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 16 of 18
- A. Resources
- B. Obligations
- C. Future benefits
- D. Expenses
Explanation: Liabilities are present obligations arising from past events that will require settlement through an outflow of economic resources.
Correct answer: Obligations- A. Future economic benefits for the business
- B. All kind of benefits for the business
- C. Expenses for the business
- D. Merits and Demerits for the business
Explanation: An asset is a resource controlled by the business that is expected to provide future economic benefits, such as cash inflows or service…
Correct answer: Future economic benefits for the business- A. Partnership
- B. Sole proprietorship
- C. Company
- D. Non-profit organization
Explanation: A company is a separate legal entity from its owners, and its capital is divided into shares.
Correct answer: Company- A. Identifying an economic event or transaction
- B. Preparing journals
- C. Posting entries to ledger accounts
- D. Making decisions about business
Explanation: The accounting cycle begins when an economic event or transaction is identified and evaluated for its financial effect.
Correct answer: Identifying an economic event or transaction- A. Recording
- B. summarizing
- C. Grouping
- D. Processing
Explanation: Recording means entering financial transactions in the books of original entry, such as the journal.
Correct answer: Recording- A. Analyzing
- B. Preparing financial statements
- C. Recording financial information
- D. Auditing the books of accounts
Explanation: Bookkeeping is the recording phase of accounting: it captures transactions systematically in journals and ledgers.
Correct answer: Recording financial information- A. Communicating→Recording→Identifying
- B. Recording→Communicating→Identifying
- C. Identifying→communicating→recording
- D. Identifying→recording→communicating
Explanation: The accounting process starts by identifying economic events, then records them in the books, and finally communicates the results through…
Correct answer: Identifying→recording→communicating- A. Cash
- B. Bank statement
- C. Transaction
- D. Exchange of money
Explanation: An economic event that affects the financial position of a business is called a transaction.
Correct answer: Transaction- A. General journal
- B. Cash journal
- C. Purchase journal
- D. Sales return day book
Explanation: A seller issues a credit note when goods are returned by a customer or an overcharge is corrected, so it supports entry in the sales…
Correct answer: Sales return day book- A. Cash receipts journal
- B. Cash payments journal
- C. Sales journal
- D. Purchase journal
Explanation: Rent paid is a cash outflow, so it is recorded in the cash payments journal.
Correct answer: Cash payments journal- A. Cash receipts journal
- B. General journal
- C. Source document
- D. Cash book
Explanation: A source document, such as an invoice, receipt, or cheque counterfoil, provides the original evidence that a transaction occurred.
Correct answer: Source document- A. Small businesses
- B. Big businesses
- C. Sole proprietorship
- D. Partnership
Explanation: Specialized journals are most useful in large businesses because their high volume of repeated transactions can be grouped by type.
Correct answer: Big businesses313. Credit note is the basis for recording a transaction in which of the following SPECIALIZED journals?
- A. Purchase journal
- B. Sales return journal
- C. General journal
- D. Cash receipt journal
Explanation: A seller sends a credit note when accepting a customer's return, making it the basis for recording a sales return.
Correct answer: Sales return journal- A. General journal
- B. Cash journal
- C. Purchase journal
- D. Purchase return journalChoose Bookkeeping Software
Explanation: A debit note is commonly issued by the buyer when goods are returned to the supplier, providing the basis for a purchase return entry.
Correct answer: Purchase return journalChoose Bookkeeping Software- A. General journal
- B. Cash journal
- C. Purchase journal
- D. Purchase return journal
Explanation: The purchase journal is reserved for credit purchases of goods held for resale, not long-term assets.
Correct answer: General journal316. A brief explanation recorded below every entry in general journal is commonly known as__________?
- A. Narration
- B. Explanation
- C. Summary
- D. Other information
Explanation: A narration is the brief note written below a journal entry to describe the transaction and provide its supporting context.
Correct answer: Narration- A. Purchase journal
- B. Sales journal
- C. Purchases return journal
- D. Cash payments journal
Explanation: Cash purchases are recorded in the cash payments journal because cash is paid immediately.
Correct answer: Cash payments journal- A. Bank statement
- B. Statement of cash flow
- C. Cash book
- D. Cash documents
Explanation: A cash book combines the functions of the cash receipts journal and the cash payments journal, recording both money received and money…
Correct answer: Cash book- A. Purchase journal
- B. Sales journal
- C. Cash receipts
- D. Cash payments journalChoose Bookkeeping Software
Explanation: Money received from a debtor is entered in the cash receipts journal because the business receives cash against an outstanding receivable.
Correct answer: Cash receipts- A. Credit sales
- B. Credit purchases
- C. Credit sales and purchases
- D. Cash sales and purchasesCompare Personal Loans
Explanation: Sales and purchase journals are designed for credit transactions involving goods for resale.
Correct answer: Cash sales and purchasesCompare Personal Loans