Financial Accounting MCQ Accounting

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

Financial Accounting MCQ

1. What is Accounting?

  • systematic record of transaction
  • Analysing
  • interpretating
  • All the above

2. Branches of Accounting

  • financial accounting
  • management accouting
  • cost accounting
  • All of above

3. What is journal?

  • Primary book
  • Secondary
  • third book
  • None

4. What is Cash book?

  • Recording three column,single,double
  • Recording all cash transaction
  • ledger
  • Both A & B

5. Business transactions are recorded

  • in chronological order
  • weekly
  • at the end of the month
  • all of these

6. Income and Expenditure Account records transactions of

  • Revenue nature only
  • Capital nature only
  • Both Capital and Revenue
  • Cash transactions only

7. Nominal accounts are related to ?

  • assets and liabilities
  • expenses and incomes
  • customers and creditors
  • none of these

8. Income and Expenditure Account is

  • Personal Account
  • Real Account
  • Nominal Account
  • Contingent Account

9. Journal is called a book of

  • primary entry
  • secondary entry
  • final entry
  • none of the above

10. Subscription received in advance is

  • An Income
  • An Expense
  • An Asset
  • A liability

11. Transferring information from a journal entry to a ledger account (p. 98)

  • journaling
  • posting
  • file maintenance
  • correcting entry

12. The amount of interest is credited by the buyer to

  • Interest Account
  • Vendor Account
  • Asset Account
  • Depreciation Account

13. Under hire purchase system the initial payment is known as

  • First instalment
  • Down payment
  • Purchase price
  • Hire charges

14. Non -Departmental items of expenses are charged to

  • Departments on the basis of sales
  • General Profit and Loss account
  • Departments based on fixed assets employed
  • Capital fund

15. Hire purchase price includes

  • Cash price and interest
  • Cash price and down payment
  • Down payment and interest
  • Total Price

16. Who issues International Financial Reporting Standards?

  • The government
  • The International Accounting Standards Board
  • The stock exchange
  • The IFRS Advisory Committee

17. Under the debtors system in branch a/c ,credit sales are

  • Debited to branch a/c
  • Credited to branch a/c
  • Debited to debtors a/c
  • Credited to debtors a/c

18. The Hire purchase Act came into force on 1st September, 1973

  • True
  • False

19. Each instalment including down payment is treated as hire charges by the

  • Buyer
  • Seller
  • None of these
  • All of above

20. Receipts and Payments Account is

  • Personal Account
  • Real Account
  • Nominal Account
  • Gross and Net Profit

21. Legacies are generally

  • Treated as income
  • Capitalized and taken to balance sheet
  • Treated as expenditure
  • Treated as Revenue and payments

22. Short workings irrecoverable are transferred to

  • Profit and loss a/c
  • Minimum Rent a/c
  • Royalty a/c
  • Land Lord a/c

23. On sales of Rs. 1500 to A at 5% trade discount, the sales account will be -

  • Debited by Rs. 1425
  • Credited by Rs. 1425
  • Credited by Rs. 1500
  • Debited by Rs. 1575

24. Which of the following statements is/are true?1- The IFRS Interpretations Committee is a forum for the IASB to consult with the outside world. 2 -The IFRS Foundation produces IFRSs. The IFRS Foundation is overseen by the IASB. 3 - One of the objectives of the IFRS Foundation is to bring about convergence of national accounting standards and IFRSs.

  • 1 and 3 only
  • 2 only
  • 2 and 3 only
  • 3 only

25. Under hire purchase system buyer becomes the owner

  • On payment of down payment
  • After receipts of goods
  • On payment of last instalment
  • On payment of first instalment

26. The amount paid at the time of entering the Hire-purchase transaction for the goods purchased is known as

  • Cash price
  • Down payment
  • First Instalment
  • Hire purchase price

27. Repairs to machinery is apportioned over the departments on the basis of

  • Number of machines in each department
  • Value of machine
  • Floor area of each machine
  • Rent rate of each machine

28. The cost of goods sold on hire purchase is transferred to

  • Sales a/c
  • Purchase a/c
  • Hire purchase a/c
  • Instalment a/c

29. What is the role of the IASB?

  • Oversee the standard setting and regulatory process
  • Formulate international financial reporting standards
  • Review defective accounts
  • Control the accountancy profession

30. A compound journal entry

  • has equal debits and credits
  • generally extends to several pages
  • does not require narration
  • all of these

31. Trial balance is prepared from

  • Ledger
  • Ledgers and journal
  • Ledger and cash book
  • None of these

32. Non trading institution prepare

  • Receipts and payments account
  • Income and expenditure account
  • Profit and Loss account
  • Both A & B

33. Which one of the following would not be valid grounds for a provision?

  • A company has a policy has a policy of cleaning up any environmental contamination caused by its operations, but is not legally obliged to do so.
  • A company is leasing an office building for which it has no further use. However, it is tied into the lease for another year.
  • A company is closing down a division. The Board has prepared detailed closure plans which have been communicated to customers and employees.
  • A company has acquired a machine which requires a major overhaul every three years. The cost of the first overhaul is reliably estimated at $120,000.

34. Under Hire-purchase agreement the buyer agrees to pay

  • Cash price only
  • Interest only
  • Cash price and interest
  • None of these

35. Which of the following statements about contingent assets and contingent liabilities are correct?1-A contingent asset should be disclosed by note if an inflow of economic benefits is probable.2- A contingent liability should be disclosed by note if it is probable that a transfer of economic benefits to settle it will be required, with no provision being made.3 -No disclosure is required for a contingent liability if it is not probable that a transfer of economic benefits to settle it will be required.4 -No disclosure is required for either a contingent liability or a contingent asset if the likelihood of a payment or receipt is remote.

  • 1 and 4 only
  • 2 and 3 only
  • 2, 3 and 4
  • 1, 2 and 4

36. When the lessor receives payment, he credits---------account

  • Royalty
  • Hire purchase
  • Shortworkings
  • profit and loss

37. The hire purchaser can record the asset at its

  • Hire purchase price
  • Cash down price
  • None of these
  • All of above

38. Royalty account is

  • Personal a/c
  • Real a/c
  • Nominal a/c
  • Capital a/c

39. Which of the following material events after the reporting period and before the financial statements are approved by the directors should be adjusted for in those financial statements?1-A valuation of property providing evidence of impairment in value at the reporting period2-Sale of inventory held at the end of the reporting period for less than cost3-Discovery of fraud or error affecting the financial statements4 - The insolvency of a customer with a debt owing at the end of the reporting period which is still outstanding

  • All of them
  • 1, 2 and 4 only
  • 3 and 4 only
  • 1, 2 and 3 only

40. What is the main objective of accounting?

  • to show the value of shares in the company
  • to provide information on business activities to interested users
  • to help management to plan its business activities
  • to show managers the results of their departments

41. In the books of hire vendor the depreciation is charged

  • True
  • False

42. There is no difference between hire purchase and instalment system

  • True
  • False

43. Depreciation on hire purchased asset is claimed by

  • Hire vendor
  • Hire purchaser
  • Either the hire vendor or the hire purchaser as per the agreement between them
  • No depreciation is claimed till the last instalment is paid/received.

44. The objective of branch accounting is to know

  • Profit and loss
  • Profit and loss of each department
  • Profit and loss of head office
  • Profit and loss of manufacturing companies

45. Under instalment payment system, ownership of goods

  • Is transferred at the time of payment of last instalment
  • Is not transferred
  • Is transferred at the time of signing the contract
  • None of the above

46. The balance in the 'goods sent to branch ' account is transferred to

  • Branch account
  • Head office account
  • Profit and loss account
  • Trading or purchase account

47. Which ONE of the following statements correctly describes how International Financial Reporting Standards (IFRSs) should be used?

  • To provide examples of best financial reporting practice for national bodies who develop their own requirements
  • To ensure high ethical standards are maintained by financial reporting professionals internationally
  • To facilitate the enforcement of a single set of global financial reporting standards
  • To prevent national bodies from developing their own financial reporting standards

48. Dead Rent is also called as

  • Outstanding Rent
  • Prepaid Rent
  • Minimum Rent
  • Post paid Rent

49. Trial balance can be prepared

  • At any time of year
  • At the end of year
  • In the beginning of year
  • Both A & B

50. What is the purpose of preparing trading account?

  • To calculate net sales
  • To calculate cost of sales
  • To calculate gross profit/(loss)
  • To calculate net proft

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