1|Page
ACC 291T PRINCIPLES OF ACCOUNTING Exam 2026-
2027 BANK QUESTIONS WITH DETAILED VERIFIED
ANSWERS EXAM QUESTIONS WILL COME FROM
HERE (100% Latest Already Graded A+
Question 1
Which of the following is a measure of a company's ability to pay its
current liabilities?
A) Debt to equity ratio
B) Current ratio
C) Return on assets
D) Asset turnover ratio
Correct Answer: B
Explanation: The current ratio, calculated as current assets divided by
current liabilities, specifically measures a company's ability to meet its
short-term obligations using its short-term assets. The debt to equity
ratio measures solvency and leverage, return on assets measures
profitability relative to total assets, and asset turnover measures
efficiency in generating sales from assets.
Question 2
,2|Page
A company has current assets of $500,000 and current liabilities of
$250,000. What is the current ratio?
A) 0.5 to 1
B) 1 to 1
C) 2 to 1
D) 3 to 1
Correct Answer: C
Explanation: The current ratio is determined by dividing current assets
by current liabilities. In this scenario, $500,000 divided by $250,000
equals 2.0, which is expressed as 2 to 1. This indicates that the company
has two dollars of current assets for every dollar of current liabilities,
suggesting adequate short-term liquidity.
Question 3
The quick ratio (acid-test ratio) excludes which of the following from
current assets?
A) Cash
B) Accounts receivable
C) Inventory
D) Marketable securities
Correct Answer: C
,3|Page
Explanation: The quick ratio is a more stringent measure of liquidity
that excludes inventory and prepaid expenses from current assets
because these items may not be readily convertible to cash. Cash,
accounts receivable, and marketable securities are included as they
represent the most liquid assets that can quickly cover current liabilities.
Question 4
Revenues are most often recognized when:
A) A sale takes place or a service is performed
B) Inventory is purchased for resale
C) Cash is collected
D) Inventory is manufactured for resale
Correct Answer: A
Explanation: Under generally accepted accounting principles (GAAP),
revenue is recognized when the earning process is complete or
substantially complete, which typically occurs when a sale is made or a
service is rendered. The timing of cash collection does not determine
revenue recognition under the accrual basis of accounting; rather,
revenue is recognized when performance obligations are satisfied.
Question 5
The accounting term for the recording of revenues when earned and
expenses when incurred, regardless of cash flow timing, is known as:
A) Cash basis accounting
, 4|Page
B) Accrual basis accounting
C) Modified cash basis
D) Tax basis accounting
Correct Answer: B
Explanation: Accrual basis accounting requires that revenues be
recognized when earned and expenses when incurred, irrespective of
when cash is exchanged. This is the foundational principle of GAAP and
provides a more accurate picture of a company's financial performance
than cash basis accounting, which recognizes transactions only upon
cash receipt or payment.
Question 6
Under the revenue recognition standard ASC 606, a performance
obligation is:
A) A promise to transfer a distinct good or service to a customer
B) The obligation to repay a bank loan
C) The requirement to file financial statements with the SEC
D) An obligation to pay dividends to shareholders
Correct Answer: A
Explanation: ASC 606 defines a performance obligation as a promise in
a contract with a customer to transfer a distinct good or service. Each
performance obligation must be identified before revenue can be
allocated and recognized. Repaying loans, filing SEC reports, and paying
ACC 291T PRINCIPLES OF ACCOUNTING Exam 2026-
2027 BANK QUESTIONS WITH DETAILED VERIFIED
ANSWERS EXAM QUESTIONS WILL COME FROM
HERE (100% Latest Already Graded A+
Question 1
Which of the following is a measure of a company's ability to pay its
current liabilities?
A) Debt to equity ratio
B) Current ratio
C) Return on assets
D) Asset turnover ratio
Correct Answer: B
Explanation: The current ratio, calculated as current assets divided by
current liabilities, specifically measures a company's ability to meet its
short-term obligations using its short-term assets. The debt to equity
ratio measures solvency and leverage, return on assets measures
profitability relative to total assets, and asset turnover measures
efficiency in generating sales from assets.
Question 2
,2|Page
A company has current assets of $500,000 and current liabilities of
$250,000. What is the current ratio?
A) 0.5 to 1
B) 1 to 1
C) 2 to 1
D) 3 to 1
Correct Answer: C
Explanation: The current ratio is determined by dividing current assets
by current liabilities. In this scenario, $500,000 divided by $250,000
equals 2.0, which is expressed as 2 to 1. This indicates that the company
has two dollars of current assets for every dollar of current liabilities,
suggesting adequate short-term liquidity.
Question 3
The quick ratio (acid-test ratio) excludes which of the following from
current assets?
A) Cash
B) Accounts receivable
C) Inventory
D) Marketable securities
Correct Answer: C
,3|Page
Explanation: The quick ratio is a more stringent measure of liquidity
that excludes inventory and prepaid expenses from current assets
because these items may not be readily convertible to cash. Cash,
accounts receivable, and marketable securities are included as they
represent the most liquid assets that can quickly cover current liabilities.
Question 4
Revenues are most often recognized when:
A) A sale takes place or a service is performed
B) Inventory is purchased for resale
C) Cash is collected
D) Inventory is manufactured for resale
Correct Answer: A
Explanation: Under generally accepted accounting principles (GAAP),
revenue is recognized when the earning process is complete or
substantially complete, which typically occurs when a sale is made or a
service is rendered. The timing of cash collection does not determine
revenue recognition under the accrual basis of accounting; rather,
revenue is recognized when performance obligations are satisfied.
Question 5
The accounting term for the recording of revenues when earned and
expenses when incurred, regardless of cash flow timing, is known as:
A) Cash basis accounting
, 4|Page
B) Accrual basis accounting
C) Modified cash basis
D) Tax basis accounting
Correct Answer: B
Explanation: Accrual basis accounting requires that revenues be
recognized when earned and expenses when incurred, irrespective of
when cash is exchanged. This is the foundational principle of GAAP and
provides a more accurate picture of a company's financial performance
than cash basis accounting, which recognizes transactions only upon
cash receipt or payment.
Question 6
Under the revenue recognition standard ASC 606, a performance
obligation is:
A) A promise to transfer a distinct good or service to a customer
B) The obligation to repay a bank loan
C) The requirement to file financial statements with the SEC
D) An obligation to pay dividends to shareholders
Correct Answer: A
Explanation: ASC 606 defines a performance obligation as a promise in
a contract with a customer to transfer a distinct good or service. Each
performance obligation must be identified before revenue can be
allocated and recognized. Repaying loans, filing SEC reports, and paying
