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 7 of 18
- A. Uncollected checks
- B. Uncredited checks
- C. Outstanding checks
- D. Bounced checks
Explanation: Checks issued by the business but not yet presented to the bank are outstanding checks.
Correct answer: Outstanding checks- A. Unpresented checks
- B. Uncredited checks
- C. Outstanding checks
- D. Bounced checks
Explanation: Checks deposited but not yet collected or credited by the bank are called uncollected or uncredited checks.
Correct answer: Uncredited checks- A. Credited in the cash book
- B. Debited in the cash book
- C. Entered in the bank statement
- D. Entered in the petty cash balance
Explanation: A standing order is a regular payment made automatically by the bank on the business’s instruction, so it reduces the bank balance and is…
Correct answer: Credited in the cash book- A. Uncollected checks
- B. Uncredited checks
- C. Outstanding checks
- D. Bounced checks
Explanation: An unpresented check has been issued but has not yet been presented to the bank for payment, so it remains an outstanding check.
Correct answer: Outstanding checks- A. Subtracted from bank balance
- B. Added to bank balance
- C. Added to Cash book balance
- D. Subtracted from cash book balance
Explanation: A deposit in transit has already been recorded in the cash book but is not yet included in the bank statement.
Correct answer: Added to bank balance- A. Cash receipt journal
- B. Cash payment journal
- C. Cash book
- D. Financial statements
Explanation: A bank reconciliation compares the balance and transactions shown by the bank statement with the business’s own cash book.
Correct answer: Cash book- A. Credit balance of cash book
- B. Debit balance of cash book
- C. Bank overdraft
- D. Adjusted balance of cash book
Explanation: A favorable cash book balance means the business has cash at bank rather than an overdraft.
Correct answer: Debit balance of cash book- A. Bank charges will be debited in cash book
- B. Bank charges will be added to cash book balance
- C. Bank charges will be credited in cash book
- D. Bank charges need no adjustment in cash book
Explanation: Bank charges are an expense and reduce the bank balance, so they are entered on the credit side of the cash book.
Correct answer: Bank charges will be credited in cash book- A. Accountant of the business
- B. Manager of the business
- C. Controller of the bank
- D. Accountant of the bank
Explanation: The business’s accountant prepares the bank reconciliation by comparing the cash book with the bank statement and explaining differences.
Correct answer: Accountant of the business- A. Bank can't verify your identity
- B. There are not sufficient funds in your account
- C. Check has been forged
- D. Check can't be cashed being illegal
Explanation: NSF means “not sufficient funds,” indicating that the account did not contain enough money to honor the check.
Correct answer: There are not sufficient funds in your account- A. Debit
- B. Credit
- C. Expenses
- D. Liability
Explanation: From the bank’s perspective, a deposit increases the amount it owes to the customer, so it is recorded as a credit in the bank statement.
Correct answer: Credit- A. Genuine trade reasons
- B. For mutual financial accommodation
- C. To help augment money supply
- D. All the three
Explanation: An accommodation bill is drawn and accepted without a genuine sale or purchase, mainly to provide mutual financial help or credit to the…
Correct answer: For mutual financial accommodation- A. 4-4-2013
- B. 3-4-2013
- C. 1-4-2013
- D. 31-3-2013
Explanation: Three calendar months from 1 January end on 1 April, and the usual three days of grace are added to a bill's maturity.
Correct answer: 4-4-2013- A. Acceptance
- B. Unconditional promise to pay
- C. Properly stamped
- D. Payment to be made legal currency
Explanation: A promissory note is made directly by the maker, so acceptance by a drawee is not required.
Correct answer: Acceptance- A. Triplicate
- B. Duplicate
- C. Single
- D. Quadruplicate
Explanation: A foreign bill is generally drawn in a set of three identical parts, called triplicate, to reduce the risk of loss in international…
Correct answer: Triplicate- A. Unconditional
- B. Certainty of amount
- C. In writing
- D. Amount to be paid in foreign currency
Explanation: A bill of exchange must be written, contain an unconditional order, and state a certain sum of money.
Correct answer: Amount to be paid in foreign currency- A. 1981
- B. 1881
- C. 1871
- D. 2001
Explanation: The Negotiable Instruments Act was enacted in 1881 and governs instruments such as bills of exchange, promissory notes, and cheques.
Correct answer: 1881- A. 4
- B. 2
- C. 3
- D. 5
Explanation: A bill of exchange generally involves three parties: the drawer who orders payment, the drawee who is directed to pay, and the payee who…
Correct answer: 3- A. It must be in writing
- B. It contains an unconditional promise to pay
- C. It is payable to the bearer
- D. It must be signed by the maker
Explanation: A promissory note contains the maker's written and signed unconditional promise to pay, but it is not ordinarily made payable to bearer.
Correct answer: It is payable to the bearer140. Under which of the following situations, is journal entry not passed in the books of the drawer?
- A. When a discounted bill is honoured by the drawee on the due date
- B. When a bill is sent to the bank for collection
- C. When a bill is renewed at the request of the drawee
- D. When a debtor accepts a bill drawn by the drawer
Explanation: When a discounted bill is honoured on the due date, the drawer's liability is discharged automatically through the bank, so no further…
Correct answer: When a discounted bill is honoured by the drawee on the due date