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
  • management accouting
  • cost accounting
  • advanced accounting

3. What is journal?

  • Primary book
  • Secondary
  • third book
  • None

4. What is Cash book?

  • reording sales information
  • Recording all cash transaction
  • Recording three column,single,double
  • ledger

5. Business transactions are recorded

  • (a) in chronological order
  • (b) weekly
  • (c) at the end of the month
  • (d) all of these

6. Nominal accounts are related to ?

  • (a) assets and liabilities
  • (b) expenses and incomes
  • (c) customers and creditors
  • (d) none of these

7. Income and Expenditure Account is

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

8. What is the main purpose of financial accounting?

  • ORGANIZE FINANCIAL INFORMATION
  • PROVIDE USEFUL, FINANCIAL INFORMATION TO OUTSIDERS
  • KEEP TRACK OF COMPANY EXPENSES
  • MINIMIZE COMPANY TAXES

9. Journal is called a book of

  • (a) primary entry
  • (b) secondary entry
  • (c) final entry
  • (d) none of the above

10. Which account increases equity?

  • EXPENSES
  • WITHDRAWALS
  • TREASURY STOCK
  • REVENUES

11. Subscription received in advance is

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

12. Which financial statement displays the revenues and expenses of a company for a period of time?

  • INCOME STATEMENT
  • BALANCE SHEET
  • CASH FLOW STATEMENT
  • STATEMENT OF STOCKHOLDER’S EQU

13. Which of these is not included as a separate item in the basic accounting equation?

  • ASSETS
  • REVENUES
  • LIABILITIES
  • STOCKHOLDER’S EQUITY

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

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

15. Royalty account is

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

16. Hire purchase price includes

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

17. Who issues International Financial Reporting Standards?

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

18. Dead Rent is also called as

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

19. Receipts and Payments Account is

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

20. 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

21. Legacies are generally

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

22. Non trading institution prepare

  • Profit and Loss account
  • Manufacturing account
  • Receipts and payments account
  • Income and expenditure account

23. 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

24. 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

25. A profit on sale of furniture of a club will be taken to

  • Income and expenditure account
  • Cash account
  • Receipts and payments account
  • Balance sheet

26. The originator of Double Entry System

  • Lucas Pacioli
  • Marshall
  • Pikles
  • Batliboi

27. A compound journal entry

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

28. Which of the following is the correct definition of an adjusting event after the reporting period?

  • An event that occurs between the reporting date and the date on which the financial statements are authorised for issue that provides further evidence of conditions that existed at the reporting date
  • An event that occurs between the reporting date and the date on which the financial statements are authorised for issue that provides evidence of conditions that arose subsequent to the reporting date
  • An event that occurs after the date the financial statements are authorised for issue that provides further evidence of conditions that existed at the reporting date
  • An event that occurs after the date the financial statements are authorised for issue that provides evidence of conditions that arose subsequent to the reporting date

29. Discount received has

  • Debit balance
  • Credit balance
  • Both debit and credit balance

30. Trial balance is prepared from

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

31. Trial balance can be prepared

  • At any time of year
  • At the end of year
  • In the beginning of year

32. It encourages the accountant to post each entry in opposite sides of two affected accounts

  • Money Measurement Concept
  • Full disclosure convention
  • Dual aspect Concept
  • Realisation concept

33. An asset account shows a

  • Credit balance
  • Debit balance
  • Credit or debit balance

34. A manufacturing account records the administrative expenses and the finance expenses of the business

  • TRUE
  • FALSE

35. The use of a transfer price enables a factory to make additional profit which is added into the profit for the year in the income statement

  • TRUE
  • FALSE

36. Which side does Receipts from debtors belong ?

  • Debit
  • Credit

37. Which side does Discount Allowed belong?

  • Debit
  • Credit

38. Income and Expenditure Account records transactions of

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

39. Donations received for a special purpose will be taken to the

  • Liability side of the balance sheet
  • Asset side of the balance sheet
  • Income and Expenditure account
  • Receipts and payments account

40. The Assumption that revenues are recognised when earned and expenses when incurred so profit is calculated as Revenue earnt less expenses incurred is the

  • Entity assumption
  • Period assumption
  • Accrual basis assumption
  • Going concern assumption

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

  • True
  • False

42. Any loss resulting on sale of repossessed goods can be recovered from hire purchaser

  • True
  • False

43. The Assumptions that the business will continue to operate in the future and its records are kept on that basis is the

  • Entity assumption
  • Period assumption
  • Accrual basis assumption
  • Going concern assumption

44. Short workings irrecoverable are transferred to

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

45. Lease is an agreement between lessor and lessee for

  • Maintenance
  • Rent
  • Concession
  • Down payment

46. The balance sheet formula is

  • Assets = Liability + Capital
  • Assets = Capital-Liability

47. Copywrite rights of a company is a type of

  • Nominal Account
  • Real Account

48. Difference in debit side and credit side of the Trial balance is recorded in

  • suspense account
  • Purchase book
  • Sales book

49. When the hire purchaser makes default in paying the instalment the hire vendor has

  • The right to take repossession of the asset
  • No right to take repossession
  • The option to reposses the assets
  • He has to approach the court

50. In the books of lessee shortworkings recoverable in future years are

  • A revenue expense
  • A normal loss
  • An asset
  • A liability

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