Check Your Accounting IQ

Check your knowledge of Accounting by answering these questions, then play the game and come back to see how much you have learned! 


1. What is a balance sheet?

a) An accounting system where payments and debts are posted on a sheet

b) An accounting method to pay your bills on time and keep track accurately

c) A way to keep track of your assets, liabilities and owners equity

d) An accounting system to keep track of all the assets you own including your cash and accounts receivable

e) An accounting system of current inventory reconciling with your purchases and sales to balance correctly


2. What is the current ratio formula?

a) A formula using the difference between the current revenue and the revenue from the last time period in accounting

b) A formula using the difference between monies owed now compared to the money owed from the previous period

c) A formula using the measure of your current inventory vs. the inventory from the previous period

d) A formula using the price of cost of goods sold compared to your current sales

e) A formula using your current assets divided by liabilities


3. What is a short-term note/loan?

a) A promise to a vendor when credit is issued for 30 days or less

b) An obligation due and owing on equipment which may be leased

c) Generally a loan that is due and payable within one year from issue

d) An account receivable due at the end of the month

e) Generally a loan for a few months (hence short term) due and owing on demand


4. What is the return on equity?

a) A ratio of the money you owe vs. the cash on hand

b) A ratio of all the liabilities you owe vs. the cash on hand plus receivables

c) A ratio of all the expenses you incurred vs. the money you earned as a profit

d) A ratio of the price of a given stock vs. the profit earned by that stock

e) A ratio of the net profit earned divided by the value of the (asset minus any liabilities owed on that asset)


5. What is the difference between raw and finished goods?

a) Inventory available for sale as opposed to inventory ordered

b) Inventory available as opposed to inventory that has been paid for

c) Goods that are purchased from another company vs. goods manufactured

d) One is un-manufactured material(s) & the other is goods ready to be sold

e) One is unprocessed materials shipped versus those that are in receiving.


6. What is the difference between net profit and net profit margin?

a) Actual money made vs. actual money made divided by all expenses

b) Actual money made vs. actual money made divided by revenue

c) Actual money made vs. a ratio of money made divided by taxes paid (margin)

d) Actual money made vs. a ratio of money made divided the liabilities owed

e) Actual money made vs a ratio of money made divided by the cost of goods


7. What are retained earnings?

a) Profits made by a company before expenses

b) Monies paid to lawyers to and other company paid professionals in advance are retainers for future service therefore

called retained earnings

c) Earnings made and held by a company however not yet distributed or allocated to investment.

d) Monies retained/collected by the IRS or the bank for future taxes and expenses.

e) Monies retained after inventory costs but held before expenses are paid to vendors


8. What is the accrual accounting method?

a) A method adding up all business expenses to understand your costs accurately.

b) A method for deducting cost of goods from your revenue.

c) A profit and loss statement.

d) A method of posting income when product or services are sold in the sales journal

e) A method of recognizing and tracking both income when earned and expenses when incurred.


9. When do you use LIFO instead of FIFO?

a) When you want to save on taxes based on rising cost of inventory

b) When old outdated inventory is used first

c) When your data entry system selects the oldest inventory invoice first as per GAAP accounting rules

d) When inventory is perishable

e) When inventory prices are going down to save on taxes


10. What is accelerated depreciation?

a) Profits made by a company before expenses and distributed in the same year (before accrued taxes)

b) Profits distributed to shareholders more rapidly then normal

c) Used for tax purposes when a property is appreciating before appraisals are made.

d) When general business losses are taken (accelerated) as a cash expense.

e) A non-cash expense taken against fixed assets at a faster rate than normal for declining value


11. What is the solvency ratio?

f) A ratio of operating income divided by total liabilities

g) A ratio of current assets plus inventory divided by total liabilities

a) A ratio of current loans plus cash divided by monthly payments

b) A ratio of accounts receivable plus cash divided by monthly payments

c) A ratio of liquidity by taking all the assets for sale and dividing by long term loans.


12. When considering purchasing stock in a company what does the yield mean?

f) Net sales divided by gross revenues in a ratio with the current share price equals the yield.

g) When a portion of the retained earnings are distributed to shareholders as a percentage of the current share price.

h) Share price in a ratio to actual sales made in that period

i) Share price is divided by total revenue thus calculating yield as a return.

j) Share price plus paid for inventory divided by current liabilities using general accounting principles (GAAP)