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Quizzes > Business & Finance > Finance & Economics

How Well Do You Know Principles of Accounting? Take the Quiz!

Ready to ace your Principles of Accounting test? Challenge yourself now!

Difficulty: Moderate
2-5mins
Learning OutcomesCheat Sheet
Paper art illustration for accounting basics quiz on a dark blue background

Gear up for success with our Principles of Accounting Final Exam Quiz - designed for anyone preparing to ace the principles of accounting 1 final exam! This free, interactive assessment covers everything from debits and credits to adjusting entries, financial statements and ratio analysis. Ideal for students diving into the accounting final exam questions and answers or brushing up before their accountant 1 exam, you'll instantly see where you shine and where you need more practice. Take our principles of accounting test to challenge your core knowledge, then advance through a quick basic accounting exam for extra polish. Ready to boost your confidence and master key accounting concepts? Let's get started!

In the basic accounting equation, Assets = Liabilities + Equity, equity refers to:
Total amount of sales revenue
Total cash inflows for the period
Money borrowed from creditors
Owners' residual interest in assets after liabilities
Equity represents the owners' claim on a company's assets after all liabilities have been settled. It is calculated as Assets minus Liabilities and reflects the residual interest of shareholders. This concept is fundamental to understanding a company's financial position. For more details, see Investopedia.
Which of the following accounts normally has a debit balance?
Common Stock
Accounts Payable
Cash
Service Revenue
Asset and expense accounts typically carry debit balances. Cash is an asset account, so its normal balance is a debit. In contrast, liabilities and equity accounts normally have credit balances. For more information, visit AccountingCoach.
What is the primary purpose of preparing a trial balance?
To ensure debits equal credits in the ledger
To determine net income for the period
To record adjusting entries
To prepare financial statements directly
A trial balance lists all ledger account balances to verify that total debits equal total credits, helping detect errors in posting transactions. While it doesn't guarantee the absence of all errors, it is a key step before preparing adjusting entries. Once it tallies, accountants proceed to the next steps in the accounting cycle. Learn more at Investopedia.
Under the accrual basis of accounting, revenue is recognized when:
An invoice is sent to customers
Goods or services are delivered, regardless of cash receipt
Cash is received from customers
The accounting period ends
Under the accrual basis, revenue is recognized when it is earned - that is, when goods or services have been delivered or performed - even if cash hasn't been received. This method provides a more accurate picture of financial performance over a period. Contrast this with the cash basis, which recognizes revenue only when cash changes hands. For details, see AccountingTools.
Which formula is used to compute straight-line depreciation expense?
(Cost + Salvage Value) / Useful Life
Cost / Useful Life
(Cost - Salvage Value) / Useful Life
(Cost - Salvage Value) × Useful Life
The straight-line method allocates the depreciable cost of an asset evenly over its useful life using (Cost - Salvage Value) ÷ Useful Life. This yields a constant annual depreciation expense. It is the simplest and most commonly used depreciation method. More information is available at Investopedia.
At year-end, a $1,200 insurance policy paid in advance has expired evenly over 12 months. What adjusting entry is required?
Debit Prepaid Insurance $100; Credit Cash $100
Debit Insurance Expense $100; Credit Prepaid Insurance $100
Debit Prepaid Insurance $1,200; Credit Insurance Expense $1,200
Debit Insurance Expense $1,200; Credit Cash $1,200
Since the $1,200 prepaid insurance covers 12 months, $100 expires each month. The adjusting entry reduces the prepaid asset and records the expense: debit Insurance Expense $100 and credit Prepaid Insurance $100. This matches expense recognition with the period benefited. See AccountingCoach for more.
A company's bank statement shows a balance of $10,500. Outstanding checks total $2,000 and deposits in transit are $800. What is the adjusted bank balance?
$8,700
$12,700
$8,300
$9,300
To adjust the bank balance, subtract outstanding checks and add deposits in transit: $10,500 ? $2,000 + $800 = $9,300. This reconciles the bank's records to the company's cash ledger. Reconciling ensures accurate cash reporting. For a full guide, visit Investopedia.
Under FIFO inventory costing during periods of rising prices, which of the following is true?
Inventory cost flow has no effect on net income
Cost of goods sold is higher and net income is lower
Cost of goods sold is lower and net income is higher
Ending inventory is lower than under LIFO
FIFO assumes the oldest (usually cheaper) costs flow to cost of goods sold first, resulting in lower COGS and higher net income when prices rise. Ending inventory reflects more recent, higher costs, boosting reported assets. This contrasts with LIFO, which yields higher COGS in inflationary periods. See AccountingTools.
A company issues a $100,000 bond at 96 payable in 5 years with 8% annual interest. Using the effective interest method at a market rate of 10%, what is the first year's interest expense?
$10,000
$1,600
$8,000
$9,600
The bond's carrying amount at issuance is $96,000 (96% of $100,000). Under the effective interest method, interest expense equals carrying amount times market rate: $96,000 × 10% = $9,600. The difference between expense and the $8,000 cash paid is amortized discount. For more, see Investopedia.
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Study Outcomes

  1. Understand core accounting principles -

    Grasp how debits and credits function within double-entry bookkeeping and why they're essential for accurate financial records.

  2. Apply journal entries to transactions -

    Practice recording typical business events in T-accounts and ledgers to reinforce your skills for the principles of accounting test.

  3. Analyze financial statements -

    Break down income statements, balance sheets, and cash flow statements to interpret key metrics and financial health indicators.

  4. Evaluate trial balances and reconciliations -

    Identify and correct discrepancies in trial balances to ensure debits and credits are properly aligned.

  5. Interpret accounting final exam questions and answers -

    Review sample questions and model answers to pinpoint areas for improvement before the accounting final exam.

  6. Prepare confidently for the accountant 1 exam -

    Build exam readiness and boost your confidence by testing your knowledge under timed conditions similar to the principles of accounting 1 final exam.

Cheat Sheet

  1. Double-Entry System & Accounting Equation -

    Every transaction affects at least two accounts, maintaining the equation Assets = Liabilities + Equity. For your principles of accounting 1 final exam, practice by recording sample transactions from a university accounting department's case studies. Remember that mastering this framework is foundational for any principles of accounting test.

  2. Debits vs. Credits Rules (DEAD/LCR) -

    Use the mnemonic "DEAD" for Debits increasing Dividends, Expenses, Assets, and "LCR" for Credits increasing Liabilities, Capital, Revenue. Working through accounting final exam questions and answers from sources like Yale's SOM tutorials helps reinforce which side to post each account. Consistent practice with T-accounts will boost your confidence for the accountant 1 exam.

  3. Preparation of Core Financial Statements -

    Review the structure and linkages among the Income Statement, Statement of Retained Earnings, Balance Sheet, and Cash Flow Statement as outlined by FASB. A common practice question is deriving net income from revenues and expenses, then reconciling it to ending equity for your principles of accounting test. Seeing how line items flow between statements will help you ace the final exam format.

  4. Accrual vs. Cash Basis Accounting -

    Understand that under accrual accounting you recognize revenue when earned and expenses when incurred, as per IFRS and GAAP guidelines. Compare sample journal entries - like unearned revenue or prepaid expense adjustments - to cash basis entries to see timing differences. This clarity will help you tackle tricky accountant 1 exam scenarios about adjusting entries.

  5. Cost Principle & Depreciation Methods -

    Assets must be recorded at cost, and depreciation allocates that cost over useful life; use the straight-line formula: (Cost − Residual Value) ÷ Useful Life. Practice with equipment purchase examples from university repository problems to calculate annual depreciation. Familiarity with both straight-line and accelerated methods is a must for your accounting final exam questions and answers.

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