Balance Sheet MCQs

By: Prof. Dr. Fazal Rehman | Last updated: July 12, 2024

Balance Sheet MCQs:
What does the balance sheet primarily show?

A) Revenues and Expenses
B) Assets, Liabilities, and Equity
C) Cash Flow
D) Profit and Loss
Answer: B) Assets, Liabilities, and Equity

Which of the following is not a component of a balance sheet?

A) Assets
B) Liabilities
C) Revenues
D) Equity
Answer: C) Revenues

Current assets are those that are expected to be converted into cash or used up within:

A) One year
B) Three years
C) Five years
D) Ten years
Answer: A) One year

Which of the following is an example of a current liability?

A) Mortgage Payable
B) Accounts Payable
C) Bonds Payable
D) Long-term Debt
Answer: B) Accounts Payable

In a balance sheet, how are total liabilities and equity related to total assets?

A) Total Liabilities and Equity = Total Assets
B) Total Liabilities = Total Assets – Equity
C) Total Assets = Total Liabilities – Equity
D) Total Assets = Total Liabilities + Equity
Answer: A) Total Liabilities and Equity = Total Assets

Which of the following would be classified as a non-current asset?

A) Cash
B) Accounts Receivable
C) Equipment
D) Inventory
Answer: C) Equipment

Which of the following is an example of a non-current liability?

A) Accounts Payable
B) Short-term Loans
C) Bonds Payable
D) Notes Payable
Answer: C) Bonds Payable

The difference between total assets and total liabilities is known as:

A) Gross Profit
B) Net Income
C) Equity
D) Working Capital
Answer: C) Equity

Which of the following accounts is classified as a liability?

A) Common Stock
B) Retained Earnings
C) Notes Payable
D) Cash
Answer: C) Notes Payable

Which financial statement provides a snapshot of a company’s financial position at a specific point in time?

A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) Statement of Retained Earnings
Answer: C) Balance Sheet

What type of asset is “Inventory”?

A) Current Asset
B) Non-current Asset
C) Intangible Asset
D) Fixed Asset
Answer: A) Current Asset

Which of the following best describes “Retained Earnings”?

A) A liability
B) A type of expense
C) Equity on the balance sheet
D) An asset
Answer: C) Equity on the balance sheet

Which of the following would not appear on a balance sheet?

A) Cost of Goods Sold
B) Cash
C) Long-term Investments
D) Accounts Receivable
Answer: A) Cost of Goods Sold

What is the formula to calculate Working Capital?

A) Current Assets – Current Liabilities
B) Total Assets – Total Liabilities
C) Total Assets – Equity
D) Current Liabilities – Current Assets
Answer: A) Current Assets – Current Liabilities

Which of the following is considered an intangible asset?

A) Buildings
B) Patents
C) Equipment
D) Inventory
Answer: B) Patents

Which of the following is classified as a current liability?

A) Bonds Payable
B) Accounts Payable
C) Mortgage Payable
D) Long-term Loans
Answer: B) Accounts Payable

“Accumulated Depreciation” appears under which category on the balance sheet?

A) Assets
B) Liabilities
C) Equity
D) Expenses
Answer: A) Assets

Which of the following is an example of an equity account?

A) Accounts Payable
B) Retained Earnings
C) Inventory
D) Equipment
Answer: B) Retained Earnings

The term “Long-term Liabilities” refers to:

A) Debts payable within one year
B) Debts payable beyond one year
C) Assets used for more than one year
D) Revenue earned over more than one year
Answer: B) Debts payable beyond one year

Which of the following would be considered a current asset?

A) Machinery
B) Accounts Receivable
C) Land
D) Patents
Answer: B) Accounts Receivable

Which statement is true about the balance sheet equation?

A) Assets = Liabilities + Equity
B) Assets = Liabilities – Equity
C) Assets = Equity – Liabilities
D) Assets = Liabilities / Equity
Answer: A) Assets = Liabilities + Equity

“Deferred Revenue” is classified as:

A) Current Asset
B) Non-current Asset
C) Current Liability
D) Equity
Answer: C) Current Liability

Which of the following would be classified as a non-current asset?

A) Accounts Receivable
B) Cash
C) Building
D) Inventory
Answer: C) Building

Which of the following is an example of a financial liability?

A) Bonds Payable
B) Common Stock
C) Inventory
D) Prepaid Insurance
Answer: A) Bonds Payable

“Common Stock” appears under which category on the balance sheet?

A) Assets
B) Liabilities
C) Equity
D) Revenue
Answer: C) Equity

“Prepaid Expenses” are classified as:

A) Current Assets
B) Non-current Assets
C) Current Liabilities
D) Non-current Liabilities
Answer: A) Current Assets

Which of the following is not considered an asset?

A) Cash
B) Accounts Payable
C) Buildings
D) Inventory
Answer: B) Accounts Payable

Which balance sheet item represents the ownership interest in the company?

A) Assets
B) Liabilities
C) Equity
D) Revenues
Answer: C) Equity

The “Cash” account is classified as:

A) Current Asset
B) Non-current Asset
C) Liability
D) Equity
Answer: A) Current Asset

“Long-term Investments” are considered:

A) Current Assets
B) Non-current Assets
C) Current Liabilities
D) Equity
Answer: B) Non-current Assets

“Notes Payable” with a due date in 18 months would be classified as:

A) Current Liability
B) Non-current Liability
C) Current Asset
D) Non-current Asset
Answer: B) Non-current Liability

Which of the following accounts would appear under the “Current Liabilities” section?

A) Bonds Payable
B) Long-term Debt
C) Accounts Payable
D) Mortgage Payable
Answer: C) Accounts Payable

Which balance sheet item is not depreciated?

A) Equipment
B) Building
C) Land
D) Vehicles
Answer: C) Land

The term “Shareholders’ Equity” refers to:

A) Total Liabilities
B) Total Assets minus Total Liabilities
C) Total Assets plus Total Liabilities
D) Net Income
Answer: B) Total Assets minus Total Liabilities

Which of the following would be found under “Non-current Liabilities”?

A) Accounts Payable
B) Short-term Loans
C) Bonds Payable
D) Accrued Expenses
Answer: C) Bonds Payable

“Accounts Receivable” is an example of:

A) Current Asset
B) Non-current Asset
C) Liability
D) Equity
Answer: A) Current Asset

“Accumulated Depreciation” is classified as:

A) Liability
B) Asset
C) Contra Asset
D) Equity
Answer: C) Contra Asset

Which of the following is an example of a “Contra Liability”?

A) Accumulated Depreciation
B) Discount on Bonds Payable
C) Retained Earnings
D) Cash
Answer: B) Discount on Bonds Payable

“Unrealized Gains” from investments are typically reported in:

A) Current Liabilities
B) Equity
C) Non-current Assets
D) Income Statement
Answer: B) Equity

The term “Current Assets” includes all except:

A) Cash
B) Inventory
C) Prepaid Expenses
D) Equipment
Answer: D) Equipment

“Retained Earnings” represents:

A) Revenues earned but not yet received
B) Profits not distributed to shareholders
C) Cash available for dividends
D) Long-term investments in other companies
Answer: B) Profits not distributed to shareholders

Which of the following is an example of an operating liability?

A) Notes Payable
B) Bonds Payable
C) Accounts Payable
D) Mortgage Payable
Answer: C) Accounts Payable

“Goodwill” is classified as:

A) Current Asset
B) Non-current Asset
C) Liability
D) Equity
Answer: B) Non-current Asset

“Inventory” is classified as:

A) Non-current Asset
B) Current Liability
C) Current Asset
D) Equity
Answer: C) Current Asset

Which account represents a claim against a company’s assets by creditors?

A) Equity
B) Assets
C) Liabilities
D) Revenues
Answer: C) Liabilities

Which of the following is not a long-term investment?

A) Land
B) Bonds
C) Accounts Receivable
D) Equity Securities
Answer: C) Accounts Receivable

“Deferred Tax Assets” are classified as:

A) Current Assets
B) Non-current Assets
C) Liabilities
D) Equity
Answer: B) Non-current Assets

Which of the following is not included in “Owner’s Equity”?

A) Common Stock
B) Retained Earnings
C) Bonds Payable
D) Additional Paid-in Capital
Answer: C) Bonds Payable

Which of the following is an example of a financial asset?

A) Equipment
B) Land
C) Cash
D) Buildings
Answer: C) Cash

“Capital Stock” represents:

A) Revenues
B) Liabilities
C) Equity
D) Assets
Answer: C) Equity