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117 Accounting Trivia Questions & Answers

Accounting
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There are 117 questions on this topic. Last updated Mar 29 2024.
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1 The Risk-Return Trade Off principle means that the higher risk yields what effect on return?
Answer: higher return

One of the fundamental principles of Finance is the Risk-Return Trade Off. Risk is defined as the uncertainty to compensate the investors. Risk-seeker investors typically require a higher expected of return from risky investments. Different kinds of risks include credit or default risk, inflation, operational, foreign exchange etc.
trivia question Quick Question
Copyrights, goodwill, and patents are part of what specific non-current asset?




2 What is the activity sequence of the basic information processing model?
Answer: collect data, organize and process data, and communicate information

Information processing is collecting data such as invoice or a canceled check; organizing and processing the data through transaction analysis, journalizing, posting and preparing the worksheet; and communicating the information to users through the financial statements.
3 What does the abbreviation GAAP stand for?
Answer: Generally Accepted Accounting Principles

There are various generally accepted accounting principles that should always be followed by all businesses if they don't want the trouble of having auditors keep a close eye on their company.
4 A cost that changes with the number of units produced, but that can never be zero, is what kind of cost?
Answer: Mixed cost

If the cost can never be zero, it has a fixed component. However, since it changes with the number of units produced, it also has a variable component. This is a mixed cost. Product and period costs refer to cost classifications rather than cost behaviors.
5 Goods bought on credit from J Roger. What is debited?
Answer: Purchases a/c

Many of you may have selected goods. However, when someone will review the accounts there may be confusion as to what is actually being done with the goods. To avoid confusion, whenever you buy goods, especially for resale, it is written as purchases.
6 The first 3 questions refer to the basic rules of accounting when it comes to debit and credit. How many rules are there?
Answer: 3

There are 3 rules of accounting-
Debit what comes in, credit what goes out.
Debit the receiver, credit the giver.
Debit all expenses and losses, credit all incomes and gains.
7 What are resources owned by a business called?
Answer: Assets

Assets are essential to any business. Some last for long periods of time and can assist in generating profits.
8 Julia Child goes to the grocery store to buy some lamb chops, lettuce, tomatoes, and various herbs and spices which are used on her cooking show. How should she record this purchase?
Answer: As an expenditure on the income statement

The supplies would be expensed when actually used.
9 The financial statement that summarizes information concerning the cash inflows and outflows during a period is the ...?
Answer: Statement of Cash Flows

The primary purpose of a statement of cash flows is to provide financial information about the cash receipts and cash payments of an enterprise for a specific period of time. ("Accounting Principles, Canadian Edition", Volume 1, by Weygandt, Kieso, and Trenholm, p. 26.)
Question Reference: Quiz: Accounting #3.
10 A group of accounts with a common characteristic, such as all customer accounts is a...?
Answer: Subsidiary ledger

The subsidiary ledger frees the general ledger from the details of individual account balances. A subsidiary ledger is an addition to the general ledger. (Accounting Principles, Canadian Edition, volume 1, by Weygandt, Kieso, and Trenholm, page 244).
Question Reference: Quiz: Accounting #2.
11 What is the normal balance for an expense account?
Answer: Debit

Expenses decrease the owner's capital.
12 What side of a T account is the debit side?
Answer: left

The debit side of any account is the left side. The credit side of any account is the right side.
13 Who are given a preference to the corporation's distribution of assets, earnings and dividends?
Answer: Preferred Shareholders only

Preferred shareholders are prioritized over common shareholders for the earnings and assets in the event of company's liquidation. However, they are rarely given voting rights as compared to the common shareholders. Preferred shares could be participating, non-participating, cumulative, non-cumulative, or even cumulative-participating.
14 What are internal controls designed to do?
Answer: safeguard assets and optimize the use of resources

Internal controls are the methods and procedures used by management to safeguard assets, prevent and detect fraud and error, optimize the use of resources and maintain reliable control systems.
15 If a single owner manages and owns a business, what do you call this type of organization (in North America)?
Answer: proprietorship

A proprietorship generally has a single owner. A partnership is a business with two or more co-owners; each co-owner is a partner. A corporation is a legal entity separate from its owners. A corporation's owners are called shareholders.
16 What is the amount collected from the sale of goods and services called?
Answer: Revenue

When a company does a service or sells something revenue is recorded on an income statement and raises the overall equity of the owner.
17 Manufacturing overhead is allocated as what kind of cost?
Answer: Product cost

While the behavior of manufacturing overhead is probably a mixture of fixed and variable costs, it is allocated to the product produced rather than the accounting period, making it a product cost.
18 Vans bought on credit from K Logan. What is debited?
Answer: Vans a/c

Vans are debited because they are an asset. You are not buying it for resale so it cannot be written as purchases.
19 What are the factors that a business owes or needs to pay called?
Answer: Liabilities

Liabilities include all loans, outstanding expenses, creditors, and mortgages, etc.
20 Julia Childs buys a new stove for $12,000 to use on her cooking show by writing a check for the full amount. How should she record the purchase?
Answer: As a fixed asset on her balance sheet

Equipment used for the production of goods and services should be recorded as a fixed asset on the balance sheet. Each month a portion of the cost should be recorded as depreciation expense over the useful life of the asset.
21 If current assets are $1,500 and current liabilities are $1,000, the current ratio is ...?
Answer: 1.5 to 1

The calculation for the current ratio is as follows: Current assets divided by Current liabilities. So, $1,500 divided by $1,000 = 1.5 (to 1). This ratio shows the difference between current assets and current liabilities, which is called working capital. ("Accounting Principles, Canadian Edition", Volume 1, by Weygandt, Kieso, and Trenholm, p. 156.)
Question Reference: Quiz: Accounting #3.
22 Net credit sales are normally sold on terms of n/30 (net in 30 days). Net credit sales total $50,000, and the average net accounts receivable is $5,000 in the current period. The collection period ratio is...?
Answer: 36.5 days

The collection period ratio is calculated as follows: Days in the Year divided by Receivables Turnover (Receivables Turnover = Net Credit Sales divided by Average Accounts Receivable) = the Average Collection Period. (Accounting Principles, Canadian Edition, volume 1, by Weygandt, Kieso, and Trenholm, page 351). So, Receivables Turnover = $50,000 divided by $5,000, which is equal to 10 times. Then, 365 divided by 10 = 36.5.
Question Reference: Quiz: Accounting #2.
23 A primary user of accounting information with a direct financial interest in the business is a...?
Answer: director

Taxing authorities, regulatory agencies, and labour unions are all considered to have an indirect financial interest in a business, so they are external users of accounting information. Directors have a direct financial interest in a business, so they are internal/primary users of accounting information. (Accounting Principles, Canadian Edition, volume 1, by Weygandt, Kieso, and Trenholm, page 3).
Question Reference: Quiz: Accounting #1.
24 The act of transferring the information from the General Journal to the General Ledger is called what?
Answer: Posting

You JOURNALIZE an entry from the source, and POST the journal entry to the ledger.
25 When revenue is greater than expenses, you have a ___?
Answer: Net profit