Exit Exam Tutorial Class

RVU METEHARA CAMPUS EXIT EXAM TUTORIAL CLASS:
FOR ACCOUNTING AND FINANCE STUDENTS
👇👇👇👇👇👇👇👇👇
FINANCIAL MANAGEMENT
1. _ is the process of simply preparing financial statements for external reporting.
a) Financial analysis
b) Financial reporting
c) Financial planning
d) Financial accounting
Answer: b) Financial reporting
2. __ is the ability to meet short-term debts.
a) solvency
b) liquidity
c) profitability
d) stability
Answer: b) liquidity
3. A company with a debt-equity ratio of 1:2 has $100,000 of debt. What is the value of equity?
a) $100,000
b) $200,000
c) $300,000
d) $400,000
Answer: b) $200,000 (Debt-equity ratio = Total debt/Total equity, therefore Total equity = Total debt ÷
Debt-equity ratio. Substituting values, Total equity = $100,000 ÷ 1:2 = $200,000)
4. Which of the following represents the range of independent variables?
a) Y-Intercept Range
b) Deviation Range
c) Range of Values
d) Range of the Domain
Answer: d) Range of the Domain
5. The initial outlay for a machine is $100,000, and its estimated salvage value is $20,000 at the end of
its five-year life. What is the annual depreciation of the machine using straight-line depreciation?
a) $16,000
b) $18,000
c) $20,000
d) $22,000
Answer: a) $16,000 (Straight-line depreciation = (Initial cost - Salvage value)/Useful life. Substituting
values, Straight-line depreciation = ($100,000 - $20,000)/5 = $16,000)
FINANCIAL ACCOUNTING
6. __ financial statements present only data that would affect the current period.
a) Accrual-based
b) Cash-based
c) Period-based
d) Cost-based
Answer: b) Cash-based
7. __ is an accounting principle that ensures that companies account for transactions and consolidate
accounts using the same methods and procedures.
a) Consistency
b) Conservatism
c) Credibility
d) Comparability
Answer: d) Comparability
8. When a company records an expense before it actually incurs the cost, it is called:
a) Prepaid expense
b) Accrued expense
c) Deferred expense
d) Operating expense
Answer: b) Accrued expense
9. Which of the following is an example of an intangible asset?
a) Land
b) Machinery
c) Copyright
d) Building
Answer: c) Copyright
10. A company sold merchandise costing $10,000 for $15,000 on credit. What is the journal entry to
record this transaction?
a) Debit Cash $15,000, Credit Sale $10,000, Credit Revenue $5,000
b) Debit A/R $10,000, Credit Cash $10,000, Credit Revenue $5,000

c) Debit COGS $10,000, Credit Inventory $10,000, Credit Revenue $5,000
d) Debit Cash $10,000, Credit Sale $15,000, Credit COGS $10,000
Answer: b) Debit A/R $10,000, Credit Sales $10,000, Credit Revenue $5,000 (Sales revenue and cost of
goods sold transactions are recorded separately)
AUDITING
11. Which of the following is NOT a typical objective of an audit?
a) Express an opinion on the company's financial statements.
b) Identify fraud or errors in the financial statements.
c) Provide consulting services related to accounting and assurance.
d) Assess whether internal controls are effective.
Answer: c) Provide consulting services related to accounting and assurance (Consulting services could
create a conflict of interest in the auditor's independent assessment of the company's financial
statements)
12. Which of the following is the most important reason for the auditors to assess the client's internal
controls?
a) To determine the company's solvency
b) To ensure the company's compliance with tax regulations
c) To ensure that the financial statements are fairly presented
d) To prevent fraud and errors
Answer: d) To prevent fraud and errors
13. A(n) _ opinion on a company's financial statements indicates that there are no significant exceptions
or errors in the statements.
a) Unqualified
b) Qualified
c) Adverse
d) Disclaimer
Answer: a) Unqualified
14. Which of the following is the most relevant to the audit of cash?
a) Completeness
b) Valuation
c) Payroll
d) Authorization
Answer: a) Completeness
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15. Which of the following is an example of a misstatement in the financial statements?
a) The audit evidence gathered is not reliable.
b) The client fails to provide the required disclosures in the footnotes.
c) The auditor fails to identify a tax liability.
d) The client violates the Code of Professional Ethics.
Answer: b) The client fails to provide the required disclosures in the footnotes.
TAXATION
16. ___ is a tax levied on individuals or corporations based on their income or profits.
a) Sales tax
b) Property tax
c) Income tax
d) Excise tax
Answer: c) Income tax
17. What is the purpose of filing a tax return?
a) To pay your taxes
b) To claim a refund
c) To provide information to the IRS about your income and deductions
d) To avoid an IRS audit
Answer: c) To provide information to the IRS about your income and deductions
18. Which of the following is an example of a tax credit?
a) Deduction for charitable contributions
b) Standard deduction
c) Child tax credit
d) Personal exemption
Answer: c) Child tax credit
19. Which of the following is true about estimated taxes?
a) They are paid once a year.
b) They are always based on actual income.
c) They are required of individuals who do not have taxes withheld from their income.
d) They are paid only by corporations.
Answer: c) They are required of individuals who do not have taxes withheld from their income.
20. ___ is a tax on a transaction, generally on the sale or transfer of property or services.
a) Income tax
b) Excise tax
c) Sales tax
d) Property tax
Answer: c) Sales tax
MANAGEMENT ACCOUNTING
21. ___ involves developing plans and forecasts for the organization's future operations and financial
performance.
a) Budgeting
b) Cost analysis
c) Performance measurement
d) Variance analysis
Answer: a) Budgeting
22. Which of the following is an example of a fixed cost?
a) Utilities
b) Raw materials
c) Labor
d) Rent
Answer: d) Rent
23. ___ is the cost of producing one unit of a specific product or service.
a) Direct cost
b) Indirect cost
c) Marginal cost
d) Sunk cost
Answer: c) Marginal cost
24. Which of the following is used in job-order costing?
a) Predetermined overhead rate
b) Equivalent unit
c) Break-even point
d) Standard cost
Answer: a) Predetermined overhead rate
25. ___ is the process of allocating overhead costs to products or services.
a) Cost behavior analysis
b) Cost-volume-profit analysis
c) Job-order costing
d) Activity-based costing
Answer: d) Activity-based costing
FINANCIAL MANAGEMENT
26. Which of the following most accurately characterizes the goal of financial management?
a) Maximizing profit
b) Stabilizing the share price
c) Maximizing shareholder wealth
d) Increasing market share
Answer: c) Maximizing shareholder wealth

27. Which of the following is an example of a current asset?
a) Land
b) Buildings
c) Account receivable
d) Company car
Answer: c) Account receivable
28. The ____ is the expected rate of return on an asset, given its risk.
a) Discount rate
b) Cost of equity
c) Opportunity cost
d) Weighted average cost of capital
Answer: b) Cost of equity
29. What is the present value of $10,000 to be received five years from now, assuming a discount rate of
10%?
a) $5,537
b) $6,210
c) $6,765
d) $7,750
Answer: b) $6,210 (Present value = Future value/(1 + r)n, where r is the discount rate and n is the
number of years. Substituting values, Present value = $10,000/(1 + 0.1)5 = $6,210)
30. Which of the following best defines operating leverage?
a) The degree to which a firm is financed by debt

b) The ability of a firm to adapt to changes in demand
c) The degree to which a firm relies on fixed costs
d) The ability of a firm to generate short-term profits
Answer: c) The degree to which a firm relies on fixed costs
FINANCIAL ACCOUNTING
31. Which financial statement reports company’s assets, liabilities, and equity at a specific point in time?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Notes to the financial statements
Answer: a) Balance sheet
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32. Which of the following is an example of a contra account?
a) Accumulated depreciation
b) Goodwill
c) Retained earnings
d) Accounts payable
Answer: a) Accumulated depreciation
33. Which of the following is an accounting equation?
a) Assets - Liabilities = Equity
b) Assets - Liabilities = Revenue
c) Assets + Liabilities = Revenue

d) Assets + Liabilities = Equity
Answer: d) Assets + Liabilities = Equity
34. Assume that a business owner borrows $100,000 from the bank. The journal entry to record this
would be:
a) Debit Notes Payable $100,000, Credit Cash $100,000
b) Debit Cash $100,000, Credit Notes Receivable $100,000
c) Debit Cash $100,000, Credit Notes Payable $100,000
d) Debit Notes Receivable $100,000, Credit Cash $100,000
Answer: a) Debit Notes Payable $100,000, Credit Cash $100,000
35. Which of the following is true about the accounting equation?
a) Assets must be greater than liabilities and equity.
b) Assets must be less than liabilities and equity.
c) Assets must be equal to liabilities and equity.
d) Assets have no effect on liabilities and equity.
Answer: c) Assets must be equal to liabilities and equity.
AUDITING
36. Which of the following is true of internal auditors?
a) They work exclusively for external audit firms.
b) They are responsible for preparing financial statements.
c) They report to management and the audit committee.
d) They express an opinion on the fairness of financial statements.

Answer: c) They report to management and the audit committee.
37. The audit risk formula is:
a) Audit risk = Control risk × Detection risk × Inherent risk
b) Audit risk = Inherent risk / Control risk × Detection risk
c) Audit risk = Detection risk × Inherent risk / Control risk
d) Audit risk = Inherent risk × Control risk × Detection risk
Answer: d) Audit risk = Inherent risk × Control risk × Detection risk
38. ___ involves reviewing and analyzing a large amount of data using statistical models and other
analytical tools.
a) Sampling
b) Documentation
c) Analyzing
d) Analytical procedures
Answer: d) Analytical procedures
39. Which of the following is an example of a management assertion?
a) Completeness
b) Materiality
c) Independence
d) Integrity
Answer: a) Completeness
40. Which of the following is the least appropriate function of internal control?
a) Safeguarding assets
b) Promoting efficient operations
c) Restricting participation by personnel
d) Ensuring compliance with laws and regulations
Answer: c) Restricting participation by personnel
TAXATION
41. ___ is the tax levied on the transfer of property after a person's death.
a) Income tax
b) Tax on gifts
c) Estate tax
d) Property tax
Answer: c) Estate tax
42. What is a tax liability?
a) The total amount of refund you are eligible to receive from the government
b) The total amount of tax that you owe to the government at the end of the year
c) The total amount of tax that you paid through withholdings and estimated tax
d) The total amount of tax that you could have avoided paying legally
Answer: b) The total amount of tax that you owe to the government at the end of the year
43. What is a tax bracket?
a) The tax rate that applies to your entire income
b) The range of income to which a tax rate applies
c) The maximum amount of taxes that you are legally allowed to deduct
d) The legal document that records your taxable income and deductions for the year
Answer: b) The range of income to which a tax rate applies
44. Which of the following is true about claiming a tax deduction?
a) It reduces your total taxable income.
b) It reduces the amount of tax you owe.
c) It increases the amount of tax you owe.
d) It only benefits taxpayers who itemize their deductions.
Answer: b) It reduces the amount of tax you owe.
45. Which of the following expenses can you deduct from your taxes?
a) Rent for your primary residence
b) Mortgage interest on your primary residence
c) Clothing purchased for work
d) Car payments
Answer: b) Mortgage interest on your primary residence
MANAGEMENT ACCOUNTING
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Rvu, [11/17/2023 8:48 PM]
💎 Financial Institutions and Capital Markets
1️⃣ What is the primary function of a commercial bank?
a. To provide investment advice

b. To issue stocks and bonds
c. To accept deposits and make loans
d. To underwrite government securities
🔑 Solution: c. To accept deposits and make loans
2️⃣ Which type of financial institution is owned by its members and operated for their benefit?
a. Commercial bank
b. Investment bank
c. Credit union
d. Hedge fund
🔑 Solution: c. Credit union
3️⃣ What is the purpose of a financial market?
a. To provide investment opportunities
b. To facilitate the flow of funds between borrowers and lenders
c. To regulate financial institutions
d. To provide financing for government programs
🔑 Solution: b. To facilitate the flow of funds between borrowers and lenders
4️⃣ Which of the following securities represents ownership in a corporation?
a. Stocks
b. Bonds
c. Options
d. Futures contracts
🔑 Solution: a. Stocks
5️⃣ What is the primary difference between a primary market and a secondary market?
a. The type of securities traded
b. The location of the market
c. The price of the securities traded
d. Whether new securities are issued or existing securities are traded
🔑 Solution: d. Whether new securities are issued or existing securities are traded
6️⃣ What is the role of a market maker in a capital market?
a. To buy and sell securities on behalf of individual investors
b. To provide liquidity by buying and selling securities from its own inventory
c. To manage the portfolios of institutional investors
d. To regulate the market and maintain fairness
🔑 Solution: b. To provide liquidity by buying and selling securities from its own inventory
Sure, here are some more multiple choice questions on financial institutions and capital markets:
7️⃣ Which of the following financial institutions typically offers the highest interest rates on deposits?
a. Commercial bank
b. Investment bank
c. Credit union
d. Pawnshop
🔑 Solution: c. Credit union
8️⃣ What is the primary purpose of the Securities and Exchange Commission (SEC)?
a. To regulate banks and other financial institutions
b. To issue new securities on behalf of the government
c. To protect investors and maintain fair and orderly markets
d. To provide investment advice to individual investors
🔑 Solution: c. To protect investors and maintain fair and orderly markets
9️⃣ Which of the following is an example of a non-bank financial institution?
a. Chase Bank
b. Goldman Sachs
c. Fidelity Investments
d. Wells Fargo
🔑 Solution: c. Fidelity Investments
1️⃣ 0️⃣ What is the duration of a bond?
a. The frequency of interest payments
b. The amount of interest paid
c. The time until the bond matures
d. The credit rating of the issuer
🔑 Solution: c. The time until the bond matures
1️⃣ 1️⃣ Which of the following securities is considered to be the least risky?
a. Corporate bonds
b. Municipal bonds
c. Treasury bonds
d. Junk bonds
🔑 Solution: c. Treasury bonds
1️⃣ 2️⃣ What is the purpose of a stock index?
a. To track the performance of a specific stock
b. To track the performance of a specific industry or sector
c. To track the performance of the entire stock market
d. To predict future movements in the stock market
🔑 Solution: c. To track the performance of the entire stock market
1️⃣ 3️⃣ How do credit ratings affect the cost of borrowing for a firm?
a. Higher credit ratings lead to lower borrowing costs.
b. Higher credit ratings lead to higher borrowing costs.
c. Credit ratings have no impact on borrowing costs.
d. Credit ratings only affect how much a firm can borrow, not the cost of borrowing.
🔑 Solution: a. Higher credit ratings lead to lower borrowing costs.
1️⃣ 4️⃣ What is the primary purpose of insurance companies?
a. To provide loans to individuals and businesses
b. To provide protection against financial risk
c. To sell stocks and bonds to individuals and institutional investors
d. To provide investment advice to individual investors
🔑 Solution: b. To provide protection against financial risk
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4️⃣ 9️⃣ Which of the following is a measure of the strength of the association between two continuous
variables in a non-linear relationship?
a) Spearman's rank correlation coefficient
b) Pearson's correlation coefficient
c) Standard deviation
d) Mean difference
5️⃣ 0️⃣ Which of the following is used to test the difference between two population variances?
a) T-test
b) F-test
c) Chi-square test
d) ANOVA
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1️⃣ 7️⃣ Which of the following is an example of a product in the growth stage of the product life cycle?
a. The latest version of a smartphone that has been on the market for several years
b. A new software product that is just being released
c. A car model that has been on the market for several years and is still popular
d. A household appliance that is well-established and has been on the market for years
Answer: a
1️⃣ 8️⃣ Which of the following is an example of a product in the maturity stage of the product life
cycle?
d. A household appliance that is well-established and has been on the market for years
Answer: d
1️⃣ 9️⃣ Which of the following is an example of a product in the decline stage of the product life cycle?
d. A household appliance that is well-established and has been on the market for years and is now being
phased out
Answer: d
2️⃣ 0️⃣ Which of the following is an example of a brand extension?
a. A soda company introducing a new flavor of soda
b. A clothing company starting to sell home decor items
c. A car company starting to sell boats
d. A sports equipment company starting to sell cosmetics
Answer: b
2️⃣ 1️⃣ Which of the following is an example of a co-branding strategy?
a. A shoe company partnering with a sports team to release a limited edition shoe
b. A car company partnering with a fashion designer to release a limited edition car
c. A fast food chain partnering with a toy company to release a limited edition toy
d. A technology company partnering with a food company to release a limited edition smartphone
Answer: a
2️⃣ 2️⃣ Which of the following is an example of a positioning strategy?
a. Offering a discount to customers who refer a friend
b. Advertising on social media
c. Providing point-of-purchase displays in retail stores
d. Emphasizing the unique benefits of a product or brand to a specific target market
Answer: d
2️⃣ 3️⃣ Which of the following is an example of a distribution channel?
a. A television commercial
b. A print advertisement in a magazine
c. A retail store
d. A website
Answer: c
2️⃣ 4️⃣ Which of the following is an example of direct marketing?
c. A retail store
d. A personalized email promoting a product or service
Answer: a
2️⃣ 5️⃣ Which of the following is an example of indirect marketing?
c. A retail store
d. A viral social media post about a product or service
Answer: d
2️⃣ 6️⃣ Which of the following is an example of a push promotional strategy?
a. A television commercial promoting a new product to consumers
b. Offering a discount to customers who refer a friend
d. Allowing customers to test a product before purchasing
Answer: c
2️⃣ 7️⃣ Which of the following is an example of a pull promotional strategy?

d. Allowing customers to test a product before purchasing
Answer: a
2️⃣ 8️⃣ Which of the following is an example of a personal selling technique?
b. Providing point-of-purchase displays in retail stores
c. Offering a discount to customers who refer a friend
d. A salesperson demonstrating a product to a potential customer
Answer: d
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2️⃣ 9️⃣ Which of the following is an example of a sales promotion?
d. A company donating a portion of its profits to a charity
Answer: b
3️⃣ 0️⃣ Which of the following is an example of a public relations technique?
c. Issuing a press release about a company's charitable contributions
d. Providing point-of-purchase displays in retail stores
Answer: c
3️⃣ 1️⃣ Which of the following is an example of a guerrilla marketing technique?

a. Placing an advertisement in a magazine
b. Hosting a charity event to raise awareness of a cause
c. Creating a viral social media campaign
d. Offering a discount to customers who refer a friend
Answer: c
3️⃣ 2️⃣ Which of the following is an example of a product feature?
a. A camera on a smartphone
b. The price of a product
c. The brand of a product
d. The color of a product
Answer: a
3️⃣ 3️⃣ Which of the following is an example of a product benefit?
a. The price of a product
b. The brand of a product
c. The color of a product
d. The convenience of being able to take high-quality photos with a smartphone camera
Answer: d
3️⃣ 4️⃣ Which of the following is an example of a demographic segmentation variable?
a. Lifestyle
b. Personality
c. Gender
d. Attitudes
Answer: c
3️⃣ 5️⃣ Which of the following is an example of a psychographic segmentation variable?
a. Age
b. Income
c. Social class
d. Personality
Answer: d
3️⃣ 6️⃣ Which of the following is an example of a behavioral segmentation variable?
a. Age
b. Income
c. Loyalty to a particular brand
d. Education level
Answer: c
3️⃣ 7️⃣ Which of the following is an example of a geographic segmentation variable?
a. Age
b. Income
c. Climate
d. Personality
Answer: c
3️⃣ 8️⃣ Which of the following is an example of a market research technique?
a. Offering a discount to customers who refer a friend
b. Providing point-of-purchase displays in retail stores
c. Conducting a survey of potential customers
d. A salesperson demonstrating
3️⃣ 9️⃣ Which of the following is an example of a primary data source?
a. A market research report purchased from a research firm
b. Data collected from customer surveys conducted by the company
c. Sales data provided by a third-party vendor

d. Secondary research studies conducted by industry experts
Answer: b
4️⃣ 0️⃣ Which of the following is an example of a secondary data source?
a. A market research report purchased from a research firm
b. Data collected from customer surveys conducted by the company
c. Sales data provided by a third-party vendor
d. Primary research studies conducted by industry experts
Answer: a
4️⃣ 1️⃣ Which of the following is an example of a closed-ended question in a survey?
a. "What do you think of our product?"
b. "How likely are you to recommend our product to a friend?"
c. "Tell us about your experience using our product."
d. "What improvements would you like to see in our product?"
Answer: b
4️⃣ 2️⃣ Which of the following is an example of a Likert scale question in a survey?
d. "On a scale of 1-5, how satisfied are you with our product?"
Answer: d
4️⃣ 3️⃣ Which of the following is an example of a leading question in a survey?
d. "Our product is the best, isn't it?"

Answer: d
4️⃣ 4️⃣ Which of the following is an example of a double-barreled question in a survey?
d. "How satisfied are you with our product's quality and price?"
Answer: d
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Liquidity Ratios 🎯
🔑 Liquidity ratios are financial metrics that are used to evaluate a company's ability to pay off its short-
term debts and obligations. These ratios are important for investors and creditors to determine a
company's liquidity position and ability to meet its current obligations. Here are some of the liquidity
ratios, along with their formulas, examples, and interpretations:
1️⃣ Current Ratio:
The current ratio is a measure of a company's ability to cover its current liabilities with its current assets
over a year.
↗️Formula: Current Ratio = Current Assets ÷ Current Liabilities
↗️Example: If company XYZ has Br 60,000 in current assets and Br 30,000 in current liabilities, its current
ratio would be 2:1
(Br 60,000 ÷ Br 30,000).
🔑 Interpretation: A higher current ratio means that the company has a better ability to pay off its short-
term debts and meet its current obligations.
2️⃣ Quick Ratio:

The quick ratio (also known as the acid-test ratio) measures a company's ability to pay off its short-term
liabilities with its most liquid assets within a year.
↗️Formula: Quick Ratio = (Current Assets - Inventory) ÷ Current Liabilities
↗️Example: If company ABC has Br 40,000 in current assets, Br 20,000 in inventory, and Br 15,000 in
current liabilities, its quick ratio would be 1.33:1
((Br 40,000 - Br 20,000) ÷ Br15,000).
🔑 Interpretation: A higher quick ratio indicates that a company has a better ability to pay off its short-
term debts and meet its current obligations.
3️⃣ Cash Ratio:
The cash ratio measures a company's ability to pay off its short-term liabilities with its cash and cash
equivalents.
↗️Formula: Cash Ratio = (Cash + Cash Equivalents) ÷ Current Liabilities
↗️Example: If company LMN has Br 30,000 in cash and cash equivalents and Br 10,000 in current
liabilities, its cash ratio would be 3:1 (Br 30,000 ÷ Br 10,000).
🔑 Interpretation: A higher cash ratio indicates that a company has a better ability to pay off its short-
term debts and meet its current obligations with its available cash and cash equivalents.
In general,
🎯higher liquidity ratios indicate that a company has a better ability to pay off its short-term debts and
meet its current obligations.
🎯A very high liquidity ratio may also indicate that the company is not effectively utilizing its assets to
generate revenue.
🎯 A very low liquidity ratio may indicate that the company may have trouble meeting its current
obligations.
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Asset Management Ratios 🎯
🔑 Asset management ratios, also known as turnover ratios, are financial metrics that measure how
efficiently a company utilizes its assets to generate revenue. These ratios help investors and analysts
evaluate a company's operational efficiency and effectiveness.
Here are some commonly used asset management ratios:
1️⃣ Inventory turnover ratio:
This ratio measures how efficiently a company manages its inventory. It indicates how many times a
company's inventory is sold and replaced during a given period.
💎 Formula: Inventory turnover ratio = Cost of goods sold / Average inventory
💎 Example:
If a company's cost of goods sold was Br 500,000 and its average inventory was Br 100,000, then the
inventory turnover ratio would be 5.
💎 Interpretation:
A high inventory turnover ratio suggests that a company is effectively managing its inventory, while a
low ratio could indicate poor inventory management or slow sales.
2️⃣ Accounts receivable turnover ratio:
This ratio measures how quickly a company collects payments from its customers.
💎 Formula:
Accounts receivable turnover ratio = Net credit sales / Average accounts receivable
💎 Example:
If a company's net credit sales were Br 1,000,000 and its average accounts receivable was Br 200,000,
then the accounts receivable turnover ratio would be 5.
A high accounts receivable turnover ratio suggests that a company is collecting payments quickly, while
a low ratio could indicate problems with credit and collections.
3️⃣ Fixed asset turnover ratio:
This ratio measures how efficiently a company uses its fixed assets to generate revenue.
💎 Formula:
Fixed asset turnover ratio = Revenue / Average fixed assets
💎 Example: If a company's revenue was Br 10,000,000 and its average fixed assets were Br 2,000,000,
then the fixed asset turnover ratio would be 5.
A high fixed asset turnover ratio suggests that a company is effectively utilizing its fixed assets to
generate revenue, while a low ratio could indicate that the company's fixed assets are not being used
efficiently.
4️⃣ Total asset turnover ratio:
This ratio measures how efficiently a company uses all of its assets to generate revenue.
💎 Formula:
Total asset turnover ratio = Revenue / Average total assets
💎 Example:
If a company's revenue was Br 20,000,000 and its average total assets were Br 4,000,000, then the total
asset turnover ratio would be 5.
A high total asset turnover ratio suggests that a company is effectively utilizing all of its assets to
generate revenue, while a low ratio could indicate that the company's assets are not being used
efficiently.
🔑 Overall, asset management ratios provide important insights into a company's operational efficiency
and effectiveness. However, they should be used in conjunction with other financial metrics and
qualitative analysis to fully evaluate a company's performance.
Rvu, [11/17/2023 8:48 PM]
📍 questions on process costing:
1. What types of costs are typically included in process costing?
2. How do you reconcile the cost of goods manufactured with the cost of goods sold in process costing?
3. What are some common methods for assigning costs to production in process costing?
4. What is a process cost summary and what information does it provide?
5. How do you use process costing to calculate the cost of inventory?
6. What are some of the ethical considerations that arise in process costing?
7. How do you deal with waste and scrap in process costing?
8. What are some of the key performance indicators (KPIs) that can be used in process costing?
9. How do you use process costing to determine the profitability of a particular product line?
10. What are some challenges associated with allocating joint costs in process costing?
Rvu, [11/17/2023 8:48 PM]
1. What is cost-volume-profit analysis and how is it used in decision-making?
2. How do fixed costs and variable costs impact pricing decisions?
3. How do you calculate break-even point in terms of sales volume and sales revenue?
4. What is contribution margin and how is it calculated?
5. How do you use contribution margin to assess the profitability of a product or product line?
6. How does the concept of relevant costs impact decision-making?
7. What is incremental analysis and how is it used in decision-making?
8. How do you create a budget that incorporates both fixed and variable costs?
9. How do you use break-even analysis to evaluate potential investments in new products or projects?
10. How do you conduct sensitivity analysis to assess the impact of changes in sales price or sales
volume on profitability?
11. How do you calculate the margin of safety and why is it important?
12. How does the concept of customer lifetime value impact pricing decisions?
13. How do you use variable costing and absorption costing to evaluate the performance of a product or
product line?
14. What is the difference between direct costs and indirect costs in decision-making?
15. How do you use cost-volume-profit analysis to evaluate potential changes in product mix?
Rvu, [11/17/2023 8:48 PM]
📍 management accounting
1. What is the difference between management accounting and financial accounting? Provide an
example to illustrate your answer.
2. What are the different types of cost that are used in management accounting? Give an example of
each type of cost.
3. How does a company use budgeting as a management accounting tool? Give an example of a budget
a company might prepare and how it might use that budget in making decisions.
4. What is variance analysis? Explain how it is used to help managers control costs and improve
performance.
5. Describe the balanced scorecard approach to performance measurement. How does this approach
help managers to align business strategy and performance measurement?
6. How can activity-based costing (ABC) help a company to understand and control its costs more
effectively? Give an example of how a company might use ABC to allocate costs to its products or
services.
7. Explain the difference between relevant and sunk costs, and how these concepts are used in decision-
making.
8. How can managerial accounting information be used to support decision-making in a company?
Provide an example of a real-life situation where managerial accounting information could have been
used to make a better decision.
9. What is the difference between absorption costing and variable costing? Which method do you think
is more useful for decision-making and why?
10. How can a company use performance benchmarking to improve its operations and profitability?
Rvu, [11/17/2023 8:48 PM]
💎 Capital budgeting Questions
1️⃣ Which of the following is a valid reason a company might invest in a new project?
A. To increase employee vacation time
B. To decrease sales
C. To grow revenue
D. To reduce customer satisfaction
Solution: C. To grow revenue.
2️⃣ Which capital budgeting method uses a percentage rate to calculate the present value of future
cash flows?
A. Net present value (NPV)
B. Internal rate of return (IRR)
C. Payback period
D. Profitability index
Solution: B. Internal rate of return (IRR).
3️⃣ Which of the following is a disadvantage of using payback period for capital budgeting?
A. It is easy to understand
B. It helps to manage risk

C. It ignores the time value of money
D. It considers all cash flows
Solution: C. It ignores the time value of money.
4️⃣ Which capital budgeting method takes into account the amount and timing of all cash flows?
C. Payback period
Solution: A. Net present value (NPV).
5️⃣ A project has an initial investment of $10,000 and is expected to generate $5,000 annually for five
years. What is the payback period?
A. 2 years
B. 5 years
C. 10 years
D. 25 years
Solution: B. 5 years. To calculate the payback period, subtract the annual cash flows from the initial
investment until the initial investment is recovered. In this case, it takes 2 years to recover $10,000,
leaving a remaining $10,000 to be recovered. It then takes an additional 3 years to recover the
remaining $10,000, for a total payback period of 5 years.
6️⃣ A project has an initial investment of $10,000 and has a net present value of $5,000. Should this
project be pursued?
A. Yes
B. No
Solution: A. Yes. A positive net present value indicates that a project is expected to generate more cash
than it costs. Therefore, pursuing the project is likely to benefit the company.
7️⃣ Which capital budgeting method assumes all cash flows are reinvested at the company's cost of
capital?
C. Modified internal rate of return (MIRR)
Solution: B. Internal rate of return (IRR).
8️⃣ Which of the following factors would increase a project's net present value?
A. An increase in initial investment
B. A decrease in expected cash flows
C. An increase in the discount rate
D. A decrease in the project's useful life
Solution: D. A decrease in the project's useful life. A shorter useful life means the cash flows are received
sooner, which increases the net present value.
9️⃣ Which of the following is not a step in the capital budgeting process?
A. Identifying potential projects
B. Determining a project's cash flows
C. Ignoring the time value of money
D. Evaluating and selecting projects
Solution: C. Ignoring the time value of money.

🔟 Which capital budgeting method calculates the present value of future cash flows relative to the initial
investment?
C. Payback period
Solution: D. Profitability index.
Rvu, [11/17/2023 8:48 PM]
🧑‍🏫 questions on financial statement analysis
🧑‍🎓 🧑‍🎓
1. Which of the following financial statements shows a company's revenues and expenses over a period
of time?
a) Balance Sheet
b) Income Statement
c) Statement of Cash Flows
d) Statement of Retained Earnings
Answer: b) Income Statement
2. Which ratio measures a company's ability to pay its short-term debt obligations?
a) Gross Profit Margin
b) Debt-to-Equity Ratio
c) Quick Ratio
d) Return on Assets Ratio
Answer: c) Quick Ratio

3. Which of the following ratios measures how efficiently a company uses its assets to generate sales?
a) Inventory Turnover Ratio
c) Fixed Asset Turnover Ratio
d) Price-Earnings Ratio
Answer: c) Fixed Asset Turnover Ratio
4. Which of the following ratios measures the profitability of a company relative to its investment in
assets?
a) Return on Equity Ratio
b) Gross Profit Margin
c) Return on Assets Ratio
d) Asset Turnover Ratio
Answer: c) Return on Assets Ratio
5. Which of the following is not a component of the DuPont Model of Return on Equity?
a) Net Profit Margin
b) Total Asset Turnover
c) Equity Multiplier
d) Gross Profit Margin
Answer: d) Gross Profit Margin
6. Which of the following measures the liquidity of a company's current assets?
a) Debt-to-Equity Ratio
b) Acid-Test Ratio
c) Current Ratio
d) Return on Equity Ratio
Answer: b) Acid-Test Ratio
7. Which of the following ratios measures the proportion of a company's assets that are financed by
debt?
c) Earnings per Share
Answer: b) Debt-to-Equity Ratio
8. Which of the following ratios measures the proportion of a company's earnings that are paid out as
dividends?
a) Dividend Payout Ratio
b) Price-Earnings Ratio
c) Return on Equity Ratio
d) None of the above
Answer: a) Dividend Payout Ratio
9. Which of the following statements is true about financial leverage?
a) Financial leverage refers to a company's ability to meet its financial obligations
b) Financial leverage provides a cushion against losses
c) Financial leverage increases both potential profits and losses
d) Financial leverage has no impact on a company's profitability

Answer: c) Financial leverage increases both potential profits and losses
10. Which of the following financial statements shows a company's assets, liabilities, and equity at a
specific point in time?
a) Balance Sheet
b) Income Statement
c) Statement of Cash Flows
d) Statement of Retained Earnings
Answer: a) Balance Sheet
Rvu, [11/17/2023 8:48 PM]
11. Which of the following ratios measures the ability of a company to generate cash flow from its
operations after accounting for capital expenditures?
a) Operating Cash Flow Ratio
c) Free Cash Flow Ratio
d) Debt-to-Equity Ratio
Answer: c) Free Cash Flow Ratio
12. Which of the following ratios measures the profit a company makes on each dollar of revenue?
b) Operating Profit Margin
c) Net Profit Margin
d) Return on Equity Ratio
Answer: c) Net Profit Margin

13. Which of the following ratios measures how quickly a company collects cash from its customers?
a) Quick Ratio
b) Accounts Receivable Turnover Ratio
c) Inventory Turnover Ratio
d) Current Ratio
Answer: b) Accounts Receivable Turnover Ratio
14. Which of the following ratios measures the percentage of assets a company finances with equity?
a) Equity Multiplier
b) Return on Assets Ratio
c) Gross Profit Margin
d) Debt-to-Equity Ratio
Answer: a) Equity Multiplier
15. Which of the following financial ratios indicates the degree of safety associated with a company's
debt load?
a) Total Debt Ratio
c) Interest Coverage Ratio
d) Current Ratio
Answer: c) Interest Coverage Ratio
16. Which of the following financial ratios measures the effectiveness of a company's management in
generating profits from its total assets?
a) Asset Turnover Ratio
b) Return on Equity Ratio

c) Quick Ratio
Answer: a) Asset Turnover Ratio
17. Which of the following financial ratios measures the proportion of a company's total assets financed
by debt and other liabilities?
a) Debt-to-Total Assets Ratio
b) Current Ratio
c) Earnings per Share
d) Gross Profit Margin
Answer: a) Debt-to-Total Assets Ratio
18. Which of the following financial ratios measures the rate at which a company's earnings are
growing?
d) Earnings per Share Growth Ratio
Answer: d) Earnings per Share Growth Ratio
19. Which of the following ratios measures how much a company earns from each dollar invested by
shareholders?
a) Return on Assets Ratio
b) Return on Investment Ratio
d) Operating Cash Flow Ratio

Answer: c) Return on Equity Ratio
20. Which of the following financial ratios is used to determine a company's ability to pay off its long-
term debt obligations?
a) Debt-to-Total Assets Ratio
b) Interest Coverage Ratio
c) Debt Service Coverage Ratio
d) Current Ratio
Answer: c) Debt Service Coverage Ratio
Rvu, [11/17/2023 8:48 PM]
Question 1:
Jackson Corporation reported the following information at the end of 2021:
- Net income: $500,000
- Depreciation expense: $70,000
- Accounts receivable at the beginning of the year: $80,000
- Accounts receivable at the end of the year: $95,000
- Prepaid insurance at the beginning of the year: $15,000
- Prepaid insurance at the end of the year: $10,000
- Accrued interest at the end of the year: $8,000
What is the amount of cash collected from customers during 2021?
Solution:
The cash collected from customers during 2021 can be calculated by using the following formula:
Cash collected from customers = Net sales - Decrease in accounts receivable
Net sales can be calculated by adding the beginning balance of accounts receivable to the sales recorded
during the year, and then subtracting the ending balance of accounts receivable:
Net sales = Beginning accounts receivable + Sales - Ending accounts receivable
Beginning accounts receivable = $80,000
Sales = Net income + Depreciation expense - Increase in accounts receivable - Decrease in prepaid
insurance - Accrued interest
= $500,000 + $70,000 - ($95,000 - $80,000) - ($15,000 - $10,000) - $8,000
= $537,000
Ending accounts receivable = $95,000
Therefore, net sales = $80,000 + $537,000 - $95,000 = $522,000
Cash collected from customers = $522,000 - ($95,000 - $80,000) = $507,000
Therefore, the amount of cash collected from customers during 2021 was $507,000.
Question 2:
XYZ Corporation acquired a machine on January 1, 2021, for $100,000. The machine has an estimated
useful life of 10 years and a salvage value of $10,000. What is the depreciation expense for 2021,
assuming that XYZ uses the straight-line method?
Solution:
The depreciation expense for 2021 can be calculated by using the straight-line method, which involves
dividing the cost of the asset by its expected useful life and subtracting the salvage value:
Depreciation expense = (Cost - Salvage value) / Useful life
Cost = $100,000
Salvage value = $10,000
Useful life = 10 years
Depreciation expense = ($100,000 - $10,000) / 10 = $9,000
Therefore, the depreciation expense for 2021 would be $9,000.
Question 3:
ABC Corporation reported the following information at the end of 2021:
- Cash and cash equivalents: $80,000
- Accounts receivable: $50,000
- Inventory: $100,000
- Property, plant, and equipment: $300,000
- Accumulated depreciation: $120,000
- Accounts payable: $40,000
- Long-term debt: $150,000
- Common stock: $200,000
- Retained earnings: $120,000
What is the total shareholder's equity at the end of 2021?

Solution:
The total shareholder's equity can be calculated by adding the common stock and retained earnings:
Total shareholder's equity = Common stock + Retained earnings
Common stock = $200,000
Retained earnings = $120,000
Therefore, total shareholder's equity = $200,000 + $120,000 = $320,000
Alternatively, the total shareholder's equity can also be calculated by subtracting the total liabilities
from the total assets:
Total assets = Cash and cash equivalents + Accounts receivable + Inventory + Property, plant, and
equipment - Accumulated depreciation
= $80,000 + $50,000 + $100,000 + $300,000 - $120,000
= $410,000
Total liabilities = Accounts payable + Long-term debt
= $40,000 + $150,000
= $190,000
Therefore, total shareholder's equity = $410,000 - $190,000 = $320,000.
Therefore, the total shareholder's equity at the end of 2021 was $320,000.
Rvu, [11/17/2023 8:48 PM]
Question 4:
DEF Corporation sold merchandise on account for $50,000, with terms 1/10, n/30. The company uses
the perpetual inventory system. If the customer pays within 10 days, what is the amount of the discount
and what is the amount of cash received?
Solution:
The customer is entitled to a 1% discount if payment is made within 10 days. Therefore, the amount of
the discount is:
Discount = $50,000 * 1% = $500
The customer will pay $49,500 ($50,000 - $500) if payment is made within 10 days. The following journal
entry would be recorded in DEF's accounting records when the payment is received:
Accounts receivable 49,500
Sales discounts 500
Cash 49,000
Therefore, the amount of the discount is $500, and the amount of cash received is $49,000.
Question 5:
GHI Corporation paid $50,000 for a two-year insurance policy on January 1, 2021. What is the amount of
insurance expense that should be recorded for 2021?
Solution:
The amount of insurance expense that should be recorded for 2021 can be calculated by dividing the
cost of the insurance policy by its length in years and multiplying it by the number of months for which
insurance was in effect during 2021:
Insurance expense = (Cost / Length in years) * Months in effect
Cost = $50,000
Length in years = 2
Months in effect = 12 (since the policy was in effect for the full year)
Insurance expense = ($50,000 / 2) * 12/12 = $25,000
Therefore, the amount of insurance expense that should be recorded for 2021 is $25,000.
Question 6:
JKL Corporation purchased a patent for $100,000 on January 1, 2021. The patent has a useful life of 20
years. What is the amortization expense for 2021, assuming that JKL uses the straight-line method?
Solution:
The amortization expense for 2021 can be calculated by using the straight-line method, which involves
dividing the cost of the asset by its expected useful life:
Amortization expense = Cost / Useful life
Cost = $100,000
Useful life = 20 years
Amortization expense = $100,000 / 20 = $5,000
Therefore, the amortization expense for 2021 would be $5,000.

Rvu, [11/17/2023 8:48 PM]
Question 7:
MNO Corporation issued $500,000 of 10-year, 8% bonds on January 1, 2021, at 102. The bonds pay
interest semiannually. What is the amount of interest expense recorded for the six months ending June
30, 2021?
Solution:
The amount of interest expense recorded for the six months ending June 30, 2021 can be calculated by
using the effective interest method. Under this method, the interest expense for each period is
calculated as a percentage of the carrying value of the bond liability at the beginning of the period. The
effective interest rate is calculated by dividing the annual interest payment by the bond proceeds.
The bond proceeds are calculated as follows:
Bond proceeds = Face value of bonds * Issue price / 100
= $500,000 * 102 / 100
= $510,000
The annual interest payment is calculated as follows:
Annual interest payment = Face value of bonds * Stated interest rate
= $500,000 * 8%
= $40,000
The effective interest rate is calculated as follows:
Effective interest rate = Annual interest payment / Bond proceeds

= $40,000 / $510,000
= 7.84%
The carrying value of the bond liability at the beginning of the period is the bond proceeds, since no
interest has yet been paid:
Carrying value at beginning of period = Bond proceeds
= $510,000
The interest expense for the six months ending June 30, 2021 can be calculated as follows:
Interest expense = Carrying value at beginning of period * Effective interest rate * Time
= $510,000 * 7.84% * 6/12
= $19,992
Therefore, the amount of interest expense recorded for the six months ending June 30, 2021 is $19,992.
Question 8:
PQR Corporation purchased a delivery truck for $50,000 on January 1, 2021. The truck has an estimated
useful life of five years and a salvage value of $5,000. What is the book value of the truck on December
31, 2023, assuming that PQR uses the double-declining-balance method of depreciation?
Solution:
The double-declining-balance method of depreciation calculates the depreciation expense by doubling

the straight-line rate and then applying it to the book value of the asset at the beginning of the period.
The book value of the asset is adjusted each period by subtracting the depreciation expense for the
period.
The straight-line depreciation rate can be calculated as follows:

Straight-line rate = 1 / Useful life
=1/5
= 20%
The double-declining-balance rate is double the straight-line rate:
Double-declining-balance rate = Straight-line rate * 2
= 20% * 2
= 40%
The depreciation expense for 2021 can be calculated as follows:
Depreciation expense = Book value at beginning of period * Double-declining-balance rate
= $50,000 * 40%
= $20,000
The book value at the beginning of 2022 is the cost of the asset minus the cumulative depreciation
recorded to date:
Book value at beginning of 2022 = Cost - Cumulative depreciation
= $50,000 - $20,000
= $30,000
= $30,000 * 40%
= $12,000
The book value at the beginning of 2023 is the cost of the asset minus the cumulative depreciation
recorded to date:
Book value at beginning of 2023 = Cost - Cumulative depreciation
= $50,000 - $32,000
= $18,000
= $18,000 * 40%
= $7,200
The book value of the truck on December 31, 2023 is:
Book value on December 31, 2023 = Cost - Cumulative depreciation
= $50,000 - ($20,000 + $12,000 + $7,200)
= $10,800
Therefore, the book value of the truck on December 31, 2023 is $10,800.
Question 9:
STU Corporation reported net income of $200,000 in 2021. The company had 50,000 shares of common
stock outstanding throughout the year. The company also had 10,000 shares of cumulative preferred
stock outstanding. The preferred stock has a dividend rate of 5% and a par value of $100 per share.
Rvu, [11/17/2023 8:48 PM]

What is the amount of total dividends that must be paid in 2021, assuming that no dividends were paid
in 2020?
Solution:
The preferred stockholders are entitled to a dividend of 5% of the par value per share each year. Since
the preferred stock is cumulative, any unpaid dividends from prior years must be paid before common
stockholders receive any dividends.
The total amount of preferred dividends that must be paid for 2021 is:
Preferred dividends = Number of preferred shares * Par value per share * Dividend rate
= 10,000 * $100 * 5%
= $50,000
Any unpaid dividends from prior years must also be paid. Since no dividends were paid in 2020, the
unpaid dividends as of December 31, 2020, are equal to the 2020 dividend amount. The 2020 dividend
amount is:
2020 dividend = Number of preferred shares * Par value per share * Dividend rate
= 10,000 * $100 * 5%
= $5,000
Therefore, the total amount of dividends that must be paid in 2021 is $50,000 + $5,000 = $55,000.
Since there were no dividends paid in 2020, the total dividends to be paid in 2021 are all for the current
year.
Question 10:
UVW Corporation purchased 1,000 shares of XYZ Corporation common stock for $50 per share on
January 1, 2021. The investment was classified as available-for-sale. At December 31, 2021, the fair
value of the investment was $60 per share. What is the amount of unrealized gain or loss that should be
reported on UVW's income statement for 2021?
Solution:
Since the investment is classified as available-for-sale, changes in the fair value of the investment are
reported as part of other comprehensive income on the balance sheet. The unrealized gain or loss is
calculated as the difference between the fair value and the cost of the investment.
The cost of the investment is:
Cost = Number of shares * Purchase price per share
= 1,000 * $50
= $50,000
The fair value of the investment at December 31, 2021, is:
Fair value = Number of shares * Fair value per share
= 1,000 * $60
= $60,000
The unrealized gain is the difference between the fair value and the cost:
Unrealized gain = Fair value - Cost
= $60,000 - $50,000
= $10,000
The unrealized gain of $10,000 is reported on UVW's balance sheet as part of other comprehensive
income, but it is not reported on the income statement. The gain is recognized on the income statement
only when the investment is sold.
Therefore, the amount of unrealized gain or loss that should be reported on UVW's income statement
for 2021 is $0.
Rvu, [11/17/2023 8:48 PM]
Which of the following is not a financial statement?
a) Income statement
b) Balance sheet
c) Statement of cash flows
d) Sales report
Answer: d) Sales report
What is the primary purpose of financial accounting?
a) To help managers make decisions
b) To communicate financial information to external users
c) To calculate tax liabilities
d) To comply with regulatory requirements
Answer: b) To communicate financial information to external users
What is the accounting equation?
a) Assets = Liabilities + Equity
b) Revenues - Expenses = Net Income
c) Cash + Accounts Receivable = Accounts Payable
d) Gross Profit - Operating Expenses = Net Income
Answer: a) Assets = Liabilities + Equity
Which of the following is not an asset?

a) Cash
b) Accounts payable
c) Accounts receivable
d) Inventory
Answer: b) Accounts payable
Which financial statement reports a company's revenues and expenses over a period of time?
a) Balance sheet
b) Income statement
c) Statement of retained earnings
d) Statement of cash flows
Answer: b) Income statement
Which financial statement reports a company's assets, liabilities, and equity at a specific point in time?
a) Income statement
b) Balance sheet
Answer: b) Balance sheet
Which of the following is an example of a current liability?
a) Accounts payable
b) Notes payable
c) Bonds payable
d) Common stock
Answer: a) Accounts payable
What is the formula for calculating net income?
a) Revenues - Expenses
b) Assets = Liabilities + Equity
c) Gross profit - Operating expenses
d) Beginning retained earnings + Net income - Dividends = Ending retained earnings
Answer: a) Revenues - Expenses
Which of the following is not a revenue account?
a) Sales
b) Rent income
c) Advertising expense
d) Service revenue
Answer: c) Advertising expense
Which of the following is an example of a contra asset account?
a) Accumulated depreciation
b) Accounts payable
c) Prepaid rent
d) Common stock
Answer: a) Accumulated depreciation
What is the purpose of adjusting entries?
a) To correct errors in the accounting records
b) To record transactions that were previously unrecorded
c) To record revenue and expenses in the proper period
d) To close the books at the end of the period
Answer: c) To record revenue and expenses in the proper period
Which financial statement shows the changes in retained earnings over a period of time?
a) Income statement
b) Balance sheet
Answer: c) Statement of retained earnings
Which of the following is not an example of a prepaid expense?
a) Prepaid rent
b) Prepaid insurance
c) Accounts payable
d) Prepaid advertising
Answer: c) Accounts payable
Which of the following is not a type of adjusting entry?
a) Accrued revenue
b) Accrued expenses
c) Deferred revenue
d) Depreciation expense
Answer: d) Depreciation expense
What is the purpose of the closing process?
a) To update the accounting records for adjusting entries
b) To transfer balances from temporary accounts to retained earnings
c) To record the acquisition of new assets
d) To prepare financial statements for external users
Rvu, [11/17/2023 8:48 PM]
What is the basic accounting equation?
Answer: The basic accounting equation is assets = liabilities + equity.
Define revenue and give an example.

Answer: Revenue is the income earned by a company from its business operations. An example of
revenue is the sales made by a company.
What is the purpose of the balance sheet?
Answer: The purpose of the balance sheet is to show the financial position of a company by presenting
its assets, liabilities, and equity.
What is the difference between accounts payable and accounts receivable?
Answer: Accounts payable are the amounts owed by a company to its suppliers, while accounts
receivable are the amounts owed to a company by its customers.
Define depreciation.
Answer: Depreciation is the systematic allocation of the cost of a fixed asset over its useful life.
What is the difference between gross profit and net profit?
Answer: Gross profit is the difference between revenue and cost of goods sold, while net profit is the
income left over after all expenses have been deducted from revenue.
What is the purpose of the income statement?
Answer: The purpose of the income statement is to show the profit or loss of a company by presenting
its revenues, expenses, and net income.
Define goodwill.
Answer: Goodwill is an intangible asset that represents the value of a company's reputation, brand, and
customer loyalty.
What is the difference between a current asset and a fixed asset?
Answer: A current asset is an asset that is expected to be converted into cash within one year, while a
fixed asset is an asset that is used in the production of goods or services and is expected to provide
benefits for more than one year.
What is the purpose of the statement of cash flows?

Answer: The purpose of the statement of cash flows is to show the cash inflows and outflows of a
company by presenting its operating, investing, and financing activities.
What is the difference between cash basis accounting and accrual basis accounting?
Answer: Cash basis accounting recognizes revenue and expenses only when cash is received or paid,
while accrual basis accounting recognizes revenue and expenses when they are earned or incurred,
regardless of when cash is received or paid.
Define working capital.
Answer: Working capital is the difference between a company's current assets and its current liabilities.
What is the purpose of the trial balance?
Answer: The purpose of the trial balance is to ensure that the total debits equal the total credits in the
general ledger.
Define accounts.
Answer: Accounts are records of financial transactions that are classified into different categories, such
as assets, liabilities, equity, revenue, and expenses.
What is the purpose of the general ledger?
Answer: The purpose of the general ledger is to record all the financial transactions of a company and to
keep track of its balances in each account.

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RVU METEHARA CAMPUS EXIT EXAM TUTORIAL CLASS:

FOR ACCOUNTING AND FINANCE STUDENTS

1. _ is the process of simply preparing financial statements for external reporting.

Answer: b) Financial reporting

2. __ is the ability to meet short-term debts.

4. Which of the following represents the range of independent variables?

d) Range of the Domain

Answer: d) Range of the Domain

Answer: b) Accrued expense

9. Which of the following is an example of an intangible asset?

a) Debit Cash $15,000, Credit Sale $10,000, Credit Revenue $5,000

b) Debit A/R $10,000, Credit Cash $10,000, Credit Revenue $5,000

d) Debit Cash $10,000, Credit Sale $15,000, Credit COGS $10,000

11. Which of the following is NOT a typical objective of an audit?

a) Express an opinion on the company's financial statements.

b) Identify fraud or errors in the financial statements.

c) Provide consulting services related to accounting and assurance.

d) Assess whether internal controls are effective.

a) To determine the company's solvency

b) To ensure the company's compliance with tax regulations

c) To ensure that the financial statements are fairly presented

d) To prevent fraud and errors

Answer: d) To prevent fraud and errors

Rvu, [11/17/2023 8:48 PM]

15. Which of the following is an example of a misstatement in the financial statements?

a) The audit evidence gathered is not reliable.

b) The client fails to provide the required disclosures in the footnotes.

c) The auditor fails to identify a tax liability.

d) The client violates the Code of Professional Ethics.

17. What is the purpose of filing a tax return?

a) To pay your taxes

c) To provide information to the IRS about your income and deductions

d) To avoid an IRS audit

18. Which of the following is an example of a tax credit?

a) Deduction for charitable contributions

c) Child tax credit

Answer: c) Child tax credit

19. Which of the following is true about estimated taxes?

a) They are paid once a year.

b) They are always based on actual income.

d) They are paid only by corporations.

Answer: c) Sales tax

22. Which of the following is an example of a fixed cost?

Answer: c) Marginal cost

24. Which of the following is used in job-order costing?

a) Predetermined overhead rate

Answer: a) Predetermined overhead rate

25. ___ is the process of allocating overhead costs to products or services.

a) Cost behavior analysis

Answer: d) Activity-based costing

b) Stabilizing the share price

c) Maximizing shareholder wealth

d) Increasing market share

Answer: c) Maximizing shareholder wealth

Answer: c) Account receivable

d) Weighted average cost of capital

Answer: b) Cost of equity

30. Which of the following best defines operating leverage?

a) The degree to which a firm is financed by debt