MCQs Financial Accounting

1. Which of the following financial statements reflects the overall financial position of the business?
(a) Statement of cash flows
(b) Income Statement
(c) Balance Sheet
(d) Statement of owner’s equity

2. Trial Balance is prepared:

(a) To ensure arithmetical accuracy of accounting records.
(b) To establish complete accuracy of accounting records.
(c) To determine the amounts payable to suppliers for purchase of goods on credit.
(d) To ensure efficient use of resources of the business.

3. Which of the following transactions represent an expense?

(a) The owner withdrew Rs. 1,600 from the business for personal use
(b) Purchased a photocopying machine for Rs. 2,750 cash
(c) Purchased medical supplies for cash from Healthcare Labs. Rs. 1,630
(d) Received a telephone bill amounting to Rs. 550 to be paid within ten days.

4. In the accounting cycle:

(a) Closing entries are made before adjusting entries.
(b) Closing entries are made after the adjusting entries.
(c) Adjusting entries are made after financial statements are prepared. (d) Financial
statements are prepared after closing trial balance.

5. The cash basis of accounting:

(a) Is widely used by manufacturing firms. (b) Is often used by merchandising firms.
(c) Usually results in a larger amount of tax than under accrual basis accounting.
(d) Can not be used in filing income tax returns.

6. Which of the following accounts are not closed at the end of an accounting period?
(a) Revenue accounts
(b) Expense accounts
(c) Drawing accounts
(d) Asset accounts

7. Under periodic inventory system cost of good sold is determined and recognized in the books of
accounts:
(a) At the time of purchase of goods
(b) At the time of sale of goods
(c) At the end of the year
(d) None of these

8. Which of the following is not a use of working capital?

(a) Repayment of long term debt
(b) Cash dividend declared but not paid
(c) Payment of an account payable
(d) Acquisition of treasury stock.

9. Expense is recorded in the accounting records when:

(a) Cash is paid
(b) The purchase order is placed with the supplier
(c) Purchases are made
(d) None of these

10. A transaction caused a Rs. 10,000 decrease in both assets and total liabilities. This transaction
could have been:
(a) Purchase of furniture for Rs. 10,000
(b) An asset costing Rs.10, 000 was destroyed by fire
(c) Repayment of bank loan Rs. 10,000
(d) Collection of an Rs.10, 000 account receivable

11. Which ratio indicates a firm’s ability to pay current liabilities in the shortest possible time?
(a) Current Ratio
(b) Equity Ratio
(c) Debt Ratio
(d) Quick Ratio

12. Financial statements prepared by a business firm are most likely to be:
(a) Fully reliable
(b) Tentative in nature
(c)Relevant for all types of decisions
(d) Always misleading

13. A deficit appears on the balance sheet:

(a) Among the assets
(b) As a deduction from total paid-up capital
(c) Among the liabilities
(d) None of the

14. Which of the following is least important in determining the fair market value of a share?
(a) Earnings and dividends per share
(b) Book value per share
(c) The available supply of shares and the demand to purchase the shares.
(d) The par value of share.

15. When costs are rising, which method reports higher net income:
a. LIFO
b. FIFO
c. Averaged.
d. The most recent purchase price

16. The net sales of Fresh Foods were Rs. 200,000 for the current month. If the cost of goods available
for sale was Rs. 180,000 and the gross profit rate was 35%, the ending inventory must have been:
(a) Rs. 70,000 (b) Rs. 1, 30,000
(c) Rs. 50,000
(d) Rs. 63,000
(200,000 – 180, 000 – X = 70, 000(0.35* 200,000 = 70,000)) = X= 50, 000

17. In accounting an Economic event is referred to as:

A) Cash
B) Bank statement
C) Transaction
D) Exchange of money

18. Bookkeeping mainly concerns with which part of accounting process?

A) Analyzing
B) Preparing financial statements
C) Recording financial information
D) Auditing the books of accounts
19. which of the following is the external user of financial statements?
A) Manager of the business
B) CEO of the business
C) Creditor of the business
D) Controller of the business

20. Which of the following is the internal user of financial statements?

A) Creditor of the business
B) Government agency
C) Shareholder of the business
D) Manager of the business

21. Identify the nominal account

A) Machinery account
B) Building account
C) Creditors account
D) Rent expenses account
22. Net loss occurs when
A) Expenses are greater than Income
B) Expenses are less than Income
C) Expenses=Income
D) Liabilities are greater than income

23. ________ is a separate legal entity that Total capital can be divided in many
shares
A) Partnership
B) Sole proprietorship
C) Company
D) Non-profit organization

24. An asset posses which of the following?

A) Future economic benefits for the business
B) All kind of benefits for the business
C) Expenses for the business
D) Merits and Demerits for the business

25. Auditing is what?

A) Reporting the financial information
B) Examination of financial statements
C) Preparation financial statements
D) Maintaining the ledger records

26. Liabilities are which of the following?

A) Resources
B) Obligations
C) Future benefits
D) Expenses

27. Keeping the log of financial information in books of original entries is called
A) Recording
B) Summarizing
C) Grouping
D) Processing
28. which is the most important characteristic that all assets of a business have?
A) Long life of assets
B) Value of assets
C) Intangible nature of assets
D) Future economic benefits

29. What is the basic accounting equation?

A) Capital+Liabilities=Assets
B) Assets+ liabilities =Capital
C) Capital+assets=liabilities
D) Liabilities+Capital

30. What is equity?

A) Cash from the business
B) Liability of a business
C) Owner's claim on total assets
D) Owner's claim on total liabilities
31. Double entry implies that
A) Recording entries in journal
B) Recoding entries in Ledger account
C) Recording two aspects of every transaction
D) Recording every transaction in books

32. Which of the following accounts can be classified as a real account?

A) Rent expenses account
B) Rent income account
C) Insurance expenses account
D) Cash account

33. Which of the following is an intangible asset?

(a) An investment in marketable securities
(b) Leasehold land.
(c) Loose tools.
(d) Copy rights.

34. Second hand machinery worth Rs. 10, 000 was purchased, repairing of the machinery cost Rs.
1,000. The machinery was installed by own workers. Wage for this being Rs. 200, the machinery
account should be debited for:
a. Rs. 10,000
b. Rs. 11,000
c. Rs. 11,200
d. None of these

35. Which of the ratio best reflects a company’s ability to meet immediate interest payment?
a. Debit ratio
b. Equity ratio
c. Times interest earned
d. None of these

36. Identify which items are subtracted from the list amount and not recorded when computing
purchase price:
a. Freight in
b. Trade discount
c. Purchase discount
d. Purchase return

37. Which of the following financial statements reflects the overall financial positionof the business?
(a) Statement of cash flows
(b) Income Statement
(c) Balance Sheet
(d) Statement of owner’s equity

38. Trial Balance is prepared:

(a) To ensure arithmetical accuracy of accounting records.
(b) To establish complete accuracy of accounting records.
(c) To determine the amounts payable to suppliers for purchase of goods on credit.
(d) To ensure efficient use of resources of the business.

39. Identify the asset from the following

A) Cash and cash equivalent
B) Creditors
C) Notes payable
D) Bank loan

40. _______ the withdrawal of cash and goods by the owner of the busienss for
his/her personal use
A) Depreciation
B) Drawings
C) Outflow of cash
D) Appreciation

41. Income and expenditure account in a non trading institution records

Transaction of:
a. Revenue nature only
b. Capital nature only
c. Both (a) & (b)
d. Income of revenue nature and expenditure of revenue and capital nature

42. In the accounting cycle:

(a) Closing entries are made before adjusting entries.
(b) Closing entries are made after the adjusting entries.
(c) Adjusting entries are made after financial statements are prepared.
(d) Financial statements are prepared after closing trial balance.

43. Which of the following transactions represent an expense?

(a) The owner withdrew Rs. 1,600 from the business for personal use
(b) Purchased a photocopying machine for Rs. 2,750 cash
(c) Purchased medical supplies for cash from Healthcare Labs. Rs. 1,630
(d) Received a telephone bill amounting to Rs. 550 to be paid within ten days.

44. Which of the following accounts are not closed at the end of an accounting period?
(a) Revenue accounts
(b) Expense accounts
(c) Drawing accounts
(d) Asset accounts

45. Which of the following is not a use of working capital?

(a) Repayment of long term debt
(b) Cash dividend declared but not paid
(c) Payment of an account payable
(d) Acquisition of treasury stock.

46. Under periodic inventory system cost of goods sold is determined and recognized in the books of
accounts:
(a) At the time of purchase of goods
(b) At the time of sale of goods
(c) At the end of the year
(d) None of these

47. ________ is the gross inflow of economic benefits

A) Assets
B) Liabilities
C) Income
D) Expenses

48. The gross decrease in economic benefits for the business are what?
 A) Expenses
B) Obligations
C) Creditors
D) Income or gain

49. Favorable 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

50. A cash deposit made by business appears on the bank statement

as__________balance:
a. Debit
b. Credit
c. Expenses
d. Liability

51. 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

52. 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

53. 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

54. 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

55. 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

56. 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

57. Unpresented checks also referred as:

a. uncollected checks
b. Uncredited checks
c. Outstanding checks
d. Bounced checks

58. __________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

59. Favorable balance of bank statement implies that:

a. credit balance
b. Debit balance
c. Bank overdraft
d. Adjusted balance
60. Standing order are__________?
a. credited in cash book
 b. Debited in the cash book
c. Entered in the bank statement
d. Entered in petty cash book

61. ___________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

62. Uncollected checks also referred as:

a. Unpresented checks
b. Uncredited checks
c. Outstanding checks
d. Bounced checks

63. $5000 deposited in bank account was entered twice in the cash book. Identify
the correct adjustment in cash book:
a. $5000 will be debited
b. $5000 will be credited
c. $10,000 will be credited
d. $10,000 will be debited

64. 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

65. Cash budget excludes the following:

(a) Non-Cash items
(b) Cash items
(c) Purchase on Credit items.

66. Operating cost in often named as:

(a) Manufacturing cost plus commercial expenses
(b) Prime cost plus factory overheads
(c) Direct material plus direct labour
(d) Selling plus administrative expenses

67. Short term Loan can be best described as:

(a) If the period is three years
(b) If the period is less than one year
(c) If the period is over one year
(d) None of these

68. Economic resources of a business that are expected to be of

benefit in the future are referred to as:
(a) Liabilities
(b) Owner’s equity
(c) Withdrawals
(d) Assets
(e) None of these

69. Maximum number of partners in a partnership firm set up in

Pakistan under Partnership Act, 1932 is:
(a) 5
(b) 25
(c) 20
(d) None of these

70. Preparation of final financial reports is governed in Pakistan under:

(a) No law
(b) Companies Ordinance 1984
(c) None of these

71. Depreciation is based on:

(a) Economic life of asset
(b) Declared life of asset by supplier
(c) Normal life of asset
(d) None of these

72. Balance Sheet is always prepared:

(a) for the year ended.
(b) As on a specified date.
(c) None of these.

73. Quick Ratio can be computed as under:

(a) Quick Assets/Quick Liabilities
(b) Quick. Liabilities/Current Assets
(c) Current Assets/ Current Liabilities
d. Debt/Equity

74. Retained earning is synonymous to:

a. Accumulated profit and loss account
b. Profit for the year
c. None of these
d. General Reserve

75. Which of the following is a liability?

A) Cash
B) Equipment
C) Debtors
D) Creditors

76. Liability is arisen from which of the following events?

A) Present event
B) Future event
C) Past event
D) None of them

77. Which of the following can be considered as the most important phase of
accounting cycle and it is the primarily objective of financial accounting?
A) Identifying transactions
B) Preparing "T Accounts"
C) Preparing financial statements
D) Preparing trial balances

78. An asset must be _______ by the business to be shown as an asset in its

"balance sheet"
A) Possessed
B) Owned
C) Controlled
D) Used

79. In bank reconciliation statement the amount of outstanding checks

is added to ______________balance of cash book.
a. Adjusted
b. B. Unadjusted
c. Understated
d. Overstated

80. Balance as per cash book (adjusted) = $1000, Unpresented checks

= $2000, Uncredited checks = $500, Deposit in transit = $500.
Compute the blance as per bank statement
a. $2000
b. Zero
c. $3000
d. $2500

81. 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 cash book

82. 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 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

83. _________ is the first phase of accounting cycle

A) Identifying an economic event or transaction.
B) Preparing journals.
 C) Posting entries to ledger accounts.
D) Making decisions about business.

84. Financial statements differ from management account because

A) They are mainly prepared for external users of financial
information.
B) They are more complex and hard to prepare.
C) The are the summary of accounting data.
D) The are prepared on basis of actual concept.

85. The accounting process involves in recording:

A) Quantifiable economic event
B) Non quantifiable economic event
C) All of them
D) None of them

86. Comparison of a company’s financial condition and performance across time is a:

a. Ratio analysis
b. Horizontal analysis
c. Vertical analysis
d. None of these

87. 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

88. The first step in accounting process is

A) Recording the transaction

B) Identifying the transaction
C) Posting the transaction
D) Preparing the source documents

89. 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

90. Discount for quick repayment of debt is normally referred as

A) Trade discount
B) Prompt payment discount
C) Cash discount
D) Bulk discount

91. The standard format of journal does not include which of the following?
A) Assets column
B) Date column
C) Description column
D) Amount column

92. In which of the following orders data is entered in journal?

A) Alphabetical order
B) Numeric order
C) Bullets order
D) Chronological order

93. Journals are also referred as

A) Book of entries
B) Book of original entries
C) T account
D) Books of economic event

94. Discount allowed is

A) Expense of business
B) Income of business
C) Loss of business
D) Abnormal loss of business

95. _________ is the evidence that a transaction took place

A) Source documents
B) Ledger
C) Bonds
D) Journals

96. Which of the following will be debited if a business purchases goods on

credit?
A) Cash
B) Debtor
C) Creditor
D) Purchases
97. 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

98. 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

99. 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

100. 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

101. Which of the following is (are) item (s) of cost of goods sold
statement?
a. Purchase of raw material
b. Any tax/freight paid on purchases
c. Any expense incurred on carriage/transportation of raw
material purchased items
d. All of the given options (Right Answer)

102. Which of the following voucher is used to record

transactions that do not affect bank & cash?
Journal Voucher (Right Answer)
Receipt Voucher
Payment Voucher
Nominal Voucher

103. What would conversion costs if costs of raw materials,

direct labor costs, and manufacturing overhead costs Rs.80,000,
Rs.50,000, and Rs.60,000, respectively?
Rs.130, 000
Rs.110, 000
Rs.140, 000
Rs.190, 000

104. A form that allows individuals to compare their personal

bank account records to the bank's records of the
individual's account balance in order to uncover any possible
discrepancies is known as:
Bank statement
Income statement
Financial statement
Bank Reconciliation statement

105. Cash and other resources that are expected to turn to cash
or to be used up within one year of the balance sheet date are
called:
Current liability
Current assets
Fixed assets
Long-term assets

106. An accounting system is used by a business to:

Analyze transactions
Handle routine bookkeeping tasks
Structure information
All of the given options

107. Particulars Rs. Opening written down value of machine

3,75,000 Cost of machine 50,000 Depreciation during the year
11,500 Closing written down value (WDV) of the Machines ?
Rs. 4,13,500
Rs. 4, 25,000
Rs. 3, 36,500
Rs. 61,500

108. Expenditure incurred in acquiring the patent right for the

business is an example of:
Revenue expenditure
Capital expenditure
Deferred revenue expenditure
Administrative expenditure

109. Total assets - Total liabilities =?

Owner’s Equity
Expenses
Retained earnings
Net profit

110. What will be debited, if business bought goods on credit from

Mr. Ali?
Purchases account
Mr. Ali account
Cash account
Sales account

111. Prepaid rent given in the Trial Balance will be treated as a

(an):
Asset
Liability
Revenue
Deferred expense

112. A business event which can be measured in terms of money

and must be recorded in books of accounts is called:
Condition
Transaction
Information
Record
113. Which one of the following is NOT a feature of sole
proprietorship business.
Easy Formation
Easy Dissolution
Unlimited Liability
Separate Legal Entity

114. In which of the following statement closing stock is shown?

Profit and loss account
Balance sheet
Cash flow statement
Owner’s equity

115. Which of the following Organization converts raw material

into finished goods?
Trading concern
Manufacturing concern
Merchandising concern
Service concern

116. Which of the following assets is most likely to appreciate

rather than depreciate?
Land
Motor vehicles
Plant and machinery
Fixtures and fittings

117. Which of the following item needs to be entered in the Cash

Book in order to bring it in line with the entries on the Bank
Statement?
A bank charges (Right Answer)
An error on the Bank Statement
An uncredited deposit
An unpresented cheque

118. Wages paid to laborers working in the manufacturing

department is treated as an expense of:
Cost of goods sold
Administrative expenses
Selling expenses
Marketing expenses

119. Bad debts written off (given in adjustment) always affect

the:
Debtors account
Creditors account
Cash account
Capital account

120. Carriage paid Rs. 50 for the newly purchased machinery is

debited to:
Only carriage account
Only machinery account
Both carriage and machinery account
None of the given options

121. Cost of goods manufactured - opening work in process +

ending work in process =?
Cost of goods sold
Prime cost
Conversion cost
Total factory cost

122. If cost of sales is Rs. 95,000, income from sales Rs. 200,000
and operating expenses Rs. 300,000. What will be net result?
Rs. 1, 95,000 Losses
Rs. 1, 95,000 Profits
Rs 1, 05,000 Profits
Rs1, 05,000 Losses

123. What is the proper order of the following steps in the

accounting process?
I. Prepare and analyze the trial balance
II. Record relevant transactions and events in a journal
III. Analyze each transaction and event from source
documents
 IV. Post journal information to ledger accounts
III. IV. I. II.
I. II. III. IV.
III. II. IV. I.
III. II. I. IV.
124.All of the below items are directly recorded by bank without
intimating the business until the end of month, EXCEPT:
Bank Charges
Interest on Overdraft
Un-presented Cheques
Direct Receipts
125.Which of the following is Not an Asset Account?
Plant & Machinery
Loan to XYZ co.
Cash at Bank
Loan from ABC co.
126.A balance of pass book written in brackets ( ) by the bank is
known as:
Favorable balance for customer
Unfavorable balance for bank
Unfavorable balance for customer
None of the above
127.Which of the following is an example of direct labor cost?
Production worker’s wages
Depreciation expenses
A piece of wood for the production of chair
Polish and finishing material for chair other are non direct or
factory
128.Expenditure incurred in acquiring the patent right for the
business is an example of:
Revenue expenditure
Capital expenditure
Deferred revenue expenditure
Administrative expenditure
129.Cash book is a part of _______ .
Voucher
General Journal
 General Ledger
Trial Balance
130.What will be the entry of disposal of an asset at cost price?
Debit Fixed Asset Disposal and Credit Fixed Asset Cost
Debit Accumulated Dep. and Credit Fixed Asset Disposal
Debit Cash / Bank and Credit Fixed Asset Disposal
None of the given options
131.ABC co. has a capital of Rs. 100,000, Long Term Liabilities
Rs. 50,000, net profit during the year Rs. 15,000 and the
amount of total liabilities is Rs 175,000. What will be the
amount of Current Liabilities?
Rs. 20,000
Rs. 150,000
Rs. 10,000
Rs. 25,000
132.The Sales Returns Day Book would include:
Goods bought on credit
Fixed Assets bought that are inappropriate for business
Stock that customers have returned
Goods bought on credit that are returned to the original
supplier
133.Total Sales are calculated by adding:
Cash sales and cash received from debtors
Credit sales and cash received from debtors
Cash sales and credit sales
Cash ales and credit purchases
134.In the cost of goods sold statement, the sum of labor cost
and the factory over head is known as:
Conversion cost
Prime cost
Total factory cost
Cost of goods manufactured
135.Outsider’s claim against the assets of the business is called:
Capital
Liability
Expense
Income
136.Goods returned by Mr. B amount to Rs. 4,000. The entry in the
books will be:
Mr. B is Debit Sales Returns is Credit
Sales Returns is Debit Mr. B is Credit
Mr. B is Debit Accounts Receivable Credit
Purchases Return Debit Mr. B is Credit
137.Following information is available relating to a manufacturing
concern: Cost of Goods Sold Rs. 245,000 Purchases Rs.
250,000 Freight Inward Rs. 5,000 Closing Stock Rs. 25,000
What will be the amount of Opening Stock?
Rs. 15,000
Rs. 10,000
Rs. 25,000
Rs. 20,000
138.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
139. 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
140. ________ is the common base for preparing a trial balance:
a. Ledger accounts
b. General Journal
c. Specialized journals
d. Balance sheet
141. Which of the following is true about a trial blance?
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
142. 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
143. 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

144. 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
145. 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
146. 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
147. 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 expense account
148. 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
149. General journal is a book of _______ entries
A) First
B) Original
 C) Secondary
D) Generic
150. The process of recording transactions in their respective account is called:
A) Posting
B) Entry making
C) Adjusting
D) Journalizing

151. Every business transaction affects at least ________ accounts:

A) One
B) Two
C) Three
D) Infinite

152. Discount allowed is a kind of deduction from

A) Account payable
B) Account receivable
C) Cash account
D) Discount account

153. The other name of journal is

A) Ledger
B) T account
C) Day book
D) Cash book

154. Which of the following specialized journals records "goods returned

by customers"?
A) Purchase journal
B) Sales journal
C) Purchases return journal
D) Sales return journal

155. 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

156. 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
157. Another name of journal is
A) Specialized journal
B) Day book
C) Cash book
D) Record book

158. Which of the following specialized journals will record "goods

returned by the BUSINESS "?
A) Purchase journal
B) Sales journal
C) Purchases return journal
D) Sales return journal

159. Sales and purchase journal don't record

A) Credit sales
B) Credit purchases
C) Credit sales and purchases
D) Cash sales and purchases

160. 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

161. 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

162. 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

163. A brief explanation recorded below every entry in general journal is

commonly known as
A) Narration
B) Explanation
C) Summary
D) Other information
164. Credit purchase of plant and machinery is recorded in which of the
following journals?
A) General journal
B) Cash journal
C) Purchase journal
D) Purchase return journal

165. 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

166. 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

167. 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

168. Specialized journals are more adequate for which TYPE OF

BUSINESSES ?
A) Small businesses
B) Big businesses
C) Sole proprietorship
D) Partnership

169. Which of the following is known as evidence that a transaction took

place?
A) Cash receipts journal
B) General journal
C) Source document
D) Cash book

170. 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

171. 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

172. The process of accounting is needed to

I. take a holiday
II. assist in decision making
III. invest in start up of a business
IV. track money spent
(A) I, II and III
(B) I, II and IV
(C)I, III and IV
(D)II, III and IV
173. Which of the following highlights the correct order of the stages in the
accounting cycle?
(A) Journalizing, final accounts, posting to the ledger and trial balance
(B) Journalizing, posting to the ledger, trial balance and final
accounts
(C)Posting to the ledger, trial balance, final accounts and journalizing
(D)Posting to the ledger, journalizing, final accounts and trial balance

174. One of the detailed rules used to record business transaction is

(A) Objectivity
(B) Accruals
(C) Double entry book keeping
(D)Going Concern

175. Which of the following users assesses the attractiveness of investing in a

business?
(A) Tax authorities
(B) Financial analysts
(C) Bank
(D) Employees

176. Which of the following describes the practical framework of bookkeeping?

(A) Classifying, recording and summarizing
(B) Reporting, analyzing and interpreting
(C)Classifying, analyzing and interpreting
(D)Recording, summarizing and reporting
177. Which of the following principles assumes that a business will continue for a
long time?
(A) Historical cost
(B) Periodicity
(C)Objectivity
(D)Going concern