All Free Accounting MCQs with Answers
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1,971 questions · page 9 of 99
161. Which financial statement reports a business's assets, liabilities and equity at a specific date?
- A. Income statement
- B. Statement of financial position
- C. Statement of cash flows
- D. Statement of changes in equity
Explanation: The statement of financial position presents the accounting equation at a particular date: assets equal liabilities plus equity.
Correct answer: Statement of financial position- A. Rs. 450,000
- B. Rs. 550,000
- C. Rs. 1,250,000
- D. Rs. 3,150,000
Explanation: Equity is calculated as assets minus liabilities. Therefore, Rs. 900,000 minus Rs. 350,000 gives equity of Rs. 550,000.
Correct answer: Rs. 550,000- A. Rs. 5,000
- B. Rs. 13,000
- C. Rs. 18,000
- D. Rs. 23,000
Explanation: Supplies used during the year equal the recorded supplies balance less the unused supplies, or Rs. 18,000 minus Rs. 5,000.
Correct answer: Rs. 13,000- A. Profit increases and liabilities decrease
- B. Profit decreases and liabilities increase
- C. Assets increase and profit increases
- D. Cash decreases and liabilities decrease
Explanation: The unpaid electricity cost is an expense of the current year, so it reduces profit.
Correct answer: Profit decreases and liabilities increase- A. Rs. 120,000
- B. Rs. 300,000
- C. Rs. 480,000
- D. Rs. 620,000
Explanation: Gross profit is Rs. 800,000 minus Rs. 500,000, which equals Rs. 300,000. Deducting operating expenses of Rs.
Correct answer: Rs. 120,000- A. Rs. 153,000
- B. Rs. 163,000
- C. Rs. 173,000
- D. Rs. 183,000
Explanation: Begin with profit of Rs. 150,000 and add depreciation of Rs. 20,000. Subtract the receivables increase of Rs.
Correct answer: Rs. 163,000- A. Operating activity
- B. Investing activity
- C. Financing activity
- D. Non-cash activity
Explanation: Purchasing equipment changes the business's long-term resources, so it is normally an investing cash flow.
Correct answer: Investing activity- A. Rs. 180,000
- B. Rs. 210,000
- C. Rs. 270,000
- D. Rs. 330,000
Explanation: Annual depreciation is 10% of Rs. 300,000, or Rs. 30,000. Three years produce accumulated depreciation of Rs.
Correct answer: Rs. 210,000- A. Rs. 215,000
- B. Rs. 305,000
- C. Rs. 375,000
- D. Rs. 395,000
Explanation: Closing retained earnings equal opening retained earnings plus profit less dividends. Thus, Rs. 250,000 plus Rs. 90,000 minus Rs.
Correct answer: Rs. 305,000- A. Income statement
- B. Statement of financial position
- C. Statement of cash flows
- D. Statement of changes in equity
Explanation: The statement of changes in equity reconciles opening and closing balances by showing items such as profit, losses, owner contributions…
Correct answer: Statement of changes in equity- A. Income statement
- B. Statement of financial position
- C. Statement of changes in equity
- D. Statement of cash flows
Explanation: The income statement measures financial performance by reporting revenues, expenses and resulting profit or loss for a period.
Correct answer: Income statement- A. Current liability
- B. Non-current liability
- C. Current asset
- D. Non-current asset
Explanation: A loan due after more than twelve months is normally presented as a non-current liability.
Correct answer: Non-current liability- A. Rs. 200,000
- B. Rs. 225,000
- C. Rs. 250,000
- D. Rs. 300,000
Explanation: First-year depreciation is Rs. 100,000, leaving Rs. 300,000. Second-year depreciation is Rs. 75,000, so the carrying amount becomes Rs.
Correct answer: Rs. 225,000- A. Rs. 15,000
- B. Rs. 165,000
- C. Rs. 180,000
- D. Rs. 345,000
Explanation: Inventory is normally measured at the lower of cost and net realisable value. Therefore, it is reported at Rs. 165,000 and the Rs.
Correct answer: Rs. 165,000- A. Rs. 365,000
- B. Rs. 425,000
- C. Rs. 475,000
- D. Rs. 510,000
Explanation: Cash collected equals revenue plus the opening receivables balance minus the closing receivables balance. Thus, Rs. 450,000 plus Rs.
Correct answer: Rs. 425,000- A. Operating activity
- B. Investing activity
- C. Financing activity
- D. Non-cash activity
Explanation: Dividends paid represent a distribution of finance to the company's owners and are normally shown as financing cash flows.
Correct answer: Financing activity- A. Cash and profit both decrease
- B. Cash and owner's equity decrease
- C. Expenses and liabilities increase
- D. Revenue and owner's equity increase
Explanation: A withdrawal reduces the business's cash and the owner's equity. It is treated as drawings, not as a business expense, so it does not…
Correct answer: Cash and owner's equity decrease178. At year-end, which type of account is normally closed to determine the period's profit or loss?
- A. Revenue account
- B. Asset account
- C. Liability account
- D. Capital account
Explanation: Revenue accounts are temporary accounts and are closed along with expense accounts at the end of the accounting period.
Correct answer: Revenue account- A. Assets understated and profit understated
- B. Assets overstated and profit overstated
- C. Assets understated and liabilities overstated
- D. Assets overstated and liabilities understated
Explanation: Omitting depreciation leaves the asset carrying amount higher than it should be and avoids recording an expense.
Correct answer: Assets overstated and profit overstated- A. 0.67:1
- B. 1.25:1
- C. 1.50:1
- D. 2.00:1
Explanation: The current ratio is calculated by dividing current assets by current liabilities. Rs. 240,000 divided by Rs.
Correct answer: 1.50:1