Financial Accounting MCQs – T4Tutorials.com

1 When reporting financial data rules and guidelines that should be follow is called:
(a) Accounting principles
(b) Accounting procedures
(c) Accounting assumptions
(d) None of the above
Accounting principles
2. Definite and factual basis for assets valuation from which principle?
(a) Stable Currency principle
(b) Objectivity Principle
(c) Matching Principle
(d) Cost Principle
Objectivity Principle
3. Principle that assets are purchased for the use and not for resale purpose?
(a) Stable Currency principle
(b) Objectivity Principle
(c) Going concern principle
(d) Cost Principle
Going concern principle
4. Principles adopts that a business will continue for a long time?
(a) Historical cost
(b) Periodicity
(c) Objectivity
(d) Going concern
Going concern
5.The accounting principle that states companies and owners should be account for separately:
(a) Business entity concept
(b) Going concern concept
(c) Monetary unit assumption
(d) Periodicity assumption
Business entity concept
6. Personal expenses paid by Mr. A from his own pocket would not be recorded in:
(a) Realization principle
(b) Separate entity principle
(c) Matching principle
(d) Materiality principle
Separate entity principle
7. Which of the following principle deals with the valuation and recording of the assets at cost?
(a) Entity principle
(b) Matching principle
(c) Cost principle
(d) Stable currency principle
Cost principle
8. Which of the following principle is used for recording an expense?
(a) Matching principle
(b) Cost principle
(c) Realization principle
(d) Objectivity principle
Matching principle
9. Companies not disclosing an imminent bankruptcy would violate the:
(a) Business entity concept
(b) Going concern concept
(c) Monetary unit assumption
(d) Periodicity assumption 10. The assumption that states that
Going concern concept
Business activities divided into artificial time periods:
(a) Business entity concept
(b) Going concern concept
(c) Monetary unit assumption
(d) Periodicity assumption
Periodicity assumption
11. Assets are recorded at their original securing price according to the:
(a) Materiality principle
(b) Historical cost principle
(c) Cost benefit principle
(d) Consistency principle
Historical cost principle
12. Management concealing important financial information violates the:
(a) Materiality principle
(b) Historical cost principle
(c) Full disclosure principle
(d) Consistency principle
Full disclosure principle
13. When estimating unearned revenues, which principle applies?
(a) Conservatism principle
(b) Historical cost principle
(c) Full disclosure principle
(d) Consistency principle
Conservatism principle
14. Switching accounting principles every year would violate the:
(a) Conservatism principle
(b) Historical cost principle
(c) Full disclosure principle
(d) Consistency principle
Consistency principle
15. Recording expenses and revenues in the same period in which they occur called:
(a) Objectivity principle
(b) Matching principle
(c) Historical cost principle
(d) Industry practices constraint
Matching principle
16. Which accounting concept requires that amounts of goods taken from inventory by the prospector of a business are treated as drawings?
(a) Accruals
(b) Prudence
(c) Separate entity
(d) Substance over form
Separate entity
17. Non-current assets are valued at cost minus accumulated depreciation, not at their saleable value.
(a) Understandability
(b) Relevance
(c) Comparability
(d) Going concern
Going concern
18. Inventories are valued at the lower of cost and net realizable value, according to the prudence concept.
(a) Comparability
(b) Prudence
(c) Going concern
(d) None of the above
Prudence
19. Which of the following statements about accounting procedures is not correct?
(a) The journal lists all transaction details in chronological order.
(b) A ledger shows all changes in a specific asset, liability, or owner’s equity.
(c) Posting transfers information from ledger accounts to the journal.
(d) The accounting cycle produces formal financial statements like the balance sheet and income statement.
Posting transfers information from ledger accounts to the journal.
20. Accounting is language of business because:
(a) It communicates the financial information to the Management only
(b) In order to run a business one must have knowledge about accounting
(c) Different business accounts are involved in financial statements
(d) It helps to organize and communicate information to end users financial
It helps to organize and communicate information to end users financial
21. Which explains the debit and credit rules relating to recording revenues and expenses?
(a) Realization principle and matching
(b) The effect of revenues and expenses in the owner’s equity
(c) Expenses appear on the left side of the income statement
(d) Liabilities are recorded as debit on the balance sheet
The effect of revenues and expenses in the owner’s equity
22. Business life is divided into accounting periods to measure income.
(a) Divided into specific points in time
(b) Divided into irregular cycles
(c) Divided into discrete accounting periods
(d) Considered to be a continuous cycle
Considered to be a continuous cycle
23. Which of the following statements is associated with the accrual basis of accounting?
(a) The till ling of cash receipts and disbursements is emphasized.
(b) A minimum amount of record keeping is required.
(c) This method is used less frequently by businesses than the cash method of accounting.
(d) Revenues are recognized in the period they are earned, regardless of the time period the cash’ is received
Revenues are recognized in the period they are earned, regardless of the time period the cash’ is received
24. An accounting system is used by a business to:
(a) Analyze transactions
(b) Handle routine bookkeeping tasks
(c) Structure information
(d) All of the above
All of the above
25. A business event which can be measured in terms of money and must be recorded in books of accounts is called:
(a) Condition
(b) Transaction
(c) Information
(d) Record
Transaction
26. Liabilities are which of the following?
(a) Resources
(c) Future benefits
(b) Obligations
(d) Expenses
27. Gross inflow of economic benefits is called:
(a) Assets
(b) Liabilities
(c) Income
(d) Expenses
Liabilities
28. What are the decreases in gross economic benefits of the business?
(a) Expenses
(c) Creditors
(b) Obligations
(d) Income or gain
Expenses
29. Double entry book-keeping was fathered by:
(a) F.W. Taylor
(b) Henry Fayola
(c) Luca Pacolet
(d) Murphy Smith
Luca Pacolet
30. One or the detailed rule used to record business transaction is:
(a) Objectivity
(b) Accruals
(c) Double entry book keeping
(d) Going concern
Double entry book keeping
31. Accounting period duration is:
(b) Three months Two years
(c) One year
(d) Five years
Five years
32. Which of the following is not normally required for revenue to be recognize according to the revenue principle of accrual basis accounting?.
(a) The price is fixed determinable
(b) Services have been performed
(c) Cash that has already been collected
(d) Evidence of an arrangement for customer payment exists
Evidence of an arrangement for customer payment exists
33. Which of the following balances does the contra-asset account show typically?
(a) Credit
(b) Debit
(c) Negative
(d) Positive
Credit
34. Which of the following statements is (are) not consistent with generally accepted accounting principles relating to asset valuation:
(a) Many assets are originally recorded in accounting record at their cost to the business entity
(b) Subtracting liabilities from assets shows the owner’s equity under current market conditions.
(c) Accountants assume assets will be used in operations, not sold at market prices
(d) Accountants value assets based on objective evidence, not appraisals or personal opinions.
Subtracting liabilities from assets shows the owner’s equity under current market conditions.
35. The concept of materiality (indicate wrong answer):
(a) Financial statements must be rounded to the nearest dollar, excluding cents.
(b) Is based upon what users of financial statements are thought to consider important
(c) Permits accountants, to ignore generally accepted accounting principles in certain situations
(d) Permits accountants to use the easiest and most convenient means of accounting for events that are immaterial
Requires that financial statements be accurate to the nearest dollar, but need not
36. The application of generally accepted accounting principles to valuing accounts receivable ensures consistency and accuracy.
(a) Realization principle Accounts receivables are shown at their net realizable value in the balance sheet
(b) The matching principle recognizes losses from uncollectible accounts in the same period as the sale, not when the account is deemed worthless.
(c) Cost principle Accounts receivables are shown at the initial cost of the merchandise to customers, less the cost the seller must pay. to cover uncollectible accounts
(d) Principle of conservatism Accountants favors using the lowest reasonable estimate for the amounts of uncollectible accounts.
The matching principle recognizes losses from uncollectible accounts in the same period as the sale, not when the account is deemed worthless.
37. What is not a value of accounting relevance?
(a) Predictive value
(b) Feedback value (c) Timeliness
(d) Reliability
Reliability
38. What is not a value of accounting reliability?
(a) Verifiability
(b) Representational faithfulness
(c) Timeliness
(d) Neutrality
Timeliness
39. Which of the following true with respect to provision?
(a) It is a liability of uncertain
(b) timing or amount It is a liability of certain timing or amount
(c) It is an asset of uncertain timing or amount
(d) It is an income of uncertain timing or amount
It is a liability of uncertain
40. Which of the following is true with respect to the measurement of revenue?
(a) Revenue shall be measured at the fair value of the consideration received receivable .or
(b) Revenue shall be measured at the future value of the consideration receivable received or
(c) Revenue shall be measured at the discounted value of the consideration receivable received or
(d) Revenue shall not be measured at the fair value of the consideration receivable received or
Revenue shall be measured at the fair value of the consideration received receivable .or
41. If stock valuation method Is changed every year by the firm, which concept the firm has violated?
(a) The materiality concept
(b) The consistency concept
(c) The prudence concept
(d) The going concern concept
The consistency concept
42. Which of the following is related to the qualitative characteristics that make financial information useful?
(a) Reliability only
(b) Relevancy only
(c) Both reliability and relevancy
(d) Comparability
Both reliability and relevancy
43. Which of the following statement is true regarding going concern concept?
(a) The business is profitable
(b) The assets of the business are valued at market value
(c) The business will continue until the directors decide to close it
(d) The business will continue for indefinite period
The business will continue for indefinite period
44. Under which of the following assumptions, the financial statements are to be prepared?
(a) Future assumptions
(b) Past assumptions
(c) Accrual basis and going concern basis
(d) Accrual basis assumption only
45. Revenue is most commonly recognized at the time when:
(a) Cash is collected
(b) The order is received from customers
(c) The sale is made
(d) None of the above
The sale is made
46. For each transaction, double-entry accounting involves which of the following:
(a) Debits to asset accounts must create credits to liability or equity accounts
(b) A debit to a liability account must create a credit to an asset accounts
(c) Total debits must equal total credits
(d) None of these
Total debits must equal total credits
47. Accumulated loss of a company in shown in the balance sheet as:
(a) Liability (
(b) Asset
c) As footnote in balance sheet
(d) None of the above
Asset
48. Deciding whether to record a sale when order for services is received of when the services are performed is an example of a:
(a) Classification issue
(b) Recognition issue
(c) Valuation issue
(d) None of the above
Recognition issue
49. Which of the following is an important accounting? Reason for studying
(a) Accounting information useful in making economic decisions
(b) Accounting plays an important role in society
(c) The study of accounting can lead to a challenging career
(d) None of the above
Accounting information useful in making economic decisions
50. The prime function of accounting is to:
(a) Record economic data
(b) Provide the informational basis for action
(c) Classifying and recording business transactions
(d) Attain non-economic goals
Classifying and recording business transactions
51. The basic function of financial accounting is to:
(a) Record all business transactions
(b) Interpret financial data
(c) Assist the management in performing functions effectively
(d) None of the above
Record all business transactions
52. Book keeping is mainly concern with:
(a) Recording of financial data relating to business operations
(b) Designing the systems recording, in classifying, summarizing the recorded data
(c) Interpreting the data for internal and external end users
(d) None of the above
Recording of financial data relating to business operations
53. Accounting principles are generally based on:
(a) Practicability
(b) Subjectivity
(c) Convenience in recording
(d) All of the above
Convenience in recording
54. Revenue from sale of products ordinarily is reported as part of the earning in the period:
(a) The sale is made
(b) The cash is collected
(c) The products are manufactured
(d) The planning takes place
The sale is made
55. Which type of accounting change accounted for in current and future periods?
(a) Change in accounting principle
(b) Change in reporting entity (c) Change in accounting estimate
(d) Correction of an error
Change in accounting principle
56. The going concern concept is the underlying basis for:
(a) Depreciating fixed asset over their useful lives
(b) Disclosing the market value of securities
(c) Consolidating the accounts of subsidiary companies with those of parent company
(d) Disclosing the sales and other operating information in the income statement
Depreciating fixed asset over their useful lives
57. Revenue is said to be realized:
(a) When the sales are made
(b) When the goods manufactured are
(c) When cash is received
(d) All of the above
When the sales are made
58. In case of gold, r venue is recognized in the accounting period in which the gold:
(a) Is mined
(b) Is sold
(c) Is delivered
(d) None of the above
Is sold
59. In case of long tend contracts, revenue is generally recognized:
(a) Only on full completion of the contract
(b) Only when the full cash is received
(c) Even when a part of the contract has been completed
(d) All of the above
Even when a part of the contract has been completed
60. In case of traditional approach, the expense to be matched with revenue is based on:
(a) Original cost
(b) Replacement cost
(c) Cash cost
(d) None of the above
Original cost
61. Which of the following pairs of accounting concepts are most likely to be in conflict ‘with one another?
(a) Comparability and understandability
(b) Accruals basis and going concern
(c) Comparability and reliability
(d) Relevance and reliability
Relevance and reliability
62. Which of the following statements is most accurate about the historical cost concepts?
(a) Records transactions from past years
(b) Fails to take account of changing price levels over time
(c) Values assets at their cost to the business, irrespective of any depreciation or other loss in value
(d) Is no longer used in modern accounting systems
Fails to take account of changing price levels over time
63. In times of falling prices, the historical cost convention:
(a) Understates asset values and profits
(b) Understates asset values and overstates
(c) Overstates asset values and profits
(d) Overstates asset values and understates profits
Overstates asset values and understates profits
64The characteristics of financial information contributing to reliability according to the IAS framework include objectivity, verifiability, and neutrality.
(a) Completeness
(b) Prudence
(c) Neutrality
(d) Faithful
(e) All of the above
All of the above
65. International Accounting standards are acronym of?
(a) IAS
(b) ISA
(c) (a) & (b)
(d) None of above
IAS
66. Accounting standards which applies in Pakistan are?
(a) IAS
(b) ISA
(c) GAAP
(d) None of above
IAS
67. GAAP stands for:
(a) Generally Adopted Accounting Principles
(b) Generally Accepted Auditing Principles
(c) Generally Accepted Accounting Principles
(d) Generally Adapted American Principles
Generally Accepted Accounting Principles
68. GAAP are applicable in?
(a) USA
(b) Pakistan
(c) (a) & (b)
(d) None of above
USA

Financial Accounting MCQs
By: Prof. Dr. Fazal Rehman | Last updated: July 28, 2024

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