- What is the purpose of accounting?
A. To track business expenses
B. To communicate financial information
C. To manage payroll
D. To create marketing strategies

Answer: B. To communicate financial information

Explanation: Accounting is primarily used to communicate the financial health of a business to various stakeholders such as investors, creditors, and management.
- What is the accounting equation?
A. Assets = Liabilities + Equity
B. Revenue = Expenses
C. Debits = Credits
D. Income = Expenditure

Answer: A. Assets = Liabilities + Equity

Explanation: The accounting equation represents the relationship between a company's assets, liabilities, and equity. It must always be in balance.
- What is a balance sheet?
A. A statement of cash flows
B. A list of all transactions
C. A financial statement that shows a company's assets, liabilities, and equity at a specific point in time
D. A summary of revenue and expenses

Answer: C. A financial statement that shows a company's assets, liabilities, and equity at a specific point in time

Explanation: A balance sheet provides a snapshot of a company's financial position, including what it owns (assets), what it owes (liabilities), and what is left for the owners (equity).
- What is the purpose of an income statement?
A. To show the cash inflows and outflows
B. To calculate taxes owed
C. To report the company's financial performance over a period of time
D. To list all the company's expenses

Answer: C. To report the company's financial performance over a period of time

Explanation: An income statement shows a company's revenues, expenses, and profits or losses over a specific period, typically a quarter or a year.
- What is the difference between accounts receivable and accounts payable?
A. Accounts receivable are amounts owed by customers, while accounts payable are amounts owed to suppliers
B. Accounts receivable are amounts owed to suppliers, while accounts payable are amounts owed by customers
C. Accounts receivable are expenses, while accounts payable are revenues
D. There is no difference between the two

Answer: A. Accounts receivable are amounts owed by customers, while accounts payable are amounts owed to suppliers

Explanation: Accounts receivable represent money owed to the company by customers, while accounts payable represent money owed by the company to suppliers.
- What is depreciation?
A. An increase in the value of an asset
B. A decrease in the value of an asset over time
C. A type of revenue
D. An accounting error

Answer: B. A decrease in the value of an asset over time

Explanation: Depreciation is the allocation of the cost of a tangible asset over its useful life. It reflects the decrease in value of the asset as it is used and wears out.
- What is a journal entry?
A. A formal letter to shareholders
B. A record of a single transaction in the accounting system
C. A summary of