D102 Financial Accounting - Set 3 - Part 1

Test your knowledge of technical writing concepts with these practice questions. Each question includes detailed explanations to help you understand the correct answers.

Question 1: Which of the following is an example of a current liability?

Accounts payable

Long-term debt

Equipment

Prepaid expenses

Question 2: How is interest expense classified on the income statement?

Operating expense

Financing expense

Investing expense

Administrative expense

Question 3: Which of the following accounts normally has a debit balance?

Revenue

Accounts payable

Cash

Accumulated depreciation

Question 4: Which of the following is an intangible asset?

Land

Inventory

Patent

Equipment

Question 5: What is the journal entry when a company declares dividends but has not yet paid them?

Debit cash, credit dividends

Debit dividends payable, credit cash

Debit dividends, credit dividends payable

Debit retained earnings, credit dividends

Question 6: How is depreciation expense typically reported?

As a current asset

As a liability

As an expense on the income statement

As a reduction in equity

Question 7: Which of the following would be classified as a financing activity?

Purchasing equipment

Paying interest on a loan

Issuing stock to investors

Selling land

Question 8: What is the correct journal entry to record accrued wages?

Debit wages expense, credit cash

Debit cash, credit wages payable

Debit wages expense, credit wages payable

Debit wages payable, credit cash

Question 9: How is goodwill typically created?

Through the normal course of business operations

By purchasing assets at a premium

By issuing dividends

Through advertising

Question 10: Which financial statement provides details of cash inflows and outflows?

Balance sheet

Income statement

Statement of retained earnings

Statement of cash flows

Question 11: What does the term "FOB shipping point" mean?

The seller bears all transportation costs

The buyer owns the goods once they reach their destination

The buyer owns the goods once they leave the seller’s warehouse

The seller is responsible for the goods until delivery is complete

Question 12: Which of the following is a contra-asset account?

Accumulated depreciation

Accounts receivable

Inventory

Prepaid expenses

Question 13: What is the impact on the accounting equation when a company pays off a loan?

Assets increase, liabilities decrease

Assets decrease, liabilities decrease

Assets increase, equity decreases

Liabilities increase, assets decrease

Question 14: What is the correct journal entry when a customer returns goods?

Debit sales returns, credit accounts receivable

Debit accounts payable, credit sales

Debit sales revenue, credit inventory

Debit cost of goods sold, credit sales returns

Question 15: What is the purpose of adjusting entries in accounting?

To correct errors in the trial balance

To record revenues and expenses in the correct period

To close nominal accounts

To record cash transactions

Question 16: When a company purchases inventory on credit, what is the impact on the financial statements?

Increases assets and increases liabilities

Increases assets and decreases equity

Decreases assets and decreases liabilities

Increases liabilities and decreases assets

Question 17: What does the matching principle require?

Expenses should be recorded when cash is paid

Revenues and expenses should be matched in the same period

Expenses should be recognized in the following period

Revenues should be recognized when cash is received

Question 18: How is unearned revenue classified on the balance sheet?

Asset

Liability

Revenue

Equity

Question 19: Which of the following is considered an operating activity?

Issuing stock

Repaying a loan

Purchasing equipment

Paying wages to employees

Question 20: What is the impact of a credit to a revenue account?

Increases revenue

Decreases revenue

Increases liabilities

Decreases equity

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