Financial Accounting Questions with Detailed Verified Answers

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Financial Accounting Questions with
Detailed Verified Answers



Question: Assets
Answer: Economic resources that the business plans to use in the future to
make money.


Question:Balance sheet
Answer: The financial report that shows business assets, liabilities, and
owner's equity as of a particular day.


Question:Balanced books
Answer: When "Where did it go?" equals "Where did it come from?" or wen a
company's assets equal its liabilities plus owner's equity.


Question:Capital
Answer: Assets that help a business or a person make money.


Question:Capitalizer
Answer: When money is changed into another asset that helps the business
make money.


Question:Creditors
Answer: Outsiders to whom the company owes money.

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Question:Current assets
Answer: Assets that can be used to pay current liabilities.


Question:Current liabilities
Answer: Debts that must be paid within one year or one operating cycle,
whichever is longer.


Question:Financial accounting
Answer: The skill of producing financial statements from business
transactions.


Question:Fiscal Year
Answer: The 12-month period a business uses to report the results of its
operations.


Question:Heading
Answer: All financial statement have a standard 3-line heading as follows:
1. Name of Company
2. Name of the Report
3. Date (balance sheet) or Period of Time (all other statements)


Question:Liabilities
Answer: Debts owed to people outside the company.


Question:Liquid

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Answer: The easier it is to change an asset into cash, the more liquid that
asset is.


Question:Operating cycle
Answer: The natural period of time before certain business activities tend to
repeat- normally one year.


Question:Owner's equity
Answer: The portion of the business the owner gets to keep after paying off
all creditors.


Question:Sole proprietor
Answer: The individual owner (without partners) of an unincorporated
business.


Question:Basic accounting equation
Answer: Assets = liabilities + Owner's equity
OR
Owner's equity = Assets - Liabilities
OR
Liabilities = Assets - Owner's equity


Question:Business entity
Answer: The financial statements report about a single business. Every
business gets its own set of books. Accountants do not mix in the owner's
personal financial info.

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Question:Current
Answer: "Current" liabilities are those debts that must be paid within one year
of one operating cycle, whichever is longer.


Question:Current ratio
Answer: (Current assets)/(Current liabilities)= Current ratio


Question:Debt Ratio
Answer: (Total liabilities)/(Total assets)= debt ratio or 100%- equity ratio=
debt ratio


Question:Double entry accounting
Answer: Recording business transactions twice: once to show where the
money came from , and another time to show where the money went.


Question:Equity ratio
Answer: (Total equity)/(Total assets)= Equity ratio
OR
100% - Debt ratio = Equity ratio


Question:Liability account
Answer: Payable or Deferred


Question:Equity Account
Answer: Owner's name, Withdrawal, Dividend, Stock.


Question:Expense Account