Financial Accounting Solved MCQs | Part Three
1. 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.
Answer: Option D
Solution: Cash account can be classified as a real account. A real account is an account that retains and rolls forward its ending balance from period to perioThe areas in the balance sheet in which real accounts are found are assets, liabilities, and equity.
2. Capital increases if ______ increases
A. Expenses are greater than income.
B. Drawings.
C. Interest on capital.
D. Revenue.
Answer: Option D
Solution: Capital increases if revenue increases. The extent to which an increase in revenue will affect company's working capital depends on how efficiently business operates.
3. Capital of a business decreases if there is an increase in
A. Drawings.
B. Income.
c. Gains.
D. Fresh capital.
Answer: Option A
Solution: Capital of a business decreases if there is an increase in Drawings. Drawing is always deducted from capital.
4. Net income equal to Revenues minus
A. Gains.
A. Depreciation.
A. Expenses.
A. Capital expenditure.
Answer: Option C
Solution: Net income equal to Revenues minus Expenses. Revenue is the income generated before any expenses are taken out. Therefore, when a company is said to have "top-line growth," the company's revenue is growing. Revenue is also called net sales which is revenue minus any returns of purchased merchandise.
5. Payment of expenses will ______ the assets
A. Increase.
B. Reduce.
C. Apportion.
D. Overstate.
Answer: Option B
Solution: Payment of expenses will reduce the assets. When an expense is recorded at the same time it is paid for with cash, the cash (asset) account declines, while the amount of the expense reduces the retained earnings account.
6. Which of the following accounting equations is correct?
A. Cash + Other assets = Capital - Liabilities.
B. Capital + Liabilities = Assets + Income.
C. Assets - Liabilities = Capital.
D. Assets + Capital = Liabilities.
Answer: Option C
Solution: Assets - Liabilities = Capital is correct. The Accounting Equation states that the Assets are always equal to the sum of Capital & Liabilities.
7. Fresh capital introduction will increase
A. Assets and Liabilities.
B. Assets and Equity.
C. Liabilities and equity and bank balance.
D. Capital and Liabilities.
Answer: Option B
Solution: Fresh capital introduction will increase Assets and Equity. Capital will increase the Equity. Cash at Bank will increase the Asset.
8. Current Assets - Current Liabilities = ?
A. Capital + Liabilities = assets.
B. Absorbed capital.
C. Net assets.
D. Working capital.
Answer: Option D
Solution: Current Assets - Current Liabilities = Working capital. Working capital is calculated as current assets minus current liabilities.
9. The process of recording in Journal is done
A. Two times in a year.
B. Once in a year.
C. Frequently during the accounting period.
D. At the end of an accounting period.
Answer: Option C
Solution: The process of recording in Journal is done frequently during the accounting perioAn organization begins its accounting cycle with the recording of transactions using journal entries.
10. General Journal is a book of _____ entries
A. First.
B. Original.
C. Secondary.
D. Generic.
Answer: Option B
Solution: General Journal, sometimes also known as the Book of Original Entry, because it is the first place a transaction is entered into the books. Journal Entries are made from source documents, which can be anything from receipts to invoices to bank statements.
11. The process of recording transactions in different journals is called
A. Posting.
B. Entry making.
C. Adjusting.
D. Journalising.
Answer: Option D
Solution: The process of recording transactions in different journals is called Journalising. Journalizing is the process of recording a business transaction in the accounting records. This activity only applies to the double-entry bookkeeping system.
12. Every business transaction affects at least ____ accounts
A. One.
B. Two.
C. Three.
D. Infinite.
Answer: Option B
Solution: Every business transaction affects at least two accounts, our accounting system is known as a double-entry system.
13. Discount allowed is a kind of deduction from
A. Account Payable.
B. Account Receivable.
C. Cash account.
D. Discount account.
Answer: Option B
Solution: Discount allowed is a kind of deduction from accounts receivable.
14. The other name of the Journal is
A. Ledger.
B. T account.
C. Day Book.
D. Cash Book.
Answer: Option C
Solution: The other name of Journal is Day Book. A journal is also named the book of original entry, from when transactions were written in a journal prior to manually posting them to the accounts in the general ledger or subsidiary ledger.
15. The Journal entry in which two or more accounts are debited or credited is referred to as
A. Journal entry.
B. Multi entry.
C. Additional entry.
D. Compound entry.
Answer: Option D
Solution: The Journal entry in which two or more accounts are debited or credited is referred to as a Compound entry. A compound journal entry is an accounting entry in which there is more than one debit, more than one credit, or more than one of both debits and credits.
16. Goods returned by customer should be debited to which of the following accounts?
A. Sales income account.
B. Sales account.
C. Return inward account.
D. Expenses account.
Answer: Option C
Solution: Goods returned by the customer should be debited to Return inward account.
17. Discount allowed is
A. Expense of business.
B. Income of business.
C. Loss of business.
D. Abnormal loss of business.
Answer: Option A
Solution: Discount allowed is Expense of business. When the buyer receives a discount, this is recorded as a reduction in the expense (or asset) associated with the purchase, or in a separate account that tracks discounts.
18. Which of the following will be debited if a business purchases goods on credit?
A. Cash.
B. Debtor.
C. Creditor.
D. Purchases.
Answer: Option D
Solution: Purchases will be debited if a business purchases goods on credit.
19. Which of the following accounts will be debited if the business's owner withdraws cash from the business for personal use?
A. Drawings.
B. Cash.
C. Business.
D. Stock.
Answer: Option A
Solution: Drawings accounts will be debited if the business's owner withdraws cash from the business for personal use. Goods withdrawn for personal use by the owner of a business reduce inventory and are recorded on a drawings account.
20. Journals are also referred to as
A. Book of entries.
B. Book of original entries.
C. T account.
D. Book of economic events.
Answer: Option B
Solution: Journals are also referred to as books of original entries. The information in these books is then summarized and posted into a general ledger, from which financial statements are produced.
