100 IMPORTANT MULTIPLE CHOICE QUESTIONS WITH ANSWERS RELATED TO BOOK-KEEPING AND ACCOUNTANCY
Which of the following is not a primary function of bookkeeping?
a) Recording financial transactions
b) Preparing financial statements
c) Analyzing financial data
d) Budgeting and forecasting
Answer: d) Budgeting and forecasting
Which of the following is an example of a current liability?
a) Accounts receivable
b) Prepaid expenses
c) Long-term debt
d) Accounts payable
Answer: d) Accounts payable
The accounting equation is represented as:
a) Assets = Liabilities + Equity
b) Assets + Liabilities = Equity
c) Assets – Liabilities = Equity
d) Assets = Liabilities – Equity
Answer: a) Assets = Liabilities + Equity
Depreciation is an example of which type of account?
a) Asset
b) Liability
c) Equity
d) Revenue
Answer: a) Asset
A company’s net income is calculated as:
a) Revenue – Expenses
b) Revenue + Expenses
c) Assets – Liabilities
d) Assets + Liabilities
Answer: a) Revenue – Expenses
Which financial statement shows the financial position of a company at a specific point in time?
a) Income statement
b) Balance sheet
c) Statement of cash flows
d) Statement of retained earnings
Answer: b) Balance sheet
Which of the following represents revenue for a company?
a) Payment received from a customer
b) Purchase of equipment
c) Repayment of a loan
d) Payment of salaries to employees
Answer: a) Payment received from a customer
The matching principle in accounting states that:
a) Expenses should be recorded when cash is received
b) Revenue should be recorded when cash is received
c) Expenses should be recorded when incurred to earn revenue
d) Revenue should be recorded when incurred to earn expenses
Answer: c) Expenses should be recorded when incurred to earn revenue
Which of the following is not an example of an adjusting entry?
a) Depreciation expense
b) Accrued revenue
c) Prepaid expenses
d) Payment of utility bills
Answer: d) Payment of utility bills
The term “double-entry” in bookkeeping means:
a) Recording each transaction twice
b) Recording each transaction once
c) Recording each transaction in two different journals
d) Recording each transaction in two different currencies
Answer: a) Recording each transaction twice
A contra account is used to:
a) Offset the balance of another account
b) Increase the balance of another account
c) Reduce the balance of another account
d) Reverse the balance of another account
Answer: a) Offset the balance of another account
Which of the following is a cash outflow for a company?
a) Sale of inventory
b) Payment of dividends
c) Collection of accounts receivable
d) Accrued expenses
Answer: b) Payment of dividends
The purpose of a trial balance is to:
a) Ensure that debits equal credits
b) Determine the net income of a company
c) Prepare financial statements
d) Record adjusting entries
Answer: a) Ensure that debits equal credits
The accounting cycle refers to:
a) The process of recording financial transactions
b) The process of preparing financial statements
c) The period of time covered by financial statements
d) The sequence of steps in the accounting process
Answer: d) The sequence of steps in the accounting process
A contra asset account is used to record:
a) Assets that have been fully depreciated
b) Assets that have not been depreciated
c) Liabilities that have been fully paid off
d) Liabilities that have not been paid off
Answer: a) Assets that have been fully depreciated
Which financial statement reports the revenues and expenses of a company for a specific period?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
Answer: b) Income statement
Which of the following is an example of a long-term liability?
a) Accounts receivable
b) Unearned revenue
c) Mortgage payable
d) Supplies expense
Answer: c) Mortgage payable
Which of the following is a characteristic of a corporation?
a) Limited liability
b) Unlimited liability
c) Sole proprietorship
d) Partnership
Answer: a) Limited liability
Which accounting principle requires that assets and liabilities should be recorded at their original cost?
a) Matching principle
b) Conservatism principle
c) Historical cost principle
d) Materiality principle
Answer: c) Historical cost principle
Which of the following is an example of a contra account?
a) Accounts payable
b) Accumulated depreciation
c) Sales revenue
d) Interest expense
Answer: b) Accumulated depreciation
The term “liquidity” refers to:
a) The ability of a company to meet its short-term obligations
b) The ability of a company to generate profits
c) The ability of a company to attract investors
d) The ability of a company to borrow money
Answer: a) The ability of a company to meet its short-term obligations
Which of the following is not a current asset?
a) Cash
b) Accounts receivable
c) Inventory
d) Buildings
Answer: d) Buildings
