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.
Last updated
351 questions · page 6 of 18
- A. Receipts
- B. Payments
- C. Income
- D. Expense
Explanation: Rent paid causes cash to leave the business, so it is recorded on the payments side of the cash book.
Correct answer: Payments102. Drawings by owner of business are generally recorded on which of the following side of a cash book?
- A. Receipts
- B. Payments
- C. Incomes
- D. Expenditures
Explanation: Drawings made in cash reduce the business's cash balance, so they are entered on the payments side of the cash book.
Correct answer: Payments103. A cash book that is used to record the small payments of cash is generally referred as_________?
- A. Simple cash book
- B. Two column cash book
- C. Three column cash book
- D. Petty cash book
Explanation: A petty cash book is specifically maintained for recording small, frequent cash payments such as postage, stationery and local travel.
Correct answer: Petty cash book- A. Bank
- B. Prepaid expenses
- C. Accounts receivable
- D. Creditor
Explanation: Unused postage stamps represent a future service already paid for, so they are treated as prepaid expenses until used.
Correct answer: Prepaid expenses- A. Receipts
- B. Payments
- C. Incomes
- D. Expenditures
Explanation: Buying office equipment for cash decreases cash, so the transaction is entered on the payments side of the cash book.
Correct answer: Payments- A. Bank
- B. Payments
- C. Discount
- D. Cash
Explanation: A simple or one-column cash book has only one amount column, the cash column.
Correct answer: Cash- A. Simple cash book
- B. Two column cash book
- C. Three column cash book
- D. Petty cash book
Explanation: A cash book containing cash and discount columns has two columns, so it is called a two-column cash book.
Correct answer: Two column cash book- A. Payee
- B. Payer
- C. Bank
- D. Seller
Explanation: The usual parties to a cheque are the drawer or payer, the drawee bank, and the payee.
Correct answer: Seller- A. Cash
- B. Bank balance
- C. Accounts receivable
- D. Cash reserve
Explanation: A postdated cheque cannot be encashed until its stated future date, so it is not treated as cash immediately.
Correct answer: Accounts receivable- A. Every day
- B. Every half year
- C. Every year
- D. At the end of every accounting period
Explanation: Under the imprest system, petty cash is restored to its fixed amount at the end of the accounting period, or when replenishment is…
Correct answer: At the end of every accounting period- A. Bank balance
- B. Cash at bank
- C. Bank overdraft
- D. Bank underdraft
Explanation: A credit balance in the bank column of the cash book means payments or withdrawals exceed the available bank balance.
Correct answer: Bank overdraft- A. Liability
- B. Asset
- C. Expenses
- D. Income
Explanation: The petty cash balance represents cash still held by the business, so it is a current asset.
Correct answer: Asset- A. Bank
- B. Accountant of business
- C. Manager of a company
- D. Bank's cashier
Explanation: The cash book is a book of original entry maintained for the business, normally by its accountant or accounting staff.
Correct answer: Accountant of business- A. Cash payments
- B. Cash receipts
- C. Cash payments and cash receipts
- D. Neither cash payments nor cash receipts
Explanation: A cash book records both cash received and cash paid, and may also include bank and discount columns.
Correct answer: Cash payments and cash receipts- A. Cash entry
- B. Contra entry
- C. Payment entry
- D. Compound entry
Explanation: A transaction recorded on both sides of the same cash book is a contra entry, such as cash deposited into the bank or cash withdrawn from…
Correct answer: Contra entry- A. $5000 will be credited
- B. $5000 will be debited
- C. $10,000 will be credited
- D. $10,000 will be debited
Explanation: The deposit has increased the bank column twice, so the duplicate $5,000 debit must be reversed by crediting $5,000 in the cash book.
Correct answer: $5000 will be credited- A. $1000 will be added to cash book balance
- B. $2000 will be deducted from cash book balance
- C. $3000 will be added to cash book balance
- D. $3000 will be subtracted from cash book balance
Explanation: Three bank payments of $1,000 each were omitted, so the cash book balance is overstated by $3,000 and must be reduced by crediting that…
Correct answer: $3000 will be subtracted from cash book balance- A. Credit balance
- B. Debit balance
- C. Bank overdraft
- D. Adjusted balance
Explanation: A favorable bank-statement balance is a credit balance from the bank's perspective, because the bank owes that amount to the account…
Correct answer: Credit balance- A. Unpresented checks
- B. Uncredited checks
- C. Outstanding checks
- D. Bounced checks
Explanation: A check that has reached the bank but has not yet been credited is an uncredited check.
Correct answer: Uncredited checks- A. $500 will be debited
- B. $500 will be credited
- C. Non-adjustable
- D. $1000 will be subtracted
Explanation: A bank debit advice means the bank has reduced the company's account, so the same reduction must be recorded by crediting the bank column…
Correct answer: $500 will be credited