Financial Statement MCQs

By: Prof. Dr. Fazal Rehman | Last updated: May 21, 2025

1. : Notes to financial statements are beneficial financial reporting. The note should not be used to:
(A) Correct an improper presentation in the financial statements
(B) Describe significant accounting policies
(C) Describe depreciation methods employed by the company
(D) Describe principles and methods peculiar to the industry

2. : Which of the following is not the part of annual report?
(A) Financial statements
(B) Auditor’s report
(C) Five year summary
(D) Future investments report

3. : Which of the following must be included in a company’s summary of significant accounting policies?
(A) Description of current year equity transactions
(B) Summary of long-term debt outstanding
(C) Schedule of fixed assets
(D) Revenue recognition policies

4. : In accounting cycle is known as the end product of the:
(A) Tax return
(B) Financial statements
(C) Auditor’s annual report
(D) Annual general meeting

5. : For purpose of measuring business income, the life of a business is divided into
(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

6. : Identify the statement that is not true about the Profits Account and Costs Account:
(A) These accounts are the temporary
(B) These are closed in Income summery account
(C) These may included in closing trial balance
(D) These are also known as Nominal Accounts

7. : Which of the following is not an item required to be shown in the heading of a financial report?
(A) The preparation date of the financial statement
(B) The title of the financial statement
(C) The unit of measure in the financial statement
(D) The name of the business entity

8. : Which of the following is not a qualitative characteristic of financial statements?
(A) Understandability
(B) Relevance
(C) Full disclosure
(D) Comparability

9. : Which of the following company would like to use the accelerated depreciation method?
(A) A company with large tax burdens
(B) A company with low tax burdens
(C) A company that wants to report high net income
(D) A company that wants to report huge assets

10. : Financial statements are prepared mainly for:
(A) Internal users of financial information
(B) External users of financial information
(C) Creditors of the business
(D) Managers of the business

11. : Identify the external user of financial information or financial statements:
(A) Management of the business
(B) CFO of the business
(C) Employees of the business
(D) Investors of the business

12. : Financial reports mainly help in:
(A) Assumption of economic events
(B) Anticipation of economic events
(C) Recording of economic events
(D) Communication of economic events