BUS-A 201 Introduction to Financial
Accounting Exam Questions With
Correct Answers (Verified Answers) Plus
Rationales 2026 Q&A | Instant
Download Pdf
1. What is the primary objective of financial accounting?
A. To minimize taxes
B. To provide information useful for decision-making
C. To calculate employee salaries
D. To manage daily operations
Correct Answer: B
Rationale: Financial accounting is designed to provide useful
economic information to external users such as investors,
creditors, and regulators for decision-making purposes.
2. Which of the following is NOT an external user of financial
statements?
A. Investors
B. Creditors
,C. Management
D. Government agencies
Correct Answer: C
Rationale: Management is an internal user; external users
include investors, creditors, and regulators.
3. The accounting equation is expressed as:
A. Assets = Liabilities + Equity
B. Assets = Revenue − Expenses
C. Liabilities = Assets + Equity
D. Equity = Assets + Revenue
Correct Answer: A
Rationale: The fundamental accounting equation states that
resources (assets) are financed by creditors (liabilities) and
owners (equity).
4. Which financial statement shows a company’s financial
position at a specific date?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Changes in Equity
,Correct Answer: C
Rationale: The balance sheet presents assets, liabilities, and
equity at a specific point in time.
5. Revenues are recognized when:
A. Cash is received
B. Goods are ordered
C. They are earned
D. Expenses are paid
Correct Answer: C
Rationale: Under accrual accounting, revenue is recognized
when earned, not necessarily when cash is received.
6. Which accounting principle requires expenses to be
matched with revenues?
A. Cost principle
B. Matching principle
C. Full disclosure principle
D. Monetary unit assumption
Correct Answer: B
Rationale: The matching principle ensures expenses are
recorded in the same period as the revenues they help
generate.
, 7. Assets are best defined as:
A. Obligations owed to creditors
B. Resources controlled by a business
C. Owner investments only
D. Company expenses
Correct Answer: B
Rationale: Assets are economic resources controlled by an
entity expected to provide future benefits.
8. Which of the following is a liability?
A. Equipment
B. Accounts Receivable
C. Accounts Payable
D. Cash
Correct Answer: C
Rationale: Accounts payable represents amounts owed to
suppliers, making it a liability.
9. Owner’s equity represents:
A. Total assets
B. Amount owed to creditors
Accounting Exam Questions With
Correct Answers (Verified Answers) Plus
Rationales 2026 Q&A | Instant
Download Pdf
1. What is the primary objective of financial accounting?
A. To minimize taxes
B. To provide information useful for decision-making
C. To calculate employee salaries
D. To manage daily operations
Correct Answer: B
Rationale: Financial accounting is designed to provide useful
economic information to external users such as investors,
creditors, and regulators for decision-making purposes.
2. Which of the following is NOT an external user of financial
statements?
A. Investors
B. Creditors
,C. Management
D. Government agencies
Correct Answer: C
Rationale: Management is an internal user; external users
include investors, creditors, and regulators.
3. The accounting equation is expressed as:
A. Assets = Liabilities + Equity
B. Assets = Revenue − Expenses
C. Liabilities = Assets + Equity
D. Equity = Assets + Revenue
Correct Answer: A
Rationale: The fundamental accounting equation states that
resources (assets) are financed by creditors (liabilities) and
owners (equity).
4. Which financial statement shows a company’s financial
position at a specific date?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Changes in Equity
,Correct Answer: C
Rationale: The balance sheet presents assets, liabilities, and
equity at a specific point in time.
5. Revenues are recognized when:
A. Cash is received
B. Goods are ordered
C. They are earned
D. Expenses are paid
Correct Answer: C
Rationale: Under accrual accounting, revenue is recognized
when earned, not necessarily when cash is received.
6. Which accounting principle requires expenses to be
matched with revenues?
A. Cost principle
B. Matching principle
C. Full disclosure principle
D. Monetary unit assumption
Correct Answer: B
Rationale: The matching principle ensures expenses are
recorded in the same period as the revenues they help
generate.
, 7. Assets are best defined as:
A. Obligations owed to creditors
B. Resources controlled by a business
C. Owner investments only
D. Company expenses
Correct Answer: B
Rationale: Assets are economic resources controlled by an
entity expected to provide future benefits.
8. Which of the following is a liability?
A. Equipment
B. Accounts Receivable
C. Accounts Payable
D. Cash
Correct Answer: C
Rationale: Accounts payable represents amounts owed to
suppliers, making it a liability.
9. Owner’s equity represents:
A. Total assets
B. Amount owed to creditors
