Elements of Accounting - Quiz

The correct answer is:

C. Accrual Accounting ✅

👉 Explanation:

• Cash Accounting → Records transactions only when cash is received or paid. This does not always reflect true profitability, because revenues and expenses may occur in different periods.

• Flow of Funds Accounting → Focuses on the movement of funds and resources, not on profitability.

• Accrual Accounting → Records income when earned and expenses when incurred, regardless of cash flow.

  • This matches revenues with related expenses in the correct period.

  • Hence, it provides the most accurate picture of profitability.

The correct answer is:

A. Net Profit ✅

👉 Explanation:

• The phrase “bottom line” comes from the fact that Net Profit (or Net Income) appears at the last line (bottom line) of the Income Statement.

• It shows the company’s final profitability after deducting all expenses, taxes, and interest.

• Gross Profit and Gross Margin are higher up in the statement and do not represent the final outcome.

⚡ In short:
Bottom line = Net Profit (true profitability).

The correct answer is:

A. Inventory Evaluation ✅

👉 Explanation:

• LIFO (Last In, First Out) and FIFO (First In, First Out) are inventory valuation methods.

• They determine how the cost of inventory sold (COGS) and ending inventory are calculated.

  • FIFO assumes the oldest inventory is sold first.

  • LIFO assumes the newest inventory is sold first.

• They affect reported profits and inventory values but are not related to profit ratios or financing.

💡 Key point: These methods help businesses match costs with revenues and comply with accounting standards.

The correct answer is:

A. Expense ✅

👉 Explanation:

• The Income Statement (Profit & Loss Account) shows a company’s revenues and expenses over a period to determine profit or loss.

• Expenses (like salaries, rent, utilities, cost of goods sold) are recorded here.

• Fixed Assets (like machinery, buildings) and Liabilities (like loans, payables) appear on the Balance Sheet, not the Income Statement.

💡 Remember:
Income Statement = Revenues – Expenses → Net Profit/Loss

The correct answer is:

C. Depreciation Expense ✅

👉 Explanation:

• Depreciation is a non-cash expense.

  • It represents the allocation of the cost of a fixed asset over its useful life.

  • No actual cash leaves the business when depreciation is recorded.

• Lease Expense and Advertising Expense involve actual cash payments, so they reduce cash.

💡 Key point:
Non-cash expenses like Depreciation, Amortization, and Provisions affect profit but not the cash position.

The correct answer is:

C. Assets = Liabilities + Owner’s Equity ✅

👉 Explanation:

• This is the fundamental accounting equation, which forms the foundation of double-entry bookkeeping.

• It shows that everything a business owns (Assets) is financed either by:

  • Liabilities (borrowed funds) or

  • Owner’s Equity (owner’s investment).

• Other options are either incorrect formulas or relate to profit calculations, not the basic accounting structure.

💡 Remember: Assets always equal the sum of Liabilities and Equity — it keeps the books balanced.

Accessibility of classes in Java

• In Java, top-level classes (i.e., not inner classes) can only have:

  • public → accessible from anywhere.

  • default (no modifier) → accessible only within the same package.

• private and protected cannot be used with a top-level class.

• final means the class cannot be inherited, but it doesn’t restrict access across packages.

Now checking the options

(a) private → ❌ Not allowed for a top-level class.
(b) protected → ❌ Not allowed for a top-level class (only applies to members).
(c) final → ❌ Only prevents subclassing, not accessibility.
(d) don’t use any keyword at all (make it default) → ✅ Correct!

• A default (package-private) class is accessible only within the same package.

• Classes outside the package cannot access it.

✅ Answer: (d) don’t use any keyword at all (make it default)

Access modifiers in Java (for class members)

• private → visible only inside the same class.

• default (no keyword) → visible inside the same package only.

• protected → visible inside the same package + visible in all subclasses (even if in a different package).

• public → visible everywhere.

• private protected → ❌ Not a valid keyword in Java.

Your question:

We want a member of a class visible in all subclasses, regardless of the package.

✅ That’s exactly what protected does.

Correct Answer:

(b) protected

The use of protected keyword to a member in a class will restrict its visibility as follows:

• protected → Accessible in:

  • same package (all classes inside it) ✅

  • subclasses even in other packages ✅

So the correct answer is:
(c) visible in all classes in the same package and subclasses in other packages

Which of the following keywords are used to control access to a class member?

• default → ✔ (no keyword → package-private access)

• abstract → ❌ (used for abstract methods/classes, not access control)

• protected → ✔

• interface → ❌ (not an access modifier, but a type definition)

• public → ✔

✅ Correct answers: default, protected, public