Accounting
1) The accounting process involves in recording:
A) Quantifiable economic event
B) Non quantifiable economic event
C) All of them
D) None of them
2) In accounting an Economic event is referred to as:
A) Cash
B) Bank statement
C) Transaction
D) Exchange of money
3) Identify the correct sequence of accounting process
A) Communicating→Recording→Identifying
B) Recording→Communicating→Identifying
C) Identifying→communicating→recording
D) Identifying→recording→communicating
4) Bookkeeping mainly concerns with which part of accounting process?
A) Analysing
B) Preparing financial statements
C) Recording financial information
D) Auditing the books of accounts
5) Financial accounting provides financial information to all of the following external users except:
A) Government agencies
B) investors
C) Creditors
D) Managers
6) For which step of accounting process the accountants of business entity prepare financial
statements?
A) Identification of economic event
B) Communication of financial information
C) Recording financial information
D) Making decisions about business
7) Keeping the log of financial information in books of original entries is called
A) Recording
B) summarizing
C) Grouping
D) Processing
8) Auditing is what?
A) Reporting the financial information
B) Examination of financial statements
C) Preparation financial statements
D) maintaining the ledger records
9) Which of the following is the external user of financial statements?
A) Manager of the business
B) CEO of the business
C) Creditor of the business
D) Controller of the business
10) Which of the following is the internal user of financial statements?
A) Creditor of the business
B) Government agency
C) Shareholder of the business
D) Manager of the business
1. a
2. c
3. d
4. c
5. d
6. b
7. a
8. b
9. c
10. d
11) _________ is the first phase of accounting cycle
A) Identifying an economic event or transaction
B) Preparing journals
C) Posting entries to ledger accounts
D) Making decisions about business
12) Financial statements differ from management account because
A) They are mainly prepared for external users of financial information
B) They are more complex and hard to prepare
C) The are the summary of accounting data
D) The are prepared on basis of actual concept
13) ________ is a separate legal entity that Total capital can be divided in many shares
A) Partnership
B) Sole proprietorship
C) Company
D) Non-profit organization
14) An asset posses which of the following?
A) Future economic benefits for the business
B) All kind of benefits for the business
C) Expenses for the business
D) Merits and Demerits for the business
15) Liabilities are which of the following?
A) Resources
B) Obligations
C) Future benefits
D) Expenses
16) ________ is the gross inflow of economic benefits
A) Assets
B) Liabilities
C) Income
D) Expenses
17) The gross decrease in economic benefits for the business are what?
A) Expenses
B) Obligations
C) Creditors
D) Income or gain
18) An asset must be _______ by the business to be shown as an asset in its "balance sheet"
A) Possessed
B) Owned
C) Controlled
D) Used
19) Liability are arisen from which of the following events?
A) Present event
B) Future event
C) Past event
D) Non of them
20) Which of the following can be considered as the most important phase of accounting cycle and it is
the primarily objective of financial accounting?
A) Identifying transactions
B) Preparing "T Accounts"
C) Preparing financial statements
D) Preparing trial balances
11. a
12. a
13. c
14. a
15. a
16. c
17. a
18. c
19. c
20. c
21) Which is the most important characteristic that all assets of a business have?
A) Long life of assets
B) Value of assets
C) Intangible nature of assets
D) Future economic benefits
22) What is the basic accounting equation?
A) Capital+Liabilities=Assets
B) Assets+ liabilities =Capital
C) Capital+assets=liabilities
D) Liabilities+Capital
23) Which of the following is a liability?
A) Cash
B) Equipment
C) Debtors
D) Creditors
24) What is equity?
A) Cash from the business
B) liability of a business
C) Owner's claim on total assets
D) Owner's claim on total liabilities
25) Identify the asset from the following
A) Cash and cash equivalent
B) Creditors
C) Notes payable
D) Bank loan
26) _______ the withdrawal of cash and goods by the owner of the busienss for his/her personal use
A) Depreciation
B) Drawings
C) Outflow of cash
D) Appreciation
27) Net loss occurs when
A) Expenses are greater than Income
B) Expenses are less than Income
C) Expenses=Income
D) Liabilities are greater than income
28) Double entry implies that
A) Recording entries in journal
B) Recoding entries in Ledger account
C) Recording two aspects of every transaction
D) Recording every transaction in books
29) Identify the nominal account
A) Machinery account
B) Building account
C) Creditors account
D) Rent expenses account
30) Which of the following accounts can be classified as a real account?
A) Rent expenses account
B) Rent income account
C) insurance expenses account
D) Cash account
21. d
22. a
23. d
24. c
25. a
26. b
27. a
28. c
29. d
30. d
31. The accounting profession can be divided into three major categories; specifically, the practice of
public accounting, private accounting, and governmental accounting. A somewhat unique and important
service of public accountants is:
a. Financial accounting.
b. Managerial accounting.
c. Auditing.
d. Cost accounting.
32. The primary private sector agency that oversees external financial reporting standards is the:
a. Financial Accounting Standards Board.
b. Federal Bureau of Investigation.
c. General Accounting Office.
d. Internal Revenue Service.
33. Which of the following equations properly represents a derivation of the fundamental accounting
equation?
a. Assets + liabilities = owner's equity.
b. Assets = owner's equity.
c. Cash = assets.
d. Assets - liabilities = owner's equity.
34. Wilson Company owns land which cost $100,000. If a "quick sale" of the land was necessary to
generate cash, the company feels it would receive only $80,000. The company continues to report the
asset on the balance sheet at $100,000. This is justified under which of the following concepts?
a. The historical-cost principle.
b. The value is tied to objective and verifiable past transactions.
c. Neither of the above.
d. Both "a" and "b".
35. Retained earnings will change over time because of several factors. Which of the following factors
would explain an increase in retained earnings?
a. Net loss.
b. Net income.
c. Dividends.
d. Investments by stockholders.
36. Which of these items would be accounted for as an expense?
a. Repayment of a bank loan.
b. Dividends to stockholders.
c. The purchase of land.
d. Payment of the current period's rent.
37. Which of the following transactions would have no impact on stockholders' equity?
a. Purchase of land from the proceeds of a bank loan.
b. Dividends to stockholders.
c. Net loss.
d. Investments of cash by stockholders.
38. Which of the following would not be included on a balance sheet?
a. Accounts receivable.
b. Accounts payable.
c. Sales.
d. Cash.
39. Remington provided the following information about its balance sheet:
Cash $ 100
Accounts receivable 500
Stockholders' equity 700
Accounts payable 200
Bank loans 1,000
Based on the information provided, how much are Remington's liabilities?
a. $200.
b. $900.
c. $1,200.
d. $1,700.
40. Gerald had beginning total stockholders' equity of $160,000. During the year, total assets increased
by $240,000 and total liabilities increased by $120,000. Gerald's net income was $180,000. No additional
investments were made; however, dividends did occur during the year. How much were the dividends?
a. $20,000.
b. $60,000.
c. $140,000.
d. $220,000.
31. c
32. a
33. d
34. d
35. b
36. d
37. a
38. c
39. c
40. b
41. The financial position of the business on a given date is reported on the
a.
Income Statement
b.
Balance Sheet
c.
Statement of Changes In Owner's Equity
d.
Statement of Cash Flows
42. The net profit or loss for a particular period of time is reported on the
a.
Income Statement
b.
Balance Sheet
c.
Trial Balance
d.
Statement of Changes In Owner's Equity
43. The investment of cash into the business results in a/an
a.
increase in cash and a decrease in capital
b.
increase in cash and an increase in capital
c.
decrease in cash and an increase in capital
d.
increase in fees earned and an increase in capital
44. The purchase of supplies for cash will result in a/an
a.
increase in cash and a decrease in capital
b.
increase in cash and an increase in supplies
c.
increase in supplies and a decrease in cash
d.
increase in equipment and an increase in capital
45. Services rendered for cash will result in a/an
a.
increase in cash and a decrease in capital
b.
increase in cash and an increase in fees earned
c.
decrease in cash and an increase in fees earned
d.
increase in fees earned and an decrease in capital
42-6. Cash is received from a client for office rental space.
a.
cash increases and rental fees earned decreases
b.
cash increases and rental fees earned increases
c.
cash decreases and capital increases
d.
cash decreases and withdrawals increases
47. Keeping the records of the business separate from the personal records of the owner of the business
is said to be adherence to which accounting principle or concept?
a.
Continuing-concern concept
b.
Business entity principle
c.
Realization principle
d.
Objectivity principle
48. Which of the following is a formal written promise to pay a definite sum of money on demand or at a
fixed or determinable future date?
a.
Account payable
b.
Account receivable
c.
Note payable
d.
Prepaid insurance policy
49. Peter Atli decided to pay himself a salary of $3,000 per month for the work he performs for his
business, a single proprietorship. Each time a cheque is recorded for $3,000, which account should be
increased?
a.
Salaries Expense
b.
Capital
c.
Peter Atli, Withdrawals
d.
Owner Salary Expense
50. The personal telephone bill of Junior Sample was paid by issuing a cheque from the business
chequing account. No business calls had been made from Junior's personal phone. What account must
be charged for this transaction?
a.
Junior, Capital
b.
Cash
c.
Junior, Withdrawals
d.
Telephone Expense
51. Which of the following accounts is NOT a liability?
a.
Accounts Payable
b.
Accounts Receivable
c.
Salaries Payable
d.
Notes Payable
52. Assets total $50,000 and Liabilities total $10,000. The equity of the business must total
a.
$4,000
b.
$40,000
c.
$400
d.
$40
53. The resulting amount when total liabilities are subtracted from total assets is known as
a.
owner's equity or net assets
b.
net income or net loss
c.
total expenses
d.
total revenue
54. A broad rule adopted by the accounting profession as a guide in measuring, recording, and reporting
the financial affairs and activities of a business is known as
a.
an accounting concept
b.
an accounting principle
c.
the basic accounting equation
d.
objectivity principle
55. Using a sales invoice as the basis for recording a sale of merchandise is an example of using which
accounting principle or concept for recording transactions?
a.
Recognition principle
b.
Objectivity principle
c.
Realization principle
d.
Continuing-concern concept
56. Which of the following statements is true?
a.
a salary paid to a partner is an expense to the partnership
b.
a salary paid to a proprietor is an expense to the proprietorship
c.
a salary paid to a shareholder is an expense of the corporation
d.
the business entity principle does not apply to corporations
57. Keith Manich deposited $5,000 in a bank account he established for a pet store that he is going to
own and operate as KM's Pets. Recording the deposit will
a.
increase an asset, increase a liability
b.
decrease an asset, decrease a liability
c.
increase an asset, increase owner's equity
d.
decrease an asset, decrease owner's equity
58. Better-Cars Selection, a used car dealer, has total assets and liabilities of $50,000 and $18,000,
respectively. The firm constructed a shelter for its automobiles by promising to pay the building
contractor, upon completion of the building, $500 per month for twenty-four months. Upon completion,
owner's equity will:
a.
increase by $12,000
b.
remain unchanged
c.
decrease by $12,000
d.
increase by $500, each month
59. The owner of a computer services business was able to acquire a new computer, valued at $5,000,
by establishing an account with the computer vendor, Com Pewters Unlimited. There was no down
payment. Recording the transaction will
a.
increase an asset, increase a liability
b.
decrease an asset, decrease a liability
c.
increase an asset, increase owner's equity
d.
decrease an asset, decrease owner's equity
60. A sole proprietor recorded the payment of an account payable to an office supplies store. Recording
the transaction will
41. b
42. a
43. b
44. c
45. b
46. b
47. b
48. c
49. c
50. c
51. b
52. b
53. a
54. b
55. b
a.
increase an asset, increase a liability
b.
decrease an asset, decrease a liability
c.
increase an asset, increase owner's equity
d.
decrease an asset, decrease owner's equity
56. c
57. c
58. b
59. a
60. b
61. If during the accounting period the assets increased by $5,000, and the owner's equity increased by
$1,000, then the liabilities must have
a.
increased by $6,000
b.
increased by $4,000
c.
decreased by $4,000
d.
decreased by $6,000
62. If during the accounting period the assets increased by $7,000, and the owner's equity decreased by
$3,000, then the liabilities must have
a.
increased by $10,000
b.
increased by $4,000
c.
decreased by $4,000
d.
decreased by $10,000
63. One of the local fast-food outlets hired a first-year accounting student to oversee the cash-collection
procedures. When the firm pays the student her weekly wage, the transaction will
a.
increase an asset, increase a liability
b.
decrease an asset, decrease a liability
c.
increase an asset, increase owner's equity
d.
decrease an asset, decrease owner's equity
64. Which of the following statements is incorrect?
a.
b.
c.
d.
Assets - Capital = Liabilities
Assets - Liabilities = Capital
Liabilities + Assets = Capital
Liabilities + Capital = Assets
65. Which of the following is not an asset?
a.
b.
c.
d.
Debtors
Cash balance
Buildings
Loan from K Harris
66. Which of the following is a liability?
a.
b.
c.
d.
Creditors for goods
Cash at Bank
Machinery
Motor Vehicles
67. Which of the following best describes the meaning of ‘Purchases’?
Goods bought on credit
Goods bought for resale
Goods paid for
Items bought
68. Which of the following should not be called ‘Sales’?
Sale of item previously included in ‘Purchases’
Goods sold on credit
Office fixtures sold
Goods sold for cash
69. Given the following, what is the amount of Capital? Assets: Premises £20,000; Stock £8,500; Cash
£100. Liabilities: Creditors £3,000; Loan from A Adams £4,000
£21,100
£32,400
£21,600
£21,400
70. Which of the following is correct?
Profit increases capital
Profit does not alter capital
Profit reduces capital
Capital can only come from profit
61. b
62. a
63. d
64. c
65. b
66. c
67. a
68. d
69. d
70. d
71. What would have been the balance on the account of C De Freitas in MC17 on 19 May 20X5?
a.
b.
c.
d.
A credit balance of £265
A credit balance of £95
A debit balance of £265
A credit balance of £445
72. Which of the following best describes a trial balance?
a.
b.
c.
d.
Shows all the entries in the books
Shows the financial position of a business
It is a special account
It is a list of balances on the books
73. Is it true that the trial balance totals should agree?
a.
b.
c.
d.
Yes, except where the trial balance is extracted at the year end
No, there are sometimes good reasons why they differ
Yes, always
No, because it is not a balance sheet
74. Which of the following are correct?
a. (i), (ii) and (iv) only
b. (i), (iii) and (iv) only
c. (i) and (ii) only
d. (i), (ii) and (iii) only
75. Of the following, which are incorrect?
a. (ii) and (iv) only
b. (i) and (iii) only
c. (ii) and (ii) only
d. (ii) and (iii) only
71. b
72. c
73. a
74. a
75. a