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 8 of 18
- A. Discounting of the bill with the bank
- B. Payment of the bill on due date
- C. Remitting or receiving the amount
- D. Sending the bill to bank for collection
Explanation: An accommodation bill has no underlying trade transaction, so the party receiving the accommodation must remit funds or receive the…
Correct answer: Remitting or receiving the amount142. The noting charges levied on dishonour of an endorsed bill by the Notary Public are to be borne by
- A. The drawer of the bill
- B. The person responsible for dishonour
- C. The holder of the bill
- D. The endorser of the bill
Explanation: Noting charges are ultimately recoverable from the party responsible for the dishonour, normally the acceptor or drawee.
Correct answer: The person responsible for dishonour- A. Acceptor's Account is debited in the books of drawer
- B. Bills Receivable Account is credited in the books of drawer
- C. Bank Account is debited in the books of drawer
- D. Bills Payable Account is debited in the books of drawer
Explanation: On dishonour, the drawer reverses the bank discounting transaction by debiting the acceptor and crediting the bank.
Correct answer: Acceptor's Account is debited in the books of drawer144. A Bill of Exchange is drawn on 1st April, 2018 payable after 3 months. The due date of the bill is?
- A. 30th June,2018
- B. 1st July,2018
- C. 4th July,2018
- D. 4th August,2018Government Agencies
Explanation: Three calendar months from 1 April end on 1 July, and three days of grace are added to a bill payable after a period.
Correct answer: 4th July,2018- A. 6441
- B. 5431
- C. 7150
- D. 5876
Explanation: Because the commission is calculated before charging commission, it is simply 11% of 65,000: 65,000 × 11% = 7,150.
Correct answer: 7150- A. 6441
- B. 5431
- C. 7654
- D. 9876
Explanation: When commission is calculated after charging commission, the base amount is 111% of the commission, so commission = 65,000 × 11/111 =…
Correct answer: 6441- A. Profit and Loss A/c
- B. Capitalized with work in progress
- C. Trading A/c
- D. Shown in Balance SheetAccounting & Auditing
Explanation: Carriage on purchases is carriage inward, a direct expense incurred to bring goods to the business.
Correct answer: Trading A/c- A. At the time of opening new books of account
- B. At the time of closing the accounts
- C. During the course of accounting period any time
- D. After certification of accounts
Explanation: Closing entries transfer revenue and expense balances to the Profit and Loss Account and ultimately to capital or retained earnings.
Correct answer: At the time of closing the accounts- A. Debts included in Sundry Debtors which are doubtful in nature
- B. Uncalled liability on partly paid shares
- C. Claims against the company not acknowledged as debts
- D. Arrears of fixed cumulative dividend
Explanation: Doubtful debts are an estimated loss or provision relating to receivables, not a contingent liability.
Correct answer: Debts included in Sundry Debtors which are doubtful in nature- A. Business entity concept
- B. Money measurement concept
- C. Going concern concept
- D. Matching concept
Explanation: The business entity concept treats the company as separate from its owners, so share capital represents the owners' claim against the…
Correct answer: Business entity concept- A. Prepaid expenses
- B. Trademark
- C. Discount on issue of shares
- D. Outstanding Salaries
Explanation: Outstanding salaries are expenses incurred but not yet paid, creating a short-term obligation and therefore a current liability.
Correct answer: Outstanding Salaries- A. Current assets
- B. Intangible assets
- C. Deferred revenue expenditure
- D. Not an asset
Explanation: A computer merely taken on hire is normally treated as a hired service or lease expense rather than an owned asset in traditional…
Correct answer: Not an asset- A. Gross Profit+ Sales+ Direct expenses+ Purchases+ Closing stock = Opening stock
- B. Gross Profit+ Sales+ Direct expenses+ Purchases- Closing stock = Opening Stock
- C. Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock = Sales
- D. Gross Profit - Opening Stock + Direct expenses + Purchases +Closing stock = Sales
Explanation: From the trading equation, Sales = Opening Stock + Purchases + Direct Expenses - Closing Stock + Gross Profit.
Correct answer: Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock = Sales- A. Loss on sale of undertaking
- B. Debts considered bad and written off
- C. Liability arising from a breach of contract
- D. Director's remuneration
Explanation: Director's remuneration is deducted when arriving at net profit for calculating managerial remuneration.
Correct answer: Director's remuneration- A. Sales - Cost of goods sold
- B. Sales - Closing Stock + Purchases
- C. Opening Stock + Purchases - Closing Stock
- D. None of the above
Explanation: Gross profit is the excess of sales over the cost of goods sold. Therefore, Gross Profit = Sales - Cost of Goods Sold; the other formula…
Correct answer: Sales - Cost of goods sold- A. Debit of 800 to Trading Account and credit of 600 and 200 to insurance company and
- B. Profit and Loss Account respectively
- C. Deduct the 800 from closing stock in the Trading Account
- D. Credit insurance company for 600
- E. Debit of 600 and 200 to insurance company and Profit and Loss Account respectively and
- F. credit of 800 to Trading Account
Explanation: The full loss of goods costing 800 is removed from the Trading Account, while the accepted insurance claim of 600 is recovered from the…
Correct answer: Debit of 600 and 200 to insurance company and Profit and Loss Account respectively and- A. Adding 2,200 to closing stock
- B. Deducting 1,800 from closing stock and deducting 2,200 each from debtors and sales
- C. Adding 1,800 to closing stock and deducting 2,200 each from debtors and sales
- D. Deducting 1,800 from debtors
Explanation: Goods sent on approval remain inventory until approval, so stock must increase by their cost of 1,800.
Correct answer: Adding 1,800 to closing stock and deducting 2,200 each from debtors and sales158. Which of the following entries is correct in respect of reserve for discounts on accounts payable?
- A. Debit P&L A/c and Credit Reserve for Discount on Accounts Payable A/c
- B. Debit Accounts Payable A/c and Credit P&L A/c
- C. Debit Reserve for Discount on Accounts Payable A/c and Credit P&L A/c
- D. Debit Reserve for Discount on Accounts Payable A/c and credit Accounts Payable A/c
Explanation: Expected discount on accounts payable is an anticipated gain, so the reserve is debited and Profit and Loss Account is credited.
Correct answer: Debit Reserve for Discount on Accounts Payable A/c and Credit P&L A/c- A. Credited to P&L A/c
- B. Debited to P&L A/c
- C. Reduced from debtors in Balance Sheet
- D. Added to debtors in Balance Sheet
Explanation: Bad debts recovered are a recovery of an amount previously written off, so they are treated as income and credited to Profit and Loss…
Correct answer: Credited to P&L A/c- A. P&L A/C is debited with 1,400
- B. P&L A/C is debited with 1,200
- C. 200 is shown as current asset
- D. Both B. and C. above
Explanation: Only the amount relating to the current period is an expense: 1,400 minus the 200 prepaid equals 1,200 debited to P&L.
Correct answer: Both B. and C. above