Practice Quiz

CLEP Financial Accounting Exam Prep - Question List

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16. Larry, who uses the accrual basis of accounting, hired an extra driver to help him make deliveries in December. The extra driver only works from December 1st through the 31st . Larry pays the driver on January 5th, but the expense is shown on the December income statement. Why?
  1. Cost benefit analysis
  2. Matching principle
  3. Cost principle
  4. Going concern principle
  5. Gross profit margin analysis
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17. Money owed to others for goods or services are known as:
  1. Accounts receivable
  2. Assets
  3. Accounts payable
  4. Receipts
  5. Equity
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18. What is the purpose of the balance sheet?
  1. To show cash flow
  2. To show solvency and income of the company in the current period
  3. To provide information on revenue and expenses
  4. To show the gross profit margin
  5. To provide a snapshot of the company’s financial condition
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19. Which form of ownership is considered the most advantageous for shorter-termed projects or business ventures?
  1. Corporations
  2. General partnerships
  3. Sole proprietorships
  4. Limited liability partnerships or corporations
  5. Stock ownership
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20. If a share of cumulative preferred stock has a call price of $95 and has had four years of dividends of $5 each, what is the book value of that share of stock?
  1. $95
  2. $100
  3. $115
  4. $105
  5. $110
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