About Financial Accounting

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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