Basic Accounting Principles for Non-Accountants

Question 1
What is the primary purpose of a balance sheet in accounting?

(A) To forecast future cash flows

(B) To provide a snapshot of a company's financial position at a specific point in time

(C) To summarize the revenues and expenses over a period

(D) To record daily transactions using debits and credits

Question 2
Which of the following best describes accrual accounting?

(A) It focuses solely on cash transactions and defers recording of expenses

(B) It records transactions only when cash is received or paid

(C) It records transactions when they occur regardless of cash flow timing

(D) It ignores revenues earned on account

Question 3
In double-entry bookkeeping, a debit entry generally indicates:

(A) A record that exactly cancels out a credit entry without affecting account balances

(B) A decrease in all asset accounts regardless of type

(C) An increase in assets or expenses, or a decrease in liabilities or equity

(D) A mistake that needs correction in the ledger

Question 4
Which financial statement summarizes a company's revenues and expenses over a specific period?

(A) Statement of retained earnings

(B) Income statement

(C) Cash flow statement

(D) Balance sheet

Question 5
When non-accountants refer to 'financial statements', what is the best description of these documents?

(A) Reports that provide insights into a company's performance and inform decision-making

(B) Reports used strictly to calculate tax obligations without other analytical value

(C) Random documents prepared solely for legal procedures

(D) Detailed logs of every single transaction recorded by the company

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