Free Accounting Principles MCQs with Answers
351 Accounting Principles MCQs from Accounting, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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351 questions · page 14 of 18
- A. Increase
- B. Reduce
- C. apportion
- D. Overstate
Explanation: Paying an expense usually involves paying cash, so assets decrease. The expense also reduces profit and therefore equity, but the question…
Correct answer: Reduce- A. Increase assets and decrease assets
- B. Increase assets and decrease liabilities
- C. Increase assets and increase capital
- D. Increase assets and increase cash
Explanation: Collecting a receivable changes one asset into another: cash increases while accounts receivable decreases.
Correct answer: Increase assets and decrease assets- A. Gains
- B. Depreciation
- C. Expenses
- D. Capital expenditures
Explanation: Net income is calculated as revenues minus expenses, with gains and losses treated separately where applicable.
Correct answer: Expenses264. If the business's owner withdraws cash for his/her personal use what will be the effect on capital?
- A. Increase in capital
- B. Remain the same
- C. Decrease in capital
- D. No effect on capital
Explanation: Owner withdrawals are drawings, not business expenses, but they reduce the owner's claim on the business.
Correct answer: Decrease in capital- A. Drawings
- B. Income
- C. Gains
- D. Fresh capital
Explanation: Drawings are withdrawals by the owner and reduce the owner's equity. Income and gains increase capital, while fresh capital directly…
Correct answer: Drawings- A. $4000
- B. $6000
- C. $7000
- D. $3000
Explanation: Using Assets = Liabilities + Capital, assets equal $5,000 + $1,000 = $6,000.
Correct answer: $6000- A. Asset=Expense +Income
- B. Assets=Cash+Capital
- C. Assets=Capital+Liabilities
- D. Assets=Expenses+Capital
Explanation: The basic accounting equation states that the resources of a business, or assets, are financed by liabilities and the owner's capital.
Correct answer: Assets=Capital+Liabilities- A. Balance c/d
- B. Balance b/d
- C. Balance e/d
- D. Balance f/c
Explanation: Balance c/d means balance carried down and represents the balance determined at the end of the accounting period.
Correct answer: Balance c/d- A. Nominal accounts
- B. Balance sheet accounts
- C. Real accounts
- D. None of them
Explanation: Nominal accounts record temporary items such as revenues, expenses, gains and losses, so they are closed into the profit and loss account…
Correct answer: Nominal accounts- A. Office equipment
- B. Rent expenses
- C. Rent income
- D. Insurance expense
Explanation: Office equipment is a tangible asset, so it is classified as a real account.
Correct answer: Office equipment- A. General journal
- B. Real accounts
- C. Ledger accounts
- D. Cash accounts
Explanation: The ledger groups transactions into individual accounts, allowing similar transactions to be classified and summarized according to their…
Correct answer: Ledger accounts- A. Nominal
- B. Real
- C. Cash
- D. Capital
Explanation: Office equipment represents a tangible business asset, so its account is a real account.
Correct answer: Real- A. Nominal
- B. Real
- C. Cash
- D. Capital
Explanation: A building is a tangible fixed asset owned by the business, so the building account is classified as a real account.
Correct answer: Real- A. Expenses
- B. Revenues
- C. Capital
- D. Drawing
Explanation: In the broad balance-sheet classification used in basic accounting, real accounts include assets, liabilities, and capital, all of which…
Correct answer: Capital- A. Nominal accounts
- B. Real account
- C. Cash accounts
- D. Banks accountHire An Accountant
Explanation: Revenue and expense accounts are nominal accounts because they record income and costs for a particular accounting period and are then…
Correct answer: Nominal accounts- A. Credit balance
- B. Cash balance
- C. Overdraft
- D. Debit balanceCompare Personal Loans
Explanation: Rent is an expense, and expenses normally increase on the debit side under the rules of double-entry bookkeeping.
Correct answer: Debit balanceCompare Personal Loans- A. Debit increases the capital account balance
- B. Credit increases the capital account balance
- C. Fresh capital increases the capital account balance
- D. Net income increases the capital account balance
Explanation: Capital normally has a credit balance, so a credit, fresh investment, or net income increases it.
Correct answer: Debit increases the capital account balance- A. Debit balance
- B. Credit balance
- C. Cash balance
- D. Neither debit nor credit balance
Explanation: Liabilities represent claims against the business and increase when credited, so their normal balance is credit.
Correct answer: Credit balance- A. Credit balance
- B. Debit balance
- C. Cash balance
- D. Neither debit nor credit balance
Explanation: Assets increase on the debit side and decrease on the credit side, giving asset accounts a normal debit balance.
Correct answer: Debit balance- A. Credit balance
- B. Debit balance
- C. Cash balance
- D. Neither debit nor credit balanceCompare Personal Loans
Explanation: Capital is the owner's claim on the business and normally increases through credits, including additional investment and profit.
Correct answer: Credit balance