UF FAR1 EXAM 1 2026 WITH 100% ACCURATE
QUESTIONS AND ANSWERS
1. Which of the following describes the financing activities section of the
statement of cash flows?
it shows the beginning and ending balances of cash
it includes transactions that primarily affect current assets and
current liabilities
it includes cash transactions affecting long term liabilities and
equity of the business
it includes increases and decreases in long term assets
2. Describe the significance of the Current Ratio in financial analysis.
The Current Ratio indicates the profitability of a company over a
period of time.
The Current Ratio measures a company's ability to pay its
short-term obligations with its short-term assets.
The Current Ratio reflects the total equity of a company
compared to its total liabilities.
The Current Ratio shows the relationship between cash flows and
net income.
3. What is the purpose of an adjusting entry in accounting?
To close the books at the end of the fiscal year.
To record revenues and expenses in the correct accounting
period.
To adjust the cash balance for outstanding checks.
To prepare the financial statements for external reporting.
,4. Which ratio is calculated as net sales divided by average total assets?
asset turnover
net income
beginning total assets
average sales
5. What is the formula for calculating asset turnover?
Asset turnover = Average total assets / Net Sales
Asset turnover = Net Sales / Average total assets
Asset turnover = Net Income / Total assets
Asset turnover = Total assets / Total liabilities
6. If a company holds bonds that are classified as 'Held to Maturity', how
would this affect their balance sheet classification?
The bonds would be classified as Long Term Investments until
the year of maturity.
The bonds would be classified as intangible assets.
The bonds would not be classified on the balance sheet at all.
The bonds would be classified as current assets due to their
liquidity.
7. Describe the significance of calculating Income from Continuing
Operations in a comprehensive income statement.
Income from Continuing Operations reflects the profitability of
a company's core business activities, excluding discontinued
operations.
Income from Continuing Operations only considers nonrecurring
, gains and losses.
Income from Continuing Operations includes all revenues and
expenses, regardless of their nature.
Income from Continuing Operations is the total income before
taxes and expenses.
8. What is the first step in converting from cash-basis to accrual-basis
accounting?
Calculate Net Income
Change to Accrual Basis Revenues
Change to Accrual Basis Expenses
Adjust Cash Collected from Customers
9. What are the components of faithful representation in accounting?
Completeness, Neutrality, Free From Error
Comparability, Verifiability, Timeliness, Understandability
Predictive Value, Confirmatory Value, Materiality
Relevance, Faithful Representation, Enhancing Quality
10. The ______________________ activities section of the statement of cash flows
includes the adjustments in non-cash working capital accounts.
investing
financing
operating
11. What are the components listed under current assets in the balance
sheet according to the provided information?
Cash, Short Term Investments, Accounts Payable, Inventory,
QUESTIONS AND ANSWERS
1. Which of the following describes the financing activities section of the
statement of cash flows?
it shows the beginning and ending balances of cash
it includes transactions that primarily affect current assets and
current liabilities
it includes cash transactions affecting long term liabilities and
equity of the business
it includes increases and decreases in long term assets
2. Describe the significance of the Current Ratio in financial analysis.
The Current Ratio indicates the profitability of a company over a
period of time.
The Current Ratio measures a company's ability to pay its
short-term obligations with its short-term assets.
The Current Ratio reflects the total equity of a company
compared to its total liabilities.
The Current Ratio shows the relationship between cash flows and
net income.
3. What is the purpose of an adjusting entry in accounting?
To close the books at the end of the fiscal year.
To record revenues and expenses in the correct accounting
period.
To adjust the cash balance for outstanding checks.
To prepare the financial statements for external reporting.
,4. Which ratio is calculated as net sales divided by average total assets?
asset turnover
net income
beginning total assets
average sales
5. What is the formula for calculating asset turnover?
Asset turnover = Average total assets / Net Sales
Asset turnover = Net Sales / Average total assets
Asset turnover = Net Income / Total assets
Asset turnover = Total assets / Total liabilities
6. If a company holds bonds that are classified as 'Held to Maturity', how
would this affect their balance sheet classification?
The bonds would be classified as Long Term Investments until
the year of maturity.
The bonds would be classified as intangible assets.
The bonds would not be classified on the balance sheet at all.
The bonds would be classified as current assets due to their
liquidity.
7. Describe the significance of calculating Income from Continuing
Operations in a comprehensive income statement.
Income from Continuing Operations reflects the profitability of
a company's core business activities, excluding discontinued
operations.
Income from Continuing Operations only considers nonrecurring
, gains and losses.
Income from Continuing Operations includes all revenues and
expenses, regardless of their nature.
Income from Continuing Operations is the total income before
taxes and expenses.
8. What is the first step in converting from cash-basis to accrual-basis
accounting?
Calculate Net Income
Change to Accrual Basis Revenues
Change to Accrual Basis Expenses
Adjust Cash Collected from Customers
9. What are the components of faithful representation in accounting?
Completeness, Neutrality, Free From Error
Comparability, Verifiability, Timeliness, Understandability
Predictive Value, Confirmatory Value, Materiality
Relevance, Faithful Representation, Enhancing Quality
10. The ______________________ activities section of the statement of cash flows
includes the adjustments in non-cash working capital accounts.
investing
financing
operating
11. What are the components listed under current assets in the balance
sheet according to the provided information?
Cash, Short Term Investments, Accounts Payable, Inventory,
