Quiz: General Accounting Foundations — 44 questions

1. Which characteristic distinguishes an enterprise from a dependent organization?

A. It operates under another organization’s authority and responsibility

B. It operates with financial independence and its own responsibility

C. It provides services without selling them in a market

D. It produces goods without pursuing financial results

Answer: (B)

Explanation

An enterprise is financially independent and acts under its own authority and responsibility while producing goods or services for a market. A dependent organization, by contrast, operates under another entity’s authority, so that description does not define an enterprise.

2. Which set contains the four essential aspects of an enterprise?

A. Market, product, benefit, and financial independence

B. Market, technology, ownership, and administrative control

C. Product, taxation, borrowing, and commercial distribution

D. Customers, employees, premises, and financial independence

Answer: (A)

Explanation

The essential aspects are the market, the product, the benefit, and financial independence. Customers, technology, or taxation may matter to an enterprise, but they are not the four defining aspects listed here.

3. How does an enterprise contribute to the economy through its financial and economic roles?

A. It sets public policy, collects taxes, and controls household consumption

B. It supplies credit, regulates banks, and determines national currency values

C. It distributes income, participates in payment flows, and circulates goods and services

D. It manages public budgets, supervises markets, and issues legal regulations

Answer: (C)

Explanation

An enterprise distributes money and income, participates in payment flows as customer, supplier, borrower, and lender, and helps produce, distribute, and circulate goods and services. The other choices describe functions mainly associated with public authorities or financial regulators.

4. A company owned partly by the State and partly by private investors is classified legally as what type of enterprise?

A. A private enterprise belonging to individuals

B. A partnership formed under private commercial law

C. A public or parapublic enterprise

D. An individual enterprise managed by one owner

Answer: (C)

Explanation

An enterprise is public or parapublic when the State owns all or part of it. Private enterprises belong to private individuals, including individual businesses and companies such as SA, SNC, and SARL.

5. Which activity best represents a secondary-sector enterprise?

A. Providing transportation services to commercial customers

B. Transforming harvested crops into packaged food products

C. Extracting minerals from a natural deposit for sale

D. Reselling purchased clothing without changing its form

Answer: (B)

Explanation

Secondary-sector enterprises transform raw materials into finished goods, such as turning crops into packaged food. Extraction belongs to the primary sector, while resale and transportation illustrate tertiary-sector activities.

6. Which sequence describes the operating cycle of an industrial enterprise?

A. Buying raw materials, transforming them, and selling finished products

B. Buying merchandise, storing it, and reselling it as received

C. Extracting resources, exporting them, and purchasing finished products

D. Providing services, collecting fees, and distributing purchased goods

Answer: (A)

Explanation

An industrial enterprise purchases raw materials, transforms them into finished products, and sells those products. The merchandise-storage-resale sequence describes a commercial enterprise rather than an industrial one.

7. What is the principal function of accounting as an information system?

A. It records only cash movements and excludes assets and results

B. It forecasts sales by replacing operational and financial management

C. It records quantified data and produces statements about an entity’s financial situation

D. It stores informal notes about transactions without standardized reporting

Answer: (C)

Explanation

Accounting captures, classifies, and records quantified data, then presents statements showing the faithful image of an entity’s assets, financial position, and result. Informal notes do not provide the standardized financial statements required for this purpose.

8. Which situation illustrates accounting’s role as a decision-making tool and legal proof?

A. A household tracks personal spending without producing formal business evidence

B. Management uses financial information to choose an investment, while records support a business claim

C. A firm prepares advertisements and uses them to estimate customer preferences

D. A company records invoices but avoids using information for planning or disputes

Answer: (B)

Explanation

Accounting supports decisions by providing information for choices such as investment, and it provides evidence in business through documented records. Merely recording invoices without using the information for decisions or proof does not reflect these broader purposes.

9. How are source documents handled during accounting processing?

A. They are summarized informally before being separated from accounting records

B. They are classified by operation and entered into computerized work registers

C. They are grouped by employee and stored without recording their amounts

D. They are discarded after payment because the transaction is already complete

Answer: (B)

Explanation

Accounting processing classifies, enters, and records documents such as invoices, checks, payroll sheets, and cash documents by category of operation using computerized work registers. Discarding or informally summarizing source documents would undermine systematic accounting processing.

10. What is the primary purpose of accounting normalization?

A. To allow each enterprise to design independent accounting rules

B. To eliminate unnecessary variations in accounting practices

C. To make accounting methods depend on individual transactions

D. To replace financial statements with management reports

Answer: (B)

Explanation

Accounting normalization codifies common rules, principles, and technical methods to reduce unnecessary differences across entities. An individual enterprise may still choose methods within the standardized framework, so normalization does not mean every method is independently designed.

11. When was the revised AUDCIF adopted in Brazzaville?

A. 26 January 2017

B. 1 January 2017

C. 26 January 2018

D. 1 January 2018

Answer: (A)

Explanation

The revised AUDCIF was adopted in Brazzaville on 26 January 2017. Its entry into force occurred later, on 1 January 2018, which makes that date a plausible but incorrect alternative.

12. A company expects to continue operating for the foreseeable future and has no plan or obligation to liquidate; which principle supports this accounting assumption?

A. The continuity principle

B. The prudence principle

C. The independence-of-periods principle

D. The non-compensation principle

Answer: (A)

Explanation

The continuity principle treats an entity as continuing its operations in the reasonably foreseeable future when liquidation is not intended or required. Prudence instead concerns recognition of expected losses and expenses, not the entity’s operating horizon.

13. Under the prudence principle, how should an expected loss and an unrealized gain generally be treated?

A. Defer both the expected loss and the unrealized gain

B. Recognize both the expected loss and the unrealized gain

C. Defer the expected loss and recognize the unrealized gain

D. Recognize the expected loss and defer the unrealized gain

Answer: (D)

Explanation

Prudence recognizes expected expenses and losses while recognizing income and gains when they are realized. Recognizing an unrealized gain while deferring an expected loss reverses the principle’s protective treatment.

14. Which OHADA accounting classes contain ordinary expenses and ordinary income?

A. Classes 6 and 7

B. Classes 1 and 2

C. Classes 3 and 4

D. Classes 8 and 9

Answer: (A)

Explanation

Class 6 contains ordinary expenses and class 7 contains ordinary income in the OHADA accounting system. Class 9 instead concerns commitments and management accounting, so it does not represent ordinary income and expenses.

15. Which financial reporting system is intended for very small entities below the legal thresholds?

A. The Abbreviated System

B. The Consolidated Reporting System

C. The Minimal Treasury System

D. The Normal System

Answer: (C)

Explanation

The Minimal Treasury System applies to very small entities below the legal thresholds. The Abbreviated System serves small entities above the SMT thresholds, while the Normal System applies to medium and large entities.

16. What is the SMT eligibility threshold for a service entity?

A. 60,000,000 CFA francs

B. 40,000,000 CFA francs

C. 90,000,000 CFA francs

D. 30,000,000 CFA francs

Answer: (D)

Explanation

Service entities have an SMT threshold of 30,000,000 CFA francs. The 40,000,000 and 60,000,000 CFA franc thresholds apply respectively to craft or similar entities and trading entities.

17. Which financing source represents a durable resource belonging to the enterprise rather than an external financial debt?

A. Operating subsidy

B. Borrowing

C. Equity capital

D. Leasing

Answer: (C)

Explanation

Equity capital is a durable resource contributed to or retained by the enterprise. Borrowing creates an external financial debt, while leasing and subsidies have different contractual or support-based characteristics.

18. Which combination correctly describes possible capital contributions at enterprise formation?

A. Cash, in-kind, or a mixture of both

B. Investment subsidies, loans, or a mixture of both

C. Operating income, expenses, or a mixture of both

D. Borrowing, leasing, or a mixture of both

Answer: (A)

Explanation

Formation contributions may consist of money, property other than money, or a combination of the two. Borrowing and subsidies are financing arrangements rather than the stated forms of capital contribution.

19. A subsidy is granted to finance the acquisition of a machine; what type of subsidy is it?

A. A financing-interest subsidy

B. A balancing subsidy

C. An operating subsidy

D. An investment subsidy

Answer: (D)

Explanation

An investment subsidy finances the acquisition or creation of fixed assets such as a machine. An operating subsidy addresses selling prices or operating expenses, whereas a balancing subsidy offsets all or part of an overall loss.

20. Which item belongs to the investment cycle?

A. The payment of employee wages

B. The settlement of supplier invoices

C. The acquisition or disposal of a business

D. The collection of customer receivables

Answer: (C)

Explanation

The investment cycle includes capitalized expenses, fixed assets, and the acquisition or disposal of a business. Customer collections, wage payments, and supplier settlements relate to operating or working-capital activities rather than the listed investment-cycle components.

21. Which set correctly identifies the enterprise’s main operating and financial cycles?

A. Sales and customers; purchases and suppliers; personnel and wages; inventories and production; treasury

B. Sales and suppliers; purchases and customers; personnel and inventories; production and wages; treasury

C. Customers and expenses; suppliers and income; wages and treasury; production and sales; investments

D. Sales and production; purchases and inventories; personnel and customers; wages and suppliers; financing

Answer: (A)

Explanation

The enterprise’s cycles include sales and customers, purchases and suppliers, personnel and wages, inventories and production, and treasury. The second option reverses the customer and supplier relationships, which confuses the sales and purchase cycles.

22. A company delivers merchandise to a customer and receives payment by bank transfer. Which classification best describes the two associated flows?

A. The merchandise delivery is a financial flow, and the bank transfer is a real flow.

B. Both flows are financial because the transaction changes the company’s accounts.

C. Both flows are real because they arise from a sale of merchandise.

D. The merchandise delivery is a real flow, and the bank transfer is a financial flow.

Answer: (D)

Explanation

Goods move through a real or physical flow, while money moves through a financial flow. Treating the merchandise delivery as financial confuses goods with payment or credit relationships.

23. What accounting relationship exists when a seller allows a buyer to pay at a later date?

A. The seller and buyer have no financial relationship until the invoice is cancelled.

B. The buyer has a receivable and the seller has a debt until the goods are returned.

C. The seller records a debt and the buyer records a receivable until delivery occurs.

D. The seller has a receivable and the buyer has a debt until payment is made.

Answer: (D)

Explanation

Deferred payment creates a receivable for the seller and a debt for the buyer, which remain until payment extinguishes the transaction. The opposite pairing reverses the creditor and debtor positions.

24. Which description best defines an economic flow?

A. A financial adjustment made by an enterprise without interaction with another agent

B. A physical transfer of merchandise that excludes services and payment instruments

C. A movement of goods, services, or means of payment between economic agents

D. A change in ownership recorded within one account of a single enterprise

Answer: (C)

Explanation

Economic flows are movements of goods, services, or means of payment between economic agents. A flow is broader than a merchandise transfer because it can also involve services or means of payment.

25. When a retailer purchases inventory on credit, how should the merchandise movement be classified from the retailer’s perspective?

A. As an outgoing real flow representing sales resources

B. As an outgoing financial flow representing a supplier credit

C. As an incoming quasi-real flow representing a labor service

D. As an incoming real flow representing an operating use

Answer: (D)

Explanation

Goods purchased by the buyer are an incoming real flow and represent an operating use. Supplier credit is a financial flow associated with the purchase, not the classification of the merchandise itself.

26. Which transaction is an example of a quasi-real flow?

A. A customer pays an invoice using a bank cheque.

B. A wholesaler delivers merchandise measured through its selling price.

C. A buyer accepts a debt created by deferred payment.

D. Employees provide labor measured through wages and social contributions.

Answer: (D)

Explanation

Quasi-real flows concern services, including labor measured by wages and social contributions. Merchandise delivery is a real flow, while cheques and deferred-payment debts are financial flows.

27. In double-entry translation, what does employment represent?

A. The account that identifies the external agent supplying the transaction

B. The creditor relationship created when a customer delays payment

C. The destination of a flow and the use of the element entering the enterprise

D. The origin of a flow and the means leaving the enterprise to finance a need

Answer: (C)

Explanation

Employment identifies where a flow is directed and represents the use of the element transferred into the enterprise. The origin and means leaving the enterprise describe a resource instead.

28. A company uses cash to finance an operating purchase. Which statement correctly describes the resource?

A. The purchased goods are the flow’s origin and represent the means leaving the enterprise.

B. The supplier is the flow’s destination and represents the use recorded by the enterprise.

C. The cash is the flow’s origin and represents the means leaving the enterprise.

D. The cash is the flow’s destination and represents the use entering the enterprise.

Answer: (C)

Explanation

The resource is the origin of the flow and corresponds to the means used to satisfy or finance a need, such as cash leaving the enterprise. The purchased goods represent the employment, or destination, of the flow.

29. An operation records total debits of $4{,}000$. Under the double-entry principle, what must be true?

A. Total credits may differ if the operation involves an external supplier.

B. Total credits equal $2{,}000$, because two accounts share the resource.

C. Total credits equal $4{,}000$, because total employment equals total resource.

D. Total debits equal zero after the resource account is credited.

Answer: (C)

Explanation

Double-entry accounting requires total employment to equal total resource, so total debits must equal total credits. The number of accounts or involvement of an external supplier does not alter that equality.

30. An enterprise purchases transport equipment for $2{,}600{,}000$, paying $1{,}500{,}000$ by bank and owing $1{,}100{,}000$ to the investment supplier. Which entry correctly translates the operation?

A. Debit transport equipment $2{,}600{,}000$; credit bank $1{,}500{,}000$ and investment supplier $1{,}100{,}000$.

B. Debit bank $1{,}500{,}000$ and investment supplier $1{,}100{,}000$; credit transport equipment $2{,}600{,}000$.

C. Debit transport equipment $1{,}500{,}000$; credit bank $2{,}600{,}000$ and investment supplier $1{,}100{,}000$.

D. Debit transport equipment $2{,}600{,}000$ and bank $1{,}500{,}000$; credit investment supplier $1{,}100{,}000$.

Answer: (A)

Explanation

The equipment received is the employment and is debited for $2{,}600{,}000$, while the bank payment and supplier obligation are resources credited for $1{,}500{,}000$ and $1{,}100{,}000$. The second option reverses the debit and credit treatment of the equipment and financing accounts.

31. Which sequence correctly describes the accounting recording circuit from the beginning to the end?

A. Dated source document, input draft, journal, ledger, and trial balance

B. Dated source document, journal, input draft, trial balance, and ledger

C. Input draft, dated source document, ledger, journal, and trial balance

D. Journal, dated source document, input draft, ledger, and trial balance

Answer: (A)

Explanation

The recording circuit begins with evidence of the transaction and proceeds through the input draft, journal, ledger, and trial balance. Starting with the journal skips the initial documentary and drafting stages.

32. What must support every accounting entry, and for how long must the accounting documents be retained?

A. An undated internal note retained for five years

B. A dated and preserved document retained for ten years

C. A manager’s memory retained until the audit ends

D. A verbal authorization retained for ten years

Answer: (B)

Explanation

Each entry requires a dated document that is preserved, and accounting documents must be retained for ten years. A memory-based operation or verbal authorization does not provide the required documentary evidence.

33. Which feature distinguishes the journal from the general ledger?

A. The journal records operations daily and chronologically with supporting details

B. The journal presents assets and liabilities to show the enterprise’s financial position

C. The journal groups all operations by account and shows their accumulated movements

D. The journal lists account balances in chart-of-accounts order at a specific date

Answer: (A)

Explanation

The journal records operations in chronological order and includes dates, accounts, amounts, descriptions, and source references. Grouping movements account by account is the function of the general ledger.

34. What is the primary function of the general ledger?

A. It records enterprise operations daily in the order in which they occur

B. It compares total debits and credits at a particular reporting date

C. It collects all enterprise accounts and receives journal entries account by account

D. It lists source documents before transactions are entered into accounting records

Answer: (C)

Explanation

The general ledger is the collection of all accounts into which journal operations are transferred by account. Chronological recording belongs to the journal, while comparing totals belongs to the trial balance.

35. What does a general trial balance present at a given date?

A. The enterprise’s assets and liabilities without account movements

B. Only the source documents used to authorize recorded operations

C. Only the detailed transactions recorded in each account during the period

D. All enterprise accounts with opening balances, movements, and closing balances

Answer: (D)

Explanation

A general trial balance is an exhaustive account table showing opening balances, debit and credit movements, and closing balances in chart-of-accounts order. Detailed account movements remain in the ledger.

36. Which condition indicates that a trial balance is balanced?

A. Debit and credit movements match, journal totals match, and debit and credit balances match

B. Debit balances exceed credit balances while journal totals remain unchanged

C. The number of debit entries equals the number of credit entries in the ledger

D. Opening balances match closing balances for each account regardless of movements

Answer: (A)

Explanation

A balanced trial balance has equal debit and credit movements, agreement between total movements and the journal, and equal debit and credit balances. Matching the number of entries does not establish equality of accounting amounts.

37. What does a balance sheet show about an enterprise at a given date?

A. Its account movements and the equality of debit and credit totals

B. Its chronological transactions and the documents supporting each entry

C. Its assets and liabilities, and therefore its financial position

D. Its revenues and expenses without showing financial resources

Answer: (C)

Explanation

The balance sheet presents assets and liabilities at a particular date, revealing the enterprise’s financial position. Chronological transactions and debit-credit checks are presented in other accounting records.

38. How are assets and liabilities distinguished in the balance-sheet structure?

A. Assets contain only cash items; liabilities contain fixed assets, operating stocks, and receivables

B. Assets consist of revenues and expenses; liabilities consist of journal entries and ledger transfers

C. Assets are uses classified as fixed, current, and cash assets; liabilities are resources classified as stable, current, and cash liabilities

D. Assets are resources classified as stable, current, and cash liabilities; liabilities are uses classified as fixed, current, and cash assets

Answer: (C)

Explanation

Assets represent uses of funds and include fixed, current, and cash assets, whereas liabilities represent sources and include stable, current, and cash liabilities. Reversing uses and resources is the central conceptual error.

39. How do asset and liability accounts change when transactions are recorded?

A. Asset accounts increase by debit and decrease by credit; liability accounts increase by credit and decrease by debit

B. Both asset and liability accounts increase by debit and decrease by credit

C. Both asset and liability accounts increase by credit and decrease by debit

D. Asset accounts increase by credit and decrease by debit; liability accounts increase by debit and decrease by credit

Answer: (A)

Explanation

The debit and credit effects are opposite for the two account categories: debits increase assets, while credits increase liabilities. Applying the asset rule to liabilities would reverse the correct treatment.

40. When does the balance-sheet result represent a profit, a loss, or zero?

A. It is a profit when assets exceed liabilities, a loss when assets are lower, and zero when they are equal

B. It is a profit when liabilities exceed assets, a loss when assets are higher, and zero when movements are unequal

C. It is a profit when assets equal liabilities, a loss when liabilities are absent, and zero when assets exceed liabilities

D. It is a profit when movements are equal, a loss when balances differ, and zero when liabilities exceed assets

Answer: (A)

Explanation

The result depends on the comparison between total assets and total liabilities: an excess of assets indicates profit, a deficit indicates loss, and equality produces zero. Equality of debit and credit movements describes trial-balance balance rather than the balance-sheet result.

41. Which accounting event is classified as an expense?

A. The creation of internal resources through enterprise activity

B. The consumption of goods or services by the enterprise

C. The increase in equity caused by an owner contribution

D. The collection of cash from a customer before delivery

Answer: (B)

Explanation

An expense records the consumption of goods or services or another impoverishment of the enterprise. Creating internal resources describes a product, while owner contributions and customer advances are not expenses.

42. What does a product represent in management accounting?

A. The consumption of resources and impoverishment of the enterprise

B. The repayment of a liability using the enterprise's cash

C. The creation of internal resources and enrichment of the enterprise

D. The transfer of an asset to another enterprise without compensation

Answer: (C)

Explanation

A product represents resources created internally by the enterprise and therefore reflects enrichment. The consumption of resources corresponds to an expense, while the other choices describe financing or asset transactions.

43. An enterprise reports products of ${\text{€}}120{,}000$ and expenses of ${\text{€}}95{,}000$ for the year. What is its net result?

A. A loss of ${\text{€}}95{,}000$

B. A profit of ${\text{€}}25{,}000$

C. A loss of ${\text{€}}25{,}000$

D. A profit of ${\text{€}}215{,}000$

Answer: (B)

Explanation

The net result is calculated as products minus expenses, so $120{,}000 - 95{,}000 = 25{,}000$, indicating a profit. Subtracting products from expenses would reverse the sign and misclassify the result.

44. How do expense and product accounts change when each account increases?

A. Both expense and product accounts increase by debit

B. Expense accounts increase by credit, while product accounts increase by debit

C. Both expense and product accounts increase by credit

D. Expense accounts increase by debit, while product accounts increase by credit

Answer: (D)

Explanation

Expense accounts increase on the debit side, whereas product accounts increase on the credit side. The opposite-side treatment applies when these accounts decrease.