Financial Reporting and Analysis MCQ Questions and Answers for Practice

1. What is the primary objective of financial reporting?

1. To comply with all applicable laws and regulations
2. To provide information useful for decision-making by investors, creditors, and other users
3. To maximize profits for shareholders
4. To minimize taxes for the company

2. What is the role of an auditor in financial reporting?

1. To advise the company on financial matters
2. To express an opinion on the fairness of the financial statements
3. To prepare the financial statements
4. To manage the company's finances

3. What are the two primary types of audit opinions?

1. Agreed and disagreed
2. Unqualified and qualified
3. Favorable and unfavorable
4. Positive and negative

4. What is an unqualified audit opinion?

1. The auditor expresses a negative opinion on the fairness of the financial statements
2. The auditor expresses no reservations about the fairness of the financial statements
3. The auditor expresses some reservations about the fairness of the financial statements
4. The auditor refuses to express an opinion on the fairness of the financial statements

5. What is a qualified audit opinion?

1. The auditor expresses a negative opinion on the fairness of the financial statements
2. The auditor expresses no reservations about the fairness of the financial statements
3. The auditor expresses some reservations about the fairness of the financial statements
4. The auditor refuses to express an opinion on the fairness of the financial statements

6. What is the difference between accrual accounting and cash basis accounting?

1. Accrual accounting is used for tax purposes, while cash basis accounting is used for financial reporting
2. Accrual accounting recognizes revenues and expenses when they are earned or incurred, regardless of when cash is received or paid
3. Cash basis accounting 1 recognizes revenues and expenses when cash is received or paid
4. Accrual accounting focuses on cash flows, while cash basis accounting focuses on profits

7. What is the matching principle?

1. Revenues and expenses should be recognized in the same accounting period
2. Revenues should be recognized when earned, and expenses should be recognized when incurred to generate those revenues
3. Assets should be recorded at their historical cost
4. Liabilities should be recorded at their fair value

8. What is the going concern assumption?

1. The assumption that revenues and expenses should be recognized in the same accounting period
2. The assumption that a company will continue to operate in the foreseeable future
3. The assumption that assets should be recorded at their historical cost
4. The assumption that liabilities should be recorded at their fair value

9. What is the historical cost principle?

1. The principle that liabilities should be recorded at their fair value
2. The principle that assets should be recorded at their original cost
3. The principle that assets should be recorded at their fair value
4. The principle that liabilities should be recorded at their historical cost

10. What is depreciation?

1. The cost of repairing and maintaining an asset
2. The systematic allocation of the cost of a tangible asset over its useful life
3. The decrease in the market value of an asset over time
4. The loss in value of an asset due to obsolescence

11. What is amortization?

1. The cost of maintaining an intangible asset
2. The systematic allocation of the cost of an intangible asset over its useful life
3. The decrease in the market value of an intangible asset over time
4. The loss in value of an intangible asset due to obsolescence

12. Which of the following is NOT a primary financial statement?

1. Board of Directors Report
2. Income Statement
3. Balance Sheet
4. Statement of Cash Flows

13. What is inventory?

1. Goods held as investments
2. Goods held for sale in the ordinary course of business
3. Goods held for use in the production process
4. Goods held for administrative purposes

14. What is the cost of goods sold?

1. The cost of transporting inventory
2. The cost of the inventory sold during a period
3. The cost of purchasing or manufacturing inventory
4. The cost of holding inventory

15. What are accounts receivable?

1. Investments in other companies
2. Amounts owed to the company by customers for goods or services sold on credit
3. Amounts owed by the company to suppliers for goods or services purchased on credit
4. Cash on hand and in bank accounts