cash in advance for services to be performed next month. This creates a(n):
A) Asset
B) Liability
C) Revenue
D) Expense
Answer: B
Rationale: Unearned Revenue is a liability representing a performance obligation.
14. The excess of current assets over current liabilities is known as:
A) Net Income
B) Working Capital
C) Retained Earnings
D) Gross Profit
Answer: B
Rationale: Working Capital measures short-term liquidity.
15. Which of the following is NOT a component of stockholders' equity?
A) Common Stock
B) Retained Earnings
C) Accounts Payable
D) Additional Paid-in Capital
Answer: C
Rationale: Accounts Payable is a current liability.
(2026-2027)
Instructions: This exam practice bank consists of 220 multiple-choice questions covering key concepts in
financial and managerial accounting. Choose the best answer for each question.
Part 1: Foundational Concepts & Financial Statements (Questions 1-25)
1. Which of the following is the primary objective of financial accounting?
A) To provide information for internal decision-making.
B) To provide information to external users for investment and credit decisions.
C) To minimize the company's tax liability.
D) To ensure the company complies with all SEC regulations.
Answer: B
Rationale: The primary goal of financial accounting is to furnish external stakeholders with relevant financial
info.
2. The accounting equation is best represented as:
A) Assets + Liabilities = Equity
B) Assets = Liabilities - Equity
C) Assets = Liabilities + Equity
D) Equity = Assets + Liabilities
Answer: C
Rationale: Assets = Liabilities + Equity always forms the basis of double-entry accounting.
3. Which financial statement reports a company's financial position at a specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Retained Earnings
Answer: C
Rationale: The Balance Sheet provides a snapshot at a single specific date.
,4. Revenues and expenses are reported on which financial statement?
A) Balance Sheet
B) Income Statement
C) Statement of Cash Flows
D) Statement of Retained Earnings
Answer: B
Rationale: The Income Statement reports revenues and expenses over a period.
5. Under the accrual basis of accounting, revenue is recognized when:
A) Cash is received from the customer.
B) The performance obligation is satisfied.
C) The contract is signed.
D) The customer places an order.
Answer: B
Rationale: Accrual basis recognizes revenue when performance obligations are satisfied.
6. A company provides services on account. This transaction will:
A) Increase assets and increase liabilities.
B) Increase assets and increase equity.
C) Increase liabilities and decrease equity.
D) Decrease assets and increase equity.
Answer: B
Rationale: It increases Accounts Receivable (asset) and Revenue which increases Equity.
7. Which of the following is a contra-asset account?
A) Accumulated Depreciation
B) Sales Revenue
C) Unearned Revenue
D) Retained Earnings
Answer: A
Rationale: Accumulated Depreciation reduces the asset balance.
,8. The primary purpose of the Statement of Cash Flows is to:
A) Show the profitability of a company.
B) Reconcile the beginning and ending balances of cash.
C) Report the company's assets and liabilities.
D) Determine the company's tax obligation.
Answer: B
Rationale: It explains the change in cash over a specific period.
9. The qualitative characteristic of accounting information that allows users to identify similarities and
differences between two companies is:
A) Relevance
B) Faithful Representation
C) Comparability
D) Timeliness
Answer: C
Rationale: Comparability lets users analyze and benchmark different firms.
10. Which of the following would be reported as an operating activity on the Statement of Cash Flows?
A) Purchase of equipment.
B) Issuance of common stock.
C) Payment of cash dividends.
D) Payment of salaries to employees.
Answer: D
Rationale: Salaries are a core operational transaction that affects net income.
11. A list of all accounts and their balances used to prove the equality of debits and credits is a:
A) General Journal
B) General Ledger
C) Trial Balance
D) Chart of Accounts
Answer: C
Rationale: A trial balance ensures total debits equal total credits.
, 12. The principle that requires expenses to be recognized in the same period as the revenues they helped to
generate is the:
A) Revenue Recognition Principle
B) Matching Principle
C) Historical Cost Principle
D) Full Disclosure Principle
Answer: B
Rationale: The matching principle pairs expense outlays with revenue generated.
13. A company collects cash in advance for services to be performed next month. This creates a(n):
A) Asset
B) Liability
C) Revenue
D) Expense
Answer: B
Rationale: Unearned Revenue is a liability representing a performance obligation.
14. The excess of current assets over current liabilities is known as:
A) Net Income
B) Working Capital
C) Retained Earnings
D) Gross Profit
Answer: B
Rationale: Working Capital measures short-term liquidity.
15. Which of the following is NOT a component of stockholders' equity?
A) Common Stock
B) Retained Earnings
C) Accounts Payable
D) Additional Paid-in Capital
Answer: C
Rationale: Accounts Payable is a current liability.
