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School
University of Birmingham**We aren't endorsed by this school
Course
BSC 100
Subject
Accounting
Date
Jan 11, 2025
Pages
2
Uploaded by MateFlamingoPerson587
Financial Accounting BasicsIntroductionFinancial accounting is a branch of accounting that focuses on recording, summarizing, and reporting a company’s financial transactions. Its primary goal is to provide accurate and timely financial information to external stakeholders, such as investors, creditors, and regulatory authorities. Financial accounting adheres to established standards like Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).Key Financial Statements1.Income Statement:Shows the company’s performance over a period, including revenue, expenses, and profit or loss.2.Balance Sheet:Provides a snapshot of the company’s financial position at a specific point in time, detailing assets, liabilities, and equity.3.Cash Flow Statement:Tracks the cash inflows and outflows from operating, investing, and financing activities.Accounting Principles1.Accrual Basis Accounting:Revenues and expenses are recognized when they are earned or incurred, not when cash is exchanged.2.Matching Principle:Expenses should be matched with the revenues they help to generate.3.Consistency Principle:Accounting methods should remain consistent across periods to ensure comparability.Multiple Choice Questions (MCQs)1.Which of the following is the primary purpose of financial accounting?a) To provide information to internal managers b) To help with budgeting c) To provide information to external stakeholders d) To determine product costsAnswer:c) To provide information to external stakeholders2.Which statement provides a snapshot of a company’s financial position at a specific point in time?a) Income Statement b) Cash Flow Statement c) Balance Sheet d) Statement of Retained EarningsAnswer:c) Balance Sheet3.Under accrual accounting, when are revenues recognized?a) When cash is received b) When the revenue is earned c) At the end of the financial year d) When expenses are incurredAnswer:b) When the revenue is earned4.Which of the following principles ensures that expenses are matched with the revenues they generate?a) Accrual Principle b) Consistency Principle c) Matching Principle d) Revenue Recognition Principle
Answer:c) Matching Principle5.Which financial statement shows cash inflows and outflows?a) Balance Sheet b) Income Statement c) Cash Flow Statement d) Statement of Changes in EquityAnswer:c) Cash Flow Statement