1. What is the primary purpose of financial reporting?

 (A) To prepare tax returns

 (B) To provide information to stakeholders for decision-making
 (C) To calculate profit margins
 (D) To comply with legal requirements
2. Which of the following is NOT a characteristic of useful financial information?
 (A) Relevance
 (B) Reliability
 (C) Timeliness
 (D) Complexity
3. Which financial statement provides a snapshot of an entity's financial position at a
specific point in time?
 (A) Income Statement
 (B) Statement of Cash Flows
 (C) Statement of Changes in Equity
 (D) Statement of Financial Position
4. What does the term "going concern" refer to in financial reporting?
 (A) The ability of a company to pay its debts
 (B) The assumption that an entity will continue to operate for the foreseeable
future
 (C) The process of liquidating assets
 (D) The valuation of assets at fair market value
5. Which accounting principle requires that expenses be matched with revenues?
 (A) Accrual basis
 (B) Cash basis
 (C) Consistency principle
 (D) Prudence principle
6. Which organization is responsible for setting International Financial Reporting
Standards (IFRS)?
 (A) Financial Accounting Standards Board (FASB)
 (B) International Accounting Standards Board (IASB)
 (C) Securities and Exchange Commission (SEC)
 (D) American Institute of Certified Public Accountants (AICPA)
7. What is the main objective of the regulatory framework in financial reporting?
 (A) To ensure profitability for businesses
 (B) To enhance comparability and transparency in financial statements
 (C) To minimize tax liabilities for companies
 (D) To promote competition among firms
8. Which of the following is NOT a component of the regulatory framework for financial
reporting?
 (A) International Financial Reporting Standards
 (B) National accounting standards
 (C) Internal control systems
 (D) Corporate governance codes
9. What is the purpose of an audit in financial reporting?
 (A) To prepare tax returns for a company
 (B) To provide assurance that financial statements are free from material
misstatement
 (C) To increase sales revenue
 (D) To enhance marketing strategies
10. In double-entry bookkeeping, every transaction affects at least how many accounts?
 (A) One
 (B) Two
 (C) Three
 (D) Four
11. What type of account is "Accounts Receivable"?
 (A) Asset
 (B) Liability
 (C) Equity
 (D) Expense
12. Which of the following entries would increase an asset account?
 (A) Debit to an asset account
 (B) Credit to an asset account
 (C) Debit to a liability account
 (D) Credit to an expense account
13. If a company purchases inventory on credit, which accounts are affected?
 (A) Inventory and Cash
 (B) Inventory and Accounts Payable
 (C) Cash and Accounts Payable
 (D) Sales Revenue and Cash
14. What does a trial balance show?
 (A) The net income or loss for a period
 (B) A list of all accounts and their balances at a specific date
 (C) The cash flow from operating activities
 (D) The changes in equity over time
15. Which accounting equation represents the foundation of double-entry bookkeeping?
 (A) Assets = Liabilities + Revenues
 (B) Assets + Liabilities = Equity
 (C) Assets = Liabilities + Equity
 (D) Revenues = Expenses + Equity
16. When recording a sale made on credit, which accounts are affected?
 (A) Cash and Sales Revenue
  (B) Accounts Receivable and Sales Revenue
 (C) Inventory and Cost of Goods Sold
 (D) Accounts Payable and Inventory
17. What is the purpose of adjusting entries in accounting?
 (A) To correct errors in previous entries
 (B) To ensure that revenues and expenses are recognized in the correct period
 (C) To close temporary accounts at year-end
 (D) To prepare financial statements
18. Which type of account is "Accumulated Depreciation"?
 (A) Asset
(B) Contra asset
(C) Liability
(D) Expense
19. What happens to an expense account when it is closed at year-end?
(A) It remains open until paid
(B) It is transferred to retained earnings
(C) It is reset to zero
(D) It becomes an asset
20. Which of the following is an example of a current liability?
(A) Long-term debt
(B) Accounts Payable
(C) Goodwill
(D) Equipment
21. What is the primary function of the Statement of Cash Flows?
(A) To show the profitability of a company
(B) To report the financial position of a company at a specific date
(C) To provide information about cash inflows and outflows during a period
(D) To summarize changes in equity
22. Which accounting concept dictates that expenses should be recognized when
incurred, regardless of when cash is paid?
 (A) Matching principle
(B) Revenue recognition principle
(C) Going concern assumption
(D) Cash basis accounting
23. In double-entry bookkeeping, which of the following transactions would require a
debit entry to an expense account?
(A) Purchasing equipment for cash
(B) Paying rent for the month
(C) Selling goods on credit
(D) Receiving cash from customers
24. What is the effect of recording depreciation on fixed assets?
(A) It increases total assets on the balance sheet.
(B) It decreases net income on the income statement.
(C) It has no effect on cash flow.
(D) Both B and C are correct.