Bookkeeping MCQs
Bookkeeping MCQs
These Bookkeeping multiple-choice questions and their answers will help you strengthen your grip on the subject of Bookkeeping. You can prepare for an upcoming exam or job interview with these Bookkeeping MCQs.
So scroll down and start answering.
1: Which principle/guideline requires a company's balance sheet to report its land at the amount the company paid to acquire the land, even if the land could be sold today at a significantly higher amount?
A. Economic entity
B. All of the above
C. Cost Principle
D. Business
E. Monetary Unit
2: True or False? An accrual occurs before a payment or receipt. A deferral occurs after a payment or receipt.
A. False
B. True
3: A business with available cash to use will have a ......?
A. Debit closing balance on the Bank Statement
B. Debit balance in its Cash At Bank account
C. Credit balance in its Cash at Bank account
4: Which of the following statement about the perpetual inventory system is TRUE?
A. it provides a partial record of stock turnover
B. it is cheaper to operate than the physical inventory system
C. it eliminates the need to carry out stocktakes
D. it provides a continuous record of stock turnover
E. it does not record stock movements
5: What are the two main accounting methods used for record-keeping?
A. debit & accrual basis
B. debit and cash basis
C. prepaid and accrual basis
D. credit and debit basis
E. cash and accrual basis
6: "A statement of assets and liabilities that is reconciled with the equity of the owner at the close of an accounting period" is a definition of which financial report?
A. Income statement
B. Bank reconciliation
C. Balance sheet
D. Equity statement
E. Cashflow statement
7: If a company has $50,000 in Total Assets (including $10,000 in Current Assets + $40,000 in Fixed Assets) and $20,000 in Equity, what is their Total Liability?
A. $0
B. $20,000
C. $30,000
D. $10,000
E. $40,000
8: When an owner invests more money into the business, which of the following bookkeeping entries is correct ?
A. Credit Owners equity, Credit Cash account
B. Credit Cash account, Debit Owners equity
C. Debit Cash account, Debit Owners equity
D. Debit Cash account, Credit Owners equity
9: Which principle/guideline requires the company's financial statements to have footnotes containing information that is important to users of the financial statements?
A. Conservatism
B. Matching Principle
C. Full disclosure
D. Materiality
E. Going Concern
10: Which of the following would be reported in the financial statements as a current asset?
A. Shares held in other companies
B. Office furniture
C. Plant and equipment
D. Accounts receivable
E. Patents
11: Which of the following does NOT form part of the bank reconciliation process?
A. Outstanding deposits
B. Aged debtors
C. Bank charges
D. Direct deposits from customers
E. Outstanding checks
12: The golden rule of accounting says that, for every debit entry, there must be...
A. an asset purchase
B. a credit sale entry
C. a cash sale entry
D. a corresponding credit entry
13: Under what section is the Accounts Receivable account reported in the Balance Sheet?
A. Non current assets
B. Non current liabilities
C. Liabilities
D. Equity
E. Current assets
14: Which of the following transactions is primarily identified in the bank reconciliation process?
A. advertising expenses
B. cash sales
C. sales commission fees
D. bank charges
E. accounting fees
15: Net profit is always greater than Gross Profit.
A. False
B. True
16: If Assets totaled $55,000 and Liabilities totaled $25,000, Equity would be ....?
A. impossible to calculate
B. $25,000
C. $80,000
D. $55,000
E. $30,000
17: All of the debt a company owes, such as bonds, loans and unpaid bills is called
A. Liabilities
B. Assets
C. Balance Sheet
D. Equity
18: For every financial transaction entered in the bookkeeping system, the total of the debits must equal the total of the credits?
A. False
B. True
19: True or False: Recording a business transaction always requires at least a debit to one account and a credit to a different account.
A. True
B. False
20: That part of the equity that the owner invests in the business is known as ...?
A. Current earnings
B. Loans
C. Retained earnings
D. Drawings
E. Capital
21: When an owner contributes additional money to a business, the equity ....?
A. Increases
B. Decreases
C. Is unaffected
22: For every debit there is a ----------------------------
A. debit
B. credit
23: Loan funds owed to a bank would belong to which account group?
A. Assets
B. Liabilities
C. Expenses
D. Revenue
E. Equity
24: A _______ entry is entered on the left side of an account.
A. decreased
B. list
C. increased
D. credit
E. debit
25: What three sections make up the Balance Sheet?
A. income, liabilities and equity
B. revenue, liabilities and equity
C. revenue, expenses and equity
D. assets, liabilities and equity
E. assets, liabilities and revenue
26: Which of the following general ledger accounts would NOT generally have a subsidiary ledger?
A. Accounts receivable
B. Inventory
C. Fixed assets
D. Accounts payable
E. Goodwill
27: Which term in accounting means that every transaction affects two or more accounts?
A. triple entry
B. double entry
C. single entry
D. multiple entry
28: What is money owed by a business to its suppliers shown as a liability on a company's balance sheet?
A. Retained Earnings
B. Accounts payable
C. Unearned Revenue
D. Accounts Receivable
E. Inventory
29: An adjustment being made for an error relating to transactions posted to the wrong expense account would be recorded in which journal?
A. purchases
B. sales
C. cash receipts
D. cash payments
E. general
30: Which amounts appear on left side of T-account?
A. debit
B. credit
31: Which of the following is a capital expenditure?
A. Purchase of stationery
B. Purchase of merchandise
C. Salaries paid
D. Payment for services rendered
E. Purchase of equipment
32: What is a listing of account numbers with account titles but without amounts called?
A. Balance Sheet
B. Income Statement
C. Ledgers
D. Trial Balance
E. Chart of Accounts
33: Which of the following items would be accounted for as an expense?
A. Payment of the current period's rent
B. The purchase of land
C. Repayment of a bank loan
D. Dividends to stockholders
34: Which account group does 'Accounts Receivable' belong to?
A. Assets
B. Equity
C. Revenue
D. Expenses
E. Liabilities
35: There are two accounting methods for recording financial transactions, the cash method and the:
A. receivable method
B. adjustment method
C. accrual method
D. payable method
E. prepaid method
36: Invoices from vendors (suppliers) which are due in 30 days should be credited to Accounts _______.
A. Cash Flow
B. Balance Sheet
C. Credit
D. Payable
E. Receivable
37: Assets that will be converted to cash within one year will be reported under what category in the Balance Sheet?
A. Current Assets
B. Fixed Assets
C. Long term Liabilities
D. Current Liabilities
E. Capital
38: Interest paid by a business on a bank loan is ...?
A. an asset
B. owner's drawings
C. revenue
D. a liability
E. an expense
39: Income that has been earned within a financial period but has not yet been received in cash, is known as ...?
A. revenue in advance
B. accrued revenue
C. accounts payable
D. extraordinary income
E. accrued expenses
40: "Amounts owed by the business and expected to be paid out within one year" is the description of which account group?
A. Current assets
B. Current liabilities
C. Expenses
D. Non-current liabilities
E. Debtors
41: Inventories encompass all of the following, except:
A. Finished goods produced
B. Merchandise purchased by a retailer
C. Materials and supplies awaiting use in the production process
D. Land and other property not held for sale
42: An invoice being paid that relates to insurance cover for the next accounting period should be reported in the financial statements for this accounting period as .....?
A. accrued revenue
B. Insurance expense in the current accounting period
C. Revenue in advance
D. accrued expense
E. a prepaid expense
43: Under which classification would 'Merchandise Inventory' be recorded?
A. Non-current asset
B. Current asset
C. Intangible asset
D. Fixed asset
E. Inventments
44: An accounts payable ledger records which transactions?
A. Cash payments
B. Cash purchases
C. Purchases made on credit
D. Cash sales
E. Sales made on credit
45: Which of the following account groups does NOT appear on the Balance sheet of the business?
A. Current Liabilities
B. Current Assets
C. Owners equity
D. Fixed Assets
E. Expenses
46: The calculation for gross profit is, Sales less ...?
A. Purchases
B. Opening stock
C. Expenses
D. Cost of goods sold
E. Closing stock
47: 'Prepaid expenses' are classified and reported in the financial statements under which account group?
A. Expenses
B. Assets
C. Liabilities
D. Revenue
E. Owners equity
48: What is the typical balance of a liability account reported in the Balance Sheet?
A. credit balance
B. debit balance
49: On which part of a Balance Sheet do Prepaid Expenses appear?
A. Prepaid Expenses do not appear on the Balance Sheet
B. Assets
C. Shareholders' Equity
D. Liabilities
50: Which account group does 'Drawings' belong to?
A. Revenue
B. Liabilities
C. Owners equity
D. Expenses
E. Assets
51: Which of the following transactions would have NO impact on stockholders' equity?
A. Investment of cash by stockholders
B. Dividends paid to stockholders
C. Purchase of land from the proceeds of a bank loan
D. Net loss in the current period
52: Which of the following is NOT a method of inventory valuation?
A. ISO
B. LCM - Lower of cost or market
C. Weighted average
D. LIFO
E. FIFO
53: The owner of a small business writes himself a check for 5,000 for personal use. How is this check recorded in the journal?
A. credit Cash at bank account, debit Drawings
B. debit Bank Loan, credit Drawings
C. credit Accounts Receivable, debit Drawings
D. credit Drawings, debit Cash at bank account
54: Which specific expense group is deducted from revenue to calculate gross profit?
A. Cost of sales
B. Overhead expenses
C. Finance & Funding expenses
D. Selling & Administration expenses
E. Depreciation & Amortization expenses
55: Which of the following would NOT be considered a “The Bottom Line” result in financial reporting?
A. Sales
B. Net Income
C. Net profit
D. Earnings
56: Which type of balances do Expense and Asset accounts typically have?
A. credit
B. negative
C. debit
D. nil
57: Net Sales minus the Cost of Goods Sold equals ...?
A. Operating profit
B. Gross profit
C. Net profit
D. Earnings After Tax
E. EBIT
58: The books of original entry are known as the ......?
A. Ledgers
B. Financial statements
C. Bank deposit books
D. Source documents
E. Journals
59: An accounting principle that record asset such as land at original cost and ignoring increases in value is the:
A. Conservative Rule
B. Historical Cost Rule
C. Consistency Rule
D. Materiality Rule
60: Which is not a current asset?
A. Petty Cash
B. Furniture
C. Accounts Receivable
D. Prepaid Insurance
61: What is the basic rule for debit account?
A. Value parted with
B. Value received
62: Which of the following is NOT a correct description of the 'Debit and Credit' concept in bookkeeping?
A. it is a classification and recording process that keeps the accounting equation in balance
B. 'Debit' is always good for the business and 'Credit' is always bad for the business.
C. it is a method for classifying financial transactions
D. it is a method for recording the changing values in the financial accounts of a business caused by monetary transactions
E. it records the flow of economic resources from a source to a destination
63: Cost of Good Sold is calculated by adding purchases to the beginning inventory and then subtracting ...?
A. Ending Inventory
B. Accounts Payable balance owed to inventory vendors
C. Gross profit
D. Any Accounts Payable discounts taken
E. Selling expenses
64: Taking the information from the journals and recording it in the ledgers, is known in bookkeeping as ....?
A. reconciling
B. transferring
C. posting
D. journalizing
E. crediting
65: In which journal do bookkeepers generally add memos or notes for individual transactions?
A. General
B. Purchases
C. Cash payments
D. Sales
E. Cash receipts
66: When a business uses cash to purchase inventory, which of the following bookkeeping entries is the correct one?
A. Credit - Inventory account, Debit - Cash account
B. Debit - Inventory account, Debit - Cash account
C. Debit - Inventory account, Credit - Cash account
D. Credit - Cash account, Credit - Inventory account
67: On December 15, XYZ Co. hired Jane Houston as a contractor to begin working on January 3 at a monthly salary of $5,000. ABC's balance sheet of December 31 will show a liability of...
A. 5000
B. 3000
C. 1000
D. 4000
E. No liability
68: Which of the following is NOT a liability of the business?
A. Interest Payable
B. Customer Advances
C. Unearned revenue
D. Accounts Payable
E. Accounts Receivable
69: A company disposes of equipment that it no longer uses in its business. The amount received by the company is more than the amount the asset is carried at in the accounting records. The company will report a...
A. None of these
B. Revenue
C. Profit
D. Gain
E. Loss
70: Which of the following is NOT generally used as an alternative name for 'Owners Equity'?
A. Capital
B. Net Worth
C. Shareholder's equity
D. Investments and loans
71: The accounting practice where general treatment of items does not differ from period to period, is known as ...?
A. Consistency
B. Reliability
C. Substance over form
D. Accruals
E. Relevance
72: Recording revenues as they are earned and expenses as they are incurred, regardless of when the money is exchanged, is known as ....?
A. Single entry accounting
B. Accrual accounting
C. Cash accounting
D. Cost accounting
73: The current period's profit will be reported in which section of the Balance Sheet?
A. Equity
B. Current assets
C. Current liabilities
D. Non-current assets
E. Non-current liabilities
74: What accounting concept is being applied when personal transaction must be separated from business transaction?
A. Going concern concept
B. Objectivity Principle
C. Accrual method
D. Cost Principle
E. Business entity concept
75: To credit an expense account means to decrease it.
A. False
B. True
76: The cost price of a box produced by the company "X" is $2. On December 31, 2014 they have 1.000 boxes on stock. On the same day net sales price for this box is $1.9. Which value of boxes has to be present in their balance sheet for 2014: 1. $ 100 2. $ 2,000 3. $ 2 4. $ 1,900
A. 1, 2, 3
B. 4
77: If a financial transaction increased an asset you would credit the asset account in the bookkeeping system?
A. True
B. False
78: Under the accrual basis of accounting, revenues are reported in the accounting period when the
A. cash received
B. Delivery of goods or services
79: In the double-entry bookkeeping system, financial transactions are first recorded in the:
A. spiral notebook
B. general ledger
C. trial balance
D. journals
E. subsidiary ledger
80: When applying the accrual basis of accounting, how would you report expenses that covered a future period?
A. As an asset - prepaid expenses
B. As drawings against equity in a future period
C. As a liability in the current period
D. As an expense in the current period
81: Working capital is calculated by the formula ...?
A. Equity - Total liabilities
B. Total assets - Current liabilities
C. Current assets - Inventory
D. Current asset - Current liabilities
E. Current assets + Current earnings
82: When an asset is sold for cash, into which journal is the transaction recorded?
A. Sales journal
B. Cash receipts journal
C. Sales returns journal
D. Cash payments journal
E. Purchases journal
83: When an invoice for a service covers more than one accounting period, the journal entry will show an Expense and a:
A. Cash Entry
B. Prepaid Expense
C. Liability
D. Non-current asset entry
84: The accounting equation is ....?
A. Assets = Liabilities - Owners equity
B. Assets + Liabilities = Owners equity
C. Owners Equity = Liabilities - Assets
D. Assets = Liabilities + Owners equity
E. Liabilities = Assets + Owners Equity
85: What is the next step in the bookkeeping process after you have recorded the financial transaction details in the appropriate journal?
A. Prepare a trial balance
B. Post the details to the general ledger
C. Prepare financial statements
D. Calculate and record the end of period adjusting entries
E. Analyse and classify the financial transactions
86: Transactions that include revenue that has been earned but not yet collected OR expenses that have been incurred but not yet evidenced or paid, are known as...
A. Accruals
B. Cash payments and receipts
C. Prepaid expenses
D. Credit Purchases
E. Unearned revenues
87: When a check received for a sale is returned by the bank, the two accounts to be adjusted are cash and ...?
A. Discount on Sales
B. Accounts payable
C. Accounts receivable
D. Purchases
E. Bank Charges
88: Which of the following is more an accountant's role than a bookkeeper's role?
A. ensuring a balanced 'trial balance'
B. classifing transactions into the correct ledger accounts
C. recording the organisation’s day-to-day financial transaction
D. ensuring that financial transactions are recorded correctly
E. reporting to governments and meeting statutory requirements
89: Which of the following transactions increases the balance of the Creditors control account in the general ledger?
A. Discount allowed
B. Purchases on credit
C. Discount revenue
D. Cash received
90: Which of the following statements describes the accounting equation?
A. Assets + Liabilities = Equity/Capital
B. Assets = Equity/Capital - Liabilities
C. Assets = Liabilities + Equity/Capital
D. Assets = Liabilities - Equity/Capital
E. Assets = Liabilities = Equity/Capital
91: Which of the following is NOT found on an income statement?
A. Purchases
B. Postage and shipping
C. Bad debts
D. Depreciation expense
E. Cash at bank
92: The accounting convention that requires the assets of a business to be reported in the financial statement at the actual price that was paid to acquire them, is known as .....?
A. Materiality
B. Monetary measurement
C. Going Concern
D. Historical cost
E. Realization of income
93: The original book of entry for financial transactions in the bookkeeping system is the .....?
A. General Ledger
B. Journal
C. Cash at Bank account
D. Subsidiary Ledger
94: As at the balance date, prepaid expenses will be represented in the financial statements as ....?
A. a debit balance non-current asset
B. a credit balance expense
C. a credit balance non-current asset
D. a credit balance current asset
E. a debit balance current asset
95: Which statement correctly completes the sentence? If Cost of Goods Sold increases, ........
A. closing stock decreases
B. gross profit increases
C. gross profit decreases
D. net profit increases
E. sales revenue decreases
96: Which one of the following is a Contra-Asset account?
A. Accumulated Depreciation
B. Bank Charges
C. Marketable Securities
D. Accrued Revenue
97: Under which account group is 'Accumulated depreciation' reported in the financial statements?
A. Revenue
B. Liabilities
C. Owners Equity
D. Assets
E. Expenses
98: In what type of journal would adjustments be generally recorded?
A. General Ledger
B. Cash Receipts Journal
C. Purchase Journal
D. General Journal
E. Sales Journal
99: A credit balance in the bank statement would be normally reconciled with:
A. a debit balance in the Cash at Bank account
B. a debit balance in the Accounts Receivable account
C. a nil balance in the Cash at Bank account
D. a credit balance in the Cash at Bank account
E. a debit balance in the Bank Fees and Charges account
100: The process of writing off the value of intangible assets to acknowledge their loss of value is known as:
A. Asset appreciation
B. Posting
C. Amortization
D. Accruals
E. Depreciation
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