About Accounting Basics

Accounting is the study and practice of keeping track of and disclosing financial transactions. With this feedback loop in place, managers can see how their firm is performing in relation to what they had hoped. To understand how an accounting system works and how it is used to generate financial reports, the following review of accounting fundamentals is necessary.

System of Record Keeping

A systematic approach to record-keeping is recommended at the outset. Accounts must be set up and financial information must be stored in them. Accounts fall under the following classifications:

  • Assets: Assets are purchased things that are not immediately used.
  • Liabilities: Liabilities are commitments owed by a company that must be paid in the future.
  • Equity: Equity is the difference between the value of a company's entire assets and its total liabilities.
  • Revenue: Product or service prices that are passed on to end-users in the form of a bill.
  • Expenses: The term "expenses" is used to describe the use of assets throughout the measurement period.

Transactions

As an accountant, you are responsible for a wide range of business transactions that come from different divisions of the company. These transactions result in a change in the balances of the accounts mentioned before. The following are some critical transactions

  • The purchase of supplies and services is necessary.
  • Product and service offerings should be marketed to potential customers.
  • Client money is collected.
  • In order to retain workers, you must compensate them

Reporting

Accounting records are compiled and reorganized into three documents known as financial statements by the accountant following the completion of all transactions for a given accounting period. A few examples of this kind follow

  • Income Statement
  • Statement of Cash Flows
  • Balance Sheet

Additional Accounting Topics

The basic accounting data only gives a vague idea of what an accountant's job entails. Besides the topics listed below, there are many more specialized fields of accounting.

  • Tax Accounting
  • Cost Accounting
  • Internal Auditing

Following are some of the multiple choice questions on the Accounting Basics with answers that will help the students in developing their knowledge.

Accounting Basics MCQ

1. Expense is debit or credit ?

  • debit
  • credit

2. A bank reconciliation statement is prepared by?

  • Banker
  • Accountant of the business
  • Auditors
  • Registrars

3. The main purpose of preparing a bank reconciliation statement is?

  • Part of a Bank Statement
  • Part of the Cash Book
  • A separate statement
  • A sub-division of a journal

4. What are source documents?

  • these are the small track of transaction.
  • these are used to keep the business running
  • they are the small proof that the transaction did happen.
  • small documents

5. Diterima pendapatan jasa bengkel Rp 250.000jurnal nya adalah...

  • pendapatan jasa (D), kas(K) Rp 250.000
  • kas (D), piutang (K) Rp 250.000
  • kas (D), pendapatan jasa (K) Rp 250.000
  • piutang (D), kas(K) Rp 250.000

6. The bone building cells.

  • Osteoclasts
  • Osteocytes
  • Osteoblasts
  • osteocalcin

7. Accounting entries involve a minimum of how many accounts?

  • One
  • Two
  • Three
  • Four

8. One of the following is an example of materiality concept:

  • Purchase of pencil recorded as an expense instead of including in stock
  • Purchase of car for private use
  • Purchase of plant for business
  • Purchase of building to extend the business

9. Unearned Revenues is what type of account?

  • Asset
  • Liability
  • Stockholders' Equity
  • None of these

10. The petty cash fund is a liability with a normal debit balance.

  • True
  • False

11. Uncollected cheques are also known as?

  • Outstanding cheques
  • Uncleared cheques
  • Outstation cheques
  • Both A & B

12. The business or economic entity concept is applicable to

  • sole proprietorship form of business
  • partnership form of business
  • corporate form of business
  • all of the above

13. Unfavourable balance means?

  • Credit balance in cash book
  • Credit balance in bank statement
  • Debit balance in cash book
  • Debit balance in petty cash book

14. Favourable balance means?

  • Credit balance in the cash book
  • Credit balance in the bank statement
  • Debit balance in cash book
  • Both B & C

15. The accounting equation is

  • Assets = Liabilities + Owner's Equity
  • Assets = Liabilities - Owner's Equity
  • Assets - Owner's Equity + Liability
  • None of these

16. Switching accounting principles every year would violate the

  • money measurement principle
  • consistency principle

17. Assets taken out of a business for the owner's personal use

  • capital
  • withdrawals
  • equities
  • revenue

18. Entries to revenues accounts such as Service Revenues are usually

  • Debits
  • Credits

19. The accrual concept is the accounting rule requiring that whenever possible the amounts used in recording transactions be based on objective evidence rather than on subjective judgements.

  • True
  • False

20. Entries to expenses such as Rent Expense are usually

  • Debits
  • Credits

21. Anything of value that is owned

  • account
  • asset
  • withdrawal
  • expense

22. A decrease in owner's equity resulting from the operation of a business

  • account
  • capital
  • asset
  • expense

23. Investment by owner

  • Dr. Cash Cr. Revenue
  • Dr. Owner's Capital Cr. Cash
  • Dr. Cash Cr. Accounts Receivable
  • Dr. Cash Cr. Owner's Capital

24. To which account in the Balance Sheet is the net income or net loss transferred to at the end of the accounting period?

  • Retained Earnings
  • Cash
  • Accounts Receivable
  • Inventory

25. When cash is received, the account Cash will be

  • Debited
  • Credited

26. Liabilities often have the word __________ in their account title.

  • Assets
  • Payable
  • Paid
  • Equity

27. What will usually cause an asset account to increase?

  • Debit
  • Credit

28. Assets are usually reported on the balance sheet at which amount?

  • Cost
  • Current Market Value
  • Expected Selling Price
  • None of These

29. A business owned by one person

  • service business
  • revenue
  • expense
  • proprietorship

30. The balance on the debit side of the bank column of cash book indicates?

  • The total amount that has been drawn from the bank
  • Cash at bank
  • The total amount overdraft in the bank
  • None of above

31. Amount owed by a business

  • liability
  • asset
  • capital
  • account

32. Which of the following are Assets?

  • Bank Account
  • Vehicles
  • Furniture and fittings
  • All of above

33. Concept: When a business activity is large enough to impact business decisions, it should be recorded clearly in the financial statements

  • realization of revenue
  • materiality
  • unit of measurement
  • consistent reporting

34. Under the accrual basis of accounting, revenues are reported in the accounting period when the:

  • Cash is Received
  • Service or Goods Have Been Delivered
  • End of the Month Has Arrived
  • Customer Pays

35. When a company pays a bill, the account Cash will be

  • Debited
  • Credited

36. What will usually cause the liability account Accounts Payable to increase?

  • Debit
  • Credit

37. Accrual concept is based on :

  • matching principle
  • dual aspect principle
  • cost principle
  • going concern concept

38. The economic entity assumption states that economic events can be identified with a particular unit or accountability.

  • True
  • False

39. Things you own are asset or liability

  • Asset
  • Liability

40. A balance sheet reports a business's financial

  • Condition over a specific period of time
  • Progress over a specific period of time
  • Condition on a specific date
  • Progress on a specific date

41. A petty cash fund is always replenished

  • daily.
  • weekly.
  • at the end of the month.
  • none of these.

42. What is the difference between cash and credit transaction?

  • credit no cash involved
  • you pay in cash
  • you buy witout using cash
  • none of the above

43. Financial reports that summarize the financial condition and operations of a business

  • financial statements
  • ethics
  • withdrawals
  • equities

44. The account used to summarize the owner's equity in a business

  • account
  • expense
  • capital
  • revenue

45. The amount in an account

  • account title
  • revenue
  • account balance
  • accounting records

46. An increase in owner's equity resulting from the operation of a business

  • asset
  • expense
  • withdrawl
  • revenue

47. How would an accountant record an increase in sales?

  • debit
  • credit

48. How would an accountant record an increase in cash?

  • Debit
  • Credit

49. Explain a measure to improve collection from debtors

  • offer discounts for early payments
  • charge interest
  • set credit limit
  • threatening

50. If I take home $500 for personal use from my business which transactions will I carry out

  • Decrease bank Column by - $500
  • Decrease Equity by - $500
  • Increase Equity by + $500
  • Both A & B

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