Exam (elaborations) CPA - Certified Public Accountant

FAC1601 Assignment 2 – Complete
Answers & Detailed Explanations
 What is the primary objective of financial accounting?

 A) To prepare tax returns
 B) To provide information useful for decision-making
 C) To detect fraud
 D) To ensure compliance with laws
 Correct Answer: B

 Which of the following is classified as a current asset?

 A) Land
 B) Accounts receivable
 C) Equipment
 D) Long-term investments
 Correct Answer: B

 What is the accounting equation?

 A) \Assets = Liabilities + Equity \
 B) \Assets = Revenue - Expenses \
 C) \Assets = Liabilities - Equity \
 D) \Assets = Equity \
 Correct Answer: A

 Which financial statement shows the financial position of a company?

 A) Income statement
 B) Statement of cash flows
 C) Balance sheet
 D) Statement of changes in equity
 Correct Answer: C

 What is the purpose of depreciation?

 A) To allocate the cost of an asset over its useful life
 B) To increase the value of an asset
 C) To record the sale of an asset
 D) To reduce tax liability
 Correct Answer: A

 Which of the following is an example of a non-current liability?

,  A) Accounts payable
 B) Bank overdraft
 C) Long-term loan
 D) Accrued expenses
 Correct Answer: C

 What does the statement of cash flows report?

 A) Net income
 B) Changes in cash and cash equivalents
 C) Assets and liabilities
 D) Equity transactions
 Correct Answer: B

 Which principle requires expenses to be recognized in the same period as the revenues
they help generate?

 A) Revenue recognition principle
 B) Matching principle
 C) Cost principle
 D) Consistency principle
 Correct Answer: B

 What is the purpose of a trial balance?

 A) To prepare financial statements
 B) To detect errors in the ledger
 C) To ensure debits equal credits
 D) To calculate net income
 Correct Answer: C

 Which of the following is an intangible asset?

 A) Inventory
 B) Goodwill
 C) Machinery
 D) Land
 Correct Answer: B

 What is the purpose of adjusting entries?

 A) To close temporary accounts
 B) To correct errors in the ledger
 C) To update accounts before preparing financial statements
 D) To record transactions during the period
 Correct Answer: C