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 15 of 18
- A. Credit balance
- B. Debit and credit balance
- C. Cash balance
- D. Debit balance
Explanation: An account's balance is determined by subtracting the smaller side from the larger side and naming the larger side.
Correct answer: Debit balance- A. Journal
- B. Cash account
- C. Ledger account
- D. Balance sheet
Explanation: The ledger collects the debit and credit balances of all individual accounts, and these balances are used to prepare the trial balance.
Correct answer: Ledger account- A. Cash
- B. Charity
- C. Purchases
- D. SalesBanking
Explanation: When goods are donated, the charity or donation account is debited as an expense, while Purchases is credited to remove the goods from the…
Correct answer: Purchases284. If debit side of a bank account is greater than credit side it indicates which of the following?
- A. Cash at bank
- B. Bank understatement
- C. Bank overdraft
- D. Balance overstatementCredit & Lending
Explanation: A debit balance in a bank account means deposits and other debit entries exceed withdrawals and credits, leaving cash available at the…
Correct answer: Cash at bank- A. Bank overdraft
- B. Cash at bank
- C. Bank balance
- D. Current Asset
Explanation: When the credit side exceeds the debit side, withdrawals have exceeded available bank funds, producing a credit balance called a bank…
Correct answer: Bank overdraft- A. Increase
- B. Decrease
- C. Increase or decrease
- D. Appreciation
Explanation: An account is maintained to record both increases and decreases in the balance of an item, such as cash, capital, or a liability.
Correct answer: Increase or decrease- A. Recording
- B. Transferring
- C. Posting
- D. Entry making
Explanation: Posting is the process of transferring debit and credit entries from the journal to their respective ledger accounts.
Correct answer: Posting- A. Rent expenses account
- B. Rent income account
- C. insurance expenses account
- D. Cash account Accounting & Auditing
Explanation: Cash is a real account because it represents a tangible asset owned by the business.
Correct answer: Cash account Accounting & Auditing- A. Machinery account
- B. Building account
- C. Creditors account
- D. Rent expenses account
Explanation: Rent expense is a nominal account because it records an expense and is closed to the income statement at the end of the accounting period.
Correct answer: Rent expenses account- A. Recording entries in journal
- B. Recording entries in Ledger account
- C. Recording two aspects of every transaction
- D. Recording every transaction in books
Explanation: Double entry means every transaction is recorded through two equal aspects, such as a debit and a credit.
Correct answer: Recording two aspects of every transaction291. _______ the withdrawal of cash and goods by the owner of the busienss for his/her personal use?
- A. Depreciation
- B. Drawings
- C. Outflow of cash
- D. Appreciation Hire Grant Writers
Explanation: Drawings are cash, goods, or other assets withdrawn by the owner for personal use, reducing the owner's capital.
Correct answer: Drawings- A. Cash and cash equivalent
- B. Creditors
- C. Notes payable
- D. Bank loan
Explanation: Cash and cash equivalents are current assets because they are cash or highly liquid investments readily convertible into cash.
Correct answer: Cash and cash equivalent293. What is equity?
- A. Cash from the business
- B. liability of a business
- C. Owner's claim on total assets
- D. Owner's claim on total liabilities
Explanation: Equity is the owner's residual claim after liabilities are deducted from total assets, expressed as Assets − Liabilities.
Correct answer: Owner's claim on total assets- A. Cash
- B. Equipment
- C. Debtors
- D. Creditors
Explanation: Creditors are amounts owed to suppliers and therefore represent a liability.
Correct answer: Creditors- A. Capital+Liabilities=Assets
- B. Assets+ liabilities =Capital
- C. Capital+assets=liabilities
- D. Liabilities+Capital Compare Credit Cards
Explanation: The accounting equation is Assets = Capital + Liabilities, showing that business resources are financed by the owner and outsiders.
Correct answer: Capital+Liabilities=Assets- A. Long life of assets
- B. Value of assets
- C. Intangible nature of assets
- D. Future economic benefits
Explanation: An asset is recognised because it is expected to provide future economic benefits controlled by the business.
Correct answer: Future economic benefits- A. Present event
- B. Future event
- C. Past event
- D. None of them
Explanation: A liability results from a past transaction or event that creates a present obligation, such as purchasing goods on credit.
Correct answer: Past event- A. Possessed
- B. Owned
- C. Controlled
- D. Used
Explanation: Accounting recognises an asset when the business controls the resource and can obtain its future economic benefits, even if it does not…
Correct answer: Controlled- A. Expenses
- B. Obligations
- C. Creditors
- D. Income or gain
Explanation: Expenses are gross decreases in economic benefits during an accounting period, such as through using assets or incurring liabilities.
Correct answer: Expenses- A. Assets
- B. Liabilities
- C. Income
- D. Expenses Government & Public Sector Jobs
Explanation: Income is the gross inflow or increase in economic benefits from activities such as sales or service revenue.
Correct answer: Income