Accounting Practice Test & Answer Key

Accounting Practice Test!!

1. Basic Accounting Equation

If a company's assets are $100,000 and its liabilities are $40,000, what is the equity of the
company?

a) $60,000
b) $40,000
c) $100,000
d) $140,000

2. Financial Statements

Which financial statement shows the financial position of a company at a specific point in
time?

a) Income Statement
b) Statement of Cash Flows
c) Balance Sheet
d) Trial Balance

3. Double-Entry Accounting

If a company purchases inventory on credit, how does this transaction affect the accounting
equation?

a) Assets increase; Liabilities increase
b) Assets decrease; Liabilities decrease
c) Assets increase; Equity increases
d) Assets decrease; Equity decreases

4. Recording Transactions

If a company receives cash for services rendered, which accounts are affected?

a) Cash (debit), Revenue (credit)
b) Accounts Receivable (debit), Cash (credit)
c) Cash (debit), Accounts Payable (credit)
d) Revenue (debit), Cash (credit)