mcqs 500 - 1 file download

MCQs 500

19-01-2010

Financial

Accounting

zaheerswati

@ciit.net.pk

[email protected] financial accounting of 47

1. Which of the following statement is true?

(a) The director of a company is liable for any losses of the company

(b) Sole trader business is owned by share holder and operated by the proprietor

(c) Partner is liable for losses in a partnership in proportion to their share ratio

(d) A company is run by a director on behalf of its member

2. A work sheet provides total information for preparing

(a) Income statement (b) Balance sheet (c) Financial statement (d) Adjusting entries

3. Which of the following is not a long-term liability?

(a) Accounts payable (for payables due in more than one year) (b) Bank overdrafts

(c) Bank borrowings reimbursable in more than one year (d) Bonds

4. Bank statement also called

(a) Pass book (b) Cash book (c) Credit book (d) Debit book

5. In cash book bank charges recorded

(a) Debit side (b) Credit side (c) both a & b (d) Non of them

6. Which of the following is not a current asset?

(a) Accounts receivable (b) Inventory of finished products

(c) Inventory of raw materials (d) Land

7. Which of the following transaction would have no impact on Gross Profit?

(a) Carriage in (b) Wages (c) Wages outstanding (d) Loss by fire

8. Closing stock effect which accounts

(a) Adjustment Trial balance and Income statement (b) Income statement and Trading account

(c) Trading account and Balance sheet (d) Adjustment Trial balance and Trading account

9. Which of the following is recorded under Long Term Liabilities section of the

Balance Sheet?

(a) Creditors (b) Provision for Taxation (c) Dividend Payable (d) Bonds

10. A contra assets account shows as a deduction from the related assets account in the balance sheet.

(a) Assets Account (b) Accumulated Depreciation (c) Expense Account (d) Revenue Account

11. When all the items relating to revenue and expense have been recorded in the income statement than ultimate result

(a) Net Income/Net Loss (b) Resource valuation (c) Claim valuation (d) None

12. The Accrued Expenses which are Shown in the Worksheet and balance Sheet under the head of

(a) Current Assets (b) Current Equity (c) Current Liability (d) Current Expenses

13. Direct expenses are

(a) Carriage inward (b) Carriage outward (c) Wages (d) Both a & c


14. Liabilities are

(a) Equal to the sum of assets plus owner’s equity

(b) Created when stockholder contributed cash to company by stock exchanges

(c) Obligation of the entity to outsiders (d) All of above are correct

15. When do revenues affect net income?

(a) In the period during which they are earned

(b) In the period in which their cash equivalent is collected (c) Both a and b (d) Neither a nor b

16. Which of the following statements is true?

(a) The balance sheet, the income statement and the cash flow statement are totally linked

(b) There are links only between the balance sheet and the cash flow statement

(c) There is no link between the balance sheet, the income statement and the cash flow statement

(d) There are links only between the income statement and the cash flow statement

17. What is the final stage of the accounting process?

(a) Journal (b) Financial statement (c) Ledger (d) Trial balance

18. Which of the following does not describe accounting?

(a) Language of business (b) Useful for decision making

(c) Is an end rather than a mean to an end?

(d) Used by business, government, non-profit organizations and individuals

19. AAA stands for

(a) American accounting agency (b) American accounting association

(c) Asian accounting association (d) Australian accounting association

20. Double entry book-keeping was fathered by

(a) F. W. Taylor (b) Jones (c) Henry Fayol (d) L. Pacioli

21. Which one of the following statement completely and correctly describe accounting

(a) Recording, classifying and summarizing economic activities in systematic way

(b) Recording, classifying and summarizing all activities in useful manner

(c) Accounting is the systematic process of recording social activities only

(d) Recording, classifying and summarizing economic activities in informal manner

22. Which of the following would not be considered a component of 'cost' of Goods Sold?

(a) Sales force Salaries (b) Transportation for purchase

(c) Import duties or raw material (d) Factory electricity expense

23. The accountant's worksheet:

(a) Lays the groundwork for formal financial statement preparation

(b) Is a fundamental financial statement

(c) Provides details necessary for full disclosure and the preparation of footnotes

(d) Is prepared at the end of each operating cycle


24. Work sheet signify

(a) A complete sketch of business activities (b) Information about assts and liabilities

(c) Adjusting entries as closed of period (d) None of above

25. Consider the following

Sales $80,000

Beginning merchandise inventory $10,000

Purchases $45,000

Cost of goods sold $50,000

Determine the value of the ending merchandise inventory

(a) $ 10,000 (b) $ 15,000 (c) $ 5,000 (d) $ 25,000

26. To arrive at the Gross profit of a Trading business, which one of the following formula is applied?

(a) Sales - (Opening Stock - Purchases - Closing Stock) (b) Sales - (Opening Stock + Purchases + Closing Stock)

(c) Sales - (Opening Stock + Purchases - Closing Stock) (d) Sales - (Opening Stock - Purchases + Closing Stock)

27. Amount of profit on revenue after deducting the direct cost of making the goods or supplying the services is called

(a) Gross profit (b) Cost of sales (c) Expenses (d) Net profit

28. Cost of Goods sold is classified as which type of account

(a) Asset (b) Liability (c) Revenue (d) Expense

29. Which of the following is a financial asset?

(a) Inventories (b) Equipment (c) Marketable Securities (d) Leasehold land

30. A business started its financial period with 100 bicycles and then bought 600 bicycles during the period. The cost of 50

bicycles was owing to creditors at the end of the period. It sold 500 bicycles during the financial period, but customers

have paid for only 400. Each bicycle was bought for £100 and sold for £150. What is the value of sales to be included in

the firm's profit and loss account for the period?

(a) £40,000 (b) £60,000 (c) £50,000 (d) £75,000

31. Cost of finished goods inventory is calculated by

(a) Multiplying units of finished goods inventory with the cost per unit

(b) Dividing units of finished goods inventory with the cost per unit

(c) Dividing per unit cost with finished goods inventory (d) Deducting total cost from finished goods inventory

32. An organization sold units 2,000 and has closing finished goods 500 units and opening finished goods units were

300.The quantity of unit produced would be

(a) 7,500 units (b) 4,500 units (c) 8,500 units (d) 2,200 units

33. Increase in material Inventory means:

(a) The ending inventory is greater than opening inventory

(b) The ending inventory is less than opening inventory

(c) Both ending and opening inventories are equal (d) Can not be determined


34. Conversion cost = Direct labor +___________

(a) Labor (b) F.O.H (c) Material (d) Non of these

35. Direct expenses are such expenses

(a) Which are directly paid to the employee (b) Which are directly associated with the purchase

(c) Which are directly associated with the sale (d) All of above

36. Selling expenses are shown in

(a) Cost of Goods sold (b) Profit and loss account

(c) Manufacturing account (d) Profit and loss appropriation account

37. A top dress designer misjudged the fashion market, and has an unsold stock of 100 silk dresses which normally sell for

Rs. 500 each. They cost the business Rs. 200 each to make, but can now only be sold for Rs.100 each. What is the

valuation per dress for the purposes of the asset valuation in the balance sheet?

(a) Rs. 200 (b) Rs. 500 (c) Rs. 100 (d) None

38. Which of the following is true regarding the income statement?

(a) The income statement is sometimes called the statement of operations

(b) The income statement reports revenues, expenses, and liabilities

(c) The income statement reports only revenue at the point of sale

(d) It shows financial position of a business at a particular period of time

39. The specific cost of the workforce used to produce a product such cost is called

(a) Direct labor cost (b) Direct material cost (c) Other than production cost (d) Non of above

40. Loss obtained by the business is written in work sheet on

(a) Assets side of Balance sheet (b) Liability side of Balance Sheet

(c) Plus in Equity side of Balance sheet (d) b and c

41. Retain earning increased when the corporation has a

(a) Profit (b) Loss (c) No profit, No loss (d) None of them

42. A company has, by the end of its financial period, paid out more Value Added Tax than it has received. How would this

be shown in the balance sheet?

(a) As an accrual (b) As a debtor within current assets

(c) As a 'creditor due within one year' (d) As a 'creditor due after more than one year'

43. The controller's responsibilities are primarily in nature, while the treasurer's responsibilities are primarily related to

(a) Operational; Financial accounting (b) Financial management; Accounting

(c) Financial management; Operations (d) Accounting; Financial management

44. The outcome of financial accounting is to

(a) Record all transactions in the books of accounts (b) Provide management with detailed analyses of costs

(c) Present the financial results to the organization by means of recognized statements (d) Calculate profit

45. The Maximum number of Banking Partners in Pakistan can be fixed at the following

(a) 10 (b) 20 (c) 50 (d) No Limit


46. The focal point of financial management in a firm is

(a) The number and types of products or services provided by the firm

(b) The minimization of the amount of taxes paid by the firm

(c) The creation of value for shareholders (d) The dollars profits earned by the firm

47. Which of the following is not a user of Management Accounting Information?

(a) Store Manager (b) Chief Executive Officer (c) Creditor (d) Chief Financial Officer

48. Which of the following is a benefit of the corporate form of business

(a) Rising large amount of capital is easier (b) Ownerships are easily transferrable

(c) Limited liability of the shareholders/stockholders (d) All of the above

49. Company with single taxation is called

(a) LLP (b) S-Type (c) Joint Stock Company (d) PC

50. In general, the asset side of the balance sheet is designed to summarize balance sheet accounts with

(a) Credit balances (b) Debit balances (c) Neither a. nor b (d) Both a and b

51. Preparation of companies’ financial reports is governed in Pakistan under

(a) State Bank of Pakistan Act (b) Companies Ordinance 1984

(c) Partnership Act (d) Banking Companies Ordinance 1962

52. External Reporting is the Result of

(a) Financial Accounting (b) Management Accounting (c) Cost Accounting (d) Social Accounting

53. Special purpose financial statements are prepared by

(a) Management Accountants (b) Cost Accountants

(c) Financial Accountants (d) Both a and c

54. A large organization with separate legal status is known as

(a) Sole proprietorship (b) Partnership (c) Joint stock company (d) None

55. Which of these characteristics does not apply to partnership?

(a) Unlimited liabilities (b) Unlimited life (c) Mutual agency (d) Income tax

56. The output of financial accounting is

(a) The measurement of accounting income (b) The preparation of financial position

(c) The measurement of taxable income (d) The preparation of financial reports

57. The personnel, procedure, devices and records used by an organization to develop accounting information and

communicate that information to decision maker are called which of the following?

(a) Audits (b) Accounting information systems (AIS)

(c) Personnel systems (d) Internal control structures

58. Which of the following groups use financial accounting?

(a) Management, employees, shareholders and lenders (b) Suppliers, customers and competitors

(c) Tax authorities, government and general public (d) All of the above


59. Which of the following business entity is known as firm?

(a) Sole trader-ship (b) Partnership (c) Co-operative society (d) Company

60. Prospectus for shares can be issued by

(a) Public limited companies (b) Private limited companies

(c) Both a and b (d) Non of Above

61. All economics costs that a business incur through its operation to earn revenues?

(a) Assets (b) Drawing (c) Expense (d) Revenue

62. Which of the following statements is false?

(a) If you increase an asset account, you could increase a liability account.

(b) If you decrease an asset account, you could increase a shareholders’ equity account

(c) If you increase an asset account, you could decrease an asset account

(d) If you decrease an asset account, you could decrease a shareholders’ equity account

63. All of following are Assets except

(a) Prepaid Rent (b) Goods (c) Unearned Income (d) b and c

64. Which One of the following is an example of Intangible asset?

(a) Copy rights (b) Discount on issue of debentures (c) Investments (d) Preliminary expenses

65. To understand and use accounting information in making economic decisions, you must understand

(a) The nature of economic activities that accounting information describes

(b) The assumptions and measurement techniques involved in developing accounting information

(c) Which information is relevant for a particular type of decision that is being made?

(d) All of Above

66. How many approaches accounting has

(a) One (b) Two (c) Three (d) None

67. The long-run objective of financial management is to

(a) Maximize the value of the firm's common stock (b) Maximize return on investment

(c) Maximize earnings per share (d) Maximize market share

68. Purpose of an accounting system include all of the following except

(a) Interpret and record the effects of business transaction

(b) Classify the effects of transactions to facilitate the preparation of reports

(c) Summarize and communicate information to decision makers

(d) Dictate the specific type of business transaction that the enterprise may engage in

69. In preparing a work sheet, a net loss would be computed and entered in the

(a) Debit column of the income statement columns of the worksheet

(b) Credit column of the income statement in worksheet

(c) In the debit column of the adjusted trial balance

(d) In the credit column of the balance sheet columns of the worksheet


70. An accrued revenue would be shown on the balance sheet as,

(a) A receivable (b) A payable (c) Prepaid revenue (d) Unearned revenue

71. If the accountant forgets to adjust the prepaid expense account, there will be,

(a) An understatement of net income (b) An overstatement of net income

(c) An overstatement of expense (d) a and c

72. Which of the following is true for every adjusting entry,

(a) They affect only income statement accounts

(b) They affect balance sheet account and an income statement account

(c) They affect only balance sheet accounts (d) They affect only accounts with normal debit balance

73. Earnings are the result of the difference between:

(a) Revenue and assets (b) Revenue and liabilities (c) Revenue and expenses (d) Liabilities and expenses.

74. An examination of records of financial accounts to verify their accuracy is called

(a) Inspection (b) Audit (c) Reporting (d) Budget

75. The accounts which have their existence after the close of accounting year is called

(a) Nominal accounts (b) Real accounts (c) final accounts (d) None

76. The balance in the office supplies account on July 1 was $3,200, supplies purchased during July were $2,500, and the

supplies on hand at July 31 were $2,800. The amount to be used for the appropriate adjusting entry is:

(a) $3,500 (b) $2,800 (c) $3,200 (d) $2,900

77. A business pays weekly salaries of $15,000 on Friday for a five-day week ending on that day. The adjusting entry

necessary at the end of the fiscal period ending on Thursday is:

(a) Debit Salaries Payable, $12,000; credit Cash, $12,000

(b) Debit Salary Expense, $12,000; credit Drawing, $12,000

(c) Debit Salary Expense, $12,000; credit Salaries Payable, $12,000

(d) Debit Salary Expense, $18,000; credit Salaries Payable, $18,000

78. A balance sheet is designed to show:

(a) The financial position of an enterprise under accounting conventions

(b) What the enterprise could be sold for (c) The performance of the enterprise for the year

(d) What it would cost to set up a similar enterprise

79. Gross profit is the difference between

(a) Liabilities & assets (b) Purchase and sale

(c) Net sales and operating expenses (d) Net sales and cost of goods sold

80. Which of the following would be included in a cash budget?

(a) Depreciation charges (b) Dividends (c) Goodwill (d) Patents

81. Calculate the gross profit if; Sales Rs. 6,000; cost of sales Rs. 5,000; opening stock Rs. 1,000; purchases Rs. 4,000;

wages Rs. 2,000 and office rent Rs. 1,000.

(a) Loss Rs. 2,500 (b) Loss Rs. 1,500 (c) Profit Rs. 2,500 (d) Profit Rs. 1,000


82. Marketable securities are primarily

(a) Short-term equity securities (b) Short-term debt instruments

(c) Long-term equity securities (d) Long-term debt instruments

83. In 2005 work in process inventories of Park Inc., totaled $20,000 on January 1 and $15,000 on December 31. If total

manufacturing cost was 90% of cost of goods sold, how much was cost of goods sold?

(a) Cannot be determined from the information presented (b) 110% of total manufacturing cost

(c) ($20,000 - $15,000)/0.90 (d) ($20,000 - $15,000) + 110% of total manufacturing cost

84. The largest expense of most manufacturing firms is?

(a) Salaries Expense (b) Amortization Expense (c) Rent Expense (d) Cost of goods sold

85. Residual interest in the net asset of an entity that remain after deducting its liabilities is

(a) Owner Equity (b) Liabilities (c) Asset (d) Expense

86. Which of the following is an expense

(a) Purchasing operating equipment (b) Purchasing cleaning service

(c) Purchasing an investment of another company (d) Purchasing a computer for the accounting

87. All of following are Expenses except

(a) Wages (b) Rent Payable (c) Salaries (d) Carriage

88. Dealing between two persons including money or a valuable thing is called

(a) Economic activities (b) Personal activities (c) Social activities (d) None of these

89. Which of the following item of revenue nature?

(a) Dividends payable (b) Rent incur (c) Fee earned (d) Payment for building improvement

90. Which of the following is not an asset?

(a) Debtors (b) Buildings (c) Cash balance (d) Loan from Ali

91. Goodwill is an example of

(a) A current assets (b) Fixed asset (c) Tangible Assets (d) Intangible Assets

92. Finance has been described as

(a) The lifebuoy of the business (b) The lifeboat of the business

(c) The lifeline of the business (d) The lifeblood of the business

93. The extended balance sheet equation, which is the basis of double-entry bookkeeping is

(a) Assets + Expenses = Liabilities + Income - Capital

(b) Assets - Expenses = Liabilities - Income - Capital

(c) Assets - Expenses = Liabilities + Income + Capital

(d) Assets + Expenses = Liabilities + Income + Capital

94. Find out the value of liabilities from the following of cash Rs. 50,600; account receivable Rs. 12,400; office supplies

Rs. 1,350 and capital Rs. 50,000

(a) Rs. 15,850 (b) Rs. 14,350 (c) Rs. 5,500 (d) Rs. 26,300

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95. Which of the following is correct?

(a) Profit does not alter equity (b) Profit reduces equity

(c) Equity can only come from profit (d) Profit increases equity

96. Which of the following statement/s are true?

(i) Accounting can be described as the recording, classifying and summarizing of transactions

(ii) End result of financial accounting is balance sheet only

(a) (i) Only (b) (ii) Only (c) Neither (i) nor (ii) (d) Both (i) & (ii)

97. Which of the following statements is incorrect?

(a) Assets – Liabilities = Capital (b) Liabilities + Assets = Capital

(c) Liabilities + Capital = Assets (d) Assets - Capital = Liabilities

98. Which of the following statement is true about purpose of accounting

(a) The purpose of accounting provide information to manager

(b) Accounting purpose gives quantitative information to economic decision makers

(c) Provision of base for decision making is purpose of accounting

(d) All of above statement are true regarding purpose of accounting

99. Which of the following statement is true?

(a) The directors of a company are liable for any losses of the company

(b) A sole trader business is owned by shareholders and operated by the proprietor

(c) Partners are liable for losses in a partnership in proportion to their profit share ratio

(d) A company is run by directors on behalf of its stockholders

100. XYZ (Pvt.) Ltd. provided the following information about its balance sheet

Cash $ 100 Accounts receivable $ 500

Stockholders' equity 700 Outstanding bills 200

Bank loans 1,000 Prepaid insurance 350

Based on the information provided, how much are XYZ (Pvt.) Ltd. liabilities?

(a) $ 900 (b) $ 1,050 (c) $ 1,200 (d) $ 1,700

101. Assets which have no physical existence and which cannot be seen, touched or felt are

(a) Current assets (b) Tangible assets (c) Fictitious assets (d) Intangible assets

102. Which of the following is a liability?

(a) Motor Vehicles (b) Creditors for goods (c) Machinery (d) Cash at Bank

103. On January 1st, 2009 an entity's balance sheet showed total assets of $ 750 and liabilities of $ 250. Owners' equity at

January 1st was

(a) $ 500 (b) $ 1,000 (c) $ 750 (d) $ 250

104. Which of the following is not a correct form of the Accounting Equation

(a) Assets = Claims (b) Assets = Liabilities + Owner Equity

(c) Assets – Liabilities = Owner’s Equity (d) Assets + Owner’s Equity = Liabilities


105. Due from customer is

(a) Liability (b) Assets (c) Revenue (d) None of these

106. Find out value of account receivable from following Cash € 48,000 account payable € 33,000 office equipment €

21,000 owner equity € 77,000

(a) € 21,000 (b) € 41,000 (c) € 15,000 (d) € 110,000

107. Which of the following is not a satisfactory statement of the balance sheet equation?

(a) Assets = liabilities + owner’s equity (b) Assets - liabilities = owner’s equity

(c) Assets = liabilities - owner’s equity (d) Assets - owner’s equity = liabilities

108. Share holder equity is the difference between

(a) Assets amount plus liabilities minus revenues (b) Assets amount minus revenues

(c) Assets amount plus revenues minus liabilities (d) Assets amount minus liabilities

109. If company has liabilities & assets are $ 190,000 and $ 900,000. What will be owner equity?

(a) $ 1,090,000 (b) $ 590,000 (c) $ 710,000 (d) Non of these

110. Expenses will automatically cause on __________________ in equity

(a) Decrease (b) Increase (c) Remain same (d) No effect on stockholder equity

111. An enterprise’s profit for the year may be computed by using which of the following formulae?

(a) Opening capital + drawings - capital introduced - closing capital

(b) Closing capital + drawings - capital introduced - opening capital

(c) Opening capital - drawings + capital introduced - closing capital

(d) Closing capital - drawings + capital introduced - opening capital

112. A debit will reduce _______________________, but increase ___________________________

(a) Accounts receivable; accounts payable (b) Revenues; accounts payable

(c) Accounts payable; common stock (d) Common stock; prepaid insurance

113. A person who pays out something or to whom money is owing is called

(a) Debtors (b) Creditors (c) Account receivable (d) Owner capital

114. The amount charged to customer for goods or services sold is called

(a) Expense (b) Net income (c) Revenue (d) Assets

115. The payment of cash to supplier will

(a) Reduce cash balance and reduce current liabilities (b) Increase receivables and reduce cash balance

(c) Reduce account payable and increase purchases (d) Increase payable and reduce cash balance

116. Accounts

(a) Do not reflect money amounts (b) Are used only by entities that manufacture products

(c) Are records of increases and decreases in individual financial statement items

(d) Are only used by large entities with many transactions

117. If cost of merchandise sold exceeds net sales then it’s a

(a) Gross loss (b) Gross (c) Net loss (d) Net profit


118. In double entry system of book–keeping every business transaction affects?

(a) Debit and credit side of the same amount (b) only debits side

(c) The same side of the same account (d) Two accounts

119. The amount of salary paid to sohail should be debited to

(a) The account of sohail (b) Salary account (c) Cash account (d) No entry passed

120. The effect of a credit entry on the payables account is to

(a) Decrease the account balance (b) Increase the account balance

(c) Decrease or increase the account balance (d) Decrease & increase the account balance

121. How the debit side of journal effect?

(a) Increase in Asset (b) Increase in liability (c) Decrease in Asset (d) Introduce owner equity

122. Which of the following transactions results in an immediate increase in expenses?

(a) Purchase of office equipment on credit (b) Payment of accounts payable

(c) Payment of wages (d) Repayment of bank loan

123. In practice, accountants record sales revenue when

(a) An order is placed by a customer (b) Cash is received for the sales

(c) A product is finished and ready for sale (d) An invoice or account is sent to the customer

124. What is the nature of sales?

(a) Income (b) Expense (c) Liability (d) Asset

125. To record goods returned inward

(a) Debit sales account and credit payables account (b) Debit returns inward and credit receivables account

(c) Debit returns inwards and credit receivables account (d) Debit receivable account and credit returns inwards

126. If the asset of a business are Rs. 100,000 and equity is Rs. 20,000, the value of liability will be

(a) Rs. 100,000 (b) Rs. 80,000 (c) Rs. 120,000 (d) 20,000

127. If the goods are purchased for the purpose of resale on credit , then the following account would be credited

(a) Goods (b) Purchase (c) Merchandising (d) Creditor

128. Expired cost of any fixed assets

(a) Decreases (b) Devalue (c) Deprecation (d) The purchase of an asset on credit

129. Every transaction has

(a) Two aspect (b) Three aspect (c) Five aspect (d) All of above

130. The amount received in respect of debtor’s account

(a) Increase liabilities (b) Decrease in assets

(c) Decrease liabilities (d) Conversion in assets side

131. Double entry bookkeeping means that

(a) Entry in two sets of accounting books (b) Entry at two dates

(c) Entry for two aspects of transaction (d) All of above


132. Which one the following document is prepared for documentary evidence by business?

(a) Invoice (b) Voucher (c) Receipt (d) Memo

133. The resources owed by a business are called

(a) Owner's Equity (b) Liabilities (c) Drawings (d) Assets

134. Economic resources of business that expected to be of benefit in future time referred as

(a) Owner Equity (b) Liabilities (c) Withdrawals (d) Assets

135. Adjusting Entries Concept are based on

(a) Single Entry Accounting System (b) Accrual basis of accounting (c) Cash basis of accounting (d) FASB

136. Expenses, revenue and drawing accounts are called

(a) Nominal account (b) Real account (c) Temporary account (d) None of them

137. The basic sequence in the accounting process can best be described as

(a) Transaction, journal entry, source document, ledger account, trial balance

(b) Source document, transaction, ledger account, journal entry, trial balance

(c) Transaction, source document, journal entry, trial balance, ledger account

(d) Transaction, source document, journal entry, ledger account, trial balance

138. Revenue is generally recognized being earned at the point of time when

(a) Sales is affected (b) Cash is received

(c) Production is completed (d) Goods are delivered

139. The accounting system, in which accounting entries are made on the basis of amount having become due for payment or

receipt, is known as

(a) Cash system of accounting (b) Current accounting period

(c) Accrual system of accounting (d) None of the given options

140. Bookkeeping is mainly concerned with

(a) Recording the Economic Activities (b) Interpreting the data

(c) Designing the systems for recording, classifying and summarizing (d) All of Above

141. The following statements all pertain to the accounting cycle. Which of these statements is wrong?

(a) A post-closing trial balance is prepared prior to closing temporary accounts

(b) Formal financial statements may be produced from the worksheet

(c) Adjusting entries are recorded in the journal and posted to the ledger

(d) The post-closing trial balance is prepared by examining ledger balances subsequent to the closing of accounts

142. Which one of the following system of recording transaction has a dual aspect concept of accounting?

(a) Double entry system (b) Single entry system (c) Cash system of accounting (d) Accrual system of accounting

143. Presents the revenue earned and expenses are incurred by an entity during a specific time period.

(a) Income statement (b) Statement of O.E (c) Balance sheet (d) none of them

144. The documents relating to purchase of asset must be authorized by?

(a) Senior management (b) Middle management (c) Lower level management (d) None

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145. Which one of the following qualitative characteristics of financial information can be described as a 'Threshold' quality?

(a) Reliability (b) Relevance (c) Materiality (d) Understandability

146. Which of the following items should be expensed as incurred?

(a) Broker's fees on the purchase of a long-lived asset

(b) Repair of damage occurring during installation of new equipment

(c) Freight charges on the purchase of equipment

(d) Normal installation fees on the purchase of equipment

147. An accrual expenses can best be described as amount

(a) Paid and currently matched with the revenue

(b) Paid and not matched currently matched with revenue

(c) Not paid not currently matched with revenue

(d) Not paid and currently matched with revenue

148. A manufacturer is considering the point at which a transaction can be recognized for inclusion within its profit and loss

account. At which of the following stages is this permitted?

(a) Order placed for the goods (b) Products accepted by customer

(c) Product manufactured (d) Sample products requested by customer

149. A company sold $ 400,000 of merchandise for cash and $120,000 of merchandise to credit customers who will pay for

the merchandise in a later time period. How much revenue should be reported on the income statement of the current

time period?

(a) $ 280,000 (b) $ 520,000 (c) $ 400,000 (d) $ 120,000

150. Voucher is used to record transactions that do not affect cash or bank

(a) Payment Voucher (b) Cash Voucher (c) Journal Voucher (d) None of these

151. All of Liabilities except

(a) Income Receivable (b) Note Payables (c) Wages outstanding (d) Non

152. What is owned by a business and used in carrying out its operating activities is best described as

(a) Liabilities (b) Purchases (c) Revenues (d) Assets

153. Which of the following is a liability?

(a) Petty cash (b) Loose tools (c) Unearned Revenue (d) Leasehold premises

154. Accrual-basis of accounting

(a) Result in higher income than Cash-basis of accounting

(b) Leads to the reporting of more complete information than does cash-basis

(c) Is not acceptable under GAAP (d) Non of Above

155. Items such as a sales slip, a check, a bill, or a cash register tape are examples of

(a) Balance sheet accounts (b) Income statement accounts (c) Cost of goods sold (d) Source documents

156. The basic rule of book keeping debit all expenses and losses and credit income and gains is applicable to

(a) Personal Account (b) Real Account (c) Nominal Account (d) None








157. Retained earnings is classified as which type of account,

(a) Asset (b) Stockholder's equity (c) Liability (d) Expense

158. The amount brought in by Owner of the business should be Credited to

(a) Owner Equity (b) Drawing (c) Cash (d) All of above

159. Which of the following transactions would have no impact on stockholders' equity?

(a) Purchase of the land from the proceeds of bank loan (b) Dividends to stock holders

(c) Net loss (d) Investment of cash by stock holders

160. Which of the following transactions occurs on daily basis in a large business organization

(a) Credit sales (b) Payroll (c) Purchaser of equipment (d) Payment of suppliers

161. How much types a transaction has?

(a) One (b) Two (c) Three (d) Four

162. Transactions are initially recorded in the

(a) Book of Final Entry (b) Book of Original Entry (c) T Accounts (d) Accounting Equation

163. Of the following account types, which would be increased by a debit?

(a) Liabilities and expenses (b) Assets and equity (c) Assets and expenses (d) Equity and revenues

164. Sales made to Ahmed for cash should be debited to

(a) Account Receivable (b) Cash (c) Account Receivable-Ahmed (d) Sales

165. Bill payable book is a

(a) Subsidiary book (b) Principal book (c) Ledger (d) Memorandum book

166. All economic costs that a business incurs through its operations to earn revenue is called

(a) Revenue (b) Expense (c) Liabilities (d) None of these

167. According to the rules of debit and credit for balance sheet accounts

(a) Increase in assets, liabilities and owner equity recorded by debit

(b) Decrease in asset and liability are recorded by credit (c) Increase in asset and owner’s equity are recorded by debit

(d) Decrease in liability and owner’s equity are recorded by debit

168. Types of trial balance are

(a) 2 (b) 3 (c) 4 (d) 5

169. Bill receivable book is a part of the

(a) Journal (b) Ledger (c) Profit and Loss account (d) Trial Balance

170. In which order does the journal list transactions?

(a) Alphabetical (b) Decreasing (c) Increasing (d) Chronological

171. Revenue may be define as

(a) The increase in assets resulting from supplying goods and services to customers

(b) Increase in assets from all Sources (c) The amount of capital invested by the owners of a business.

(d) The reduction of liabilities previously owned









172. Which of the following statements is true concerning Assets?

(a) They are recorded at cost and adjusted for inflation (b) They are recorded at market value for financial reporting

(c) Accounting principles require that companies report assets on the income statement

(d) Assets are measured using the cost concept

173. Which of the following accounts would be increased with a debit?

(a) Contributed Capital (b) Retained Earnings (c) Revenues (d) Expenses

174. A credit represents three of the following, which is the odd one out?

(a) Decrease in liability (b) Decrease in asset (c) Increase in liability (d) Increase in capital

175. An alternative name for a sales journal is

(a) Sales invoice (b) Sales day book (c) Daily sales (d) Sales ledger

176. Which of the following is not a book of prime or original entry?

(a) Sales daybook (b) Purchase daybook (c) Debtor’s account (d) Cashbook

177. Withdrawal by Owner would

(a) Reduce Owner’s Equity and Increase Liabilities (b) Reduce Assets and Increase Equity

(c) Reduce both Assets and Owner’s Equity (d) Reduce Assets and Increase Liabilities

178. A building is purchased using cash, for business purposes. Which of these would represent the entry for the transaction?

(a) Debit a liability account & Credit an expense account (b) Debit the bank account & Credit an expense account

(c) Debit an asset account & Credit an asset account (d) Debit an asset account & Credit a sales account

179. Account that is an offset to or reduction of, the primary account is

(a) Counter account (b) Contra account (c) Pro account (d) None of these

180. Purchase of Machinery for Cash would

(a) Increase Assets and Equity sides (b) Reduce Assets and Equity sides

(c) Conversion in Asset side (d) Conversion in Equity side

181. Amount of Cash or other Assets removed from business by proprietor is

(a) Contra to owner equity (b) Assets (c) Drawing (d) a and c

182. The Rent paid to landlord should be debited to

(a) Rent (b) Landlord (c) Cash (d) Owner Equity

183. A firm buys goods on credit from Khan which account would be credit

(a) Purchases (b) Account Payable (c) Account Receivables (d) Account Payable-Khan

184. An owner’s investment of cash into the business would

(a) Increase Liabilities (b) Increase Drawings (c) Increase Assets (d) Decrease Owner’s Equity

185. Sales discount with term 2/10, n/30 mean?

(a) 2 % discount for payment within 10 days or the full amount is due within 30 days

(b) Two-Tenths of a percent discount for payment within 30 days

(c) 2 % discount for payment within 30 days (d) None of above


186. The following journal entry was made in Global Co. accounting records.

Cash ……………………………………… 12,000

Note Receivables ………………………… 48,000

Land …………………………………………………… 60,000

(a) Involves the purchase of land for $ 60,000 (b) Involves a $ 12,000 cash payment

(c) Involves the sale of land for $ 60,000 (d) Causes an increase in total assets of $ 12,000

187. Contain a chronological record

(a) Ledger (b) Journal (c) Trial Balance (d) All of before

188. The following comments each relate to the recording of journal entries. Which statement is true?

(a) For any given journal entry, debits must exceed credits

(b) It is customary to record credits on the left and debits on the right

(c) The chart of accounts reveals the amount to debit and credit to the affected accounts.

(d) Journalization is the process of converting transactions and events into debit and credit format

189. Check withdrawn by proprietor for purchase of motorcar for office use shall be debited to?

(a) Expense (b) Drawings (c) Repairs to motorcar (d) Motorcar

190. The specimen relating of a journal is divided into

(a) Three columns (b) Five Columns (c) Seven columns (d) Two columns

191. The owner of a business starts up using $ 5,000 of her own money. The entry of this transaction is best shown as

(a) A debit to an asset account and a credit to an expense account

(b) A debit to a liability account and a credit to an asset account

(c) A debit to a shares account and a credit to an asset account

(d) A credit to a capital account and a debit to an asset account

192. The process of recording the economic effects of business transactions in a book of original entry

(a) Double entry system (b) Debit (c) Credit (d) Journalizing

193. Although debit may used to increase assets, they may also be used to

(a) Decrease Assets (b) Increase O.E (c) Increase Expenses (d) Increase Liabilities

194. Which of the following statement is best describes the meaning of ‘Purchases’?

(a) Goods paid for (b) Goods bought for resale

(c) Goods bought on credit (d) Get free merchandise

195. The amount of salary paid to Ahmed should be credited to

(a) Salary (b) Ahmed (c) Cash (d) Non

196. A company issues a check to pay an account payable. The effect of the transaction is to

(a) Increase assets and liabilities (d) Decrease assets and liabilities

(c) Increase assets and decrease liabilities (d) Increase assets and stockholders' equity

197. When Owner Equity and Revenues are Increased they would be recorded as

(a) Debit (b) Credit (c) Not Debit and Not Credit (d) Non of above







198. Both assets and owner’s equity would be increase by

(a) Proprietor’s Drawings (b) Purchase of Machinery on credit

(c) Payment to creditors (d) Profit earn retained in business

199. Goods bought on credit by X from Y are returned before they paid for. Entry would be

(a) Account payable-Y (Debit) To Purchases (Credit) (b) Account Payable-X (Debit) To Purchases (Credit)

(c) Account Payable-Y (Debit) To Purchase return (Credit) (d) A/ P-X (Debit) To Purchase return (Credit)

200. Which accounts belong in the accounts payable ledger?

(a) Customer Accounts (b) Vendor Accounts (c) Cash Accounts (d) All

201. If total assets increased $ 20,000 during a period and total liabilities increased $ 12,000 during the same period, the

amount and direction (increase or decrease) of the change in owner's equity for that period is

(a) A $ 32,000 decrease (b) A $ 8,000 increase (c) A $ 8,000 decrease (d) A $ 32,000 increase

202. The purchase of office equipment on credit will

(a) Increase an asset and increase a liability (b) Increase an assets and increase owner’s equity

(c) Increase an asset and decrease another asset (d) Increase an asset and decrease the liability

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