ACG 5005 Financial Accounting Midterms Exam Review 2025 (Qns & Ans)

ACG 5005

Financial Accounting

Midterms Exam Review (Qns & Ans)

2025



1. Which of the following financial statements provides a
snapshot of a company's financial position at a specific point in
time?
- A. Income statement
- B. Balance sheet
- C. Statement of cash flows
- D. Statement of retained earnings


ANS: B. Balance sheet
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, Rationale: The balance sheet provides a snapshot of a
company's financial position at a specific point in time, showing
assets, liabilities, and shareholders' equity.


2. What is the primary purpose of an income statement?
- A. To report a company's financial position
- B. To show changes in equity
- C. To present a company's revenues and expenses
- D. To outline cash inflows and outflows


ANS: C. To present a company's revenues and expenses
Rationale: The income statement presents a company's
revenues and expenses over a specific period, culminating in net
income or loss.


Fill-in-the-Blank Questions


3. The __________ principle states that expenses should be
recorded in the same period as the revenues they help generate.


ANS: Matching


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, Rationale: The matching principle ensures that expenses are
recorded in the same period as the revenues they help generate,
providing a more accurate representation of a company's financial
performance.


4. __________ are obligations that a company expects to pay
within one year or the operating cycle, whichever is longer.


ANS: Current liabilities
Rationale: Current liabilities are obligations that a company
expects to pay within one year or the operating cycle, whichever
is longer.


True/False Questions


5. True or False: Depreciation expense on equipment is an
example of an adjusting entry.


ANS: True
Rationale: Depreciation expense on equipment is an adjusting
entry made to allocate the cost of the equipment over its useful
life.



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