Accountancy / Financial Accounting MCQ Set 1
1) The Basic accounting equation is
A) Asset=Expense +Income
B) Assets=Cash+Capital
C) Assets=Capital+Liabilities
D) Assets=Expenses+Capital
2) Find out the value of assets if: Liabilities=$5000 and Capital=$1000
A) $4000
B) $6000
C) $7000
D) $3000
3) Calculate the amount of cash if: Total assets=$10,000 Total liabilities=$10,000 Total Capital=$5000
A) $6000
B) $10,000
C) $5000
D) $1000
4) Capital increases if ______ increases
A) Expenses
B) Drawings
C) Interest on capital
D) Revenue
5) Capital of a business decreases if there is an increase in
A) Drawings
B) Income
C) Gains
D) Fresh capital
6) If the total liabilities of a business decrease by $5000 what will be the effect on total asset? (assuming the amount of capital remain same)
A) Remain constant
B) Decrease by $5000
C) Increase by $5000
D) Increase by $10,000
7) If the business's owner withdraws cash for his/her personal use what will be the effect on capital?
A) Increase in capital
B) Remain the same
C) Decrease in capital
D) No effect on capital
8) Net income equal to Revenues minus
A) Gains
B) Depreciation
C) Expenses
D) Capital expenditures
9) Collection of account receivable will
A) Increase assets and decrease assets
B) Increase assets and decrease liabilities
C) Increase assets and increase capital
D) Increase assets and increase cash
10) Payment of expenses will ______ the assets
A) Increase
B) Reduce
C) apportion
D) Overstate
11) Which of the following is the practical implementation of the accounting equation?
A) Cash flow statement
B) Income statement
C) Statement of changes in equity
D) Statement of financial position
12) Which of the following accounting equation is correct?
A) Cash+Other assets=Capital-Liabilities
B) Capital+ Liabilities=Assets+Income
C) Assets-Liabilities=Capital
D) Assets+Capital=Liabilities
13) Fresh capital introduction will increase
A) Assets and liabilities
B) Assets and equity
C) Liabilities and equity and bank balance
D) Capital and liabilities
14) Cash received for services rendered will
A) Increase cash and liability
B) Increase equity and liability
C) Increase fixed assets and cash
D) Increase cash and equity
15) Which of following best describes the increase in equity expands_______
A) Business operations
B) cash outflows
C) Inflows of cash
D) Appropriation expenses
16) If Cash=$1000 inventories=$4000 Debtors=$5000 fixed assets=? Capital+Liabilities=$15000 What is the Amount of total assets?
A) $5000
B) $10,000
C) $15,000
D) $20,000
17) Depreciation decreases
A) Liabilities
B) Cash
C) Bank
D) Capital
18) An increase in provision for bad debt will
A) Decrease net income
B) Decrease liabilities
C) Increase net income
D) Increase liabilities
19) Current assets - Current liabilities=?
A) Capital
B) Absorbed capital
C) Net assets
D) Net working capital
20) Assets-Liabilities=?
A) Cash
B) Equity
C) Net income
D) Net expenses
1. c
2. b
3. c
4. d
5. a
6. b
7. c
8. c
9. a
10. b
11. d
12. c
13. b
14. d
15. a
16. a
17. d
18. a
19. d
20. b
Accountancy / Financial Accounting MCQ Set 2
1) The process of recording is done
A) Two times a year
B) once a year
C) Frequently during the accounting period
D) At the end of a accounting period
2) General journal is a book of _______ entries
A) First
B) Original
C) Secondary
D) Generic
3) The process of recording transactions in different journals is called
A) Posting
B) Entry making
C) Adjusting
D) Journalizing
4) Every business transaction affects at least ________ accounts
A) One
B) Two
C) Three
D) Infinite
5) Discount allowed is a kind of deduction from
A) Account payable
B) Account receivable
C) Cash account
D) Discount account
6) The other name of journal is
A) Ledger
B) T account
C) Day book
D) Cash book
7) A journal entry in which two or more account is debited or credited is referred as
A) Journal entry
B) Multi entry
C) Additional entry
D) Compound entry
8) The term 2/10-n/30 implies that ______ % discount will be given if the payment is made within _____ days or full amount is receivable within 30 days
A) 2,10
B) 10,2
C) 10,30
D) 3,15
9) Goods returned by customer should be debited to which of the following accounts?
A) Sales income account
B) Sales account
C) Return inward account
D) Expenses account
10) Discount allowed is
A) Expense of business
B) Income of business
C) Loss of business
D) Abnormal loss of business
11) _________ is the evidence that a transaction took place
A) Source documents
B) Ledger
C) Bonds
D) Journals
12) Which of the following will be debited if a business purchases goods on credit?
A) Cash
B) Debtor
C) Creditor
D) Purchases
13) Which of the following accounts will be debited if the business's owner withdraws cash from business for his personal use?
A) Drawings
B) Cash
C) Business
D) Stock
14) Journals are also referred as
A) Book of entries
B) Book of original entries
C) T account
D) Books of economic event
15) The standard format of journal does not include which of the following?
A) Assets column
B) Date column
C) Description column
D) Amount column
16) In which of the following orders data is entered in journal?
A) Alphabetical order
B) Numeric order
C) Bullets order
D) Chronological order
17) Which of the following accounts will be credited if a company purchases building for cash?
A) Capital account
B) Fixed assets account
C) Building account
D) Cash account
18) Discount for quick repayment of debt is normally referred as
A) Trade discount
B) Prompt payment discount
C) Cash discount
D) Bulk discount
19) The first step in accounting process is
A) Recording the transaction
B) Identifying the transaction
C) Posting the transaction
D) Preparing the source documents
20) A chart of accounts generally start with which of the following types of accounts?
A) Assets accounts
B) liability accounts
C) Cash accounts
D) Revenue accounts
1. C
2. B
3. D
4. B
5. B
6. C
7. D
8. A
9. C
10. A
11. A
12. D
13. A
14. B
15. A
16. D
17. D
18. C
19. B
20. A
Accountancy / Financial Accounting MCQ Set 3
1) Which of the following specialised journals records "goods returned by customers"?
A) Purchase journal
B) Sales journal
C) Purchases return journal
D) Sales return journal
2) Sales on credit is recorded in which of the following journal?
A) Purchase journal
B) Sales journal
C) Purchases return journal
D) Sales return journal
3) Transactions that a business doesn't record in any specialised journal are recorded in which of the following journals or day books?
A) Cash payments journal
B) Cash receipts journal
C) Purchases return journal
D) General journal
4) Another name of journal is
A) Specialized journal
B) Day book
C) Cash book
D) Record book
5) Which of the following specialised journals will record "goods returned by the business"?
A) Purchase journal
B) Sales journal
C) Purchases return journal
D) Sales return journal
6 Sales and purchase journal don't record
A) Credit sales
B) Credit purchases
C) Credit sales and purchases
D) Cash sales and purchases
7) Cash received from debtor is recorded in which of the following specialized journals?
A) Purchase journal
B) Sales journal
C) Cash receipts
D) Cash payments journal
8) Which of the following is a type of cash receipt journal + cash payment journal?
A) Bank statement
B) Statement of cash flow
C) Cash book
D) Cash documents
9) Cash purchases is recorded in which of the following specialized journals?
A) Purchase journal
B) Sales journal
C) Purchases return journal
D) Cash payments journal
10) A brief explanation recorded below every entry in general journal is commonly known as
A) Narration
B) Explanation
C) Summary
D) Other information
11) Credit purchase of plant and machinery is recorded in which of the following specialized journals?
A) General journal
B) Cash journal
C) Purchase journal
D) Purchase return journal
12) Debit note is the basis for recoding a transaction in which of the following journals?
A) General journal
B) Cash journal
C) Purchase journal
D) Purchase return journal
13) "Sale of old furniture" will be recorded in which of the following specialised journals?
A) Purchase journal
B) Sales journal
C) General journal
D) Cash receipt journal
14) Credit note is the basis for recording a transaction in which of the following specialized journals?
A) Purchase journal
B) Sales return journal
C) General journal
D) Cash receipt journal
15) Specialized journals are more adequate for which type of businesses?
A) Small businesses
B) Big businesses
C) Sole proprietorship
D) Partnership
16) Which of the following is known as an evidence that a transaction took place?
A) Cash receipts journal
B) General journal
C) Source document
D) Cash book
17) "Business paid rent amounting to $100" which of the following specialized journals records this transaction?
A) Cash receipts journal
B) Cash payments journal
C) Sales journal
D) Purchase journal
18) Credit memo or credit note No. is entered in which of the following journal?
A) General journal
B) Cash journal
C) Purchase journal
D) Sales return day book
1. D
2. B
3. D
4. B
5. C
6. D
7. C
8. C
9. D
10. A
11. A
12. A
13. C
14. B
15. B
16. C
17. B
18. A
Accountancy / Financial Accounting MCQ Set 4
1) Trial balance is prepared to check accuracy of
A) Ledger accounts balances
B) Balance sheet balances
C) Income statement balances
D) Cash flow statement balances
2) If a transaction is completely omitted from the books of accounts, will it affect the agreement of a trial balance?
A) Yes
B) No
C) Transactions can't be omitted
3) ________ is the common base for preparing a trial balance
A) Ledger accounts
B) General Journal
C) Specialized journals
D) Balance sheet
4) Which of the following is true about a trial balance?
A) It lists down the balances of accounts
B) It lists down the balances of a balance sheet
C) It is a kind of financial statement
D) It is not a part of accounting cycle
5) Debit balance = Credit balance in a trial balance indicates that
A) No error in recording transactions
B) No error in posting entries to ledger accounts
C) Account balances are correct
D) Mathematically Capital+Liabilities=Assets
6) Trial balance is commonly prepared
A) Frequently during the year
B) At the end of an accounting period
C) At the end of a month
D) At the end of a year
7) Which of the following will affect the agreement of a trial balance?
A) Complete omission of a transaction
B) Partial omission of a transaction
C) Error of principle
D) Compensating errors
8) If debit balances = credit balances, trial balance only shows or check the ____________ and it does not indicate that no errors were made during recording and posting
A) Arithmetic accuracy
B) Errors of commission
C) Omissions of economic events
D) Understatements of balances
9) Which of the following account with normal balance is shown at the debit side of a trial balance?
A) Rent income account
B) Creditors account
C) Unearned income account
D) Cash account
10) Which of the following account with normal balance is shown at the credit side of a trial balance?
A) Cash account
B) Bank account
C) Equipment account
D) Accrued expenses account
11) The closing balance of petty cash book is considered as
A) Liability
B) Asset
C) Expenses
D) Income
12) Payment of rent expenses is recorded on which side of cash book?
A) Receipts
B) Payments
C) Income
D) Expense
13) An entry which is made on both sides of a cash book is called
A) Cash entry
B) Contra entry
C) Payment entry
D) Compound entry
14) A cash book with cash, bank and discount column is commonly referred as
A) Cash book
B) Two columns cash book
C) Three columns cash book
D) Petty cash book
15) Cash book records
A) Cash payments
B) Cash receipts
C) Cash payments and cash receipts
D) Neither cash payments nor cash receipts
16) Cash discount is allowed on _______ repayment of debt
A) Lump sum
B) Prompt
C) Actual
D) None of them
17) Cash book is prepared by
A) Bank
B) Accountant of business
C) Manager of a company
D) Bank's cashier
18) The most common imprest system is the ________ system
A) petty cash
B) Cash book
C) Cash receipt
D) Discount
19) Discount received is recorded on which of the following side of a cash book?
A) Receipts
B) Payments
C) Incomes
D) Expenditures
20) Drawings by owner of business are generally recorded on which of the following side of a cash book?
A) Receipts
B) Payments
C) Incomes
D) Expenditures
21) Introduction capital by owner of business is recorded on which side of a cash book?
A) Receipts
B) Payments
C) Incomes
D) Expenditures
22) Cash book with cash and discount column is mostly referred as
A) Simple cash book
B) Two column cash book
C) Three column cash book
D) Petty cash book
23) A cash book that is used to record the small payments of cash is generally referred as
A) Simple cash book
B) Two column cash book
C) Three column cash book
D) Petty cash book
24) A simple or one column cash book usually has which of the following main columns?
A) Bank
B) Payments
C) Discount
D) Cash
25) Purchase of office equipment for cash will be recorded on which of the following sides of a cash book?
A) Receipts
B) Payments
C) Incomes
D) Expenditures
26) Postdated checks are considered as
A) Cash
B) Bank balance
C) Accounts receivable
D) Cash reserve
27) Postage stamps on hand are considered as
A) Bank
B) Prepaid expenses
C) Accounts receivable
D) Creditor
28) Petty cash fund is supposed to be replenished
A) Every day
B) Every half year
C) Every year
D) At the end of every accounting period
29) Which of the following is generally not the party to a check?
A) Payee
B) Payer
C) Bank
D) Seller
30) A credit balance in cash book indicates
A) Bank balance
B) Cash at bank
C) Bank overdraft
D) Bank underdraft
1. A
2. B
3. A
4. A
5. D
6. B
7. B
8. A
9. D
10. D
11. B
12. B
13. B
14. C
15. C
16. B
17. B
18. A
19. B
20. B
21. A
22. B
23. D
24. D
25. B
26. C
27. B
28. D
29. D
30. C
Accountancy / Financial Accounting MCQ Set 5
1) Transferring entries from journal to ledger account is commonly known as
A) Recording
B) Transferring
C) Posting
D) Entry making
2) An account records the ___________ in the balance of an item
A) Increase
B) Decrease
C) Increase or decrease
D) Appreciation
3) If credit side of a bank account is greater than the debit side, it indicates which of the following?
A) Bank overdraft
B) Cash at bank
C) Bank balance
D) Current Asset
4) If debit side of a bank account is greater than credit side it indicates which of the following?
A) Cash at bank
B) Bank understatement
C) Bank overdraft
D) Balance overstatement
5) _________ will be credited if goods are given as charity
A) Cash
B) Charity
C) Purchases
D) Sales
6) Which of the following is known as the base for preparing trial balance?
A) Journal
B) Cash account
C) Ledger account
D) Balance sheet
7) If debit balance is greater than creadit balance then the account blance will be:
A) Credit balance
B) Debit and credit balance
C) Cash balance
D) Debit balance
8) The normal balance of capital account is
A) Credit balance
B) Debit balance
C) Cash balance
D) Neither debit nor credit balance
9) The normal balance of asset account is
A) Credit balance
B) Debit balance
C) Cash balance
D) Neither debit nor credit balance
10) The normal balance of liability account is
A) Debit balance
B) Credit balance C) Cash balance
D) Neither debit nor credit balance
11) Which of the following statements is incorrect regarding capital account?
A) Debit increases the capital account balance
B) Credit increases the capital account balance
C) Fresh capital increases the capital account balance
D) Net income increases the capital account balance
12) Which of the following is the normal balance of a rent expense account?
A) Credit balance
B) Cash balance
C) Overdraft
D) Debit balance
13) Revenue and expense accounts are referred as
A) Nominal accounts
B) Real account
C) Cash accounts
D) Banks account
14) The real accounts are accounts of Assets, liabilities and ________
A) Expenses
B) Revenues
C) Capital
D) Drawing
15) Building account is classified as _________ account
A) Nominal
B) Real
C) Cash
D) Capital
16) Office equipments account is classifed as _________ account
A) Nominal
B) Real
C) Cash
D) Capital
17) ___________ helps business to classify transactions according to their nature
A) General journal
B) Real accounts
C) Ledger accounts
D) Cash accounts
18) Which of the following is a real account?
A) Office equipment
B) Rent expenses
C) Rent income
D) Insurance expense
19) Which of the following accounts are closed at the end of an accounting period?
A) Nominal accounts
B) Balance sheet accounts
C) Real accounts
D) None of them
20) Which of the following is the closing balance of a ledger account?
A) Blance c/d
B) Balance b/d
C) Balance e/d
D) Balance f/c
1. C
2. C
3. A
4. A
5. C
6. C
7. D
8. A
9. B
10. B
11. A
12. D
13. A
14. C
15. B
16. B
17. C
18. A
19. A
20. A
Accountancy / Financial Accounting MCQ Set 6
1) Favourable balance of cash book implies that
A) Credit balance of cash book
B) Debit balance of cash book
C) Bank overdraft
D) Adjusted balance of cash book
2) A cash deposit made by business appears on the bank statement as _______ balance
A) Debit
B) Credit
C) Expenses
D) Liability
3) Bank reconciliation statement is the comparison of a bank statement (sent by bank) with the _________ (prepared by business)
A) Cash receipt journal
B) Cash payment journal
C) Cash book
D) Financial statements
4) A check returned by bank marked "NSF" means that
A) Bank can't verify your identity
B) There are not sufficient funds in your account
C) Check has been forged
D) Check can't be cashed being illegal
5) In the Bank reconciliation statement "Deposit in transit" is usually
A) Subtracted from bank balance
B) Added to bank balance
C) Added to Cash book balance
D) Subtracted from cash book balance
6) Bank reconciliation statement is prepared by
A) Accountant of the business
B) Manager of the business
C) Controller of the bank
D) Accountant of the bank
7) Which of the following error results in unadjusted cash book balance?
A) Outstanding checks
B) Unpresented checks
C) Deposit in transit
D) Omission of Bank charges
8) Bank charges amounting to $5000 was not entered in the cash book. Identify the correct adjustment in cash book
A) Bank charges will be debited in cash book
B) Bank charges will be added to cash book balance
C) Bank charges will be credited in cash book
D) Bank charges need no adjustment in cash book
9) Unpresented checks also referred as
A) Uncollected checks
B) Uncredited checks
C) Outstanding checks
D) Bounced checks
10) ________ are checks that are issued by the business but not yet presented to bank
A) Uncollected checks
B) Uncredited checks
C) Outstanding checks
D) Bounced checks
Bank reconciliation statement MCQs
11) _________ Checks that are presented to bank but not yet credited by the bank
A) Unpresented checks
B) Uncredited checks
C) Outstanding checks
D) Bounced checks
12) Uncollected checks also referred as
A) Unpresented checks
B) Uncredited checks
C) Outstanding checks
D) Bounced checks
13) Favourable balance of bank statement implies that
A) Credit balance
B) Debit balance
C) Bank overdraft
D) Adjusted balance
14) Standing orders are ________
A) Credited in the cash book
B) Debited in the cash book
C) Entered in the bank statement
D) Entered in the petty cash balance
15) A company was entered in hire purchase agreement and had to pay $1000 per month.Three payments were made via bank account but no entry was found in cash book. Identify the correct adjustment in cash book
A) $1000 will be added to cash book balance
B) $2000 will be deducted from cash book balance
C) $3000 will be added to cash book balance
D) $3000 will be subtracted from cash book balance
16) $5000 deposited in bank account was entered twice in the cash book. Identify the correct adjustment in cash book
A) $5000 will be credited
B) $5000 will be debited
C) $10,000 will be credited
D) $10,000 will be debited
17) Bank sent debit advice of $500 to company being interest on overdraft. It wasn't entered in cash book. Identify the correct adjustment in cash book
A) $500 will be debited
B) $500 will be credited
C) Non-adjustable
D) $1000 will be subtracted
18) In bank reconciliation statement the amount of outstanding checks is added to ________ balance of cash book
A) Adjusted
B) Unadjusted
C) Understated
D) Overstated
19) Balance as per cash book(adjusted)=$1000, Unpresented checks=$2000, Uncredited checks=$500, Deposit in transit=$500. Compute the balance as per bank statement
A) $2000
B) Zero
C) $3000
D) $2500
20) A discount of $2000 was given to a supplier on his prompt repayment of debt but the cashier entered the gross amount in cash book. What should be the adjustment in cash to work out the correct balance of cash book?
A) $2000 will be debited in cash book
B) $2000 will be credited in cash book
C) $4000 will be debited in cash book
D) $4000 will be credited in the cash book
1. B
2. B
3. C
4. B
5. B
6. A
7. D
8. C
9. C
10. C
11. B
12. B
13. A
14. A
15. D
16. A
17. B
18. A
19. A
20. B
Accountancy / Financial Accounting MCQ Set 7
1) Accrued expenses are considered as
A) Asset
B) Liability
C) Gain
D) Income
2) Prepaid expenses are regarded as
A) Asset
B) Liability
C) Loss
D) Capital
3) Which of the following adjusting double entries is correct for Unearned income?
A) DEBIT= Income, CREDIT= Unearned income
B) DEBIT= Unearned income, CREDIT= Income
C) DEBIT= Cash, CREDIT= Unearned income
D) DEBIT= Income, CREDIT= Cash
4) Earned but not yet received income is treated as
A) Asset
B) Liability
C) Loss
D) Capital
5) Which of the following adjusting double entries is correct for accrued expenses?
A) DEBIT= Expenses, CREDIT= Accrued expenses
B) DEBIT= Accrued expenses, CREDIT= Expenses
C) DEBIT= Cash, CREDIT= Accrued expenses
D) DEBIT= Expenses, CREDIT= Cash
6) Which of the following adjusting double entries is correct for Prepaid expenses?
A) DEBIT= Expenses, CREDIT= Prepaid expenses
B) DEBIT= Prepaid expenses, CREDIT= Expenses
C) DEBIT= Cash, CREDIT= Prepaid expenses
D) DEBIT= Expenses, CREDIT= Cash
7) Unearned income is classified as
A) Asset
B) Liability
C) Loss
D) Capital
8) Which of the following adjusting double entries is correct for earned income?
A) DEBIT= Income, CREDIT= Earned income
B) DEBIT= Earned income, CREDIT= Income
C) DEBIT= Cash, CREDIT= Earned income
D) DEBIT= Income, CREDIT= Cash
9) Failure to make adjusting entries for accrued income results in
A) Overstatement of expenses
B) Understatement of expenses
C) Understatement of capital
D) Overstatement of income
10) Identify the consequences of not making adjustment entry for accrued expense
A) Overstatement of liabilities
B) Understatement of liabilities
C) Overstatement of expenses
D) Understatement of capital
11) An adjusting entry for prepaid expenses affects
A) Assets and expenses
B) Assets and income
C) Liabilities and expenses
D) Liabilities and assets
12) Adjusting entries convert cash based account into _________ based accounting
A) Capital
B) Asset
C) Accrual
D) Prepaid
13) An unearned income adjusting entry affects
A) Asset and liabilities
B) Cash and income
C) Income and liabilities
D) Cash and liabilities
14) A business paid 3 month rent amounting to $3000 out of this amount one month rent pertains to the next accounting period. Identify the correct amount prepaid expense
A) $3000
B) $1000
C) $2000
D) $4000
15) Adjusting entries help allocating incomes and expenses to their ________
A) Cash balances
B) Appropriate accounting periods
C) Credit balances
D) Received or paid cash balances
16) A customer paid you $100,000 for some construction work. However, at the end of your accounting period only 1/4 of work was completed. What amount of income should be shown in income statement?
A) 100,000
B) 50,000
C) 10,000
D) 25,000
17) A business paid $5000 for technical services but used up the services for only $2000 until the end of its accounting period. The remaining $3000 would be referred as
A) Accrued expenses
B) Accrued income
C) Prepaid income
D) Prepaid expenses
18) Revenue earned but not yet received by the business is known as
A) Contra asset revenue
B) Accrued expenses
C) Accrued revenue
D) Unearned revenue
19) Another name of accrued revenue is
A) Outstanding asset
B) Earned asset
C) Unearned revenue
D) Earned revenue
20) If Rent expenses=$5000, Insurance expenses=$4000, Prepaid rent expenses=$3000. What amount of total expenses will be shown in income statement?
A) $9000
B) $12000
C) $8000
D) $6000
1. B
2. A
3. A
4. A
5. A
6. B
7. B
8. B
9. C
10. B
11. A
12. C
13. C
14. B
15. B
16. D
17. D
18. C
19. D
20. D
Accountancy / Financial Accounting MCQ Set 8
1) Which of the following is not regarded as the fundamental concept that is identified by IAS-1
A) The going concern concept
B) The separate entity concept
C) The prudence concept
D) Correction concept
2) Using "lower of cost and net realisable value" for the purpose of inventory valuation is the implementation of which of the following concepts?
A) The going concern concept
B) The separate entity concept
C) The prudence concept
D) Matching concept
3) The concept of separate entity is applicable to which of following types of businesses?
A) Sole proprietorship
B) Corporation
C) Partnership
D) All of them
4) Does Prudence concept allow a business to build substantially higher reserves or provisions than that are actually required?
A) Yes
B) No
C) To some extent
D) It depends on the type of business
5) The revenue recognition principal dictates that all types of incomes should be recorded or recognized when
A) Cash is received
B) At the end of accounting period
C) When they are earned
D) When interest is paid
6) The matching concept matches which of the following?
A) Asset with liabilities
B) Capital with income
C) Revenues with expenses
D) Expenses with capital
7) The allocation of owner's private expenses to his/her business violates which of the following?
A) Accrual concept
B) Matching concept
C) Separate business entity concept
D) Consistency concept
8) The going concern concept assumes that
A) The entity continue running for foreseeable future
B) The entity continue running until the end of accounting period
C) The entity will close its operating in 10 years
D) The entity can't be liquidated
9) American companies prepare their their financial statement in dollars whereas Japanese companies produce financial statements in yens. Ths is an example of:
A) Stable monetary unit Concept
B) Unit of measurement Concept
C) Money value concept
D) Current swap concept
10) Which of the following is time span into which the total life of a business is divided for the purpose of preparing financial statements?
A) Fiscal year
B) Calendar year
C) Accounting period
D) Accrual period
11) Showing purchased office equipments in financial statements is the application of which accounting concept?
A) Historical cost convention
B) Materiality
C) Prudence
D) Matching concept
12) Assets can't be offset against liabilities. This the dictation of which of the following accounting concepts?
A) Matching concept
B) Accrual concept
C) Prudence concept
D) Offsetting concept
13) Information about an item is ________ if its omission or misstatement might influence the financial decision of the users taken on the basis of that information
A) Concrete
B) Complete
C) Immaterial
D) Material
14) Exercising a degree of caution in the case of judgments needed under the condition of uncertainty is assumption of which of the following accounting concepts?
A) Matching concept
B) Timeliness concept
C) Accrual concept
D) Prudence concept
15) Which one of the following concepts states that the publication or presentation financial statements should not be delayed?
A) Objectivity Concept
B) Timing concept
C) Timeliness Concept
D) Reliability Concept
16) land on lease should be shown in balance sheet contrary to fact that company doesn't own this piece of land. This is the statement of what accounting concepts?
A) Matching concept
B) Accrual concept
C) Prudence concept
D) Substance over form Concept
17) "Financial information should be neutral and bias free" is the dictation of which one of the following?
A) Completeness concept
B) Faithful representation Concept
C) Objectivity Concept
D) Duality Concept
18) A business was commenced on 1st January and it purchased 5 vehicles, each costing $5000. During the year the business managed to sell 2 vehicles at the price of $12000. How should the remaining 3 vehicles be valued if the business is going to continue its operations in the next year?
A) At the breakup value
B) On the basis of going concern
C) Liquidation value
D) More than market value
19) A company received cash $1000 in advance for auditing service. However, the company neither earned this revenue nor made any adjusting entry in its books. Identify the effect of this omission?
A) Total liabilities to be understated
B) Total expenses to be overstated
C) Total income to be overstated
D) Total assets to be understated
20) Depreciation is charged on fixed asse to comply with which of the following accounting principles or concepts?
A) Matching concept
B) Prudence concept
C) Timeliness concept
D) Reliability concept
1. D
2. C
3. D
4. B
5. C
6. C
7. C
8. A
9. B
10. C
11. B
12. D
13. D
14. D
15. B
16. D
17. C
18. B
19. A
20. A
Accountancy / Financial Accounting MCQ Set 9
1) Financial statements are prepared mainly for
A) Internal users of financial information
B) External users of financial informaiton
C) Creditors of the business
D) Managers of the business
2) Net profit is computed in which of the following?
A) Balance sheet
B) Income statement
C) Cash flow statement
D) Statement of changes in equity
3) Which of the following should be the most appropiate order of current asset in a balance sheet?
A) cash, debtor, bank, stock
B) Bank, cash, stock, debtor
C) Stock, bank, cash, debtor
D) Cash, bank, debtor, stock
4) In income statement, gross profit is always equal to
A) Sales-expenses
B) Incomes-expenses
C) Sales-cost of goods sold
D) Sales-selling costs
5) Office equipment is a ________ asset for a computer manufacturer and the same office equipment is a _________ asset for a company that deals in these equipments
A) Current, Fixed
B) Fixed, intangible
C) Tangible, intangible
D) Fixed, current
6) Identify the external user of financial information or financial statements
A) Management of the business
B) CFO of the business
C) Employees of the business
D) Investors of the business
7) A statement or report that records the fluctuation in business's capital is referred as
A) Balance sheet
B) Income statement
C) Cash flow statement
D) Statement of changes in equity
8) Financial statements mainly help in
A) Assumption of economic events
B) Anticipation of economic events
C) Recording of economic events
D) Communication of economic events
9) Purchases +opening stock-closing stock=?
A) Amount of sales
B) Gross profit
C) Cost of goods sold
D) Net income
10) Which of the following financial statements shows the financial position of a business at a specific date?
A) Balance sheet
B) Income statement
C) Cash flow statement
D) Statement of changes in equity
11) Which of the following financial reports shows the profitable of a business?
A) Income statement
B) Balance sheet
C) Cash flow statement
D) Statement of changes in equity
12) Assets minus liabilities equal to
A) Goodwill
B) Working capital
C) Net income
D) Capital
13) Which of the following financial statements shows the movement of cash and cash equivalents in during an accounting period?
A) Income statement
B) Balance sheet
C) Cash flow statement
D) Statement of changes in equity
14) Goodwill is classified as which one of the following assets?
A) Fixed
B) Long term
C) Current
D) Intangible
15) Which of the following does not appear in Balance sheet?
A) Building
B) Cash
C) Goodwill
D) Rent expenses
16) Which of the following lists down the balances to asset accounts, liability accounts and capital account balances?
A) Income statement
B) Balance sheet
C) Cash flow statement
D) Statement of changes in equity
17) Current assets are also known as
A) Working capital
B) Invested capital
C) Assets
D) Cash
18) The expenses related to the main operations of business are referred as
A) Administration expense
B) Non-administration expense
C) Selling expenses
D) Operating expenses
19) Cash receipt from the sales fixed assets is recorded under the heading of
A) Operating activities
B) Financing activities
C) Investing activities
D) Other activities
20) A current asset that is convertible to cash within 3 months can be referred to as
A) Cash asset
B) Operating asset
C) Intangible asset
D) Cash equivalent
1. B
2. B
3. D
4. C
5. D
6. D
7. D
8. D
9. C
10. A
11. A
12. D
13. C
14. D
15. D
16. A
17. A
18. D
19. C
20. D
Accountancy / Financial Accounting MCQ Set 10
1) What is the minimum number of partners required to commence a partnership business?
A) 20
B) 10
C) 2
D) 4
2) Partnership type of business is formed by the mutual agreement of partners. What kind of agreement is it?
A) Oral agreement
B) Written agreement
C) Oral or written agreement
D) None of them
3) In the general form of partnership, liabilities of partners are:
A) Limited
B) Unlimited
C) Limited to the business capital
4) Is partnership type of business considered as a separate legal entity?
A) No
B) Yes
5) can a partner transfer his/her share of business to a third party without other partners consent?
A) No
B) Yes
6) Is it compulsory for all partners to contribute equal amount of capital in the business?
A) No
B) Yes
7) Interest on drawings is:
A) Debited to partner’s current a/c
B) Credited to partner’s current a/c
C) Not shown in current account
8) The written agreement of partnership is most commonly referred to as:
A) Agreement
B) Partnership deed
C) Partnership contract
D) Partnership Act
9) Where there is no partnership agreement exists between partners, what will be the profit sharing ratio between the partners?
A) Equal
B) Unequal
C) It will depend on a partner’s capital
D) It will depend on the experience of a partner
10) Salary of a partner is _________ to current account
A) Debited
B) Credited
11) New investment by any partner in the partnership type of business is _______ to the partner’s capital account
A) Debited
B) Credited
12) Under fluctuation method of capital, what is the treatment of “interest on capital”?
A) Credited to capital account
B) Debited to capital account
C) No treatment or adjustment needed
D) Credited to current account
13) Which of the following is NOT generally the characteristic of a partnership business?
A) Limited life
B) Ease of formation
C) Mutual agency
D) Limited liability
14) In which of the following types of partnership the liability of at least one partner is unlimited whereas the liability of other partners is limited?
A) General partnership
B) Particular partnership
C) Partnership-at-will
D) Limited partnership
15) In which of the following types of partnership there is no agreement regarding the duration of partnership?
A) General partnership
B) Partnership-at-will
C) Limited partnership
D) Registered partnership
16) A&B are partners sharing profit or loss equally. A new partner enters in the partnership and invests a piece of land that had historical cost of $50,000, book value = $25000 and current market value = $30,000. By what amount the new partner’s account should be increased?
A) $25000
B) $50,000
C) $30,000
D) $75000
17) X and Y are partners sharing profit and loss at the ratio of 1/3 and 2/3 respectively. The net income for this accounting period is $10 while salary of X = $2, interest on Y’s drawings = $3 and interest on X’s capital = $2. What is the X’s share of profit or loss after the adjustment for partner’s salary, interest on capital and interest on drawings?
A) $3
B) $6
C) $9
D) $11
18) Which of the following is known as the value addition to a business because of business reputation, customers’ loyalty, brand name etc.
A) Assets
B) Market capitalization
C) Goodwill
D) Market penetration
19) Which of following is the correct double entry for revaluation surplus?
A) Revaluation = Debit and Partners capital accounts = Credit
B) Partners capital accounts = Debit and Revaluation surplus = Credit
20) A and B share profit and loss in the ratio of 3/5 and 2/5 respectively and having capital account balances of $100,000 each. At the time of revaluation, the firm’s total asset book value was $60,000 while they can only be sold for $40,000. Which of the following is the balance of A’s capital account after revaluation of firm’s assets?
A) $100,000
B) $112,000
C) $88,000
D) $72,000
21) Which one of the following double entries is correct regarding the cost of firm or partnership dissolution?
A) Credit realization a/c and Debit partners’ capital a/c
B) Credit realization a/c and Debit bank a/c
C) Debit realization a/c and Credit bank/cash
22) Identify the correct double entry for realization profit at time dissolution of partnership
A) Debit realization a/c and Credit bank a/c
B) Debit bank a/c and Credit realization account
C) Debit realization account and Credit partners’ capital accounts
23) Partner ‘A’ took firm’s vehicle worth $5000 without payment at the time of firm’s disbanding. Identify the correct adjustment in the capital account of partner ‘A’
A) $5000 will be debited
B) $5000 will be credited
C) No adjusted needed in capital a/c
24) During the process of dissolution of partnership, the carrying value of machinery=$5000 and building = $20,000 while both fixed assets were disposed at the cumulative price of $10,000 and realization cost was up to $2000. Identify what total amount needed to credit or debit in the partners capital accounts
A) $12000 Debit
B) $13000 Credit
C) $13000 Debit
C) $10,000 Debit
25) A and B are the partners in a small firm, their profit or loss sharing ratio is 6:4. A new partner C admitted in the firm that will share profit or loss at the ratio of 1/4. Which of the following is the new profit or loss sharing ratio among the partners A, B and C?
A) 6:4:1
B) 18:12:10
C) 10:12:18
D) 6:4:4
26) Which one of the following is the method of goodwill valuation?
A) Average capital method
B) Super capital method
C) Capital intensity method
D) Super profit method
27) Under capitalization method of goodwill valuation, which of the following formulas is used to calculate the “value of whole business”?
A) Value of whole business=Profit / Reasonable rate of return X 100
B) Value of whole business= Total assets / Reasonable rate of return X 100
C) Value of whole business= Equity-Net assets
28) Which of the following is not recorded in the partners current accounts?
A) Drawings
B) Interest on Drawings
C) Partners salaries
D) Administrative expenses
29) A partner that doesn’t take part in the management of business, but he/she has made investment in business and liable to creditors of the business is known as:
A) Active partner
B) Nominal partner
C) Junior partner
D) Dormant partner
1. C
2. C
3. B
4. A
5. A
6. A
7. A
8. B
9. A
10. B
11. B
12. A
13. D
14. D
15. B
16. C
17. A
18. C
19. A
20. C
21. C
22. C
23. A
24. C
25. B
26. D
27. A
28. A
29. D
