All Free Accounting MCQs with Answers

• 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.

• 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…

• 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.

• 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.

• A. Recording
• B. summarizing
• C. Grouping
• D. Processing

Explanation: Recording means entering financial transactions in the books of original entry, such as the journal.

• 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.

• 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…

• 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.

• 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…

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.

• 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…

• 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.

• 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.