Master Equity Accounting: Online Quizzes and Learning Resources

Question 1

At what point is share capital recognized in the financial statements?

Accepted Answer

When the shares are fully paid

Answer

When the shares are subscribed

Answer

When the shares are issued

Answer

When the shares are registered with the relevant authority

Question 2

How is retained earnings calculated?

Accepted Answer

Net income less dividends

Answer

Share capital less dividends

Answer

Total assets less total liabilities

Answer

Revenue less expenses

Question 3

Which of the following is not a characteristic of equity?

Accepted Answer

Unlimited liability

Answer

Residual claim on assets

Answer

Dividend rights

Answer

Voting rights

Question 4

What is the accounting treatment for a share split?

Accepted Answer

No accounting entry is required

Answer

Share capital is increased

Answer

Retained earnings are decreased

Answer

Share capital is decreased

Question 5

How do dividends and share repurchases differ in their impact on a company's financial structure?

Accepted Answer

Dividends distribute profits to shareholders, while share repurchases reduce the number of shares outstanding.

Answer

Share repurchases provide a return to shareholders, while dividends do not.

Answer

Dividends are declared by the board of directors, while share repurchases are approved by shareholders.

Answer

Share repurchases are subject to taxation, while dividends are not.

Question 6

According to accounting standards, how are treasury shares accounted for?

Accepted Answer

Deducted from total equity, reducing its value

Answer

Recorded as an asset on the balance sheet

Answer

Presented as a liability on the balance sheet

Answer

Not recognized or disclosed in the financial statements

Question 7

Within the context of financial accounting, which of the following is considered a component of equity?

Accepted Answer

Share capital

Answer

Loan obligations

Answer

Inventory

Answer

Accumulated depreciation

Question 8

Which of the following transactions would lead to an increase in retained earnings?

Accepted Answer

Generating net income

Answer

Issuing shares

Answer

Distributing dividends

Answer

Repurchasing treasury shares

Question 9

What is the primary purpose of dividends?

Accepted Answer

Distributing profits to shareholders

Answer

Repaying borrowed funds

Answer

Increasing share capital

Answer

Reducing retained earnings

Question 10

What is the primary distinction between ordinary shares and preference shares?

Accepted Answer

Priority in dividend payments

Answer

Voting rights

Answer

Maturity date

Answer

Tax implications

Question 11

What is the primary objective of a share buyback?

Accepted Answer

Reducing the number of outstanding shares

Answer

Increasing the company's debt

Answer

Raising capital

Answer

Improving the company's credit rating

Question 12

Which of the following is NOT a characteristic of equity?

Accepted Answer

It has no maturity date.

Answer

It represents the residual interest in the company's assets after deducting liabilities.

Answer

It is a source of financing for the company.

Answer

It can be divided into different classes.

Question 13

What is the journal entry to record the issuance of share capital for cash?

Accepted Answer

Debit Share Capital, Credit Cash

Answer

Debit Cash, Credit Share Capital

Answer

Debit Retained Earnings, Credit Share Capital

Answer

Debit Share Capital, Credit Retained Earnings

Question 14

What is a primary reason for retaining earnings?

Accepted Answer

To reinvest in the business and support its growth

Answer

To pay dividends to shareholders

Answer

To reduce the company's debt

Answer

To increase the company's share price

Question 15

What is the primary purpose of the statement of changes in equity?

Accepted Answer

To present the changes in the company's equity over a period of time.

Answer

To summarize the company's overall financial performance.

Answer

To disclose the company's dividend policy.

Answer

To calculate the company's earnings per share.

Question 16

What is the usual accounting treatment for a share repurchase?

Accepted Answer

Debit Share Capital, Credit Treasury Shares

Answer

Debit Retained Earnings, Credit Share Capital

Answer

Debit Share Capital, Credit Cash

Answer

Debit Cash, Credit Share Capital

Question 17

What is the accounting equation that represents equity?

Accepted Answer

Equity = Assets - Liabilities

Answer

Assets = Liabilities + Equity

Answer

Liabilities = Assets - Equity

Answer

Assets + Liabilities = Equity

Question 18

Which of the following transactions would lead to an increase in share capital?

Accepted Answer

Issuance of new shares

Answer

Repurchase of treasury shares

Answer

Declaration of dividends

Answer

Recognition of profit

Question 19

What is the primary purpose of the statement of changes in equity?

Accepted Answer

To disclose changes in equity over a specific period

Answer

To provide information about the sources and uses of funds

Answer

To calculate the net income for the period

Answer

To report on the financial position of the company

Question 20

Which of the following is not a component of equity?

Accepted Answer

Current liabilities

Answer

Share capital

Answer

Retained earnings

Answer

Dividends

Question 21

When new shares are issued at a premium, what is the accounting treatment for the share premium?

Accepted Answer

Recorded as a separate component of equity called share premium reserve

Answer

Recorded as part of retained earnings

Answer

Recorded as a direct addition to share capital

Answer

Expensed as an incurred cost

Question 22

What is the journal entry to record a cash dividend declared by a company?

Accepted Answer

Debit Retained Earnings, Credit Dividends Payable

Answer

Debit Dividends Payable, Credit Cash

Answer

Debit Cash, Credit Retained Earnings

Answer

Debit Dividends Payable, Credit Share Capital

Question 23

What is the key difference between share capital and share premium?

Accepted Answer

Share capital represents the nominal value of shares, while share premium is the excess paid above the nominal value.

Answer

Share capital represents the market value of shares, while share premium is the excess paid above the market value.

Answer

Share capital represents the total amount invested by shareholders, while share premium is the profit generated by the company.

Answer

There is no difference between share capital and share premium.

Question 24

Which of the following is a disadvantage of equity financing?

Accepted Answer

Dilution of ownership

Answer

Increased flexibility

Answer

Lower cost of capital

Answer

No obligation to repay

Question 25

Which of the following is NOT a component of equity?

Accepted Answer

Liability

Answer

Share Capital

Answer

Retained Earnings

Question 26

When a company issues shares, the amount received in exchange is recorded as:

Accepted Answer

Share Capital

Answer

Retained Earnings

Answer

Equity Reserve

Answer

Dividend Payable

Question 27

Dividends are typically paid out of:

Accepted Answer

Retained Earnings

Answer

Net Income

Answer

Share Capital

Answer

Accumulated Depreciation

Question 28

Which of the following is a primary purpose of accounting for equity?

Accepted Answer

To provide information about the financing of the business.

Answer

To calculate the company's tax liability.

Answer

To predict future stock prices.

Question 29

When a company repurchases its own shares, the effect on equity is:

Accepted Answer

Decrease

Answer

No Change

Answer

Increase

Answer

Depends on the share price

Question 30

Treasury shares are:

Accepted Answer

Shares issued by the company but reacquired

Answer

Shares issued to employees as compensation

Answer

Shares that have been forfeited due to non-payment

Answer

Shares held by the company's largest shareholder

Question 31

Which of the following is NOT a method used to measure share capital?

Accepted Answer

Market Value

Answer

Issue Price

Answer

Nominal Value

Answer

Stated Value

Question 32

What is the term used to describe the residual interest in the assets of a company after deducting all liabilities?

Accepted Answer

Equity

Answer

Liabilities

Answer

Capital

Answer

Assets

Question 33

How are dividends presented on the statement of financial position?

Accepted Answer

Deducted from retained earnings

Answer

Presented as an expense

Answer

Presented as a liability

Answer

Added to retained earnings

Question 34

Which of the following is NOT a source of retained earnings?

Accepted Answer

Issue of new shares

Answer

Prior period's retained earnings

Answer

Net income

Question 35

What is the purpose of the share premium account?

Accepted Answer

To record the excess of issue price over par value of shares

Answer

To record dividends paid

Answer

To record the purchase of treasury shares

Question 36

Which of the following would increase the balance of retained earnings?

Accepted Answer

Net income

Answer

Repayment of share capital

Answer

Dividends paid

Answer

Purchase of treasury shares

Question 37

What is the par value of a share?

Accepted Answer

The nominal value assigned to a share by the company

Answer

The market value of a share

Answer

The issue price of a share

Question 38

What is the purpose of a statement of changes in equity?

Accepted Answer

To show the changes in the various components of equity over a period of time

Answer

To show the profit or loss for a period

Answer

To show the sources and uses of cash