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Financial Accounting MCQS

1 We can say that the business is in profit, when:


C) Income exceeds Expenditure
2 According to the double entry system of accounting, an account that obtains benefit is:
A) Credit
3 Term "Credit" means_______ by the business.
A) Receiving of benefits
4) When a Liability is reduced or decreased, it is recorded on the:
D) Left or debit side of the account
5) When Capital is increased by an amount, it is recorded on the:
D) Right or credit side of the account
6)What type of expenses are paid out of Gross Profit?
A) General Expenses
B) Financial Expenses
C) Selling Expenses
D) All of the given options
7)Which of the following shows summary of a company's financial position at a specific date?
C) Balance Sheet
8)Which of the following is NOT an example of intangible assets?
D) Land
9 Which of the following is an example of business liability?
D) Creditors
10) The unfavorable balance of Profit and Loss account should be:
C) Subtracted from capital
11 ) Which of the following account will be credited, if business bought goods on credit from
Mr. Z
B) Mr.Z account
12) Interest on loan paid by business is an example of :
A) Revenue expense
13) Which of the following is NOT a function of bank reconciliation statement?
A) To check for errors in balance sheet

14) Which of the following account will be credited when a typewriter is sold that has been
used in the office?
A) Office Equipment Account
15) Which of the following subsidiary book(s) is (are) maintained for debtors control account?
A) Sales Day Book
B) Sales Return
C) Debtors Ledger
D) All of the given options
16) The allocation of the cost of a tangible plant asset to expense in the periods, in which
services are received from the asset, is termed as:
B) Depreciation
17) Which of the following is NOT a function of bank reconciliation statement?
A) To check for errors in balance sheet
18) Which of the following entry will be recorded when the Bad Debts are recovered?
A) Cash(Dr.) & Bad Debts recovered(Cr)
19) Which of the following subsidiary book(s) is (are) maintained for debtors control account?
A) Sales Day Book
B) Sales Return
C) Debtors Ledger
D) All of the given options
20)Which of the following item will be shown on debit side of debtors account?
D) Credit sales
21 ) Goods of $1,000 purchased from Mr. A were recorded in sales book, the rectification of
this error will:
B) Reduce the gross profit
22) Which of the following account will be credited when a typewriter is sold that has been
used in the office?
D) Office Equipment Account
23) When one or both aspects of a transaction are recorded in the wrong class or category of
account, this is called:
A) Error of principle
24)Which of the following item must be recorded in the adjusted Cash Book in order to bring it
in line with the entries in the Bank Statement?
A) Bank charges

25)It is supposed that on 31st December, 2007, the sundry debtors are amounted to $40,000.
On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful.
Actual bad debts are $ 1600. What amount of new provision for doubtful debts will be credited
in profit & loss account
C) $2400
26) Which of the following is an example of operating expense?
C) Purchasing cleaning services
27) Which of the following would NOT be considered as a component of 'cost' of stock?
C) Salaries of selling staff
28) Which of the following will be debited, if cash is drawn by Proprietor?
A) Proprietors drawings
29) Which of the following is TRUE about the treatment of insurance paid in advance $ 1200?
A) Current asset
30) When closing stock is given in trial balance, then it will effect
D) Trading A/C and Balance sheet
31) Current accounts of the partners should be opened when the capitals are:
A) Fixed
32) Which of the following is (are) type(s) of Public Limited Companies?
D) Both Listed Company and non listed company
33) The charter of a company which defines the limitations and powers of the company is
called:
B) Articles of association
34) Merchandise on hand at either the beginning or end of the reporting period is
called__________.
D) Inventory
35) The balance sheet reported a beginning balance of $20,000 in Accounts Receivable and an
ending balance of $15,000. Credit Sales of $200,000 were made during the year. Using this
information, compute cash collected from customers.
A) $205,000

36) - Please choose one


Gross profit
Operating profit
Sales
What is the amount of operating expenses

$
50,000
42,000
250,000
?

D) $8,000
37) - Please choose one
Debentures
Equity Capital
General Reserve
Accumulated profit
What is debt equity ratio
D) 15:35 (or 3: 7)

$
1, 50, 000
2, 00,000
90, 000
60,000
?

38) A company declares a cash dividend to be paid to its stockholders next month. The effect
of the transaction is to:
C) Decrease assets and stockholders' equity.
39) Please choose one

Direct materials costs


Direct labor costs
Manufacturing overhead costs
Prime cost

$
80,000
50,000
60,000
?

A) $130, 000
40) The amount owed by debtors at the end of a month appears on the_________ side of
the control account
A) Left side or debit
41) What would be the value of conversion cost, if the cost of material consumed during the
month is $5,000, labor cost incurred is $2,000 and the factory over head cost is $1,000?
A) $3,000
42) Mr. A & B entered into a partnership with an equal share in profit or loss. The agreement
provides that Mr. A will receive $10,000 and Mr. B will receive $8,000 as salary allowance.
The net income for the year is $85,000. What will be the total share of Mr. A?
C) $43,500
43)Which of the following capital is taken up by the general public?
A) Issued capital

44) All of the following have an effect on operating activities while preparing the statement of
cash flows except:
D) Amount received for disposal of a fixed asset
45) Which of the following financial statement is helpful for the investors and creditors
to assess the cash and non cash aspects of operating, investing and financing transactions
on an entitys financial position?
C) Statement of cash flows
46) According to the statement of cash flows following are the examples of investing
activities except:
B) Capital invested by the owners
47) Which of the following items of balance sheet are useful in evaluating a
companys liquidity?
A) Current assets and other assets
48) Which of the following can be distributed among the share holders?
B) General reserve
49) Fixed Assets (WDV) + Working Capital =?
A) Total assets employed
50) Shares for which amount is paid by public are called ______ shares.
B) Paid up
51) Which of the following is non- profit organization?
D) Trust
52) Commercial Accounting is based on:
B) Double entry book keeping
53) An Asset that is NOT physical in nature is called
A) Intangible Asset
54) In cost of goods sold statement, the cost of material consumed is equal to:
A) Opening raw material stock+ Purchases
Ending raw material stock
55) What would be the value of total factory cost, if the cost of material consumed during the
month is $6,000, labor cost incurred is $2,000 and the factory over head cost is $2,500?
A) $10,500

56) In cost of goods sold statement the cost of goods manufactured is equal to:

A) Total factory cost + Opening work in process


Ending work in process
57) Which of the following entry is passed to record discount allowed in control account?
A) Discount Allowed (Dr) and Debtors Control A/c (Cr)
58) Which of the following entry will be recorded, if a cheque deposited is dishonored by
bank?
B) Debtor's Account (Dr.) and Bank Account (Cr.)
59) In which of the following auditors remuneration payable is shown?
A) In balance sheet under the head of current liabilities
60) In which of the following interim dividend is treated?
A) In profit and Loss account
61) Which of the following documents contains rules and regulations for internal
management of the company?
B) Articles of Association
62) Which of the following is NOT a cash inflow?
D) Purchase of fixed asset
63) In cash flow statements, which of the following would appear as a cash outflow?
D) The payments for purchases made during the year
64) Credit sales appear on the __________ side of the Debtors control account
D) Right side or credit
65) The financial year of Atif Brothers & Co. is closed on June 30, 2009. Total cash sales are
$150,000, credit sales are $180,000 and total receipts are $250,000. Credit receipts will be:
B) $100,000
66) Which of the following is NOT a financial statement?
A) Audit report
67) Sunset tours has $3,500 account receivable from the Del Mar Rotary. On January 20, the
Rotary makes a partial payment of $2,100 to Sunset Tours. The journal entry made on January
20 by Sunset Tours to record this transaction includes:
B) A credit to the Accounts Receivable account of $2,100
68) Which of the following is quoted company?
C) Listed company

69) Which of the following can be utilized to set off any loss on revaluation?
C) Revaluation reserve
70) Which of the following capital is required for the registration of the company?
C) Authorized capital
71) Which of the following capital is taken up by the general public
B) Issued capital
72) Accounts Receivable & Inventory are the examples of:
A) Current assets
73) Which of the following account will be credited in the books of XYZ Co. Ltd, if the business
purchased a vehicle though cheque?
C) Bank account
74) In which of the following condition a company will have positive working capital?
A) If current assets > current liabilities
75) Which of the following is an example of direct materials cost?
B) A piece of wood for the production of chair
76) Bank Statement is a record of transactions between the bank and the holder of:
A) A foreign currency account
B) A current account
C) A saving account
D) All of the given options
77) Which of the following is CORRECT if depreciation is given in trial balance?
A) It has already been deducted from concerned asset account
78) The persons who sign articles and memorandum of the company and contribute in the
initial share capital of the company are called:
B) Shareholders
79) Merchandise on hand at either the beginning or end of the reporting period is called_
D) Inventory
80) What does a credit balance in a partners current account represent to a business?
A) Current Assets

81) Suppose a firm has 100 debtors, and each of them owes exactly $150 at the start of June.

During June each debtor has paid-off exactly $100 on their account, either by cash or by
cheque. What should be the revised total debtors figure
A) $5,000

82) Income tax expense of Eden Corporation shows a debit balance of Rs.7,000 in its
unadjusted trial balance and Rs.7,600 in adjusted trial balance. Which of the following account
will be debited in adjusting entry?
C) Income tax expense
83) The financial statement that captures both the current operating result and the associated
changes in the balance sheet is:
B) Statement of financial position
84) In statement of cash flows, all of the following items are considered as financing activity,
except:
A) Payment made for short term debts
85) Which of the following business publishes the Financial Statements?
D) Public Limited Company
86) Which financial statement show what a business owes at a particular point in time?
C) A balance sheet
87) The Balance Sheet item that represents the resources invested by the owner is known as:
A) As account (Dr.) and Bs account (Cr.)
88) If provision is created for doubtful debts, which of the following entry will be passed
to record bad debts in control account?
C) Provision for doubtful debts (Dr) and Debtors A/c (Cr)
89) Which of the following shows summary of a company's financial position at a specific
date?
C) Balance Sheet
90)Debenture is also named as:
B) Bond
91) A company declares a cash dividend to be paid to its stockholders next month. The effect
of the transaction is to:
A) Decrease assets and liabilities.

92) Which of the following is the most important document of the company?

A) Memorandum of Association
93) Authorized share capital is also known as:
A) Registered capital
94) Goods purchased from Mr. A for $2,000 passed through the sales book. The rectification
of error will result in:
A) Increase of gross profit
95) Which of the following entry will be recorded when the Bad Debts are recovered?
A) Cash account (Dr.) & Bad Debts recovered account (Cr.)
96) Which of the following would be deducted from Sundry Debtors in Balance Sheet?
A) Bad debts (Trial balance item)
C) New provision for doubtful debts
D) Both Bad debts (given in adjustment) and new provision for doubtful debts
97) The amount received; in excess of the face value of the shares is transferred to which of
the following?
A) Share premium account
98) The maximum amount with which the company is registered is called:
A) Authorized Share Capital
99) Depreciable value of an asset is equal to:
C) Cost scrap value
100) Which of the following asset is NOT depreciated?
D) Land
101) Which one of the following is NOT true about revenue expenditure?
B) They improve the financial position of the business
5) Which one of the following statement is CORRECT about Long term liabilities?
B) These are consist of all debts, payable after 12 months
6) Which of the following can offer its share to general public at large?
B) A listed company

7) What would be the value of total factory cost, if the cost of material consumed during the
month is Rs. 6,000, labor cost incurred is Rs. 2,000 and the factory over head cost is Rs.
2,500?

D) Rs. 10,500
8) Which of the following is CORRECT?
D) A cash inflow means increase in both cash and cash equivalent
9) Wages outstanding given in the trial balance will be treated as a (an):
B) Liability
10) Prepaid interest given in the Trial Balance will be treated as a (an):
A) Asset
1) A company has distributable profit = $4, 90,000. Profit sharing share ratio of Mr. A, Mr. B
and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. C in distributable profit.
C) $2, 45,000
2) the Capitals of partners are fixed then, at the end of financial year a partners drawings are
transferred to the:
D) Debit side of the partners current account
3)
A)
B)
C)
D)

In which situation(s) Partnership is dissolved?


In case of death of partner
At the admission of new partner
If any partner resigned from partnership
All of the given options

4) In calculating earning per share (EPS), the net profit is divided by which of the following?
A) Number of ordinary shares
5) A firm may earn profit during an accounting period but have less money in the bank at the
end of the period then it had at the beginning. Which of the followings, on its own, could
explain this?
C) an increase in trade debtors over the course of the period
6)
A)
B)
C)
D)

Which of the following option(s) is TRUE about the Sales returns?


Sales returns reduce the Gross sales of the firm
Sales returns affect the Net income of the firm
Sales returns affect the flow of cash
All of the given options

7) The persons who sign articles and memorandum of the company and contribute in the
initial share capital of the company are called:
A) Subscribers

8) The charter of a company which defines the limitations and powers of the company is
called:
A) The memorandum of association
9) Which of the following can offer its share to general public at large
B) A listed company
10) Which of the following are the owners of a company?
C) Shareholders
1) Rent receivable (given in trial balance) is an item of:
A) Balance Sheet
2)
A)
B)
D)

When closing stock is given in trial balance, then it will effect:


Trading account only
Balance sheet only
Both Trading account and Balance sheet

3) Which of the following account is affected from the Drawings of cash in soleproprietorship business?
A) Capital account
4) An asset is considered to be a current asset if:
B) It can be realized in cash or sold or consumed in the business within one year
5) General office expenses are charged to which of the following head:
A) Administrative expenses
6) Which of the following would NOT be considered as a component of 'cost' of stock?
A) Salaries of selling staff
7) Consider the following data and identify the amount which will be deducted from Sundry
Debtors in Balance Sheet

Particulars
Bad debts (from trial balance)
Provision for doubtful debts
(old)
Current years provision (new)

$
1,600
2,000
800

B) $800
8) A Financial statement that indicates the success or failure of a business, over a period of
time is called:
C) An income statement
9) Which of the following is NOT correct about income tax?
B) It is treated as an expense and debited in Profit & Loss account
10) (Amount of new provision + Amount of bad debts) < Amount of old provision then amount

will be shown on:


B) Credit side of P & L account
1) Which of the following rectifying entry will be recorded, if sales to Mr. A of $336 have
been debited to Mr. B account?
A) As account (Dr.) and Bs account (Cr.)
2) Which of the following account(s) will be affected, while rectifying the error of sales
Rs.100 to Mr. A recorded in the purchases book?
D) Sales account, purchase account and As account
3) Which of the following is shown on credit side of creditors control account?
A) Bills Receivable
4) Which of the following is NOT based on the concept of double entry book keeping system?
A) Subsidiary Ledgers
5) Bad Debts written off are given in adjustment, then which of the following entry for bad
debts written off is CORRECT?
B) Provision for Bad and Doubtful debts a/c (Dr) and Bad debts a/c(Cr)
6) Stock of Trading concern consists of:
C) Merchandise inventory
7) cost of goods sold statement the cost of goods manufactured is equal to:
B) Total factory cost + Opening work in process Ending work in process
8) What would be the value of total factory cost, if the cost of material consumed during the
month is $ 6,000, labor cost incurred is $2,000 and the factory over head cost is $ 2,500?
D) $10,500
9) Which of the following item appears in Trading Account of a business?
B) Wages and salaries
10) The cost of sales is $60,000, sales are $95,000 and operating expenses are $20,000 during
the year, what would be the value of Gross Profit?
B) $Rs. 35,000

1) Identify that which of the following particular(s) would NOT be shown in the format of a
Cash Book?
1. Cheque number
2. Date of transaction
3. Amount of transaction

A) (1) only
2) The process of transferring journal entry information to the ledger is called:
B) Posting
3) Which one of the following is a type of General Ledger?
B) T Account
4) Which of the following is CORRECT about the flow of recording a transaction?
A) Occurrence of event voucherJournalLedgerTrial Balanceprofit and loss account
Balance Sheet
1) Economic resources owned by a business and expected to benefit for the future operations
are called:
B) Assets
2) Bank Reconciliation Statement is prepared by:
B) Accountant of the business
3) Expenditures incurred anually on renewal of patent are known as:
A) Revenue Expenditures
4) Which of the following account will be credited, when the goods are purchased on cash?
B) Cash account
5) If the cost of sales is $60,000, sales are $95,000 and operating expenses are $20,000 during
the year, what would be the value of Gross Profit?
A) $15,000
6) Which of the following account balance will be shown on debit side of Trial Balance? (It is
assumed that all account balances are shown on normal balance).
D) Cash account
7) The amount of salary paid to Mr. Sohail should be debited to:
B) Salaries account
8) Which of the following account will be credited, if business bought goods on credit from
Mr. Ali
B) Mr. Ali account

9) The unfavorable balance of Profit and Loss account should be:


D) Subtracted from capital
10) Which of the following is NOT an example of Current Asset?

A) Bank Overdraft
Which one of the following is NOT prepared by Non profit organizations?
A) Profit & Loss account
2) An informal accounting statement that lists the ledger account balances at a point in time
and compares the total of debit balances with the total of credit balances is known as:
C) Trial Balance
3) Documentary evidence, in a specific format used to record the details of a transaction is
known as:
B) Voucher
4) A summarized record of transactions related to individuals or things is called a/an
A) Account
When a Liability is reduced or decreased, it is recorded on the:
B) Left or debit side of the account
6) Cost incurred for the maintenance of shop is considered as
C) Revenue expense
7) A sold goods for $3, 00,000 to Mr. B,$3, 00,000 will be treated as for business.
A) Revenue
8) Double entry accounting system includes:
C) Both cash and accrual accounting
9) Which of the following financial statement shows the financial health of an Organization at
a stated period of time?
A) Balance sheet
10) The records that are kept for the individual asset, liability, equity, revenue, expense, and
dividend
Components are known as:

A) Accounts

1) Revenue should be recognized or recorded when the goods are sold or services are
rendered to the customer, this concept is known as:
B) Realization Concept
2) A record maintained which is measurable in the form of money, this concept of accounting
is known as:

C) Money measurement concept


3) The cost of goods and services used up in the process of obtaining revenue is known as:
B) Expense
4) Which of the following is an accounting system in which events are recorded as and when
they occur?
B) Accrual Accounting
5) Recording of all financial transactions undertaken by an individual or organization is known
as:
B) Book-keeping
6) Any cheque drawn to creditor but not paid by bank will effect as follows:
A) Cash book will show less balance & bank book will show more
7) If no distribution is made between capital and revenue expenditure then:
C) Net profit will be incorrect
8) The Policy for charging depreciation is selected by:
C) Management
9) The estimated value at which an asset is expected to be sold after the end of its useful life
is called:
A) Residual value
B) Salvage Value
C) Scrap Value
D) All of the given options
10) Mr. A borrowed money from bank; this transaction involves which one of the following
accounts:
D) Cash & Bank
Which one of the following statement is wrong about Current liabilities?
C) A vague term for loans to be repaid by an enterprise after twelve months
2) Debenture is also named as:
B) Bond
3) In which situation(s) Partnership is dissolved?
A) In case of death of partner
B) At the admission of new partner
C) If any partner resigned from partnership
D) All of the given options

4) In calculating earning per share (EPS), the net profit is divided by which of the following?
C) Paid up capital
5) The maximum amount with which the company is registered is called:
A) Authorized Share Capital
6) When the capitals are fixed, which of the following account will be debited for drawings
made by a partner?
A) Individual Partners Current Account
7) Which of the following is(are) type(s) of capital account in partnership?
D) Both Fixed Capital and Fluctuating Capital
8)Current accounts of the partners should be opened when the capitals are:
C) Fixed
9) Which of the following journal entry will be recorded, if cash is drawn by a Proprietor?
A) Proprietors drawings a/c (Dr.) and Cash a/c (Cr.)
10) Which of the following is a selling expense?
C) Tax & freight paid on sale
1) In which of the following interim dividend is treated?
B) In profit and Loss appropriation account
2)The statement of changes in equity basically shows the movement of:
A) share capital during the year
3) Which of the following can offer its share to general public at large?
B) A listed company
4) In case of fixed capital accounts, other transactions such as Drawings and Profit etc. are
recorded in
a separate account that is called .
B) Current Account

5) Which of the following account will be debited when the interest on drawings is charged?
C) Partners current account
6) Which of the following account will be credited when interest on capital is charged against
the distribution of profit?
B) Partners capital account

7) A debit balance in the Bank Statement indicates:


B) Bank overdraft
8) Depreciable value of an asset is equal to:
C) Cost scrap value
9)If a business pays rent in advance for 12 months, it will be treated as:
A) Prepaid expenses of business
10) Which of the following asset is, generally, NOT depreciated?
D) Land
1) Which one of the following is NOT true about revenue expenditure?
B) They improve the financial position of the business
Which one of the following is NOT true about Capital Expenditure?
D) Reduce the profit of the concern
3) Which of the following is NOT a type of voucher?
D) Drawings Voucher
4) Which of the following account balance will be shown on debit side of Trial Balance? (It is
assumed that all account balances are shown on normal balance).
D) Cash account
5) Accounts Receivable & Inventory are the examples of:
B) Current assets
6) A Summarized record of transactions related to individuals or things is called a/an
A) Account
7) When Capital is increased by an amount, it is recorded on the:
D) Right or credit side of the account
8) What would be the affect on the components of the accounting equation, if goods are
purchased on cash?
C) Increase in goods and decrease in cash

9) Prepaid interest given in the Trial Balance will be treated as a (an):


A) Asset
10) The net income calculated in the income statement for the accounting period is reported
on:

C) Statement of cash flows


1) Which of the following journal entry will be recorded, if the goods are sold on credit to
Mr. 'B'?
A) Mr. B / Accounts Receivable account (Dr) and Sales account (Cr)
2) Which of the following is NOT an item of a Balance Sheet?
C) Sales Revenue
3) Accounts Receivable & Inventory are the examples of:
B) Current assets
4) Which of the following shows summary of a company's financial position at a specific
date?
C) Balance Sheet
5)Which of the following summarizes the cash movements during a specified period?
C) Receipts & Payments account
6)Which of the following financial statement summarizes the profitability of an organization for
a particular period?
B) Trading and Profit & Loss account
7)In an account, if credit side < debit side then the balance is known as:
B) Debit Balance
8) Which of the following is used to record financial transactions in chronological (day-today) order?
B) General Journal
9) When a Liability is reduced or decreased, it is recorded on the:
B) Left or debit side of the account
10) What is the nature of an expense account?
A) Debit
1) In accounting, which of the following account will be credited if the bad debts are
recovered in cash?
B) Bad debt recovered a/c
2) Which of the following is (are) NOT shown in balance sheet of sole proprietor?
C) Profit sharing ratio
3)Net profit = Gross profit - _________
A) Operating Expenses

4) In firms cash flow statements, which of the following would appear as a cash inflow?
C) Money received as result of selling fixed assets
5)Amount generated from sales in a business is called:
A) Income
6)Money spent to acquire or upgrade physical assets is known as:
B) Capital Expense
7)An example of financing activities in the context of cash flow statement is:
C) Financial charges paid
8)Fixed Asset (WDV) + __________ = Total assets Employed
B) Total assets
9)Which of the following is NOT correct regarding depreciation?
C) It refers to the end life of an asset
10)Salaries paid in advance should be shown on the:
A) Asset side of the Balance Sheet
1) Any expense that gives benefit for a period of less than twelve months is called ________.
B) Revenue Expense
2) Prepaid rent given in the Trial Balance will be treated as a (an):
A) Asset
3) If Assets = Rs. 99,500 and Owner's equity = Rs. 50,500 then Liabilities = ?
A) Rs. 49,000
4) Sale of goods to Amir is wrongly debited to Umair A/c instead of Amir A/c. Both
are debtors of business, this is an example of:
B) Error of Commission

5) Which of the following is TRUE about a merchandising company?


A) A merchandising company's business is to buy and sell products.

6) Money spent to acquire or upgrade physical assets is known as:


B) Capital Expense
7) Goods of Rs. 1,000 purchased from Mr. A were recorded in sales book. The rectification
of this error will:

B) Reduce the gross profit


8) An amount of Rs. 200 received from Mr. "P" but credited to Mr. "Q" would affect:
A) Accounts of P & Q
9) __________ is the art of recording, classifying and summarizing the transactions and
events of a business and interpreting the results thereof.
B) Accounting
10) What will be debited, if Mohsin commenced business with cash?
A) Cash account
1) In case of Income and Expenditure account, Excess of income over expenses in a
specified accounting period is called:
C) Surplus
2) Which of the following assets are shown at written down value in balance sheet?
D) Fixed assets
3) Assets are divided in which of the following categories in balance sheet.
B) Current assets, Long term assets and fixed assets
4) While making Profit & Loss account, Excess of expenses over income in a specified
accounting period is called:
B) Loss
5) In cost of goods sold statement the total factory cost is equal to:
D) Cost of material consumed + Factory overhead
6) The total of all costs incurred to convert raw material into finished goods is known as:
A) Conversion cost
7) Which one of the following is NOT a feature of sole proprietorship business.
D) Separate Legal Entity
8) What will be debited, If Mr. A started business with Rs. 2, 00,000.
A) Cash account

9)Normally single entry book keeping is followed by the:


A) Small businesses only
10) Which one of the following is INCORRECT about closing Stock?
D) It reduces the resources of business

1) Which of the following particular is NOT included in journal voucher?


B) Bank receipt number
2) Which one of the following is NOT true about Capital Expenditure?
D) They reduce the profit of the concern
3) In an account if debit side > credit side, the balance is known as the:
B) Debit balance
4) What is the next step to Journalizing in Accounting cycle?
B) Posting
5) Which of the following is NOT a characteristic of Joint Stock Company\
C) Easy formation
6) Which of the following is NOT considered a part of financial statements?
A) General Journal
7) Outsiders claim against the assets of the business is called
A) Liability
8) An expenditure whose benefit is finished or enjoyed immediately is called:
A) Expense
9)Increase in an expense is recorded on the:
C) Left or debit side of the account
10) Which of the following is Not a part of General Ledger?
A) Activity Book
1) What will be debited, If Mr. A started business with $2, 00,000
B) Cash account
2) Cash book is a part of _________ .
C) General Ledger

3) When income is reduced or decreased, that amount is recorded on:


B) Left or debit side of the account
4) What will be debited, if business sold goods for Rs.10, 000 on credit?
C) Accounts receivable account

5) A companys merchandise, raw materials, and finished and unfinished products which have
not yet been sold are known as:
C) Inventory
6)What is nature of Capital account?
B) Credit
7) The basic accounting principle/concept according to which business record must be kept
separate from the personal records of the owner is known as:
B) Separate entity principle
8) Which of the following is NOT correct?
D) Decrease in Revenue will be credit
9)What should be credited, if salary is paid to Sohail?
C) Cash account
10) Which of the following is NOT correct?
C) Decrease in Expenses will be debit
1) Which of the following is/are the example/s of Intangible Asset?
A) Copy rights
B) Good will
C) Patent rights
D) All of the given options
2) Assets are divided in which of the following categories in balance sheet.
D) Current assets, Fixed assets and deferred cost
4) Franchise rights, goodwill and patents are the examples of:
C) Intangible assets
5) What should be credited, if rent paid in cash?
C) Cash account
6) Which of the following item is found in a Journal entry? (1) Date of each transaction (2)
Rupee amount of each debit and credit (3) Explanation of each transaction
D) 1, 2 & 3

7) Which one of the following will result in increase in revenues?


B) Received discount
8) Amount generated from sales in a business is called:
A) Income

9) Which of the following is a FIRST product of accounting cycle?


B) Voucher
10) The expenses which are NOT paid out of Gross Profit is classified as:
A) Direct Expenses
1) The process of transferring journal entry information to the ledger is called:
B) Posting
2)Which of the following is NOT correct?
B) Decrease in Liabilities will be credit
3)
A)
B)
C)
D)

An accounting system is used by a business to:


Analyze transactions
Handle routine book-keeping tasks
Classify and summarize financial information
All of the given options

4) The assets which have a limited useful life are termed as:
B) Depreciateable assets
5) Accountancy covers which of the following area(s):
A) Book-keeping
B) Accounting
C) Auditing
D) All of the given options
6) If a business pays rent in advance for 12 months, it will be treated as:
A) Prepaid expenses of business
7) Which of the following transaction have NO affect on stockholders' equity?
A) Purchase of land on credit
8) Which of the following account balance is shown on credit side of Trial Balance? (It is
assumed that all account balances are shown on normal balance)
D) Capital account

9) If you start with cash book balance (Dr.), which of the following item will be deducted
in Bank Reconciliation Statement?
C) Cheque deposited but not credited by the bank

10) The cost of moving plant and machinery to a new site will be treated as:

B) Capital expense
1) Which one of the following is NOT true about Capital Expenditure?
D) Reduce the profit of the concern
2) A decrease in value of a fixed asset due to age, wear and tear is known as:
A) Depreciation
3) If Bad Debts written off are given in adjustment, then which of the following entry for bad
debts written off is CORRECT?
C) Bad debts a/c (Dr) and debtors a/c (Cr)
4) In balance sheet fixed assets are shown at:
D) Written down value (WDV)
5) In cost of goods sold statement, the cost of material consumed is equal to:
A) Opening raw material inventory + Purchases Ending raw material inventory
6) Following are the inventories of Manufacturing Concern EXCEPT
D) Merchandise inventory
7) Which of the following account balance will be shown on debit side of Trial Balance? (It is
assumed that all account balances are shown on normal balance)
A) Cash account
B) Furniture account
C) Vehicle account
D) All of the given options
8) The return of goods by a customer should be debited to:
B) Sales return account
9) Which of the following account will be credited in the books of ABC Co. Ltd., if furniture is
purchased on cash?
B) Cash account
10) Which of the following account will be credited, If Mr. A started business with cash
Rs. 2, 00,000?
A) Capital account

Introduction to Accounting and its Terminology MCQs 1 The accounting process involves in recording:
A) Quantifiable economic event
2)In accounting an Economic event is referred to as:
C) Transaction

3)Identify the correct sequence of accounting process


D) Identifyingrecordingcommunicating
4)Bookkeeping mainly concerns with which part of accounting process?
C) Recording financial information
5)Financial accounting provides financial information to all of the following external users
except:
D) Managers
6)For which step of accounting process the accountants of business entity prepare financial
statements?
B) Communication of financial information
7)Keeping the log of financial information in books of original entries is called
A) Recording
8)Auditing is what?
B) Examination of financial statements
9)Which of the following is the external user of financial statements?
C) Creditor of the business
10)Which of the following is the internal user of financial statements?
D) Manager of the business
11) _________ is the first phase of accounting cycle
A) Identifying an economic event or transaction
12)Financial statements differ from management account because
A) They are mainly prepared for external users of financial information
13)________ is a separate legal entity that Total capital can be divided in many shares
C) Company
14)An asset posses which of the following?
A) Future economic benefits for the business
15)Liabilities are which of the following?
B) Obligations
16________ is the gross inflow of economic benefits
C) Income

17)The gross decrease in economic benefits for the business are what?
A) Expenses
18)An asset must be _______ by the business to be shown as an asset in its "balance sheet"
C) Controlled
19)Liability are arisen from which of the following events?
C) Past event
20)Which of the following can be considered as the most important phase of accounting cycle
and it is the primarily objective of financial accounting?
C) Preparing financial statements
21)Which is the most important characteristic that all assets of a business have
D) Future economic benefits
22)What is the basic accounting equation?
A) Capital+Liabilities=Assets
23)Which of the following is a liability?
D) Creditors
24)What is equity?
C) Owner's claim on total assets
25)Identify the asset from the following
A) Cash and cash equivalent
26)_______ the withdrawal of cash and goods by the owner of the busienss for his/her
personal use
B) Drawings
27)Net loss occurs when
A) Expenses are greater than Income

28)Double entry implies that


C) Recording two aspects of every transaction
29)Identify the nominal account
D) Rent expenses account
30)Which of the following accounts can be classified as a real account?
D) Cash account

Accounting equation MCQs


1)The Basic accounting equation is
C) Assets=Capital+Liabilities
2)Find out the value of assets if: Liabilities=$5000 and Capital=$1000
B) $6000
3)Calculate the amount of cash if: Total assets=$10,000 Total liabilities=$10,000 Total
Capital=$5000
C) $5000
4)Capital increases if ______ increases
D) Revenue
5)Capital of a business decreases if there is an increase in
A) Drawings
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)
B) Decrease by $5000
7)If the business's owner withdraws cash for his/her personal use what will be the effect on
capital?
C) Decrease in capital
8)Net income equal to Revenues minus
C) Expenses
9)Collection of account receivable will
A) Increase assets and decrease assets
10)Payment of expenses will ______ the assets
B) Reduce

11)Which of the following is the practical implementation of the accounting equation?


D) Statement of financial position

12)Which of the following accounting equation is correct?


C) Assets-Liabilities=Capital

13)Fresh capital introduction will increase


B) Assets and equity

14)Cash received for services rendered will


D) Increase cash and equity

15)Which of following best describes the increase in equity expands_______


A) Business operations
16)If Cash=$1000 inventories=$4000 Debtors=$5000 fixed assets=? Capital+Liabilities=$15000
What is the Amount of total assets?
A) $5000

17)Depreciation decreases
D) Capital
18)An increase in provision for bad debt will
A) Decrease net income
19)Current assets - Current liabilities=?
D) Net working capital
20)Assets-Liabilities=?
B) Equity

Books of original entries - Journals MCQs


1)The process of recording is done
C) Frequently during the accounting period
2)General journal is a book of _______ entries
B) Original
3)The process of recording transactions in different journals is called
D) Journalizing
4)Every business transaction affects at least ________ accounts
B) Two
5)Discount allowed is a kind of deduction from
B) Account receivable
6)The other name of journal is
C) Day book
7)A journal entry in which two or more account is debited or credited is referred as

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
9)Goods returned by customer should be debited to which of the following accounts?
C) Return inward account
10)Discount allowed is
A) Expense of business
11)_________ is the evidence that a transaction took place
A) Source documents
12)Which of the following will be debited if a business purchases goods on credit?
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
14)Journals are also referred as
B) Book of original entries
15)The standard format of journal does not include which of the following?
A) Assets column
16)In which of the following orders data is entered in journal?
D) Chronological order
17)Which of the following accounts will be credited if a company purchases building for cash?
D) Cash account
18)Discount for quick repayment of debt is normally referred as
C) Cash discount

19)The first step in accounting process is


B) Identifying the transaction
20A chart of accounts generally start with which of the following types of accounts?
A) Assets accounts

1)Which of the following specialised journals records "goods returned by customers"?


D) Sales return journal
2)Sales on credit is recorded in which of the following journal?
B) Sales journal
3)Transactions that a business doesn't record in any specialised journal are recorded in which
of the following journals or day books?
D) General journal
4)Another name of journal is
B) Day book
5)Which of the following specialised journals will record "goods returned by the business"
C) Purchases return journal
6)Sales and purchase journal don't record
D) Cash sales and purchases
7)Cash received from debtor is recorded in which of the following specialized journals?
C) Cash receipts
8)Which of the following is a type of cash receipt journal + cash payment journal?
C) Cash book
9)Cash purchases is recorded in which of the following specialized journals?
D) Cash payments journal

10)A brief explanation recorded below every entry in general journal is commonly known as
A) Narration
11)Credit purchase of plant and machinery is recorded in which of the following specialized
journals?
A) General journal
12)Debit note is the basis for recoding a transaction in which of the following journals?
A) General journal
13) "Sale of old furniture" will be recorded in which of the following specialised journals?
C) General journal
14)Credit note is the basis for recording a transaction in which of the following specialized
journals?
B) Sales return journal

15)Specialized journals are more adequate for which type of businesses?


B) Big businesses
16)Which of the following is known as an evidence that a transaction took place?
C) Source document
17)"Business paid rent amounting to $100" which of the following specialized journals records
this transaction?
B) Cash payments journal
18)Credit memo or credit note No. is entered in which of the following journal?
A) General journal

Ledger or T accounts MCQs


1)Transferring entries from journal to ledger account is commonly known as
C) Posting
2)An account records the ___________ in the balance of an item
C) Increase or decrease
3)If credit side of a bank account is greater than the debit side, it indicates which of the
following?
A) Bank overdraft
4)If debit side of a bank account is greater than credit side it indicates which of the following?
A) Cash at bank
5)_________ will be credited if goods are given as charity
C) Purchases
6)Which of the following is known as the base for preparing trial balance?
C) Ledger account
7)If debit balance is greater than creadit balance then the account blance will be:
D) Debit balance

8)The normal balance of capital account is


A) Credit balance
9)The normal balance of asset account is
B) Debit balance

10)The normal balance of liability account is


B) Credit balance
11)Which of the following statements is incorrect regarding capital account?
A) Debit increases the capital account balance
12)Which of the following is the normal balance of a rent expense account?
D) Debit balance
13)Revenue and expense accounts are referred as
A) Nominal accounts
14)The real accounts are accounts of Assets, liabilities and ________
C) Capital
15)Building account is classified as _________ account
B) Real
16)Office equipments account is classifed as _________ account

B) Real

17)___________ helps business to classify transactions according to their nature C) Ledger


accounts
18)Which of the following is a real account?
A) Office equipment
19)Which of the following accounts are closed at the end of an accounting period? A) Nominal
accounts
20)Which of the following is the closing balance of a ledger account?
A) Blance c/d

Trial balance Mcqs


1)Trial balance is prepared to check accuracy of
A) Ledger accounts balances

2)If a transaction is completely omitted from the books of accounts, will it affect the
agreement of a trial balance?
B) No
3)________ is the common base for preparing a trial balance
A) Ledger accounts
4)Which of the following is true about a trial balance?
A) It lists down the balances of accounts
5)Debit balance = Credit balance in a trial balance indicates that
D) Mathematically Capital+Liabilities=Assets
6)Trial balance is commonly prepared
B) At the end of an accounting period
7)Which of the following will affect the agreement of a trial balance?
B) Partial omission of a transaction
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
9)Which of the following account with normal balance is shown at the debit side of a trial
balance?
D) Cash account
10)Which of the following account with normal balance is shown at the credit side of a trial
balance?
D) Accrued expenses account

Book of original entries - Cash book MCQ


1)The closing balance of petty cash book is considered as
B) Asset
2)Payment of rent expenses is recorded on which side of cash book?
B) Payments

3)An entry which is made on both sides of a cash book is called


B) Contra entry
4)A cash book with cash, bank and discount column is commonly referred as
C) Three columns cash book

5)Cash book records


C) Cash payments and cash receipts
6)Cash discount is allowed on _______ repayment of debt
B) Prompt
7)Cash book is prepared by
B) Accountant of business
8)The most common imprest system is the ________ system
A) petty cash
9)Discount received is recorded on which of the following side of a cash book?
B) Payments
10)Drawings by owner of business are generally recorded on which of the following side of a
cash book?
B) Payments
11)Introduction capital by owner of business is recorded on which side of a cash book?
A) Receipts
12)Cash book with cash and discount column is mostly referred as
B) Two column cash book
13)A cash book that is used to record the small payments of cash is generally referred as
D) Petty cash book
14)A simple or one column cash book usually has which of the following main columns?
D) Cash
15)Purchase of office equipment for cash will be recorded on which of the following sides of a
cash book?
B) Payments
16)Postdated checks are considered as
C) Accounts receivable
17)Postage stamps on hand are considered as
B) Prepaid expenses
18)Petty cash fund is supposed to be replenished
D) At the end of every accounting period

19)Which of the following is generally not the party to a check?


D) Seller
20)A credit balance in cash book indicates
C) Bank overdraft

Bank reconciliation statement MCQ


1)Favourable balance of cash book implies that
B) Debit balance of cash book
2)A cash deposit made by business appears on the bank statement as _______ balance
B) Credit
3)Bank reconciliation statement is the comparison of a bank statement (sent by bank) with the
_________ (prepared by business)
C) Cash book
4)A check returned by bank marked "NSF" means that
B) There are not sufficient funds in your account
5)In the Bank reconciliation statement "Deposit in transit" is usually
B) Added to bank balance
6)Bank reconciliation statement is prepared by
A) Accountant of the business
7)Which of the following error results in unadjusted cash book balance?
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
C) Bank charges will be credited in cash book
9)Unpresented checks also referred as
C) Outstanding checks
10)________ are checks that are issued by the business but not yet presented to bank
C) Outstanding checks
11)_________ Checks that are presented to bank but not yet credited by the bank
B) Uncredited checks
12)Uncollected checks also referred as
B) Uncredited checks

13)Favourable balance of bank statement implies that


A) Credit balance
14)Standing orders are ________
A) Credited in the cash book
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
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
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
B) $500 will be credited
18)In bank reconciliation statement the amount of outstanding checks is added to ________
balance of cash book
A) Adjusted
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
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?
B) $2000 will be credited in cash book

Adjusting Entries MCQs


1)Accrued expenses are considered as
B) Liability
2)Prepaid expenses are regarded as
A) Asset
3)Which of the following adjusting double entries is correct for Unearned income?
A) DEBIT= Income, CREDIT= Unearned income
4)Earned but not yet received income is treated as
A) Asset

5)Which of the following adjusting double entries is correct for accrued expenses?
A) DEBIT= Expenses, CREDIT= Accrued expenses
6)Which of the following adjusting double entries is correct for Prepaid expenses?
A) DEBIT= Expenses, CREDIT= Prepaid expenses
7)Unearned income is classified as
B) Liability
8)Which of the following adjusting double entries is correct for earned income?
B) DEBIT= Earned income, CREDIT= Income
9)Failure to make adjusting entries for accrued income results in
C) Understatement of capital
10)Identify the consequences of not making adjustment entry for accrued expense
B) Understatement of liabilities
11)An adjusting entry for prepaid expenses affects
A) Assets and expenses
12)Adjusting entries convert cash based account into _________ based accounting
C) Accrual
13)An unearned income adjusting entry affects
C) Income 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
B) $1000
15)Adjusting entries help allocating incomes and expenses to their ________
B) Appropriate accounting periods

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?
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

D) Prepaid expenses
18)Revenue earned but not yet received by the business is known as
C) Accrued revenue
19)Another name of accrued revenue is
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?
D) $6000

Accounting concepts MCQ


1)Which of the following is not regarded as the fundamental concept that is identified by IAS-1
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?
C) The prudence 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
5)The revenue recognition principal dictates that all types of incomes should be recorded or
recognized when
C) When they are earned
6)The matching concept matches which of the following?
C) Revenues with expenses
7)The allocation of owner's private expenses to his/her business violates which of the
following?
C) Separate business entity concept
8)The going concern concept assumes that
A) The entity continue running for foreseeable future
9)American companies prepare their their financial statement in dollars whereas Japanese
companies produce financial statements in yens. Ths is an example of:
B) Unit of measurement 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?

C) Accounting period
11) Showing purchased office equipments in financial statements is the application of which
accounting concept?
B) Materiality
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
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? D) Prudence
concept
15) Which one of the following concepts states that the publication or presentation financial
statements should not be delayed?
B) Timing 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?
D) Substance over form Concept
17) "Financial information should be neutral and bias free" is the dictation of which one of the
following?
C) Objectivity 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?
B) On the basis of going concern

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
20) Depreciation is charged on fixed asse to comply with which of the following accounting
principles or concepts?
A) Matching concept

1) Financial statements are prepared mainly for


B) External users of financial informaiton
2) Net profit is computed in which of the following?
B) Income statement
3) Which of the following should be the most appropiate order of current asset in a
balance sheet?
D) Cash, bank, debtor, stock
4) In income statement, gross profit is always equal to
C) Sales-cost of goods sold
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
D) Fixed, current
6) Identify the external user of financial information or financial statements
D) Investors of the business
7) A statement or report that records the fluctuation in business's capital is referred as
D) Statement of changes in equity
8) Financial statements mainly help in
D) Communication of economic events
9) Purchases+opening stock-closing stock=?
C) Cost of goods sold
10 Which of the following financial statements shows the financial position of a business at a
specific date?
A) Balance sheet
11) Which of the following financial reports shows the profitable of a business?
A) Income statement
12) Assets minus liabilities equal to
D) Capital
13) Which of the following financial statements shows the movement of cash and cash
equivalents in during an accounting period?
C) Cash flow statement
14) Goodwill is classified as which one of the following assets?

D) Intangible
15) Which of the following does not appear in Balance sheet?
A) Building
16) Which of the following lists down the balances to asset accounts, liability accounts and
capital account balances?
A) Income statement
17) Current assets are also known as
A) Working capital
18) The expenses related to the main operations of business are referred as
D) Operating expenses
19) Cash receipt from the sales fixed assets is recorded under the heading of
C) Investing activities
20) A current asset that is convertible to cash within 3 months can be referred to as
D) Cash equivalent
1) What is the minimum number of partners required to commence a partnership business?
C) 2
2) Partnership type of business is formed by the mutual agreement of partners. What kind of
agreement is it?
C) Oral or written agreement
3) In the general form of partnership, liabilities of partners are:
B) unlimited
7) Interest on drawings is:
A) Debited to partners current a/c
8) The written agreement of partnership is most commonly referred to as:
B) Partnership deed
9) Where there is no partnership agreement exists between partners, what will be the profit
sharing ratio between the partners?
A) Equal
10) Salary of a partner is _________ to current account
B) Credited

11) New investment by any partner in the partnership type of business is _______ to the
partners capital account
B) Credited
12) Under fluctuation method of capital, what is the treatment of interest on capital?
A) Credited to capital account
13) Which of the following is NOT generally the characteristic of a partnership business?
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?
D) Limited partnership
15) In which of the following types of partnership there is no agreement regarding the duration
of partnership?
B) Partnership-at-will
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 partners account should be
increased?
C) $30,000
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 Ys drawings = $3
and interest on Xs capital = $2. What is the Xs share of profit or loss after the adjustment for
partners salary, interest on capital and interest on drawings?
A) $3
18) Which of the following is known as the value addition to a business because of business
reputation, customers loyalty, brand name etc
C) Goodwill
19) Which of following is the correct double entry for revaluation surplus
A) Revaluation = Debit and Partners capital accounts = 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 firms total asset
book value was $60,000 while they can only be sold for $40,000. Which of the following is the
balance of As capital account after revaluation of firms assets?
C) $88,000
21) Which one of the following double entries is correct regarding the cost of firm or
partnership dissolution?

C) Debit realization a/c and Credit bank/cash


22) Identify the correct double entry for realization profit at time dissolution of partnership
C) Debit realization account and Credit partners capital accounts
23) Partner A took firms vehicle worth $5000 without payment at the time of firms
disbanding. Identify the correct adjustment in the capital account of partner A
A) $5000 will be debited
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
C) $13000 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
B) 18:12:10
26) Which one of the following is the method of goodwill valuation?
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
28) Which of the following is not recorded in the partners current accounts?
D) Administrative expenses
29) A partner that doesnt 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:
D) Dormant partner
1) Which of the following is another term for debtor control account?
D) Sales ledger control account
2) Control accounts are most commonly used for which of the following purposes?
D) Detecting errors in accounting records
3) Bad debts written off during a period of accounting are entered in which side of a control
account?
D) Credit side of debtor control a/c

4) Which of the following accounts is used to record the cash sales


A) Sales account
5) An account receivable was charged with the interest of $500, but no entry was made in the
debtor control account. What would be the adjustment in the debtor control account?
B) $500 will be debited in the debtor control a/c
6) A check for $200 was received from Mr. Z (a debtor) and was presented to bank but the bank
has dishonored it. Identity the correct treatment of check in a debtor control account?
A) Debit control account with $200
7) Sales of $500 were recorded twice in the sales ledger control account. What is the correct
adjustment in a debtor control account?
A) $500 will be credited
8) Sales return was understated by $1000. Which of the following is correct?
B) $1000 will be credited in debtor control a/c
9) $500 debit was entered as $500 credit in sales ledger control account. Whats its adjustment
in the sales ledger control account?
C) $1000 should be debited
11) Which of the following statements is/are correct?
1. Creditor control account is also known account payable control account
2. Creditor control account is also referred to as purchase ledger control account
3. Creditor control account is also called purchase ledger account
C) 1 and 2 are correct
12) A contra entry of $1000 between sales ledger and purchase ledger was omitted from
creditor control account. Which of the following is the correct adjustment in a creditor control
account?
B) $1000 should be debited
13) A creditor control account is a kind of _______ since it can be used to proved the
arithmetic correction of accounting record
C) Trial balance

14) The total of purchases return is entered on the which side of a creditor control account?
A) Debit side
15) Discount received is entered on the which side of a creditor control account?
A) Debit side

16) identify the correct double entry for bill receivable dishonor
A) Debit debtor and Credit bill dishonored
17) Generally, the total amount purchases is taken from which book of account for the
purpose of preparing Creditor control account?
C) Purchase day book
18) A creditor control account contains the following transaction:
Bank = $100
Purchases=$200
Discount received = $100
Balance c/d = $300
Work out the balance b/d
C) $300
19) Which of the following, generally, doesnt appear in a debtor control account?
D) Provision for doubtful debts
20) Which of the following is the correct entry for bill payable acceptance?
B) Creditor Debit and bill payable Credit
1) What is depreciation?
D) Portion of a fixed assets cost consumed during the current accounting period
2) Under which depreciation method the amount of depreciation expenses remains same
throughout the useful life of a fixed asset
A) Straight line method
3) A company purchased a vehicle for $6000. I will be used for 5 years and its residual value is
expected to be $1000. What is the annual amount of deprecation using straight line method of
depreciation?
A) $1000
4) What is the accumulated deprecation?
A) Sum of all depreciation expenses of a fixed asset
5) Which of the following is the normal balance of an accumulated depreciation account?
B) Credit balance
6) How trial balance shows the accumulated depreciation?
B) as a credit item
7) Which of the following is a double entry for depreciation expenses?
B) Depreciation expenses Debit and accumulated depreciation Credit

8) An alternative term used for accumulated depreciation expenses?


A) Provision for depreciation B) Cumulative depreciation
C) Targeted depreciation
D) Depletion
9) Which of the following is/are a kind of depreciation expenses?
A) Amortization
B) Depletion
C) Both of them
10) A fixed asset was bought for $5000. Its accumulated depreciation is $3000 and rate of
depreciation is 20%. Calculate its depreciation expenses for the current accounting
period using reducing balance method?
D) $400
11) In depreciation calculation, the useful life of a fixed asset is:
B) an estimate
12) Depreciable amount + Residual value of a fixed asset =?
C) Cost of the fixed asset
13) Cost of a fixed asset Accumulated depreciation expenses of the fixed asset=?
A) Book value of a fixed asset
14) The estimate about useful life of a fixed asset:
B) Can be changed
15) Which of the following is the correct formula for calculating depreciation using service
hours method?
B) Depreciation=(Cost - Accumulated depreciation) / Total hours X Actual hours )
16) The purchase price of a software that will be used for more than 12 months should be
regarded as:
B) a capital expenditure
17) XYZ firm has imported a machine from abroad. Which of the following is NOT the element
of machines cost?
D) Refundable tax

18) make sure that machine works properly. There was expense of $5000 incurred on test run,
however the sale proceeds of test production were $2000. You are required to find out the total
cost of machine?
C) 503,000
19) Which of the following fixed assets is not depreciated in the ordinary circumstances?

C) Land
20) In the calculation of depreciation, all of the following items are actually estimates except:
C) Historical cost
21) Which of the following accounting concepts or principles require the calculation of
depreciation of the fixed assets?
D) Matching concept
22) A car was purchased for $5500. Its residual value was estimated to be $500 while its
monthly depreciation expenses are $100 using straight line method. Which of the following is
the annual rate of depreciation?
B) 24%
23) Under which method of depreciation the amount of depreciation expenses remains
constant throughout the useful life of a fixed asset
C) Straight line method
24) An increase in the value of fixed asset is referred to as:
B) Appreciation
25) A fixed asset having book value of $2000 was sold for $1500. Which of the following is the
gain or loss on the sale of fixed asset?
C) $500 loss
26) Book value of a fixed asset equals to market value or sale proceeds of a fixed asset if:
C) Gain or loss on sale=0
27) The term ______ is generally used for the depreciation of natural resources
B) Depletion
28) Which of the following is a biological asset?
D) Living plants and animals
29) Items of property, plant and equipment can be recognized as assets when their cost can
be measured reliably and it is likely that the future economic benefits associated with the
assets:
C) will flow to the entity
30) Under the revaluation model of fixed assets provided by the international
accounting standards, the revaluation of the fixed assets should be carried out:
B) on a regular basis
1) Which of the following is the effect on net income if a business decreases provision for
doubtful debts?
A) It will increase net income

2) A firm has not recorded the bad debts by mistake. Which of the following is the effect of bad
debts omission?
B) Net profit would increase
3) When it is certain that a debt wont be recovered. Which of the following is correct?
B) Account receivable is credited
4) A recovery of bad debt
A) increases net income
5) The opening balance of provision for doubtful debts account is $1000 whereas the
closing balance of debtors account is 100,000. What amount of provision for doubtful debts
should be charged to income statement using a 5% provision for doubtful debts for the
current accounting period?
B) $4000
6) The opening and closing balances of provision for doubtful debts account are $1000 and
$2000 whereas bad debts are totaled $200
B) $2000 is to be subtracted from total debtors balance in the balance sheet
7) Which of the following double entries is used to transfer bad debts recovered to income
statement?
A) Bad debts recovered Debit and income statement Credit
8) What does aged debtors analysis signify?
A) shows how long debts have been outstanding
9) Which of the following is the most common cause of bad debt?
D) Debtor declared to be a bankrupt
10) According to a general rule of accounting, the older a debts is outstanding, the more
likelihood that the debt will turn out to be a
C) bad debt
11) Total debtors=$5000, the closing balance of provision for doubtful debt a/c is $500. Identify
what amount should be shown in balance sheet regarding the debtors?
A) $5000-$500=$4500

12) Which accounting concept dictates the inclusion of provision for doubtful debts in the
financial statements?
D) Prudence concept
13) Which of the following is an alternative term for provision for doubtful debts ?
C) Allowance for doubtful debts

15)A firm decided to provide for a 4% or $160 allowance for doubtful debts on all outstanding
debts. Which of the following is the value of total outstanding debts of the firm at the time of
creating the provision?
D) 4000$
16) Which of the following is a commonly used base to create the provision for doubtful
debts?
B) Total credit sales
17) Which of the following debtors have highest probability to default on trade debts?
A) Over 90 days old debtors
18) Provision for doubtful debts account is a/an
B) Contra asset account
20) Provision for cash discount on debtors is a percentage of
C) Net debtors less provision for doubtful debt
1) The value of inventories or stock is figured out at the lower of cost and
D) net realizable value
2) An overstatement in the value of closing stock overstates all of the following except
D) Cost of goods sold
3) Which of the following are generally the inventories of a service business
D) Work in process inventories
4) All of the following are the methods of inventory costing except
D) Stock take
5) Which one of the following methods of inventory costing yields highest taxable income?
A) FIFO
6) Which one of the following methods of inventory costing produces ending stock cost close
to the market value of the inventories?
A) FIFO

7) Which of the following inventory costing systems is regarded as the most complex one?
B) Perpetual inventory system

8) Which one of the following double entries is passed when goods are purchased on credit
under perpetual inventory system?
D) Inventory Debit and a/c payable Credit
9) Which of the following journal entries is passed when goods are purchased on credit under
the periodic inventory system?
C) Purchases Debit and a/c payable Credit
10) Which one of the following inventory systems ascertains the balance of stock or amount
of stock at the end of an accounting period or at the time of physical inventory count?
A) Periodic inventory system
11) Which one of the following inventory costing methods is supposed to issue the most
recently purchased goods?
C) LIFO method
12) Which of the following inventory systems is the most appropriate for a business that deals
in a precious metal such as gold?
B) Perpetual inventory system
13) Opening inventory + Net purchases = What?
D) Cost of goods available for sale
14) Cost of goods available for sale closing inventory = What?
D) Cost of goods sold
15) Gross profit is 25% on total sales and cost of goods sold amounts to $750. Which of the
following is the amount of gross profit?
D) $250
16) At the end of XYZ firms accounting period, the closing stock was found to be $10,000.
However, it was realized that a fixed asset of cost $1000 was included in the stock count.
Which of the following is the correct amount of ending inventory or stock?
C) $9000
17) NRV or net realizable value of inventory is the expected selling price or market value less
B) expenses necessary to complete sale

18) Cost of an item in the closing inventory is $100 whereas the net realizable value is $85. At
which one of following amounts the item should be shown in the financial statement?
C) $85
19) An item of inventory was purchased for $100. It can be sold for $125 and company
can replace the item with the new one at the cost of $105. Which of the following is the

historical cost of that item?


C) $100
20)Under which method of inventory costing a pre-determined cost is assigned to all items of
inventory? B) Standard cost method
1)Which of the following is generally considered as a non profit oriented organization?
A) Charitable organization
2) The receipts and payments account of a non-profit organization is a
B) Real account
3) Non-profit organizations prepare all of the following accounts except the
D) Income statement
4) Expenditures greater than incomes of a non-profit organization give rise to a
D) Deficit
5) Rent expense of a non-profit organization paid in advance. Which of the following is the
correct classification of rent?
D) Asset
6) An advance receipt of subscription from a member of the non-profit organization is
considered as a/an
B) Liability
7) Income and expenditure account is based on
B) Accrual accounting
8) Which of the following is regarded as apt to show the purchase of a fixed asset?
C) Balance sheet
9) Which of the following is to be recorded in an income and expenditure account?
C) Profit on the sale of a fixed asset
10) Honorarium is a kind of remuneration paid to a person who is not the employee of a nonprofit organization. Which of the following statements is true about the honorarium payment?
A) Its a revenue expenditure

11) The capital of a non-profit organization is generally known as


B) Accumulated fund
12) When cash is received for life membership, which one of the following double entries is
passed?

D) Cash Debit and life membership fund Credit


13) XYZ club has a bar that maintains a separate trading account for its trading activities.
Which of the following is the treatment of profit or loss on bar trading activities?
B) Profit or loss is to be presented in income and expenditure account
14) Which of the following is the accounting equation for a non-profit organization?
C) Accumulated fund + Liabilities = Assets
15) Subscription received but not yet earned is considered as a/an
B) Liability
16) A non-profit organization received $10,000 as the entrance fee of a new member. If 20% of
the fee has to be capitalized, what is the amount of fee needs to be shown in the income and
expenditure account?
B) $8000
17) $10,000 received as the annual membership subscription. Out of this, $2000 is pertaining
to the previous accounting period whereas $1000 is receivable at the end of the current
accounting period. Calculate the amount of subscription that will be shown in the income and
expenditure account for this accounting
B) $9000
18) The balance sheet of a non-profit organization such as a charitable hospital doesnt
contain the
D) Owners equity
19) Income and expenditure accounts show
D) Surplus or deficit for the current accounting period
20) On what basis the receipts and payments account is prepared?
A) Cash basis
21) The amount or property received by a non- profit organization as stated by the will of a
deceased person is commonly referred to as
C) Legacy
22) Investment in sinking fund by a non-profit organization is a/an
C) Asset

23) In non-profit accounting, the sale of old newspapers is generally considered as a/an
C) Income

1) In single entry system of accounting


B) Single aspect of a transaction is recorded
2) Statement of financial position produced from incomplete
accounting record is commonly known as
C) Statement of affairs
3) Which of the following businesses usually maintain incomplete accounting record of the
business activities?
D) Small businesses
4) In which of the following systems of recording the financial statements reflect true and fair
view of an entity and accounting records are considered to be more accurate?
B) Double entry system
5) Identify the correct formula used to ascertain the closing balance of capital
D) Closing capital = Opening capital + Net income Drawings
6) Which of the following formulas is used to calculated the net income for an accounting
period?
C) Net income = - Opening capital + Drawings + Ending capital
7) If opening capital = $1000 and closing capital = $2000. Assuming no drawings during the
accounting period, calculated the net income or loss for the period
A) $1000 net income
8) Total opening balances of assets and liabilities are $10,000 and $5000 respectively. Find out
the opening capital of the business
B) $5000
9) Which one of the following accounts is supposed to be used to get the figure of credit
purchases made during the current accounting period?
C) Creditors account
10) To obtain the amount of credit sales made during an accounting period, which account is
generally used in single entry and incomplete records?
C) Debtors account

11) Which of the following is used to work out the balance of cash drawings for an accounting
period?
D) Cash book

12) Closing balance of cash can be obtained by drawing up a


D) Cash account
13) A method wherein omitted information is determined in the first place and by using this
information net income or loss is ascertained is known as
C) Conversion method
14) If creditors balance was $1000 at 1 Jan 2012, ending balance of creditors was $2000 on 31
Dec 2012 and a payment of $500 was made to creditors, which of the following is the amount
of purchases made during the year 2012?
C) $1500
15) If debtors balance was $2000 at 1 Jan 2012, credit sales made during the year were $1000
and the total payments of $1500 were received from debtors, which of the following is the
debtors account balance at 31 Dec 2012 ?
C) $1500
16) Net profit + operating expenses = ?
D) Gross profit
17) Calculate the amount of net income or loss if the capital has been increased by $1000
during this accounting period, drawing = $5000 and $1000 fresh capital was introduced in the
business
B) $5000 net profit