Are you feeling the pressure of an upcoming financial accounting exam? Well, fret not! We’ve got your back. If you’re on the hunt for some stellar multiple choice questions and answers that will sharpen your accounting skills and boost your confidence, then look no further – because you’ve stumbled upon just the right place!
In this blog post, we’re offering a treasure trove of engaging financial accounting MCQs that will have you acing your exam in no time. So grab a cup of coffee, buckle up, and let’s dive into the world of numbers together!
Top 75 Financial Accounting Multiple Choice Questions and Answers
1. Keeping a systematic record of business transactions is known as ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Bookkeeping[/expand]
2. Accounting is the process of identifying, measuring and communicating economic information to permit ___ and ___ by the users of the information.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Informed Judgments, decisions.[/expand]
3. Accountancy explains ‘why and how to prepare the books of accounts and how to summarize the accounting information and communicate it to the interested parties. (True / False)
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: True[/expand]
4. Identification of transactions, measurement, recording, classification, summarizing and analysing is done using software packages in the present-day environment. (True / False)
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: True[/expand]
5. ___ deals with explaining the significance of those data in a manner that the end-users of the financial statement can make a meaningful judgement about the profitability and financial position of the business.
(a) Interpreting
(b) Summarizing
(c) Analysing
(d) Communicating
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (a)[/expand]
6. Accountants need not explain various factors on what has happened, why it happened, and what is likely to happen under specific conditions. (True / False)
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: False[/expand]
7. Interested users of accounting information are broadly classified into ___ and ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Internal and External[/expand]
8. Expand SEBI ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Securities Exchange Board of India[/expand]
9. Write against the following statements the terms for which these are made in reference to accounting information.
i. ___ is a common language used to communicate financial information.
ii. Managing Director, Functional Managers, shareholders, etc., using the accounting information are ___.
iii. Ability of the firm to meet all its short term or current obligations as and when they fall due__
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (i) Accounting,
(ii) Users,
(iii) Liquidity[/expand]
10. The maximum percentage of discount that can be allowed by a company without obtaining permission from Central Government is ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: 10%[/expand]
11. They have evolved over years and are accepted as universal rules.
(a) Concepts
(b) Conventions
(c) Principles
(d) Policy
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (a)[/expand]
12. Accounting policies are law or rule of conduct. (True / False)
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: False[/expand]
13. Accounting conventions are ___ or ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Customs, traditions[/expand]
14. Choose the correct answer from the following:
i. Accounting concept helps to explain ___ of accounting.
(a) What (b) Why (c) How
ii. Which concepts form the basis for the distinction between the expenditure of short term and long term?
(a) Going concern (b) Money measurement (c) Business entity
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: i. (a) why,
ii. (b) going concerned[/expand]
15. State true or false
a. The Companies Act 1956 has set a maximum limit of 15 months for the accounting period.
b. An increase in liability (including owner’s equity) and reduction in assets represent uses of funds.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (a) True,
(b) False[/expand]
16. Fill in the blanks:
a. Earning revenue leads to ___ in owner’s equity.
b. The alternative of accrual basis of accounting is ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (a) increase,
(b) cash basis of accounting[/expand]
17. Name the concept for the following applications:
a. Classification of assets as a current asset, fixed assets and fictitious assets
b. Assets –Liabilities = Capital
c. The insurance premium paid in advance
d. Indian Air Force has placed an order for 126 fighter jets to be procured by 2015
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (a)going concern concept,
(b)Dual Aspect concept,
(c)Accrual concept,
(d)Realization concept[/expand]
18. ‘Relevance’ relates to:
(a) Giving meaningful information
(b) not influenced by personal bias
(c) Implementing without much complexity or cost.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (a)[/expand]
19. Expand GAAP ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Generally Accepted Accounting Practices[/expand]
20. ___ means that the same accounting principles should be used for preparing financial statements year after year.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Convention of consistency[/expand]
21. If all units in the same industry follow the same accounting policies it is termed as ___ consistency. Choose the right choice –
(a) Vertical
(b) Horizontal
(c) Three dimensional
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (c)[/expand]
22. The convention of full disclosure requires that there should be full, ___ and ___ disclosure of accounting information.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Fair and adequate disclosure[/expand]
23. Convention of Materiality is an exception to the Convention of ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Full disclosure[/expand]
Give your decision in the following situations:
24. A business has unsold stock at the end of the year. The cost price is Rs. 200000 and the market price is Rs. 250000. At which price the unsold stock is recorded?
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Cost price[/expand]
25. What will be your decision if the cost price in the above case is Rs. 210000?
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Cost price[/expand]
26. There are at present ___ accounting standards.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: 32[/expand]
27. Simplified Schedule VI is for ___ and ___ Schedule VI is for SMCs.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Non-SMCs and Saral[/expand]
28. The difference between the issue price and face value or nominal value of a share is called ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Premium[/expand]
29. Securities premium is a ___ to the company.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Capital gain[/expand]
30. A company issues its shares of Rs.100 each at a discount of 10%, money receivable on each share is ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Rs. 90[/expand]
31. Assets include ___, ___ and ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Tangible assets, intangible assets, debts[/expand]
32. ___ is the residual interest in the assets after deducting liabilities.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Capital[/expand]
33. The liabilities of a firm are Rs.60,000 and the capital is Rs.50,000. The total assets are:
(a) 1,10,000
(b) 60,000
(c) 10,000
(d) 50,000
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (a) 1,10,000[/expand]
34. The resources (i.e., the assets) are acquired through the finances or funds provided by two sources, viz., owners (i.e., owners’ capital) and ___ (i.e., liabilities).
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Creditors[/expand]
35. Resources = ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Source of Finance[/expand]
36. The left side of the ‘T’ account is known as the ___ side.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Debit[/expand]
37. Find the value of the following:
a) If the total assets are Rs. 87,000 and the liabilities are Rs. 47,000, find out the amount of capital.
b) If the capital of the proprietor is Rs.4,00,000 and the total assets are Rs.6,00,000, what is the amount of liabilities to outsiders?
c) If creditors are Rs. 56,000, bank overdraft is Rs.1,00,000 and outstanding expenses are Rs.8,000, what is the total amount of assets?
d) Fixed assets are Rs.70,000 and current assets are Rs.1,00,000 and the creditors are Rs.30,000. What is capital?
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer:
(a) 40,000
(b) 2,00,000
(c) 1,64,000
(d) 1,40,000[/expand]
38. Classify the following accounts –
a) Insurance premium paid a/c
b) Prepaid rent a/c
c) Furniture and Fixtures a/c
d) Bank overdraft a/c
e) Capital a/c
f) Sales promotion expenses a/c
g) Discount received a/c
h) Trade creditors a/c
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer:
a) Insurance premium paid a/c – expenses a/c,
b) Prepaid rent a/c – asset a/c,
c) Furniture and Fixtures a/c – asset a/c,
d) Bank overdraft a/c – liability a/c,
e) Capital a/c – capital a/c,
f) Sales promotion expenses a/c – expenses a/c,
g) Discount received a/c – revenue a/c,
h) Trade creditors a/c – liability a/c[/expand]
39. Fill in the blanks:
a) ___ deals with the financial obligations of the firm on outsiders.
b) Patents, trademarks are ___ assets.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (a) liability, (b) intangible[/expand]
40. Debit means:
(a) An increase in the asset
(b) an increase in liability
(c) A decrease in the asset
(d) an increase in owner’s equity
[expand title=”Show Answer” swaptitle=”Hide Answer”](a)[/expand]
41. Choose the right answer from among the following:
A. Purchase book is used to record:
a. Credit purchase of goods
b. Cash purchase of goods
c. Both credit and cash purchase of goods
d. Credit purchase of goods including assets
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (a)[/expand]
B. When goods are returned to the supplier:
a. An invoice is raised
b. A debit note is raised and sent to the supplier
c. A credit note is raised and sent to the supplier
d. Information is sent through letter/email
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (b)[/expand]
42. Only credit purchases are entered in the purchase book and credit sales in the cash book (True / False)
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: False[/expand]
43. The bills payable book consists of all promissory notes or bills of exchange accepted by the business in respect of amounts owing to its ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer:customer[/expand]
44. In which book of original entry would the following transactions be entered?
a. Goods sold for cash were returned by a customer: ___.
b. Goods sold on credit were returned by a customer and cash was given immediately: ___.
c. Goods bought from Prakash & Co. the payment for which is due after a month: ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer:(a) cash book
(b) sales return book and cash book
(c) Purchase book[/expand]
45. ___ records all receipts and payments in cash.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Cashbook[/expand]
46. Choose the right option: ___ encourages prompt payment.
(a) Cash discount
(b) trade discount
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (a)[/expand]
47. The amount which the main cashier gives to the petty cashier to meet the petty or small cash expenses for a given period is known as ___ cash book.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Imprest[/expand]
48. Under the non-imprest system the chief cashier may hand over cash to the petty cashier the amount ___ spent by the petty cashier.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: equal to or more than or less than the amount[/expand]
49. ___ ledger will have separate accounts for each customer and it will show the transactions entered into with the customers.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: debtor’s[/expand]
50. ___ ledger will have a separate account for each supplier and it will show the transactions entered into with the suppliers.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: creditor’s[/expand]
51. Final accounts are the summaries of ledger accounts organized in such a manner as to show the profit or loss of the business for the accounting year. (True / False)
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: True[/expand]
52. To determine the ___, income statement or trading and profit and loss a/c is prepared.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Profit or loss[/expand]
53. ___ means that information is available to decision-makers in time to be capable of influencing their decisions.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Timeliness[/expand]
54. ___ in final accounts simply means bringing into the record all those items which have not been included in the trial balance.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Adjustments[/expand]
55. The provision made for meeting the loss arising on account of the discount that will have to be allowed to the debtors is known as___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Provision for discount on debtors[/expand]
56. Persons who owe us money are called “creditors”. (True / False)
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: False[/expand]
57. The basic principle of a closing entry is that the account to be closed should be credited if it has a debit balance and the account to which it is transferred should be debited. (True / False)
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: True[/expand]
58. For closing the sales returns account ___ account should be debited and ___ account should be credited.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Sales and sales returns[/expand]
59. For closing sales Account, the entry will be ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Sales Account should be debited and Trading Account should be credited.[/expand]
60. Credit means:
(a) An increase in the asset
(b) an increase in liability
(c) A decrease in liability
(d) a decrease in owner’s equity
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: (b)[/expand]
61. Trading account is prepared to find out the Gross profit or Gross loss of the organization. (True / False)
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: True[/expand]
62. Opening stock is shown on the ___ side of the Trading Account.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Debit [/expand]
63. Trading account is prepared to find out ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Gross profit[/expand]
64. Profit and loss account is prepared to calculate the net profit or net loss of the business.
(True / False)
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: True[/expand]
65. ___ account is prepared from nominal accounts and its balance is transferred to ___.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Profit and loss account; Capital account[/expand]
66. Selling and distribution expenses are shown on the debit side of the ___ account.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Profit and loss account[/expand]
67. ___ is a statement prepared to measure the financial position of the business on a certain fixed date.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Balance sheet[/expand]
68. ___ are assets that are usually converted to cash within one year.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Current Assets[/expand]
69. ___ are those tangible assets with a useful life greater than one year.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Fixed assets[/expand]
70. ___ given outside the trial balance has the two-fold effect to complete a double-entry system.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Adjustments[/expand]
71. If any expense has been incurred, but not paid during the period should be adjusted by creating ___ for unpaid expenses.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Liabilities[/expand]
72. ___ on the asset should be deducted from the asset.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Depreciation[/expand]
73. Interest on capital is added to the capital on the Asset side of the Balance sheet. (True / False)
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: True[/expand]
74. Office furniture is shown on the ___ side of the Balance sheet.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: Asset[/expand]
75. State true or false:
a. If the debit side is more than the credit side, the balance is shown as By balance c/d on the credit side of its account and it indicates debit balance.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: True[/expand]
b. If the credit side is more than the debit side, the balance is shown as To balance c/d on the debit side and it indicates debit balance.
[expand title=”Show Answer” swaptitle=”Hide Answer”]Answer: True[/expand]
Conclusion
We hope that our Financial Accounting Multiple Choice Questions and Answers proved to be helpful in giving you a deeper understanding of accounting principles. As we all know, financial accounting is an integral part of modern-day businesses, so it is important for every businessperson to stay up to date on this subject.
If you found our questions beneficial or have any further queries, please do not hesitate to get in touch with us. We wish you the best of luck with your upcoming examinations!
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