AKT | L3T

Accounting Knowledge Assessment Test

Welcome to the Accounting Knowledge Assessment Test!

This test is designed to evaluate your understanding of various accounting concepts relevant to the UK. Please read each question carefully and select the most appropriate answer. Choose the option that best completes the statement or answers the question. Good luck!

Instructions

Choose the most appropriate answer for each question.

Each question has only one correct answer.

Once you have completed the test, submit your responses. We'll be in touch to let you know how you did.

Name*

Your email*

Telephone number*

1. What is VAT?*

Value Added Tax

Variable Accounting Term

Very Accurate Total

Voluntary Accounting Transaction

2. What is the current standard rate of VAT in the UK?*

15%

17.5%

20%

22.5%

3. Which of the following is an example of a fixed asset?*

Inventory

Cash

Land

Accounts Payable

4. Depreciation is a process used to:*

Increase the value of assets

Reduce the value of assets over time

Keep the value of assets constant

Convert assets into cash

5. Which accounting principle requires revenue to be recognized when earned, regardless of when payment is received?*

Matching principle

Revenue recognition principle

Cost principle

Materiality principle

6. What is the formula to calculate Net Profit?*

(Revenue) - (Expenses)

(Revenue) - (Cost of Goods Sold)

(Revenue) - (Expenses + Taxes))

(Revenue) - (Cost of Goods Sold) - (Expenses)

7. Which financial statement reports a company’s assets, liabilities, and shareholders’ equity at a specific point in time?*

Income statement

Cash flow statement

Balance sheet

Statement of retained earnings

8. Accrued expenses are expenses that:*

Have been paid in advance

Have not yet been incurred or paid

Are recorded in a separate ledger

Are non-operating expenses

9. What is the purpose of double-entry bookkeeping?*

To track income only

To ensure accuracy in financial records

To minimize tax liabilities

To eliminate the need for ledgers

10. Which accounting equation represents the relationship between assets, liabilities, and equity?*

Assets = Liabilities + Revenue

Assets = Liabilities + Expenses

Assets = Liabilities + Equity

Assets = Liabilities - Equity

11. What is the term for the process of spreading the cost of an intangible asset over its useful life?*

Amortization

Depreciation

Accrual

Capitalization

12. What is a trial balance used for?*

To determine net profit

To verify the equality of debits and credits

To prepare financial statements

To record daily transactions

13. Which of the following is not a component of cash flow statement?*

Operating activities

Financing activities

Sales activities

Investing activities

14. What is the purpose of a journal entry?*

To record daily transactions

To prepare financial statements

To verify the accuracy of accounts

To communicate financial information to stakeholders

15. Which financial reporting framework is recognised in the UK?*

IFRS (International Financial Reporting Standards)

GAAP (Generally Accepted Accounting Principles)

UK GAAP (United Kingdom Generally Accepted Accounting Practice) and IFRS (International Financial Reporting Standards)

FRS (Financial Reporting Standards)

16. What is the term for the process of converting cash flows from operating, investing, and financing activities into a single amount?*

Cash reconciliation

Cash conversion

Cash budgeting

Cash flow statement

17. Which financial statement provides information about a company's cash receipts and cash payments during a specific period?*

Income statement

Balance sheet

Statement of cash flows

Statement of retained earnings

18. When does a company recognize revenue under the accrual basis of accounting?*

When cash is received

When services are performed or goods are delivered

When an invoice is issued

When expenses are incurred

19. Which of the following is not a type of financial ratio?

Liquidity ratio

Profitability ratio

Revenue ratio

Solvency ratio

20. What is the purpose of the audit process?*

To prepare financial statements

To detect errors and fraud in financial records

To minimize tax liabilities

To calculate financial ratios

21. What is the accounting equation?*

Assets = Liabilities + Revenue

Assets = Liabilities + Expenses

Assets = Liabilities + Equity

Assets = Liabilities - Equity

22. When a company receives cash from a customer for services provided, which accounts are affected?*

Debit Cash / Credit Revenue

Debit Revenue / Credit Accounts Receivable

Debit Cash / Credit Accounts Payable

Debit Accounts Receivable / Credit Cash

23. Which of the following is an example of an accrued expense?*

Prepaid rent

Unearned revenue

Salaries payable

Accounts receivable

24. What is the purpose of the income statement?*

To provide information about a company's financial position at a specific point in time

To report a company's financial performance over a specific period

To reconcile the difference between cash and accrual accounting

To communicate changes in equity to shareholders

25. Under the cash basis of accounting, when are revenues and expenses recognized?*

When cash is received or paid

When services are performed or goods are delivered

When invoices are issued

When expenses are incurred

26. What does the term "debit" mean in accounting?*

To increase an asset or expense account

To decrease an asset or expense account

To increase a liability or equity account

To decrease a liability or equity account

27. Which financial statement reports a company’s revenues and expenses over a specific period?*

Income statement

Balance sheet

Cash flow statement

Statement of retained earnings

28. What is the purpose of the trial balance?*

To ensure that deb its equal credits in the accounting system

To prepare financial statements

To record daily transactions

To verify the accuracy of accounts payable

29. When might a transaction only affect one side of the accounting equation?*

When an asset is purchased

When a liability is incurred

When equity is increased

When revenue is recognized

30. What is the purpose of the statement of cash flows?*

To provide information about a company's cash receipts and cash payments during a specific period

To report a company's financial position at a specific point in time

To reconcile the difference between cash and accrual accounting

To communicate changes in equity to shareholders

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