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 18 of 18
- A. Fictitious assets
- B. Quick asset
- C. Real asset
- D. Outstanding assetTry Knowledge Software
Explanation: Income earned before cash is received is accrued income, commonly called an outstanding asset because it is receivable from the customer.
Correct answer: Outstanding assetTry Knowledge Software342. The assets which come into existence upon the happening of a certain event are called__________?
- A. Contingent assets
- B. Fixed assets
- C. Fictitious assets
- D. Quick assetsCompare Credit Cards
Explanation: A contingent asset arises only if a specified uncertain future event occurs, such as a possible insurance claim.
Correct answer: Contingent assets- A. Fixed asset
- B. Quick asset
- C. Fictitious assets
- D. Real assets
Explanation: An asset with an actual realizable or market value is a real asset. Fictitious assets are deferred or write-off balances with no physical…
Correct answer: Real assets- A. Current asset
- B. intangible asset
- C. Tangible asset
- D. Liquid asset
Explanation: Assets with a physical form, such as buildings, machinery and inventory, are tangible assets.
Correct answer: Tangible asset- A. Profit
- B. Income
- C. Expense
- D. Drawing
Explanation: Cash taken by the owner for personal use is recorded as drawings, which reduce the owner's capital.
Correct answer: Drawing- A. Expenses paid on installation of a plant.
- B. Cost of dismantling a building in case a new building is to be constructed on the land
- C. Legal expenses incurred to defend a suit related to title of patent.
- D. The fees paid to engineer who constructed the plant.
Explanation: Legal expenses for defending an existing patent title do not create or improve a capital asset, so they are treated as revenue…
Correct answer: Legal expenses incurred to defend a suit related to title of patent.- A. two
- B. fifteen
- C. five
- D. ten
Explanation: Under the stated accounting convention, depreciation need not be provided once the asset’s book value falls to 5% of its original cost.
Correct answer: five- A. Capital redemption reserve
- B. Security premium account
- C. Debenture redemption reserve
- D. Capital reserve
Explanation: A debenture redemption reserve is created from revenue profits, although it is set aside for a specific purpose, so it is classified as a…
Correct answer: Debenture redemption reserve- A. Undervaluation of closing stock
- B. Charging capital expenditure to revenue
- C. Goods sent on consignment being shown as actual sales
- D. Charging higher rates of depreciation on fixed assets than actually required
Explanation: Showing consignment goods as actual sales overstates sales and profit rather than concealing profit through a secret reserve.
Correct answer: Goods sent on consignment being shown as actual sales- A. effluxion of time
- B. use
- C. obsolescence through technology be market changes
- D. remarket expectation
Explanation: Depreciation results from factors such as passage of time, use, and obsolescence caused by technological or market changes.
Correct answer: remarket expectation- A. Cost of raising a loan
- B. Cost of accessories of motor vehicles spent at the time of purchase
- C. Expenses incurred for laying of sewers on land purchased
- D. Insurance premium paid at the time of registration of the ship
Explanation: Accessories purchased and fitted when a motor vehicle is acquired add to the vehicle’s cost, so they are capital expenditure.
Correct answer: Cost of accessories of motor vehicles spent at the time of purchase