[email protected] financial accounting Page 2 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
[email protected] financial accounting Page 3 of 47
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
[email protected] financial accounting Page 4 of 47
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
[email protected] financial accounting Page 5 of 47
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
[email protected] financial accounting Page 6 of 47
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
[email protected] financial accounting Page 7 of 47
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
[email protected] financial accounting Page 8 of 47
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
[email protected] financial accounting Page 9 of 47
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
[email protected] financial accounting Page 10 of 47
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
[email protected] financial accounting Page 11 of 47
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
[email protected] financial accounting Page 12 of 47
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
[email protected] financial accounting Page 13 of 47
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
[email protected] financial accounting Page 14 of 47
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
[email protected] financial accounting Page 15 of 47
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
[email protected] financial accounting Page 16 of 47
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
[email protected] financial accounting Page 17 of 47
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
[email protected] financial accounting Page 18 of 47
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