R4RIN – MCQs, Mock Tests | Business Accounting Basic Accounting Multiple-Choice Questions (MCQs)

The revenues and expenses of a company are displayed in which statement?

1. Balance Sheet
2. Cash Flow Statement
3. Income Statement
4. None of the above

✅ Correct Answer: 3

The main Purpose of Financial Accounting is?

1. To Provide financial information to shareholders
2. To maintain balance sheet
3. To minimize taxes.
4. To keep track of liabilities

✅ Correct Answer: 1

The expanded accounting equation is used by which statement?

1. Cash Flow Statement
2. Balance Sheet
3. Income Statement
4. None of the above

✅ Correct Answer: 2

What type of balance do asset accounts have?

1. Contra
2. Credit
3. Debit
4. All of the above

✅ Correct Answer: 3

The kind of debts which are needed to be repaid in a short term is known as?

1. Fixed Liabilities
2. Current Liabilities
3. Depreciating Assets
4. Intangible Assets

✅ Correct Answer: 2

What type of balance do asset accounts have?

1. Contra
2. Credit
3. Debit
4. All of the above

✅ Correct Answer: 3

The kind of debts which are needed to be repaid in a short term is known as?

1. Fixed Liabilities
2. Current Liabilities
3. Depreciating Assets
4. Intangible Assets

✅ Correct Answer: 2

The account which increases equity is known as?

1. Debit Account
2. Credit Account
3. Revenue
4. Treasury Stock

✅ Correct Answer: 3

What are the long-term assets which do not have any physical existence?

1. Intangible Assets
2. Tangible Assets
3. Current Liabilities
4. Current Assets

✅ Correct Answer: 1

What is the supporting evidence in a business transaction called?

1. Journal
2. Ledger
3. Voucher
4. Contra Voucher

✅ Correct Answer: 3

The Expenses, Profit & Loss of an organisation are recorded in which account?

1. Current Account
2. Personal Account
3. Nominal Account
4. None of the above

✅ Correct Answer: 3

Which person owes an amount to a business organisation for buying goods and services on a credit basis?

1. Creditors
2. Debtors
3. Owner
4. None of the above

✅ Correct Answer: 2

When are balance sheets prepared?

1. Quarterly
2. Yearly
3. Monthly
4. None of the above

✅ Correct Answer: 2

What is Activity Ratio?

1. Financial Ratios that measure a firm's ability to convert different accounts into a balance sheet.
2. Ratios that measure a company's ability to pay debt obligations and its margin of safety.
3. Financial measurements that assess the ability of a company to meet its financial obligations
4. The ratio that evaluates the company's ability to generate income as compared to its expenses.

✅ Correct Answer: 1

What is Current Liability?

1. Assets of a company that are expected to be sold or used as a result of standard business operations over the next year.
2. A potential liability that may occur in the future.
3. Company's short-term financial obligations that are due within one year or within a normal operating cycle.
4. Obligations listed on the balance sheet not due for more than a year.

✅ Correct Answer: 3

What is an operating cycle?

1. metric that expresses the time (measured in days) it takes for a company to convert its investments in inventory and other resources into cash flows from sales.
2. The time it takes a company to buy goods, sell them and receive cash from the sale of said goods.
3. The process of hiring personnel to conduct the daily operations of the business.
4. collective process of identifying, analysing, and recording the accounting events of a company.

✅ Correct Answer: 2

What are Outstanding Expenses?

1. Expenses which are not paid off in the current balance sheet.
2. The necessss going from day-to-day.ary purchases that keep a busine
3. Type of expense that is due but has not been paid.
4. None of the above

✅ Correct Answer: 3

What is Bank Overdraft?

1. A document used by a company's accounts payable department containing the supporting documents for an invoice.
2. A negotiable instrument where payment is guaranteed by the issuing bank.
3. A negotiable instrument similar to a bill of exchange.
4. A line of credit that covers your transactions if your bank account balance drops below zero.

✅ Correct Answer: 4

Which Ratio protects the Creditors?

1. Lower Debt Equity Ratio
2. Liquidity Assets
3. Higher Inventory Ratio
4. Return on Investment Ratio

✅ Correct Answer: 1

Return on Investment =?

1. Net Sales x 100
2. Fixed Assets x 100
3. Total Assets x 100
4. None of the above

✅ Correct Answer: 3

What does improper utilization of resources and over investment in assets indicate?

1. Low Return on Investment
2. Low Sales
3. High Sales
4. Depreciation of Assets

✅ Correct Answer: 1

Which budget is prepared for Advertising, Salary, and Market Analysis?

1. Operating Budget
2. Sales Expenditure Budget
3. Static Budget
4. Labor Budget

✅ Correct Answer: 2

What does a master budget include?

1. Material Budget
2. Production Budget
3. Sales Budget
4. All of the above

✅ Correct Answer: 4

Transaction is referred as which event in accounting?

1. Political Event
2. Economic Event
3. Dividend
4. Cash Transaction

✅ Correct Answer: 2

Recording financial transaction is part of?

1. Accounting
2. Book Keeping
3. Data Entry
4. Journal

✅ Correct Answer: 2

Examining of financial information refers to?

1. Analysis
2. Auditing
3. Recording
4. Balance Sheet

✅ Correct Answer: 2

Who is an external user of financial statements?

1. Shareholders
2. CEO
3. Manager
4. Creditor

✅ Correct Answer: 4

Identifying an economic transaction is which phase of accounting cycle?

1. First
2. Second
3. Third
4. Last

✅ Correct Answer: 1

What is a Company?

1. Legal entity organized and operated for a collective, public or social benefit, in contrast with an entity that operates as a business aiming to generate a profit for its owners.
2. Business organization which is owned and carried on jointly by the members of the Hindu Undivided Family.
3. Unincorporated business with only one owner who pays personal income tax on profits earned.
4. A legal entity formed by a group of individuals to engage in and operate a business.

✅ Correct Answer: 4

What are Liabilities?

1. Resources of a Company
2. Expenses of a Company
3. Obligations of a Company
4. None of the above

✅ Correct Answer: 3

What is an Income?

1. A resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.
2. Obligation between one party and another not yet completed or paid for.
3. Earning from investments and other sources unrelated to employment.
4. The revenue a business earns from selling its goods and services.

✅ Correct Answer: 4

An Asset possessed by the business should be shown in which part of balance sheet?

1. Liabilities
2. Assets
3. Fixed Assets
4. Revenues

✅ Correct Answer: 2

What is the common characteristic of all the assets owned by a company?

1. Intangible
2. Long Life
3. Future Economic Benefits
4. None of the above

✅ Correct Answer: 3

Capital + Liabilities = ?

1. Revenue
2. Assets
3. Voucher
4. Unearned Income

✅ Correct Answer: 2

Owner's claim on total assets is?

1. Liability
2. Assets
3. Equity
4. Cash

✅ Correct Answer: 3

What are Drawings?

1. Accounting method used to allocate the cost of a tangible or physical asset over its useful life or life expectancy.
2. The amount of cash that a business disburses.
3. An increase in the value of an asset over time
4. . Money that is taken from the business account for personal use.

✅ Correct Answer: 4

What occurs when expenses are greater than income?

1. Net Loss
2. Net Profit
3. Debts
4. Decrease in Assets

✅ Correct Answer: 1

What is a nominal account?

1. An interest-bearing deposit account held at a bank or other financial institution.t that represents a country's imports and exports of goods and services.The
2. The account that represents a country's imports and exports of goods and services.
3. The account in which accounting transactions are stored for one fiscal year.
4. None of the above

✅ Correct Answer: 3

. What is a Real Account?

1. An interest-bearing deposit account held at a bank or other financial institution.
2. The account that represents a country's imports and exports of goods and services.
3. The account in which accounting transactions are stored for one fiscal year.
4. An account that retains and rolls forward its ending balance at the end of the year.

✅ Correct Answer: 4

When does the capital of a company increases?

1. Drawings Decrease
2. Liabilities Decrease
3. Revenue Increases
4. Interest on capital increases

✅ Correct Answer: 3

Revenue - Expenses =?

1. Net Income
2. Net Loss
3. Depreciation
4. None of the above

✅ Correct Answer: 1

What causes the decrease in Assets?

1. Cash Purchases
2. Liabilities
3. Payment of Expenses
4. Retained Earnings

✅ Correct Answer: 3

Assets - Liabilities = ?

1. Income
2. Gains
3. Earnings
4. Capital

✅ Correct Answer: 4

What increases the Assets & Equity?

1. Fresh Capital
2. Debts paid off
3. Revenues
4. None of the above

✅ Correct Answer: 1

What is the book of original entries?

1. Voucher Book
2. General Journa
3. l Day Book
4. Account Statement

✅ Correct Answer: 2

How many accounts are affected by a business transaction?

1. One
2. Two
3. Three
4. Several

✅ Correct Answer: 2

Day book is also known as?

1. Journal
2. Voucher
3. Ledger
4. Book Keeping

✅ Correct Answer: 1

What is a compound entry?

1. An entry involving more than two accounts.
2. Accounting entry in which just one account is debited and one is credited.
3. An accounting entry in which there is more than one debit, more than one credit, or more than one of both debits and credits.
4. Entry that is used to record a business transaction in the accounting records of a business.

✅ Correct Answer: 3

Purchases are Debited when?

1. Goods are purchased on cash
2. Goods are sold at a discount
3. Goods are purchased on credit
4. Goods are lost

✅ Correct Answer: 3

When are Drawing Debited?

1. Cash withdrawn for personal use
2. Cash withdrawn for payment of goods
3. Cash withdrawn for salary
4. Octroi

✅ Correct Answer: 1