Financial Accounting MCQS

Question 1

Which of the following is the basic accounting equation?

Accepted Answer

Assets = Liabilities + Equity

Answer

Assets = Liabilities - Equity

Answer

Equity = Assets + Liabilities

Answer

Liabilities = Assets + Equity

Question 2

The assumption that a business will continue to operate indefinitely is known as the:

Accepted Answer

Going concern concept

Answer

Accrual concept

Answer

Consistency concept

Answer

Materiality concept

Question 3

Which financial statement shows the financial position of a business at a specific point in time?

Accepted Answer

Balance Sheet

Answer

Income Statement

Answer

Cash Flow Statement

Answer

Statement of Retained Earnings

Question 4

In accounting, the process of recording transactions in a journal is called:

Accepted Answer

Journalizing

Answer

Posting

Answer

Tallying

Answer

Balancing

Question 5

Which of the following accounts normally has a credit balance?

Accepted Answer

Accounts Payable

Answer

Cash

Answer

Accounts Receivable

Answer

Equipment

Question 6

Depreciation is the process of:

Accepted Answer

Allocating the cost of a tangible asset over its useful life

Answer

Valuing an asset at its current market price

Answer

Setting aside cash to replace an asset

Answer

Increasing the value of an asset

Question 7

The principle that requires expenses to be reported in the same period as the revenues they help generate is the:

Accepted Answer

Matching principle

Answer

Revenue recognition principle

Answer

Cost principle

Answer

Full disclosure principle

Question 8

Which of the following is an intangible asset?

Accepted Answer

Goodwill

Answer

Land

Answer

Inventory

Answer

Machinery

Question 9

A trial balance is prepared to:

Accepted Answer

Prove the mathematical accuracy of the ledger

Answer

Calculate net profit

Answer

Show the cash position

Answer

Calculate income tax

Question 10

If an owner withdraws cash from the business for personal use, it is recorded as:

Accepted Answer

Drawings

Answer

An expense

Answer

A liability

Answer

A loss