Accounting

1) The accounting process involves in recording:

A) Quantifiable economic event

B) Non quantifiable economic event

C) All of them

D) None of them

2) In accounting an Economic event is referred to as:

A) Cash

B) Bank statement

C) Transaction

D) Exchange of money

3) Identify the correct sequence of accounting process

A) Communicating→Recording→Identifying

B) Recording→Communicating→Identifying

C) Identifying→communicating→recording

D) Identifying→recording→communicating

4) Bookkeeping mainly concerns with which part of accounting process?

A) Analysing

B) Preparing financial statements

C) Recording financial information

D) Auditing the books of accounts

5) Financial accounting provides financial information to all of the following external users except:

A) Government agencies

B) investors

C) Creditors

D) Managers

6) For which step of accounting process the accountants of business entity prepare financial
statements?

A) Identification of economic event

B) Communication of financial information

C) Recording financial information

D) Making decisions about business

7) Keeping the log of financial information in books of original entries is called

A) Recording

B) summarizing

C) Grouping

D) Processing

8) Auditing is what?

A) Reporting the financial information

B) Examination of financial statements

C) Preparation financial statements

D) maintaining the ledger records

9) Which of the following is the external user of financial statements?

A) Manager of the business

B) CEO of the business

C) Creditor of the business

D) Controller of the business

10) Which of the following is the internal user of financial statements?

A) Creditor of the business

B) Government agency

C) Shareholder of the business

D) Manager of the business

1. a

2. c

3. d

4. c

5. d

6. b

7. a

8. b

9. c

10. d

11) _________ is the first phase of accounting cycle

A) Identifying an economic event or transaction

B) Preparing journals
C) Posting entries to ledger accounts

D) Making decisions about business

12) Financial statements differ from management account because

A) They are mainly prepared for external users of financial information

B) They are more complex and hard to prepare

C) The are the summary of accounting data

D) The are prepared on basis of actual concept

13) ________ is a separate legal entity that Total capital can be divided in many shares

A) Partnership

B) Sole proprietorship

C) Company

D) Non-profit organization

14) An asset posses which of the following?

A) Future economic benefits for the business

B) All kind of benefits for the business

C) Expenses for the business

D) Merits and Demerits for the business

15) Liabilities are which of the following?

A) Resources
B) Obligations

C) Future benefits

D) Expenses

16) ________ is the gross inflow of economic benefits

A) Assets

B) Liabilities

C) Income

D) Expenses

17) The gross decrease in economic benefits for the business are what?

A) Expenses

B) Obligations

C) Creditors

D) Income or gain

18) An asset must be _______ by the business to be shown as an asset in its "balance sheet"

A) Possessed

B) Owned

C) Controlled

D) Used
19) Liability are arisen from which of the following events?

A) Present event

B) Future event

C) Past event

D) Non of them

20) Which of the following can be considered as the most important phase of accounting cycle and it is
the primarily objective of financial accounting?

A) Identifying transactions

B) Preparing "T Accounts"

C) Preparing financial statements

D) Preparing trial balances

11. a

12. a

13. c

14. a

15. a

16. c

17. a

18. c

19. c

20. c

21) Which is the most important characteristic that all assets of a business have?

A) Long life of assets

B) Value of assets

C) Intangible nature of assets

D) Future economic benefits

22) What is the basic accounting equation?

A) Capital+Liabilities=Assets

B) Assets+ liabilities =Capital

C) Capital+assets=liabilities

D) Liabilities+Capital

23) Which of the following is a liability?

A) Cash

B) Equipment

C) Debtors

D) Creditors

24) What is equity?

A) Cash from the business

B) liability of a business

C) Owner's claim on total assets

D) Owner's claim on total liabilities

25) Identify the asset from the following

A) Cash and cash equivalent

B) Creditors

C) Notes payable

D) Bank loan

26) _______ the withdrawal of cash and goods by the owner of the busienss for his/her personal use

A) Depreciation

B) Drawings

C) Outflow of cash

D) Appreciation

27) Net loss occurs when

A) Expenses are greater than Income

B) Expenses are less than Income

C) Expenses=Income

D) Liabilities are greater than income

28) Double entry implies that

A) Recording entries in journal

B) Recoding entries in Ledger account

C) Recording two aspects of every transaction

D) Recording every transaction in books

29) Identify the nominal account

A) Machinery account

B) Building account

C) Creditors account

D) Rent expenses account

30) Which of the following accounts can be classified as a real account?

A) Rent expenses account

B) Rent income account

C) insurance expenses account

D) Cash account

21. d

22. a

23. d

24. c

25. a

26. b

27. a

28. c

29. d

30. d

31. The accounting profession can be divided into three major categories; specifically, the practice of
public accounting, private accounting, and governmental accounting. A somewhat unique and important
service of public accountants is:

a. Financial accounting.
b. Managerial accounting.

c. Auditing.

d. Cost accounting.

32. The primary private sector agency that oversees external financial reporting standards is the:

a. Financial Accounting Standards Board.

b. Federal Bureau of Investigation.

c. General Accounting Office.

d. Internal Revenue Service.

33. Which of the following equations properly represents a derivation of the fundamental accounting
equation?

a. Assets + liabilities = owner's equity.

b. Assets = owner's equity.

c. Cash = assets.

d. Assets - liabilities = owner's equity.

34. Wilson Company owns land which cost $100,000. If a "quick sale" of the land was necessary to
generate cash, the company feels it would receive only $80,000. The company continues to report the
asset on the balance sheet at $100,000. This is justified under which of the following concepts?

a. The historical-cost principle.

b. The value is tied to objective and verifiable past transactions.

c. Neither of the above.

d. Both "a" and "b".

35. Retained earnings will change over time because of several factors. Which of the following factors
would explain an increase in retained earnings?
a. Net loss.

b. Net income.

c. Dividends.

d. Investments by stockholders.

36. Which of these items would be accounted for as an expense?

a. Repayment of a bank loan.

b. Dividends to stockholders.

c. The purchase of land.

d. Payment of the current period's rent.

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

a. Purchase of land from the proceeds of a bank loan.

b. Dividends to stockholders.

c. Net loss.

d. Investments of cash by stockholders.

38. Which of the following would not be included on a balance sheet?

a. Accounts receivable.

b. Accounts payable.

c. Sales.

d. Cash.

39. Remington provided the following information about its balance sheet:
Cash $ 100

Accounts receivable 500

Stockholders' equity 700

Accounts payable 200

Bank loans 1,000

Based on the information provided, how much are Remington's liabilities?

a. $200.

b. $900.

c. $1,200.

d. $1,700.

40. Gerald had beginning total stockholders' equity of $160,000. During the year, total assets increased
by $240,000 and total liabilities increased by $120,000. Gerald's net income was $180,000. No additional
investments were made; however, dividends did occur during the year. How much were the dividends?

a. $20,000.

b. $60,000.

c. $140,000.

d. $220,000.

31. c

32. a

33. d

34. d

35. b
36. d

37. a

38. c

39. c

40. b

41. The financial position of the business on a given date is reported on the

a. Income Statement

b. Balance Sheet

c. Statement of Changes In Owner's Equity

d. Statement of Cash Flows

42. The net profit or loss for a particular period of time is reported on the

a. Income Statement

b. Balance Sheet

c. Trial Balance

d. Statement of Changes In Owner's Equity

43. The investment of cash into the business results in a/an

a. increase in cash and a decrease in capital

b. increase in cash and an increase in capital

c. decrease in cash and an increase in capital

d. increase in fees earned and an increase in capital

44. The purchase of supplies for cash will result in a/an

a. increase in cash and a decrease in capital

b. increase in cash and an increase in supplies

c. increase in supplies and a decrease in cash

d. increase in equipment and an increase in capital

45. Services rendered for cash will result in a/an

a. increase in cash and a decrease in capital

b. increase in cash and an increase in fees earned

c. decrease in cash and an increase in fees earned

d. increase in fees earned and an decrease in capital

42-6. Cash is received from a client for office rental space.

a. cash increases and rental fees earned decreases

b. cash increases and rental fees earned increases

c. cash decreases and capital increases

d. cash decreases and withdrawals increases

47. Keeping the records of the business separate from the personal records of the owner of the business
is said to be adherence to which accounting principle or concept?

a. Continuing-concern concept

b. Business entity principle

c. Realization principle

d. Objectivity principle
48. Which of the following is a formal written promise to pay a definite sum of money on demand or at a
fixed or determinable future date?

a. Account payable

b. Account receivable

c. Note payable

d. Prepaid insurance policy

49. Peter Atli decided to pay himself a salary of $3,000 per month for the work he performs for his
business, a single proprietorship. Each time a cheque is recorded for $3,000, which account should be
increased?

a. Salaries Expense

b. Capital

c. Peter Atli, Withdrawals

d. Owner Salary Expense

50. The personal telephone bill of Junior Sample was paid by issuing a cheque from the business
chequing account. No business calls had been made from Junior's personal phone. What account must
be charged for this transaction?

a. Junior, Capital

b. Cash

c. Junior, Withdrawals

d. Telephone Expense

51. Which of the following accounts is NOT a liability?

a. Accounts Payable

b. Accounts Receivable
 c. Salaries Payable

d. Notes Payable

52. Assets total $50,000 and Liabilities total $10,000. The equity of the business must total

a. $4,000

b. $40,000

c. $400

d. $40

53. The resulting amount when total liabilities are subtracted from total assets is known as

a. owner's equity or net assets

b. net income or net loss

c. total expenses

d. total revenue

54. A broad rule adopted by the accounting profession as a guide in measuring, recording, and reporting
the financial affairs and activities of a business is known as

a. an accounting concept

b. an accounting principle

c. the basic accounting equation

d. objectivity principle

55. Using a sales invoice as the basis for recording a sale of merchandise is an example of using which
accounting principle or concept for recording transactions?

a. Recognition principle

b. Objectivity principle
 c. Realization principle

d. Continuing-concern concept

56. Which of the following statements is true?

a. a salary paid to a partner is an expense to the partnership

b. a salary paid to a proprietor is an expense to the proprietorship

c. a salary paid to a shareholder is an expense of the corporation

d. the business entity principle does not apply to corporations

57. Keith Manich deposited $5,000 in a bank account he established for a pet store that he is going to
own and operate as KM's Pets. Recording the deposit will

a. increase an asset, increase a liability

b. decrease an asset, decrease a liability

c. increase an asset, increase owner's equity

d. decrease an asset, decrease owner's equity

58. Better-Cars Selection, a used car dealer, has total assets and liabilities of $50,000 and $18,000,
respectively. The firm constructed a shelter for its automobiles by promising to pay the building
contractor, upon completion of the building, $500 per month for twenty-four months. Upon completion,
owner's equity will:

a. increase by $12,000

b. remain unchanged

c. decrease by $12,000

d. increase by $500, each month

59. The owner of a computer services business was able to acquire a new computer, valued at $5,000,
by establishing an account with the computer vendor, Com Pewters Unlimited. There was no down
payment. Recording the transaction will
 a. increase an asset, increase a liability

b. decrease an asset, decrease a liability

c. increase an asset, increase owner's equity

d. decrease an asset, decrease owner's equity

60. A sole proprietor recorded the payment of an account payable to an office supplies store. Recording
the transaction will

a. increase an asset, increase a liability

b. decrease an asset, decrease a liability

c. increase an asset, increase owner's equity

d. decrease an asset, decrease owner's equity

41. b

42. a

43. b

44. c

45. b

46. b

47. b

48. c

49. c

50. c

51. b

52. b

53. a

54. b

55. b
56. c

57. c

58. b

59. a

60. b

61. If during the accounting period the assets increased by $5,000, and the owner's equity increased by
$1,000, then the liabilities must have

a. increased by $6,000

b. increased by $4,000

c. decreased by $4,000

d. decreased by $6,000

62. If during the accounting period the assets increased by $7,000, and the owner's equity decreased by
$3,000, then the liabilities must have

a. increased by $10,000

b. increased by $4,000

c. decreased by $4,000

d. decreased by $10,000

63. One of the local fast-food outlets hired a first-year accounting student to oversee the cash-collection
procedures. When the firm pays the student her weekly wage, the transaction will

a. increase an asset, increase a liability

b. decrease an asset, decrease a liability

c. increase an asset, increase owner's equity

d. decrease an asset, decrease owner's equity

64. Which of the following statements is incorrect?

a. Assets - Capital = Liabilities

b. Assets - Liabilities = Capital
c. Liabilities + Assets = Capital
d. Liabilities + Capital = Assets

65. Which of the following is not an asset?

a. Debtors
b. Cash balance
c. Buildings
d. Loan from K Harris

66. Which of the following is a liability?

a. Creditors for goods

b. Cash at Bank
c. Machinery
d. Motor Vehicles

67. Which of the following best describes the meaning of ‘Purchases’?

Goods bought on credit

Goods bought for resale

Goods paid for

Items bought

68. Which of the following should not be called ‘Sales’?

Sale of item previously included in ‘Purchases’

Goods sold on credit

Office fixtures sold

 Goods sold for cash

69. Given the following, what is the amount of Capital? Assets: Premises £20,000; Stock £8,500; Cash
£100. Liabilities: Creditors £3,000; Loan from A Adams £4,000

£21,100

£32,400

£21,600

£21,400

70. Which of the following is correct?

Profit increases capital

Profit does not alter capital

Profit reduces capital

Capital can only come from profit

61. b

62. a

63. d

64. c

65. b

66. c

67. a

68. d

69. d

70. d

71. What would have been the balance on the account of C De Freitas in MC17 on 19 May 20X5?
 a. A credit balance of £265
b. A credit balance of £95
c. A debit balance of £265
d. A credit balance of £445

72. Which of the following best describes a trial balance?

a. Shows all the entries in the books

b. Shows the financial position of a business
c. It is a special account
d. It is a list of balances on the books

73. Is it true that the trial balance totals should agree?

a. Yes, except where the trial balance is extracted at the year end
b. No, there are sometimes good reasons why they differ
c. Yes, always
d. No, because it is not a balance sheet

74. Which of the following are correct?

a. (i), (ii) and (iv) only

b. (i), (iii) and (iv) only

c. (i) and (ii) only

d. (i), (ii) and (iii) only

75. Of the following, which are incorrect?

a. (ii) and (iv) only

b. (i) and (iii) only

c. (ii) and (ii) only

d. (ii) and (iii) only

71. b

72. c

73. a

74. a

75. a