Professional Documents
Culture Documents
14) Which of the following account will be credited when a typewriter is sold that has been
used in the office?
A) Office Equipment Account
15) Which of the following subsidiary book(s) is (are) maintained for debtors control account?
A) Sales Day Book
B) Sales Return
C) Debtors Ledger
D) All of the given options
16) The allocation of the cost of a tangible plant asset to expense in the periods, in which
services are received from the asset, is termed as:
B) Depreciation
17) Which of the following is NOT a function of bank reconciliation statement?
A) To check for errors in balance sheet
18) Which of the following entry will be recorded when the Bad Debts are recovered?
A) Cash(Dr.) & Bad Debts recovered(Cr)
19) Which of the following subsidiary book(s) is (are) maintained for debtors control account?
A) Sales Day Book
B) Sales Return
C) Debtors Ledger
D) All of the given options
20)Which of the following item will be shown on debit side of debtors account?
D) Credit sales
21 ) Goods of $1,000 purchased from Mr. A were recorded in sales book, the rectification of
this error will:
B) Reduce the gross profit
22) Which of the following account will be credited when a typewriter is sold that has been
used in the office?
D) Office Equipment Account
23) When one or both aspects of a transaction are recorded in the wrong class or category of
account, this is called:
A) Error of principle
24)Which of the following item must be recorded in the adjusted Cash Book in order to bring it
in line with the entries in the Bank Statement?
A) Bank charges
25)It is supposed that on 31st December, 2007, the sundry debtors are amounted to $40,000.
On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful.
Actual bad debts are $ 1600. What amount of new provision for doubtful debts will be credited
in profit & loss account
C) $2400
26) Which of the following is an example of operating expense?
C) Purchasing cleaning services
27) Which of the following would NOT be considered as a component of 'cost' of stock?
C) Salaries of selling staff
28) Which of the following will be debited, if cash is drawn by Proprietor?
A) Proprietors drawings
29) Which of the following is TRUE about the treatment of insurance paid in advance $ 1200?
A) Current asset
30) When closing stock is given in trial balance, then it will effect
D) Trading A/C and Balance sheet
31) Current accounts of the partners should be opened when the capitals are:
A) Fixed
32) Which of the following is (are) type(s) of Public Limited Companies?
D) Both Listed Company and non listed company
33) The charter of a company which defines the limitations and powers of the company is
called:
B) Articles of association
34) Merchandise on hand at either the beginning or end of the reporting period is
called__________.
D) Inventory
35) The balance sheet reported a beginning balance of $20,000 in Accounts Receivable and an
ending balance of $15,000. Credit Sales of $200,000 were made during the year. Using this
information, compute cash collected from customers.
A) $205,000
$
50,000
42,000
250,000
?
D) $8,000
37) - Please choose one
Debentures
Equity Capital
General Reserve
Accumulated profit
What is debt equity ratio
D) 15:35 (or 3: 7)
$
1, 50, 000
2, 00,000
90, 000
60,000
?
38) A company declares a cash dividend to be paid to its stockholders next month. The effect
of the transaction is to:
C) Decrease assets and stockholders' equity.
39) Please choose one
$
80,000
50,000
60,000
?
A) $130, 000
40) The amount owed by debtors at the end of a month appears on the_________ side of
the control account
A) Left side or debit
41) What would be the value of conversion cost, if the cost of material consumed during the
month is $5,000, labor cost incurred is $2,000 and the factory over head cost is $1,000?
A) $3,000
42) Mr. A & B entered into a partnership with an equal share in profit or loss. The agreement
provides that Mr. A will receive $10,000 and Mr. B will receive $8,000 as salary allowance.
The net income for the year is $85,000. What will be the total share of Mr. A?
C) $43,500
43)Which of the following capital is taken up by the general public?
A) Issued capital
44) All of the following have an effect on operating activities while preparing the statement of
cash flows except:
D) Amount received for disposal of a fixed asset
45) Which of the following financial statement is helpful for the investors and creditors
to assess the cash and non cash aspects of operating, investing and financing transactions
on an entitys financial position?
C) Statement of cash flows
46) According to the statement of cash flows following are the examples of investing
activities except:
B) Capital invested by the owners
47) Which of the following items of balance sheet are useful in evaluating a
companys liquidity?
A) Current assets and other assets
48) Which of the following can be distributed among the share holders?
B) General reserve
49) Fixed Assets (WDV) + Working Capital =?
A) Total assets employed
50) Shares for which amount is paid by public are called ______ shares.
B) Paid up
51) Which of the following is non- profit organization?
D) Trust
52) Commercial Accounting is based on:
B) Double entry book keeping
53) An Asset that is NOT physical in nature is called
A) Intangible Asset
54) In cost of goods sold statement, the cost of material consumed is equal to:
A) Opening raw material stock+ Purchases
Ending raw material stock
55) What would be the value of total factory cost, if the cost of material consumed during the
month is $6,000, labor cost incurred is $2,000 and the factory over head cost is $2,500?
A) $10,500
56) In cost of goods sold statement the cost of goods manufactured is equal to:
69) Which of the following can be utilized to set off any loss on revaluation?
C) Revaluation reserve
70) Which of the following capital is required for the registration of the company?
C) Authorized capital
71) Which of the following capital is taken up by the general public
B) Issued capital
72) Accounts Receivable & Inventory are the examples of:
A) Current assets
73) Which of the following account will be credited in the books of XYZ Co. Ltd, if the business
purchased a vehicle though cheque?
C) Bank account
74) In which of the following condition a company will have positive working capital?
A) If current assets > current liabilities
75) Which of the following is an example of direct materials cost?
B) A piece of wood for the production of chair
76) Bank Statement is a record of transactions between the bank and the holder of:
A) A foreign currency account
B) A current account
C) A saving account
D) All of the given options
77) Which of the following is CORRECT if depreciation is given in trial balance?
A) It has already been deducted from concerned asset account
78) The persons who sign articles and memorandum of the company and contribute in the
initial share capital of the company are called:
B) Shareholders
79) Merchandise on hand at either the beginning or end of the reporting period is called_
D) Inventory
80) What does a credit balance in a partners current account represent to a business?
A) Current Assets
81) Suppose a firm has 100 debtors, and each of them owes exactly $150 at the start of June.
During June each debtor has paid-off exactly $100 on their account, either by cash or by
cheque. What should be the revised total debtors figure
A) $5,000
82) Income tax expense of Eden Corporation shows a debit balance of Rs.7,000 in its
unadjusted trial balance and Rs.7,600 in adjusted trial balance. Which of the following account
will be debited in adjusting entry?
C) Income tax expense
83) The financial statement that captures both the current operating result and the associated
changes in the balance sheet is:
B) Statement of financial position
84) In statement of cash flows, all of the following items are considered as financing activity,
except:
A) Payment made for short term debts
85) Which of the following business publishes the Financial Statements?
D) Public Limited Company
86) Which financial statement show what a business owes at a particular point in time?
C) A balance sheet
87) The Balance Sheet item that represents the resources invested by the owner is known as:
A) As account (Dr.) and Bs account (Cr.)
88) If provision is created for doubtful debts, which of the following entry will be passed
to record bad debts in control account?
C) Provision for doubtful debts (Dr) and Debtors A/c (Cr)
89) Which of the following shows summary of a company's financial position at a specific
date?
C) Balance Sheet
90)Debenture is also named as:
B) Bond
91) A company declares a cash dividend to be paid to its stockholders next month. The effect
of the transaction is to:
A) Decrease assets and liabilities.
92) Which of the following is the most important document of the company?
A) Memorandum of Association
93) Authorized share capital is also known as:
A) Registered capital
94) Goods purchased from Mr. A for $2,000 passed through the sales book. The rectification
of error will result in:
A) Increase of gross profit
95) Which of the following entry will be recorded when the Bad Debts are recovered?
A) Cash account (Dr.) & Bad Debts recovered account (Cr.)
96) Which of the following would be deducted from Sundry Debtors in Balance Sheet?
A) Bad debts (Trial balance item)
C) New provision for doubtful debts
D) Both Bad debts (given in adjustment) and new provision for doubtful debts
97) The amount received; in excess of the face value of the shares is transferred to which of
the following?
A) Share premium account
98) The maximum amount with which the company is registered is called:
A) Authorized Share Capital
99) Depreciable value of an asset is equal to:
C) Cost scrap value
100) Which of the following asset is NOT depreciated?
D) Land
101) Which one of the following is NOT true about revenue expenditure?
B) They improve the financial position of the business
5) Which one of the following statement is CORRECT about Long term liabilities?
B) These are consist of all debts, payable after 12 months
6) Which of the following can offer its share to general public at large?
B) A listed company
7) What would be the value of total factory cost, if the cost of material consumed during the
month is Rs. 6,000, labor cost incurred is Rs. 2,000 and the factory over head cost is Rs.
2,500?
D) Rs. 10,500
8) Which of the following is CORRECT?
D) A cash inflow means increase in both cash and cash equivalent
9) Wages outstanding given in the trial balance will be treated as a (an):
B) Liability
10) Prepaid interest given in the Trial Balance will be treated as a (an):
A) Asset
1) A company has distributable profit = $4, 90,000. Profit sharing share ratio of Mr. A, Mr. B
and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. C in distributable profit.
C) $2, 45,000
2) the Capitals of partners are fixed then, at the end of financial year a partners drawings are
transferred to the:
D) Debit side of the partners current account
3)
A)
B)
C)
D)
4) In calculating earning per share (EPS), the net profit is divided by which of the following?
A) Number of ordinary shares
5) A firm may earn profit during an accounting period but have less money in the bank at the
end of the period then it had at the beginning. Which of the followings, on its own, could
explain this?
C) an increase in trade debtors over the course of the period
6)
A)
B)
C)
D)
7) The persons who sign articles and memorandum of the company and contribute in the
initial share capital of the company are called:
A) Subscribers
8) The charter of a company which defines the limitations and powers of the company is
called:
A) The memorandum of association
9) Which of the following can offer its share to general public at large
B) A listed company
10) Which of the following are the owners of a company?
C) Shareholders
1) Rent receivable (given in trial balance) is an item of:
A) Balance Sheet
2)
A)
B)
D)
3) Which of the following account is affected from the Drawings of cash in soleproprietorship business?
A) Capital account
4) An asset is considered to be a current asset if:
B) It can be realized in cash or sold or consumed in the business within one year
5) General office expenses are charged to which of the following head:
A) Administrative expenses
6) Which of the following would NOT be considered as a component of 'cost' of stock?
A) Salaries of selling staff
7) Consider the following data and identify the amount which will be deducted from Sundry
Debtors in Balance Sheet
Particulars
Bad debts (from trial balance)
Provision for doubtful debts
(old)
Current years provision (new)
$
1,600
2,000
800
B) $800
8) A Financial statement that indicates the success or failure of a business, over a period of
time is called:
C) An income statement
9) Which of the following is NOT correct about income tax?
B) It is treated as an expense and debited in Profit & Loss account
10) (Amount of new provision + Amount of bad debts) < Amount of old provision then amount
1) Identify that which of the following particular(s) would NOT be shown in the format of a
Cash Book?
1. Cheque number
2. Date of transaction
3. Amount of transaction
A) (1) only
2) The process of transferring journal entry information to the ledger is called:
B) Posting
3) Which one of the following is a type of General Ledger?
B) T Account
4) Which of the following is CORRECT about the flow of recording a transaction?
A) Occurrence of event voucherJournalLedgerTrial Balanceprofit and loss account
Balance Sheet
1) Economic resources owned by a business and expected to benefit for the future operations
are called:
B) Assets
2) Bank Reconciliation Statement is prepared by:
B) Accountant of the business
3) Expenditures incurred anually on renewal of patent are known as:
A) Revenue Expenditures
4) Which of the following account will be credited, when the goods are purchased on cash?
B) Cash account
5) If the cost of sales is $60,000, sales are $95,000 and operating expenses are $20,000 during
the year, what would be the value of Gross Profit?
A) $15,000
6) Which of the following account balance will be shown on debit side of Trial Balance? (It is
assumed that all account balances are shown on normal balance).
D) Cash account
7) The amount of salary paid to Mr. Sohail should be debited to:
B) Salaries account
8) Which of the following account will be credited, if business bought goods on credit from
Mr. Ali
B) Mr. Ali account
A) Bank Overdraft
Which one of the following is NOT prepared by Non profit organizations?
A) Profit & Loss account
2) An informal accounting statement that lists the ledger account balances at a point in time
and compares the total of debit balances with the total of credit balances is known as:
C) Trial Balance
3) Documentary evidence, in a specific format used to record the details of a transaction is
known as:
B) Voucher
4) A summarized record of transactions related to individuals or things is called a/an
A) Account
When a Liability is reduced or decreased, it is recorded on the:
B) Left or debit side of the account
6) Cost incurred for the maintenance of shop is considered as
C) Revenue expense
7) A sold goods for $3, 00,000 to Mr. B,$3, 00,000 will be treated as for business.
A) Revenue
8) Double entry accounting system includes:
C) Both cash and accrual accounting
9) Which of the following financial statement shows the financial health of an Organization at
a stated period of time?
A) Balance sheet
10) The records that are kept for the individual asset, liability, equity, revenue, expense, and
dividend
Components are known as:
A) Accounts
1) Revenue should be recognized or recorded when the goods are sold or services are
rendered to the customer, this concept is known as:
B) Realization Concept
2) A record maintained which is measurable in the form of money, this concept of accounting
is known as:
4) In calculating earning per share (EPS), the net profit is divided by which of the following?
C) Paid up capital
5) The maximum amount with which the company is registered is called:
A) Authorized Share Capital
6) When the capitals are fixed, which of the following account will be debited for drawings
made by a partner?
A) Individual Partners Current Account
7) Which of the following is(are) type(s) of capital account in partnership?
D) Both Fixed Capital and Fluctuating Capital
8)Current accounts of the partners should be opened when the capitals are:
C) Fixed
9) Which of the following journal entry will be recorded, if cash is drawn by a Proprietor?
A) Proprietors drawings a/c (Dr.) and Cash a/c (Cr.)
10) Which of the following is a selling expense?
C) Tax & freight paid on sale
1) In which of the following interim dividend is treated?
B) In profit and Loss appropriation account
2)The statement of changes in equity basically shows the movement of:
A) share capital during the year
3) Which of the following can offer its share to general public at large?
B) A listed company
4) In case of fixed capital accounts, other transactions such as Drawings and Profit etc. are
recorded in
a separate account that is called .
B) Current Account
5) Which of the following account will be debited when the interest on drawings is charged?
C) Partners current account
6) Which of the following account will be credited when interest on capital is charged against
the distribution of profit?
B) Partners capital account
4) In firms cash flow statements, which of the following would appear as a cash inflow?
C) Money received as result of selling fixed assets
5)Amount generated from sales in a business is called:
A) Income
6)Money spent to acquire or upgrade physical assets is known as:
B) Capital Expense
7)An example of financing activities in the context of cash flow statement is:
C) Financial charges paid
8)Fixed Asset (WDV) + __________ = Total assets Employed
B) Total assets
9)Which of the following is NOT correct regarding depreciation?
C) It refers to the end life of an asset
10)Salaries paid in advance should be shown on the:
A) Asset side of the Balance Sheet
1) Any expense that gives benefit for a period of less than twelve months is called ________.
B) Revenue Expense
2) Prepaid rent given in the Trial Balance will be treated as a (an):
A) Asset
3) If Assets = Rs. 99,500 and Owner's equity = Rs. 50,500 then Liabilities = ?
A) Rs. 49,000
4) Sale of goods to Amir is wrongly debited to Umair A/c instead of Amir A/c. Both
are debtors of business, this is an example of:
B) Error of Commission
5) A companys merchandise, raw materials, and finished and unfinished products which have
not yet been sold are known as:
C) Inventory
6)What is nature of Capital account?
B) Credit
7) The basic accounting principle/concept according to which business record must be kept
separate from the personal records of the owner is known as:
B) Separate entity principle
8) Which of the following is NOT correct?
D) Decrease in Revenue will be credit
9)What should be credited, if salary is paid to Sohail?
C) Cash account
10) Which of the following is NOT correct?
C) Decrease in Expenses will be debit
1) Which of the following is/are the example/s of Intangible Asset?
A) Copy rights
B) Good will
C) Patent rights
D) All of the given options
2) Assets are divided in which of the following categories in balance sheet.
D) Current assets, Fixed assets and deferred cost
4) Franchise rights, goodwill and patents are the examples of:
C) Intangible assets
5) What should be credited, if rent paid in cash?
C) Cash account
6) Which of the following item is found in a Journal entry? (1) Date of each transaction (2)
Rupee amount of each debit and credit (3) Explanation of each transaction
D) 1, 2 & 3
4) The assets which have a limited useful life are termed as:
B) Depreciateable assets
5) Accountancy covers which of the following area(s):
A) Book-keeping
B) Accounting
C) Auditing
D) All of the given options
6) If a business pays rent in advance for 12 months, it will be treated as:
A) Prepaid expenses of business
7) Which of the following transaction have NO affect on stockholders' equity?
A) Purchase of land on credit
8) Which of the following account balance is shown on credit side of Trial Balance? (It is
assumed that all account balances are shown on normal balance)
D) Capital account
9) If you start with cash book balance (Dr.), which of the following item will be deducted
in Bank Reconciliation Statement?
C) Cheque deposited but not credited by the bank
10) The cost of moving plant and machinery to a new site will be treated as:
B) Capital expense
1) Which one of the following is NOT true about Capital Expenditure?
D) Reduce the profit of the concern
2) A decrease in value of a fixed asset due to age, wear and tear is known as:
A) Depreciation
3) If Bad Debts written off are given in adjustment, then which of the following entry for bad
debts written off is CORRECT?
C) Bad debts a/c (Dr) and debtors a/c (Cr)
4) In balance sheet fixed assets are shown at:
D) Written down value (WDV)
5) In cost of goods sold statement, the cost of material consumed is equal to:
A) Opening raw material inventory + Purchases Ending raw material inventory
6) Following are the inventories of Manufacturing Concern EXCEPT
D) Merchandise inventory
7) Which of the following account balance will be shown on debit side of Trial Balance? (It is
assumed that all account balances are shown on normal balance)
A) Cash account
B) Furniture account
C) Vehicle account
D) All of the given options
8) The return of goods by a customer should be debited to:
B) Sales return account
9) Which of the following account will be credited in the books of ABC Co. Ltd., if furniture is
purchased on cash?
B) Cash account
10) Which of the following account will be credited, If Mr. A started business with cash
Rs. 2, 00,000?
A) Capital account
Introduction to Accounting and its Terminology MCQs 1 The accounting process involves in recording:
A) Quantifiable economic event
2)In accounting an Economic event is referred to as:
C) Transaction
17)The gross decrease in economic benefits for the business are what?
A) Expenses
18)An asset must be _______ by the business to be shown as an asset in its "balance sheet"
C) Controlled
19)Liability are arisen from which of the following events?
C) Past event
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?
C) Preparing financial statements
21)Which is the most important characteristic that all assets of a business have
D) Future economic benefits
22)What is the basic accounting equation?
A) Capital+Liabilities=Assets
23)Which of the following is a liability?
D) Creditors
24)What is equity?
C) Owner's claim on total assets
25)Identify the asset from the following
A) Cash and cash equivalent
26)_______ the withdrawal of cash and goods by the owner of the busienss for his/her
personal use
B) Drawings
27)Net loss occurs when
A) Expenses are greater than Income
17)Depreciation decreases
D) Capital
18)An increase in provision for bad debt will
A) Decrease net income
19)Current assets - Current liabilities=?
D) Net working capital
20)Assets-Liabilities=?
B) Equity
D) Compound entry
8)The term 2/10-n/30 implies that ______ % discount will be given if the payment is made
within _____ days or full amount is receivable within 30 days
A) 2,10
9)Goods returned by customer should be debited to which of the following accounts?
C) Return inward account
10)Discount allowed is
A) Expense of business
11)_________ is the evidence that a transaction took place
A) Source documents
12)Which of the following will be debited if a business purchases goods on credit?
D) Purchases
13)Which of the following accounts will be debited if the business's owner withdraws cash
from business for his personal use?
A) Drawings
14)Journals are also referred as
B) Book of original entries
15)The standard format of journal does not include which of the following?
A) Assets column
16)In which of the following orders data is entered in journal?
D) Chronological order
17)Which of the following accounts will be credited if a company purchases building for cash?
D) Cash account
18)Discount for quick repayment of debt is normally referred as
C) Cash discount
10)A brief explanation recorded below every entry in general journal is commonly known as
A) Narration
11)Credit purchase of plant and machinery is recorded in which of the following specialized
journals?
A) General journal
12)Debit note is the basis for recoding a transaction in which of the following journals?
A) General journal
13) "Sale of old furniture" will be recorded in which of the following specialised journals?
C) General journal
14)Credit note is the basis for recording a transaction in which of the following specialized
journals?
B) Sales return journal
B) Real
2)If a transaction is completely omitted from the books of accounts, will it affect the
agreement of a trial balance?
B) No
3)________ is the common base for preparing a trial balance
A) Ledger accounts
4)Which of the following is true about a trial balance?
A) It lists down the balances of accounts
5)Debit balance = Credit balance in a trial balance indicates that
D) Mathematically Capital+Liabilities=Assets
6)Trial balance is commonly prepared
B) At the end of an accounting period
7)Which of the following will affect the agreement of a trial balance?
B) Partial omission of a transaction
8) If debit balances = credit balances, trial balance only shows or check the ____________ and
it does not indicate that no errors were made during recording and posting
A) Arithmetic accuracy
9)Which of the following account with normal balance is shown at the debit side of a trial
balance?
D) Cash account
10)Which of the following account with normal balance is shown at the credit side of a trial
balance?
D) Accrued expenses account
5)Which of the following adjusting double entries is correct for accrued expenses?
A) DEBIT= Expenses, CREDIT= Accrued expenses
6)Which of the following adjusting double entries is correct for Prepaid expenses?
A) DEBIT= Expenses, CREDIT= Prepaid expenses
7)Unearned income is classified as
B) Liability
8)Which of the following adjusting double entries is correct for earned income?
B) DEBIT= Earned income, CREDIT= Income
9)Failure to make adjusting entries for accrued income results in
C) Understatement of capital
10)Identify the consequences of not making adjustment entry for accrued expense
B) Understatement of liabilities
11)An adjusting entry for prepaid expenses affects
A) Assets and expenses
12)Adjusting entries convert cash based account into _________ based accounting
C) Accrual
13)An unearned income adjusting entry affects
C) Income and liabilities
14)A business paid 3 month rent amounting to $3000 out of this amount one month rent
pertains to the next accounting period. Identify the correct amount prepaid expense
B) $1000
15)Adjusting entries help allocating incomes and expenses to their ________
B) Appropriate accounting periods
16)A customer paid you $100,000 for some construction work. However, at the end of your
accounting period only 1/4 of work was completed. What amount of income should be shown
in income statement?
D) 25,000
17)A business paid $5000 for technical services but used up the services for only $2000 until
the end of its accounting period. The remaining $3000 would be referred as
D) Prepaid expenses
18)Revenue earned but not yet received by the business is known as
C) Accrued revenue
19)Another name of accrued revenue is
D) Earned revenue
20)If Rent expenses=$5000, Insurance expenses=$4000, Prepaid rent expenses=$3000. What
amount of total expenses will be shown in income statement?
D) $6000
C) Accounting period
11) Showing purchased office equipments in financial statements is the application of which
accounting concept?
B) Materiality
13)Information about an item is ________ if its omission or misstatement might influence the
financial decision of the users taken on the basis of that information
D) Material
14) Exercising a degree of caution in the case of judgments needed under the condition of
uncertainty is assumption of which of the following accounting concepts? D) Prudence
concept
15) Which one of the following concepts states that the publication or presentation financial
statements should not be delayed?
B) Timing concept
16) land on lease should be shown in balance sheet contrary to fact that company doesn't own
this piece of land. This is the statement of what accounting concepts?
D) Substance over form Concept
17) "Financial information should be neutral and bias free" is the dictation of which one of the
following?
C) Objectivity Concept
18) A business was commenced on 1st January and it purchased 5 vehicles, each costing
$5000. During the year the business managed to sell 2 vehicles at the price of $12000. How
should the remaining 3 vehicles be valued if the business is going to continue its operations
in the next year?
B) On the basis of going concern
19) A company received cash $1000 in advance for auditing service. However, the company
neither earned this revenue nor made any adjusting entry in its books. Identify the effect of
this omission?
A) Total liabilities to be understated
20) Depreciation is charged on fixed asse to comply with which of the following accounting
principles or concepts?
A) Matching concept
D) Intangible
15) Which of the following does not appear in Balance sheet?
A) Building
16) Which of the following lists down the balances to asset accounts, liability accounts and
capital account balances?
A) Income statement
17) Current assets are also known as
A) Working capital
18) The expenses related to the main operations of business are referred as
D) Operating expenses
19) Cash receipt from the sales fixed assets is recorded under the heading of
C) Investing activities
20) A current asset that is convertible to cash within 3 months can be referred to as
D) Cash equivalent
1) What is the minimum number of partners required to commence a partnership business?
C) 2
2) Partnership type of business is formed by the mutual agreement of partners. What kind of
agreement is it?
C) Oral or written agreement
3) In the general form of partnership, liabilities of partners are:
B) unlimited
7) Interest on drawings is:
A) Debited to partners current a/c
8) The written agreement of partnership is most commonly referred to as:
B) Partnership deed
9) Where there is no partnership agreement exists between partners, what will be the profit
sharing ratio between the partners?
A) Equal
10) Salary of a partner is _________ to current account
B) Credited
11) New investment by any partner in the partnership type of business is _______ to the
partners capital account
B) Credited
12) Under fluctuation method of capital, what is the treatment of interest on capital?
A) Credited to capital account
13) Which of the following is NOT generally the characteristic of a partnership business?
D) Limited liability
14) In which of the following types of partnership the liability of at least one partner is
unlimited whereas the liability of other partners is limited?
D) Limited partnership
15) In which of the following types of partnership there is no agreement regarding the duration
of partnership?
B) Partnership-at-will
16) A&B are partners sharing profit or loss equally. A new partner enters in the partnership
and invests a piece of land that had historical cost of $50,000, book value = $25000
and current market value = $30,000. By what amount the new partners account should be
increased?
C) $30,000
17) X and Y are partners sharing profit and loss at the ratio of 1/3 and 2/3 respectively. The net
income for this accounting period is $10 while salary of X = $2, interest on Ys drawings = $3
and interest on Xs capital = $2. What is the Xs share of profit or loss after the adjustment for
partners salary, interest on capital and interest on drawings?
A) $3
18) Which of the following is known as the value addition to a business because of business
reputation, customers loyalty, brand name etc
C) Goodwill
19) Which of following is the correct double entry for revaluation surplus
A) Revaluation = Debit and Partners capital accounts = Credit
20) A and B share profit and loss in the ratio of 3/5 and 2/5 respectively and having
capital account balances of $100,000 each. At the time of revaluation, the firms total asset
book value was $60,000 while they can only be sold for $40,000. Which of the following is the
balance of As capital account after revaluation of firms assets?
C) $88,000
21) Which one of the following double entries is correct regarding the cost of firm or
partnership dissolution?
14) The total of purchases return is entered on the which side of a creditor control account?
A) Debit side
15) Discount received is entered on the which side of a creditor control account?
A) Debit side
16) identify the correct double entry for bill receivable dishonor
A) Debit debtor and Credit bill dishonored
17) Generally, the total amount purchases is taken from which book of account for the
purpose of preparing Creditor control account?
C) Purchase day book
18) A creditor control account contains the following transaction:
Bank = $100
Purchases=$200
Discount received = $100
Balance c/d = $300
Work out the balance b/d
C) $300
19) Which of the following, generally, doesnt appear in a debtor control account?
D) Provision for doubtful debts
20) Which of the following is the correct entry for bill payable acceptance?
B) Creditor Debit and bill payable Credit
1) What is depreciation?
D) Portion of a fixed assets cost consumed during the current accounting period
2) Under which depreciation method the amount of depreciation expenses remains same
throughout the useful life of a fixed asset
A) Straight line method
3) A company purchased a vehicle for $6000. I will be used for 5 years and its residual value is
expected to be $1000. What is the annual amount of deprecation using straight line method of
depreciation?
A) $1000
4) What is the accumulated deprecation?
A) Sum of all depreciation expenses of a fixed asset
5) Which of the following is the normal balance of an accumulated depreciation account?
B) Credit balance
6) How trial balance shows the accumulated depreciation?
B) as a credit item
7) Which of the following is a double entry for depreciation expenses?
B) Depreciation expenses Debit and accumulated depreciation Credit
18) make sure that machine works properly. There was expense of $5000 incurred on test run,
however the sale proceeds of test production were $2000. You are required to find out the total
cost of machine?
C) 503,000
19) Which of the following fixed assets is not depreciated in the ordinary circumstances?
C) Land
20) In the calculation of depreciation, all of the following items are actually estimates except:
C) Historical cost
21) Which of the following accounting concepts or principles require the calculation of
depreciation of the fixed assets?
D) Matching concept
22) A car was purchased for $5500. Its residual value was estimated to be $500 while its
monthly depreciation expenses are $100 using straight line method. Which of the following is
the annual rate of depreciation?
B) 24%
23) Under which method of depreciation the amount of depreciation expenses remains
constant throughout the useful life of a fixed asset
C) Straight line method
24) An increase in the value of fixed asset is referred to as:
B) Appreciation
25) A fixed asset having book value of $2000 was sold for $1500. Which of the following is the
gain or loss on the sale of fixed asset?
C) $500 loss
26) Book value of a fixed asset equals to market value or sale proceeds of a fixed asset if:
C) Gain or loss on sale=0
27) The term ______ is generally used for the depreciation of natural resources
B) Depletion
28) Which of the following is a biological asset?
D) Living plants and animals
29) Items of property, plant and equipment can be recognized as assets when their cost can
be measured reliably and it is likely that the future economic benefits associated with the
assets:
C) will flow to the entity
30) Under the revaluation model of fixed assets provided by the international
accounting standards, the revaluation of the fixed assets should be carried out:
B) on a regular basis
1) Which of the following is the effect on net income if a business decreases provision for
doubtful debts?
A) It will increase net income
2) A firm has not recorded the bad debts by mistake. Which of the following is the effect of bad
debts omission?
B) Net profit would increase
3) When it is certain that a debt wont be recovered. Which of the following is correct?
B) Account receivable is credited
4) A recovery of bad debt
A) increases net income
5) The opening balance of provision for doubtful debts account is $1000 whereas the
closing balance of debtors account is 100,000. What amount of provision for doubtful debts
should be charged to income statement using a 5% provision for doubtful debts for the
current accounting period?
B) $4000
6) The opening and closing balances of provision for doubtful debts account are $1000 and
$2000 whereas bad debts are totaled $200
B) $2000 is to be subtracted from total debtors balance in the balance sheet
7) Which of the following double entries is used to transfer bad debts recovered to income
statement?
A) Bad debts recovered Debit and income statement Credit
8) What does aged debtors analysis signify?
A) shows how long debts have been outstanding
9) Which of the following is the most common cause of bad debt?
D) Debtor declared to be a bankrupt
10) According to a general rule of accounting, the older a debts is outstanding, the more
likelihood that the debt will turn out to be a
C) bad debt
11) Total debtors=$5000, the closing balance of provision for doubtful debt a/c is $500. Identify
what amount should be shown in balance sheet regarding the debtors?
A) $5000-$500=$4500
12) Which accounting concept dictates the inclusion of provision for doubtful debts in the
financial statements?
D) Prudence concept
13) Which of the following is an alternative term for provision for doubtful debts ?
C) Allowance for doubtful debts
15)A firm decided to provide for a 4% or $160 allowance for doubtful debts on all outstanding
debts. Which of the following is the value of total outstanding debts of the firm at the time of
creating the provision?
D) 4000$
16) Which of the following is a commonly used base to create the provision for doubtful
debts?
B) Total credit sales
17) Which of the following debtors have highest probability to default on trade debts?
A) Over 90 days old debtors
18) Provision for doubtful debts account is a/an
B) Contra asset account
20) Provision for cash discount on debtors is a percentage of
C) Net debtors less provision for doubtful debt
1) The value of inventories or stock is figured out at the lower of cost and
D) net realizable value
2) An overstatement in the value of closing stock overstates all of the following except
D) Cost of goods sold
3) Which of the following are generally the inventories of a service business
D) Work in process inventories
4) All of the following are the methods of inventory costing except
D) Stock take
5) Which one of the following methods of inventory costing yields highest taxable income?
A) FIFO
6) Which one of the following methods of inventory costing produces ending stock cost close
to the market value of the inventories?
A) FIFO
7) Which of the following inventory costing systems is regarded as the most complex one?
B) Perpetual inventory system
8) Which one of the following double entries is passed when goods are purchased on credit
under perpetual inventory system?
D) Inventory Debit and a/c payable Credit
9) Which of the following journal entries is passed when goods are purchased on credit under
the periodic inventory system?
C) Purchases Debit and a/c payable Credit
10) Which one of the following inventory systems ascertains the balance of stock or amount
of stock at the end of an accounting period or at the time of physical inventory count?
A) Periodic inventory system
11) Which one of the following inventory costing methods is supposed to issue the most
recently purchased goods?
C) LIFO method
12) Which of the following inventory systems is the most appropriate for a business that deals
in a precious metal such as gold?
B) Perpetual inventory system
13) Opening inventory + Net purchases = What?
D) Cost of goods available for sale
14) Cost of goods available for sale closing inventory = What?
D) Cost of goods sold
15) Gross profit is 25% on total sales and cost of goods sold amounts to $750. Which of the
following is the amount of gross profit?
D) $250
16) At the end of XYZ firms accounting period, the closing stock was found to be $10,000.
However, it was realized that a fixed asset of cost $1000 was included in the stock count.
Which of the following is the correct amount of ending inventory or stock?
C) $9000
17) NRV or net realizable value of inventory is the expected selling price or market value less
B) expenses necessary to complete sale
18) Cost of an item in the closing inventory is $100 whereas the net realizable value is $85. At
which one of following amounts the item should be shown in the financial statement?
C) $85
19) An item of inventory was purchased for $100. It can be sold for $125 and company
can replace the item with the new one at the cost of $105. Which of the following is the
23) In non-profit accounting, the sale of old newspapers is generally considered as a/an
C) Income
11) Which of the following is used to work out the balance of cash drawings for an accounting
period?
D) Cash book