In the name of ALLAH, the most beneficient, the most merciful

Financial Accounting (MGT101)

Multiple Choice Questions (MCQs)

 

Objective Questions

Question

A Balance Sheet discloses the financial position of a firm:

  1. For a certain given period
  2. At a particular point of time
  3. After the fixed date
  4. None of the given options

Answer: 2 Chapter No. 9 

Question

Which of the following is used to calculate Gross Profit?

  1. Expenses + Revenues
  2. Assets – Liabilities
  3. Revenue – Labor
  4. Net Revenue – Cost of Goods Sold

Answer: 4 Chapter No. 8 

Question

Revenues, expenses and net profit are found on a:

  1. Statement of Cash Flows
  2. Income Statement
  3. Statement of Owner’s Equity
  4. Balance Sheet

Answer: 2 Chapter No. 8 

Question

Which of the following expenses are called financial expenses?

  1. Payment of rent & Salary expense
  2. Markup on loan& Bank Charges
  3. Interest & advertisement expense
  4. Wages and Depreciation expense

Answer: 2 Chapter No. 8 

Question

Working capital Rs. 20,000, Current liabilities Rs. 30,000 and fixed assets Rs. 100,000; calculate current assets?

  1. Rs. 10,000
  2. Rs. 50,000
  3. Rs. 110,000
  4. Rs. 120,000

Answer: 2 Chapter No. 4 

Question

The journal entry to record purchase of furniture on credit would include a:

  1. Credit to furniture A/c
  2. Credit to Cash A/c
  3. Credit to Payables A/c
  4. Credit to Receivables A/c

Answer: 3 Chapter No. 3 

Question

Commercial Accounting is done through a system that is known as:

  1. Single entry system of Accounting
  2. Accrual system of Accounting
  3. Double Entry system of Accounting
  4. Cash system of Accounting

Answer: 3 Chapter No. 2 

Question

What does single entry accounting mean?

  1. It means to record debit only
  2. It means to record one side of entry only
  3. It means to record cash only
  4. It means to record credit only

Answer: 3 Chapter No. 2 

Question

The main purpose of ___________ is to ascertain true result of the business operation during particular period of time.

  1. Cost Accounting
  2. Financial Accounting
  3. Managerial Accounting
  4. Tax Accounting

Answer: 2 Chapter No. 1 

Question

A transaction in which Cash A/c and Bank A/c are involved, is recorded on both the sides of Double Column Cash Book, it is called _________.

  1. Rectifying Entry
  2. Adjusting Entry
  3. Contra Entry
  4. Closing Entry

Answer: 3 Chapter No.  

Question

The proper classification of Suppliers account is:

  1. Assets
  2. Expenses
  3. Revenues
  4. Liabilities

Answer: 4 Chapter No.  

Question

The proper classification of Cost of Goods Sold account is:

  1. Assets
  2. Expenses
  3. Revenues
  4. Liabilities

Answer: 2 Chapter No.  

Question

Which of the following is / are the particular/s of a cash book? (1) Date of transaction (2) Account title (3) Amount

  1. 1 only
  2. 1 & 2 only
  3. 1 & 3 only
  4. 1, 2 & 3

Answer: 4 Chapter No.  

Question

What will be the effect on accounting equation if cash is invested by the owner in business?

  1. Increases cash and decreases equity
  2. Increases cash and increases equity
  3. Decreases cash and increases equity
  4. Decreases cash and increases dividends

Answer: 2 Chapter No.  

Question

An accounting system in which risk of fraud or its non discovery is less is known as:

  1. Double Entry Accounting system
  2. Single Entry Accounting system
  3. Cash System of Accounting
  4. Accrual Accounting system

Answer: 1 Chapter No.  

Question

________ is the art of recording, classifying and summarizing the transactions and events of a business and interpreting the results thereof

  1. Book-keeping
  2. Accounting
  3. Management
  4. Auditing

Answer: 2 Chapter No.  

Question

ABC & Co. purchased office equipment on account. Which of the following accounts would be affected from this transaction? I) Assets II) Liabilities III) Expenses IV) Revenues

  1. I and IV
  2. II and III
  3. I and II
  4. III and IV

Answer: 3 Chapter No.  

Question

Which of the following is Not an Asset Account?

  1. Plant & Machinery
  2. Loan to XYZ co.
  3. Cash at Bank
  4. Loan from ABC co.

Answer: 4 Chapter No.  

Question

Which of the following is the example of current liability?

  1. Notes payable
  2. Notes receivable
  3. Accounts receivable
  4. Prepaid expenses

Answer: 1 Chapter No.  

Question

Select the most suitable equation which properly represents the derivation of fundamental Accounting Equation.

  1. Assets = Owner’s Equity
  2. Assets + Liabilities = Owner’s Equity
  3. Cash = Assets
  4. Assets – Liabilities = Owner’s Equity

Answer: 4 Chapter No.  

Question

ABC & Co. received dividend on shares. Which of the following accounts would be affected from this transaction? I) Assets II) Liabilities III) Expenses IV) Revenues

  1. I and IV
  2. I and II
  3. II and III
  4. I and III

Answer: 1 Chapter No.  

Question

Amount generated from sales in a business is called:

  1. Income
  2. Net Income
  3. Gross Profit
  4. Operating profit

Answer: 1 Chapter No.  

Question

An accounting system is used by a business to:

  1. Analyze transactions
  2. Handle routine bookkeeping tasks
  3. Structure information
  4. All of the given

Answer: 4 Chapter No.  

Question

Budget is a plan of income, expenses & other financial operations for:

  1. Current period
  2. Future period
  3. Past period
  4. None of the given

Answer: 2 Chapter No.  

Question

Consider the following data: Particulars Rs. Assets 99,500 Owner's equity 50,500 Liabilities?

  1. Rs. 49,000
  2. Rs. 55,000
  3. Rs. 125,000
  4. Rs. 115,700

Answer: 1 Chapter No.  

Question

Find out the missing value of an Accounting Equation with the help of given data: Furniture Rs. 90,000 Cash Rs.100, 000 Debtors Rs.10, 000 Other Assets Rs. 1,000 Owner’s equity Rs. 90, 000 Liaibilities?

  1. Rs. 201,000
  2. Rs. 111, 000
  3. Rs. 290, 000
  4. Rs. 291, 000

Answer: 2 Chapter No.  

Question

For every debit there must be a credit with an equal amount. This is also called as:

  1. Separate Entity Concept
  2. Single Entry Book-Keeping
  3. Matching Concept
  4. Dual Aspect Concept

Answer: 4 Chapter No.  

Question

Normally single entry book keeping is followed by the:

  1. Small businesses only
  2. Governments only
  3. Large scale businesses only
  4. Both Small businesses and Governments

Answer: 2 Chapter No.  

Question

Outsider’s claim against the assets of the business is called:

  1. Capital
  2. Liability
  3. Expense
  4. Income

Answer: 2 Chapter No.  

Question

The proper classification of inventory account is:

  1. Assets
  2. Expenses
  3. Revenues
  4. Expenses

Answer: 1 Chapter No.  

Question

What is nature of Capital account?

  1. Debit
  2. Credit
  3. Expenses
  4. Loss

Answer: 2 Chapter No.  

Question

What is the nature of a revenue account?

  1. Asset
  2. Debit
  3. Credit
  4. Expense

Answer: 3 Chapter No.  

Question

Which of the following is NOT correct?

  1. Decrease in Assets will be debit
  2. Decrease in Liabilities will be debit
  3. Decrease in Expenses will be credit
  4. Decrease in Revenue will be debit

Answer: 1 Chapter No.  

Question

Which of the following is/are the example/s of Intangible Asset?

  1. Copy rights
  2. Good will
  3. Patent rights
  4. All of the given

Answer: 4 Chapter No.  

Question

ABC & Co. purchased a typewriter for Rs. 5,000 and paid by cheque. Which of the following accounts would be affected from this transaction? I) Assets II) Liabilities III) Expenses IV) Revenues

  1. I and IV
  2. I and II
  3. II and III
  4. I only

Answer: 4 Chapter No.  

Question

Partial Payment of loan from bank is made Rs 50000. The effects of this transaction are:

  1. Decrease in Asset Increase in Asset
  2. Decrease in Liability Increase in Asset
  3. Decrease in Liability Decrease in Asset
  4. Decrease in Liability Increase in Expense

Answer: 3 Chapter No.  

Question

The total of all costs incurred to convert raw material into finished goods is known as:

  1. Prime cost
  2. Conversion cost
  3. Sunk cost
  4. Opportunity cost

Answer: 2 Chapter No.  

Question

Another name of net income or positive financial return is:

  1. Profit
  2. Contribution Margin
  3. Revenue
  4. Credit

Answer: 2 Chapter No.  

Question

According to diminishing balance method of charging depreciation:

  1. The amount of depreciation remains constant every year
  2. The rate percent as well as amount reduces every year
  3. The amount of depreciation reduces year to year
  4. The rate percent of depreciation declines year to year

Answer: 3 Chapter No.  

Question

Cost of goods manufactured + opening finished goods – ending finished goods =?

  1. Total factory cost
  2. Cost of goods sold
  3. Prime cost
  4. Conversion cost

Answer: 2 Chapter No.  

Question

Following information is extracted from Mr. A’s balance sheet: Cash Rs.100 Accounts Receivable 500 Accounts Payable 2 00 Bank Loans 1,000 Based on the information provided, what are Mr. A’s assets?

  1. Rs.200
  2. Rs. 600
  3. Rs. 900
  4. Rs. 1700

Answer: 2 Chapter No.  

Question

At the end of accounting period a list of all ledger balances is prepared. This list is called ______.

  1. Journal
  2. Ledger
  3. Cash Book
  4. Trial Balance

Answer: 4 Chapter No.  

Question

All of the following are Non-commercial (Non-Profit Oriented) organizations, EXCEPT:

  1. NGO's (Non-government Organizations)
  2. Trusts
  3. Limited Companies
  4. Societies

Answer: 3 Chapter No.  

Question

The expenses which are NOT paid out of Gross Profit is classified as:

  1. Direct Expenses
  2. General Expenses
  3. Financial Expenses
  4. Selling Expenses

Answer: 1 Chapter No.  

Question

What will be debited, If Mr. “A” started business with Rs. 2, 00,000.

  1. Capital account
  2. Cash account
  3. Mr. A’s account
  4. Business account

Answer: 2 Chapter No.  

Question

If debit side of a ledger is greater than credit side, the balance will be called as:

  1. Debit Balance
  2. Credit Balance
  3. Excess Balance
  4. None of the given

Answer: 1 Chapter No.  

Question

In which of the following statement opening stock is shown?

  1. Profit and loss account
  2. Balance sheet
  3. Cash flow statement
  4. Owner’s equity

Answer: 1 Chapter No.  

Question

Which one of the following is INCORRECT about closing Stock?

  1. It is added into current assets
  2. It is deducted from Material available for use
  3. It becomes opening stock of next year
  4. It reduces the resources of business

Answer: 4 Chapter No.  

Question

Find out the missing value of an Accounting Equation with the help of given data: Owner’s equity Rs. 22,500 Total Liabilities Rs. 80, 385 Cash Rs. 1,000 Bank Rs. 2,000 Debtors Rs. 500

  1. Rs. 102,885 other assets
  2. Rs. 102,885 current liabilities
  3. Rs. 99,885 current liabilities
  4. Rs. 99,385 other assets

Answer: 4 Chapter No.  

Question

Total depreciation of an asset can not exceed its:

  1. Scrap value
  2. Residual value
  3. Market value
  4. Depreciable value

Answer: 2 Chapter No.  

Question

_______ is the basic part of an item, which is processed to make a complete item:

  1. Factory overhead
  2. Raw material
  3. Finished goods
  4. Work in process

Answer: 2 Chapter No.  

Question

A sum of Rs. 8,000 paid as wages to repair the office furniture should be debited to:

  1. Repair Account
  2. Furniture Account
  3. Cash Account
  4. Office expense Account

Answer: 1 Chapter No.  

Question

Generally Accepted Accounting Principles (GAAP) are necessary because financial statements

  1. are publicly available
  2. should be standardized
  3. should be understandable
  4. All of the given

Answer: 4 Chapter No.  

Question

Budget is another name of __________ in Accounting.

  1. Guest Strategy
  2. Statement of Cash Flow
  3. Financial Forecast
  4. Expected life of Asset

Answer: 3 Chapter No.  

Question

The amount of depreciation charged on Furniture will be debited to:

  1. Furniture Account
  2. Depreciation Account
  3. Accumulated Depreciation A/c
  4. Cash Account

Answer: 2 Chapter No.  

Question

Machinery purchased on Credit for Rs 15000 will have an effect on which of the following accounts?

  1. Purchases Account & Accounts Payable Account
  2. Machinery Account & Cash Account
  3. Purchases Account & Cash Account
  4. Machinery Account & Accounts Payable Account

Answer: 4 Chapter No.  

Question

The proper classification of fees earned account is:

  1. Assets
  2. Liabilities
  3. Revenues
  4. Expenses

Answer: 3 Chapter No.  

Question

Loss on the sale of plant and machinery should be written off against:

  1. Sales premium account
  2. Depreciation fund account
  3. Sales account
  4. Plant and machinery

Answer: 4 Chapter No.  

Question

A company’s merchandise, raw materials, and finished and unfinished products which have not yet been sold are known as:

  1. Sales
  2. Purchases
  3. Inventory
  4. Work in process

Answer: 3 Chapter No.  

Question

In which of the following statement/s closing stock is/are shown?

  1. Profit and loss account
  2. Balance sheet
  3. Income statement
  4. All of the given

Answer: 4 Chapter No.  

Question

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?

  1. Rs. 1, 95,000 Losses
  2. Rs. 1, 95,000 Profits
  3. Rs 1, 05,000 Profits
  4. Rs1, 05,000 Losses

Answer: 1 Chapter No.  

Question

Which of the following particular/s is/are included in payment voucher?

  1. Name of organization
  2. Cash payment
  3. Date
  4. All of the given

Answer: 4 Chapter No.  

Question

The amount of depreciation charged under straight line method:

  1. Decreases every year
  2. Remains constant every year
  3. Increases every year
  4. First increases than decreases

Answer: 2 Chapter No.  

Question

What should be credited, if rent paid in cash?

  1. Landlord’s account
  2. Rent account
  3. Cash account
  4. Accounts receivable account

Answer: 3 Chapter No.  

Question

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 assets is Rs 175,000. What will be the amount of Current Liabilities?

  1. Rs. 20,000
  2. Rs. 150,000
  3. Rs. 10,000
  4. Rs. 25,000

Answer: 3 Chapter No.  

Question

Under the diminishing balance method, depreciation is calculated on:

  1. The original cost
  2. The scrap value
  3. Book value
  4. Both original cost and Scrap value

Answer: Chapter No.  

Question

Following information is extracted from Mr. A’s balance sheet: Cash Rs.100 Accounts Receivable 500 Accounts Payable 2 00 Bank Loans 1,000 Based on the information provided, what are Mr. A’s assets?

  1. Rs. 200
  2. Rs. 600
  3. Rs. 900
  4. Rs. 1700

Answer: Chapter No.  

Question

How many directors are there in the private limited company:

  1. 1
  2. 2
  3. 3
  4. 4

Answer: 2 Chapter No.  

Question

The process of transferring journal entry information to the ledger is called:

  1. Journalizing
  2. Posting
  3. Balancing
  4. Analyzing

Answer: Chapter No.  

Question

Find out the missing value of an Accounting Equation with the help of given data: Furniture Rs. 90,000 Cash Rs.100, 000 Debtors Rs.10, 000 Other Assets Rs. 1,000 Owner’s equity Rs. 90, 000 Liabilities?

  1. Rs. 201,000
  2. Rs. 111, 000
  3. Rs. 290, 000
  4. Rs. 291, 000

Answer: Chapter No.  

Question

The proper classification and normal balance of accounts receivables account is:

  1. Assets
  2. Liabilities
  3. Revenues
  4. Expenses

Answer: Chapter No.  

Question

The first step in the posting process is:

  1. Recording the ledger account number in the journal
  2. Recording the date in the ledger account
  3. Recording the journal page number in the ledger account
  4. Recording the explanation in journal

Answer: Chapter No.  

Question

Salaries paid to employees Rs. 15,000. The effect of this transaction would be:

  1. An increase in Asset Decrease in Asset
  2. Decrease in Liability Decrease in Asset
  3. Increase in Expense Decrease in Asset
  4. Decrease in Expense Decrease in Capital

Answer: Chapter No.  

Question

What will be debited, if Mohsin commenced business with cash?

  1. Cash account
  2. Capital account
  3. Drawings account
  4. Proprietor account

Answer: Chapter No.  

Question

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?

  1. Rs. 1, 95,000 Losses
  2. Rs. 1, 95,000 Profits
  3. Rs 1, 05,000 Profits
  4. Rs1, 05,000 Losses

Answer: Chapter No.  

Question

Inventory is considered a current asset because it:

  1. Often reflects the most current trends and styles
  2. Was purchased during the current year, usually
  3. Will be converted into cash in the course of the company's operating cycle
  4. Can be returned to the supplier for a cash refund

Answer: Chapter No.  

Question

For every debit there must be a credit with an equal amount. This is also called as:

  1. Separate Entity Concept
  2. Single Entry Book-Keeping
  3. Matching Concept
  4. Dual Aspect Concept

Answer: Chapter No.  

Question

Which of the following is the "right issue" of shares:

  1. shares issued to the general public for subscription
  2. shares issued to the subscribers of the company
  3. shares issued to the existing shareholder in proportion to the current shares held by the shareholders
  4. shares issued to the directors of the company

Answer: Chapter No.  

Question

Which of the following account summarizes the profitability of business for a specific accounting period?

  1. Profit & Loss account
  2. Cash flow statement
  3. Receipt & Payment account
  4. Balance Sheet

Answer: Chapter No.  

Question

Which of the following docmuent has the conclusive evidence that the seperate legal entity has been formed:

  1. memorandum of association
  2. articles of association
  3. certificate of commencement of business
  4. certificate of incorporation of the business

Answer: Chapter No.  

Question

The "provisions for bad debt" account is:

  1. asset account
  2. contra-asset account
  3. expense account
  4. liability account

Answer: Chapter No.  

Question

Which of the following is the first book to record a transaction?

  1. Trial Balance
  2. Journal
  3. Trial Balance
  4. Balance Sheet

Answer: Chapter No.  

Question

A statement which is prepared at the end of financial year of a manufacturing concern showing a brief summary of the whole process is called as:

  1. Statement of owner’s equity
  2. Balance Sheet
  3. Cost of Goods sold statement
  4. Income Statement

Answer: Chapter No.  

Question

If, Cost of machine = Rs.400, 000 Useful life = 5 years Residual value = Rs.25, 000 Sale price = Rs.40, 000 Rate of depreciation = 40% What will be book value of machine after four years using straight line method?

  1. Rs.75, 000
  2. Rs.40, 000
  3. Rs.55, 000
  4. Rs.100, 000

Answer: Chapter No.  

Question

The entry for Revaluation of an asset, in case of gain on revaluation will be:

  1. Debit: Revaluation Reserve A/c Credit: Cost of Asset A/c
  2. Debit: Revaluation Reserve A/c Credit: Accumulated Depreciation A/c
  3. Debit: Cost of Asset A/c Credit: Revaluation Reserve A/c
  4. Debit: Profit & Loss A/c Credit: Cost of Asset A/c

Answer: Chapter No.  

Question

Net profit = Gross profit - _________

  1. Operating Expenses
  2. Product Cost
  3. Deferred Expenses
  4. Direct Cost

Answer: Chapter No.  

Question

Following are the parts of the debtors control account except:

  1. credit sales
  2. sales return
  3. cash sales
  4. cash/checque received

Answer: Chapter No.  

Question

In Book keeping, _________ is the first document to record an entry:

  1. Journal
  2. Ledger
  3. Voucher
  4. Trial Balance

Answer: Chapter No.  

Question

Consider the following data: Particulars Rs. Assets? Owner's equity 35,000 Liabilities 90,000

  1. Rs. 35,000
  2. Rs. 55,000
  3. Rs. 1, 25,000
  4. Rs. 1, 05,000

Answer: 3 Chapter No.  

Question

Prepayments are included in:

  1. current assets
  2. non current assets
  3. sales
  4. other income

Answer: Chapter No.  

Question

What is the next step to Journalizing in Accounting cycle?

  1. Recording
  2. Posting
  3. Balancing
  4. Analyzing

Answer: Chapter No.  

Question

"Share Premium" account is which type of the reserve:

  1. general reserve
  2. capital reserve
  3. specific reserve
  4. None of the given

Answer: Chapter No.  

Question

Which of the following assets are shown at written down value in balance sheet?

  1. Current assets
  2. Liquid assets
  3. Floating assets
  4. Fixed assets

Answer: 4 Chapter No.  

Question

A wrong entry on the debit side of the Cash Book would lead to:

  1. Cash Book showing less Balance
  2. Cash Book showing more Balance
  3. Cash withdrawal
  4. Purchases

Answer: Chapter No.  

Question

Bank Reconciliation Statement is:

  1. A memorandum statement
  2. A ledger account
  3. A part of cash book
  4. A part of journal

Answer: Chapter No.  

Question

Partnership means a lawful business owned by at least:

  1. Two or more persons
  2. Five or more persons
  3. Seven or more persons
  4. Nine or more persons

Answer: 1 Chapter No.  

Question

In a single entry system, it is NOT possible to prepare:

  1. Trial balance
  2. Statement of affairs
  3. Balance Sheet
  4. Sales accounts

Answer: 2 Chapter No.  

Question

Which of the following is the first book to record a transaction?

  1. Trial Balance
  2. Journal
  3. Trial Balance
  4. Balance Sheet

Answer: 2 Chapter No.  

Question

Which of the following is the best explanation of capital expenditure?

  1. It is recurring and regular and it occurs repeatedly
  2. Neither an asset is acquired not the value of an asset is increased
  3. It does not occur again and again. It is non-recurring and irregular
  4. Its effect is temporary, i.e. the benefit is received within the accounting year

Answer: 3 Chapter No.  

Question

The total cost of an asset minus accumulated depreciation is called as _________.

  1. Current market Value
  2. Historical Cost
  3. Book Value
  4. Replacement Cost

Answer: 3 Chapter No.  

Question

In a partnership business, there's a profit of 450,000 and A, B, and C are partners with profit/loss sharing ratio of two-ninth, three-ninth and four-ninth respectively, then how much would be the profit of the each partner?

  1. A: 75,000, B: 170,000, C: 205,000
  2. A: 70,000, B: 175,00, C: 205,000
  3. A:100,000, B: 150,000, C: 200,000
  4. A: 105,000, B: 145,000, C: 200,000

Answer: 3 Chapter No.  

Question

An amount of Rs. 200 received from Mr. "P" but credited to Mr. "Q" would affect:

  1. Accounts of P & Q
  2. Only Cash Account
  3. Only P’s account
  4. Only Q’s account

Answer: 1 Chapter No.  

Question

Inventory is considered a current asset because it:

  1. Often reflects the most current trends and styles
  2. Was purchased during the current year, usually
  3. Will be converted into cash in the course of the company's operating cycle
  4. Can be returned to the supplier for a cash refund

Answer: 3 Chapter No.