All Free Accounting MCQs with Answers

• 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.

• 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.

• 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…

• 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.

• 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.

• 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…

• 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.

• 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…

• 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.

• 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.

• 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.

• A. internal audit
• B. external audit
• C. functional audit
• D. treasury audit

Explanation: Internal audit is conducted within an organization to review records, controls, and reporting processes for reliability and integrity.

• A. back-flush trails
• B. audit trails
• C. trigger trails
• D. lead manufacturing trailsHire An Accountant

Explanation: An audit trail allows transactions and resource usage to be traced through the stages of a production or accounting system.

• A. Reporting the financial information
• B. Examination of financial statements
• C. Preparation financial statements
• D. maintaining the ledger records

Explanation: Auditing involves the independent examination and evaluation of financial statements and supporting evidence before an opinion is…

• A. Financial information
• B. Non-financial information
• C. Both (a) and (b)
• D. None of theseCompare Credit Cards

Explanation: A financial audit primarily examines financial information, especially the financial statements, to provide an opinion on whether they are…

• A. Profit making entity
• B. Non-profit making entity
• C. Corporate entity only
• D. Any entity

Explanation: An audit engagement may be performed for any suitable entity, including profit-making companies, nonprofit organizations and other…

• A. Standards on Auditing
• B. Standard on Quality Control
• C. Standards on Review Engagement
• D. Standards on Assurance EngagementHire An Accountant

Explanation: Standards on Auditing, Review Engagements and Assurance Engagements govern types of professional engagements.

• A. Unqualified opinion
• B. Qualified opinion
• C. Adverse opinion
• D. Disclaimer of opinion.
• E. All of above

Explanation: Unqualified, qualified, adverse and disclaimer of opinion are the principal forms of audit opinion or report conclusion.

• A. Obtain the client's permission to communicate with the existing auditor
• B. Obtain the existing auditor's working papers
• C. Obtain a copy of the company's most recent board minutes
• D. Obtain a copy of the existing auditor's letter of engagement Hire An Accountant

Explanation: Before accepting a new audit, the proposed auditor should obtain the client's permission to communicate with the existing auditor and seek…

• A. Taking management decisions
• B. Preparation of accounting records
• C. Preparing tax computations
• D. Advising on weaknesses in the internal control systems

Explanation: Auditors may provide accounting, tax and internal-control services within applicable safeguards, but management decisions must remain with…