FA MCQ QUESTIONS

Unit 1 (20+10=30 questions)

Accounting MCQs with Answers:

Question 1
Accounting furnishes data on
A) Income and cost for the managers
B) Financial conditions of the institutions
C) Company’s tax liability for a particular year
D) All the above
Answer: D
Question 2
Long term assets having no physical existence but, possessing a value are called
A) Intangible assets
B) Fixed assets
C) Current assets
D) Investments
Answer: A
Question 3
The assets that can be easily converted into cash within a short period, i.e., 1 year or less are
known as
A) Current assets
B) Fixed assets
C) Intangible assets
D) Investments
Answer: A
Question 4
Copyrights, Patents and Trademarks are,
A) Current assets
B) Fixed assets
C) Intangible assets
D) Investments
Answer: C
Question 5
The debts which are to be repaid within a short period (a year or less) are referred to as,
A) Current Liabilities
B) Fixed liabilities
C) Contingent liabilities
D) All the above
Answer: A
Question 6
Gross profit is
A) Cost of goods sold + Opening stock
B) Excess of sales over cost of goods sold
C) Sales fewer Purchases
D) Net profit fewer expenses of the period
Answer: B
Question 7
Net profit is computed in the
A) Profit and loss account
B) Balance sheet
C) Trial balance
D) Trading account
Answer: A
Question 8
In order to find out the value of the closing stock during the end of the financial year we,
A) do this by stocktaking
B) deduct the cost of goods sold from sales
C) deduct opening stock from the cost of goods sold
D) look in the stock account
Answer: A
Question 9
Which of these best explains fixed assets?
A) Are bought to be used in the business
B) Are expensive items bought for the business
C) Are items which will not wear out quickly
D) Are of long life and are not purchased specifically for resale
Answer: D
Question 10
The charges of placing commodities into a saleable condition should be charged to
A) Trading account
B) P & L a/c
C) Balance Sheet
D) None of the above
Answer: B
Question 11
Suppliers personal a/c are seen in the
A) Sales Ledger
B) Nominal ledger
C) Purchases Ledger
D) General Ledger
Answer: C
Question 12
If you want to ensure that your money will be secured if cheques sent are wasted in the post,
you should
A) Always pay by cash
B) Cross your Cheques ‘Account Payee only, Not Negotiable.’
C) Always get the money in person
D) Not use the postal service in future
Answer: B
Question 13
Discounts received are
A) Deducted by us when we pay our accounts
B) Deducted when we receive cash
C) Given by us when we sell goods on credit
D) None of these
Answer: A
Question 14
Sales invoices are first entered in
A) The Cash Book
B) The Purchases Journal
C) The Sales Journal
D) The Sales Account
Answer: C
Question 15
Entered in the Purchases Journal are
A) Discounts received
B) Purchases invoices
C) Payments to suppliers
D) Trade discounts
Answer: B
Question 16
At the balance sheet date, the balance on the Accumulated Provision for Depreciation
Account is
A) Transferred to Depreciation Account
B) Transferred to the Asset Account
C) Transferred to Profit and Loss Account
D) Simply deducted from the asset in the Balance Sheet
Answer: D
Question 17
If we take goods for own use we should
A) Debit Drawings Account, Credit Purchases Account
B) Debit Drawings Account: Credit Stock Account
C) Debit Sales Account: Credit Stock Account
D) Debit Purchases Account: Credit Drawings Account
Answer: A
Question 18
When a petty cash book is kept there will be
A) No entries made at all in the general ledger for items paid by petty cash
B) The same number of entries in the general ledger
C) Fewer entries made in the general ledger
D) More entries made in the general ledger
Answer: C
Question 19
If a trial balance totals do not agree, the difference must be entered in
A) The Profit and Loss Account
B) A Nominal Account
C) The Capital Account
D) A Suspense Account
Answer: D
Question 20
If it is required to maintain fixed capitals then the partners’ shares of profits must be
A) Credited to capital accounts
B) Debited to capital accounts
C) Debited to partners’ current accounts
D) Credited to partners’ current accounts
Answer: D
MCQ on accounting principles

Q.1 GAAP stands for:

(a) Generally Accepted Accounting Provisions
(b) Generally Accepted Accounting Policies
(c) Generally Accepted Accounting Principles
(d) None of these
Answer: c
Q.2 Which accounting principle states that companies and owners should be treated as
separate entities.
(a) Monetary Unit Assumption
(b) Business Entity Concept
(c) Periodicity Assumption
(d) Going Concern Concept
Answer: b
Q.3 Cost or expenses must be recorded at the same time as the revenue to which they
correspond is specified by which principle?
(a) Matching Principle
(b) Going Concern Principle
(c) Consistency Principle
(d) Prudence Principle
Answer: a
Q.4 Which concept states that “for every debit, there is a credit”?
(a) Money Measurement Concept
(b) Accounting Period Concept
(c) Separate Entity Concept
(d) Dual Aspect Concept
Answer: a
Q.5 For measuring income, the most acceptable method is?
(a) To apply normal rate of return on capital invested
(b) To apply the average return in industry on capital
(c) To match the cost with revenue
(d) To find out the difference in net worth as on two dates
Answer: c
Q.6 The correct form of Accounting equation is
(a) Assets – Receivable = Equity
(b) Assets + Receivable = Equity
(c) Assets – Liabilities = Equity
(d) Assets + Liabilities = Equity
Answer: c
Q.7 As per revenue recognition principle, sales revenues should be recognized at the
time when?
(a) Order is taken for merchandise
(b) Ownership of goods gets transferred from the seller to the buyer
(c) Cash is received
(d) All of the above
Answer: b
Q.8 Due to which concept, accounting does not record non-financial transactions?
(a) Going concern concept
(b) Money measurement concept
(c) Accrual concept
(d) Cost concept
Answer: b
Q.9 The owner of the business is treated as a creditor of the business according to which
of the following concept?
(a) Entity concept
(b) Materiality concept
(c) Consistency concept
(d) Periodicity concept
Answer: a
Q.10 As per the accrual concept of accounting, any financial or business transaction
should be recorded:
(a) when profit is computed
(b) when balance sheet is prepared
(c) when cash is received or paid
(d) when transaction occurs
Answer: d
Unit 2

MCQs on Journal Entries

Journal entry is a record of a business transaction taking place in the accounting books of a
business. It is the first step of the accounting process. A journal entry is mostly recorded in a
general ledger.
Following are some of the journal entry multiple choice questions and answers that will help
the students in brushing up their understanding of the concept of journal entries in
accounting.
Q1. Among these transactions, which transaction will have no impact on stockholders’
equity?
(a) Net loss
(b) Investment of cash by stockholders
(c) Dividends to stockholders
(d) Purchase of the land from the proceeds of bank loan
Answer: d
Q2. Amount invested by the proprietor in the business should be credit to:
(a) A/c payable
(b) Capital
(c) Cash
(d) Drawing
Answer: b
Q3. Transactions are first recorded in which book/account?
(a) Book of Original Entry
(b) T Accounts
(c) Accounting Equation
(d) Book of Final Entry
Answer: a
Q4. Customer goods returned will be credited to which account?
(a) Purchases A/C
(b) Return outward
(c) Customer’s A/C
(d) Return inward
Answer: d
Q5. Journal is also called a?
(a) A day book
(b) History book
(c) Ledger book
(d) An entry book
Answer: a
Q6. ________ A/c is credited and ____ A/c is debited in case wages are paid for
construction of business premises
A) Cash, Wages
B) Cash, Premises
C) Premises, Cash
D) Wages, Cash
Answer: a
Q7. Journal lists transactions in which order?
(a) Decreasing
(b) Chronological
(c) Alphabetical
(d) Increasing
Answer: b
Q8. Among these statements which one is incorrect regarding journal entry?
(a) The debited account titles are listed first
(b) Journal entries show the effects of transactions
(c) Each journal entry should begin with a date
(d) Journal entries provide account balances
Answer: d
Q.9 Cash withdrawal from business by the proprietor should be credited to
(a) Cash account
(b) Purchase account
(c) Capital account
(d) Drawings account
Answer: a
Q10. Which one of the following is called the book of original entry?
(a) Receipt and Payment Account
(b) Trial Balance
(c) General Journal
(d) General Ledger
Answer: c

Final Accounts MCQs:

Question 1
Business is said to be in a profit when
A) Expenditure exceeds income
B) Income exceeds expenditure
C) Income exceeds liability
D) Assets exceed expenditure
Answer: B
Question 2
As per the accounting double-entry system, an account that receives the benefit is
A) No need to show as an accounting record
B) Income
C) Debit
D) Credit
Answer: D
Question 3
What does the term “credit” mean in business?
A) It depends upon items
B) Provides benefits
C) It has no effect on business
D) Receiving benefits
Answer: D
Question 4
When a Liability is decreased or reduced, it is registered on the
A) Debit side or left side of the account
B) Credit side or right side of the account
C) Debit side or right side of the account
D) Credit side or left side of the account
Answer: A
Question 5
When there is an increase in capital by an amount, it is registered on the
A) Credit or right side of the account
B) Debit or left side of the account
C) Credit or left side of the account
D) Debit or right side of the account
Answer: A
Question 6
What kind of expenses are paid from Gross Profit?
A) Selling Expenses
B) Financial Expenses
C) General Expenses
D) All of the above
Answer: D
Question 7
Which option gives a review report on the firm’s financial status at a specified date?
A) Income & Expenditure Account
B) Balance Sheet
C) Cash Flow Statement
D) Profit & Loss Account
Answer: B
Question 8
Which of the options is not an intangible asset?
A) Land
B) Patents
C) Goodwill
D) Franchise rights
Answer: A
Question 9
Which of the options is an example of business liability?
A) Creditors
B) Cash
C) Building
D) Land
Answer: A
Question 10
The unfavourable balance of Profit and Loss account should be
A) Subtracted from liabilities
B) Subtracted from capital
C) Subtracted from current assets
D) Added in liabilities
Answer: B