by runte.minnie
In the intricate world of business, understanding transactions is paramount for success. Whether you’re an aspiring entrepreneur or a seasoned professional, this quiz will test your grasp on the fundamental and advanced aspects of business transactions. Sharpen your skills and see how well you know the ins and outs of financial dealings.
We recommend that you do not leave the page that you are taking this quiz in. Stay honest 🙂
Business Transactions Quiz Questions Overview
1. What is the primary purpose of a business transaction?
To increase liabilities
To generate revenue
To decrease assets
To record expenses
2. Which financial statement summarizes a company’s financial performance over a specific period?
Balance Sheet
Income Statement
Cash Flow Statement
Statement of Retained Earnings
3. What does the term ‘double-entry bookkeeping’ refer to?
Recording each transaction twice
Recording two aspects of every transaction
Entering transactions in two different books
Using two accountants for verification
4. Which account is debited when a company purchases inventory on credit?
Accounts Payable
Inventory
Cash
Sales Revenue
5. What is the effect of a credit entry on the accounts payable account?
Increases the balance
Decreases the balance
No effect
Transfers the balance
6. Which of the following is considered a non-cash transaction?
Paying salaries
Purchasing equipment with cash
Issuing shares to investors
Receiving cash from customers
7. What type of account is ‘Prepaid Expenses’?
Asset
Liability
Equity
Revenue
8. Which principle requires that expenses be matched with revenues?
Revenue Recognition Principle
Matching Principle
Cost Principle
Full Disclosure Principle
9. What is the purpose of a trial balance?
To record all transactions
To ensure that debits equal credits
To prepare financial statements
To calculate net income
10. Which of the following is an example of a financing activity?
Paying suppliers
Issuing bonds
Purchasing inventory
Selling products
11. What does the term ‘liquidity’ refer to in business?
Profitability
Solvency
Ability to meet short-term obligations
Long-term growth potential
12. Which document is used to formally record a business transaction?
Invoice
Receipt
Journal Entry
Ledger
13. What is the accounting equation?
Assets = Liabilities + Equity
Assets = Revenue – Expenses
Liabilities = Assets + Equity
Equity = Assets – Liabilities
14. Which type of account is ‘Accounts Receivable’?
Asset
Liability
Equity
Expense
15. What does ‘accrual basis accounting’ mean?
Recording transactions when cash is received or paid
Recording transactions when they are incurred
Recording only large transactions
Recording transactions at the end of the fiscal year
16. Which financial statement shows a company’s financial position at a specific point in time?
Income Statement
Cash Flow Statement
Balance Sheet
Statement of Retained Earnings
17. What is the purpose of depreciation?
To allocate the cost of an asset over its useful life
To increase the value of an asset
To record the sale of an asset
To reduce tax liability
18. Which account is credited when a company issues common stock?
Cash
Common Stock
Retained Earnings
Accounts Payable
19. What is the effect of a debit entry on the cash account?
Increases the balance
Decreases the balance
No effect
Transfers the balance
20. What is ‘retained earnings’?
Total revenue earned
Profits not distributed as dividends
Cash reserves
Total assets minus liabilities
21. Which of the following is an example of an operating activity?
Paying dividends
Issuing stock
Selling products
Repaying loans
We recommend that you do not leave the page that you are taking this quiz in. Stay honest 🙂
