Financial Accounting MCQs

Financial Accounting MCQs

Our team has conducted extensive research to compile a set of Financial Accounting MCQs. We encourage you to test your Financial Accounting knowledge by answering these multiple-choice questions provided below.
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1: Inventory falls under which category?

A.   Current Assets

B.   Non current assets

C.   Retained Earnings

D.   Current Liability

E.   Long term liability

2: What type of account is allowance for doubtful accounts?

A.   A liability account

B.   A cost of good account

C.   A contra sales account

D.   A contra asset account

3: Which of the following is an example of a contingent liability?

A.   An environmental lawsuit.

B.   Notes payable.

C.   Prepaid Rent.

D.   Accrued payroll.

4: Which of the following will be found on the income statement?

A.   None are found on a typical income statement

B.   Taxes payable

C.   Tax liability

D.   Taxes due

E.   Tax expense

5: What is the net number calculated from the three parts of the Statement of Cash Flows?

A.   Net increase (decrease) in cash

B.   Net increase (decrease) in Assets

C.   Net increase (decrease) in Liabilities

D.   Net increase (decrease) in Shareholder's Equity

6: A normal balance of asset accounts is journaled as a ____.

A.   Credit

B.   Debit

7: What are the assets of a business?

A.   debit

B.   credit

C.   loans

D.   resources

8: What method of depreciation is used most often for land?

A.   Land is not depreciated.

B.   Straight-line.

C.   Double declining balance.

D.   Weighted average balance

9: What is one method for recording uncollectible receivables?

A.   Direct write-off

B.   Nonrecognition

C.   Accrual

D.   Cash basis

10: Accounting equation is given as

A.   Assets + Liabilities = Owners Equity

B.   Owners Equity = Liabilities+ Assets

C.   Liabilities = Assets + Owners Equity

D.   Assets = Liabilities + Owners Equity

11: Why is an increase in inventory shown as a negative amount in the statement of cash flows?

A.   An increase in inventory indicates that a company has sold more goods than it has purchased. Increasing inventory requires a cash inflow. Cash inflows have a negative effect on the company’s cash balance.

B.   An increase in inventory indicates that a company has purchased more goods than it has sold. Increasing inventory requires a cash outflow. Cash outflows have a negative effect on the company’s cash balance.

12: On the cash flow statement, buying of a bond is found in the _________ section.

A.   Investing

B.   Financing

C.   Operating

D.   Income

E.   Not located on the cash flow statement

13: What is short-term debt considered?

A.   Asset

B.   Liability

C.   Shareholder Equity

D.   Expense

E.   Revenue

14: Mergers and acquisitions are covered under which accounting concept?

A.   Currency Translation

B.   Depreciation

C.   Business Combinations

D.   Revenue

E.   Inventories

15: What is considered a current asset?

A.   Goodwill

B.   Accounts Receivable

C.   Property, plant and equipment

D.   Patents

16: What is the best definition of Paid-in capital?

A.   Loans made by shareholders to the company

B.   The amount shareholders contributed to the company in exchange for the shares of common stock or preferred stock less stated par value of the securities

C.   The excess of purchase price over asset value when a company is acquired

D.   Assets-Liabilities=Paid-in Capital

17: Equity can be best defined as the amount of ownership left in the business after deducting total liabilities from total assets.

A.   False

B.   True

18: Which of these is NOT a tangible asset?

A.   Trademarks

B.   Buildings

C.   Natural Resources

D.   Fixtures

E.   Land

19: Which of the following is considered an internal user of financial information?

A.   Suppliers

B.   Government agencies

C.   Investors

D.   Board of Directors

E.   Lenders

20: Which of these is NOT an intangible asset?

A.   Franchises

B.   Equipment

C.   Copyrights

D.   Licenses

E.   Patents

21: What is the best definition of Retained earnings?

A.   The remaining balance of Net Income after dividends have been subtracted.

B.   The difference of cash holdings at the beginning of the year and cash at end of the year

C.   Cash required to be held for loan repayment requirements

D.   Liquid funds in escrow required by lender convenants

22: Standard costing is usually associated with:

A.   Manufacturing cost of product

B.   Commodity pricing

C.   Comparable industry analysis

D.   High tech contract labor

23: What is the difference between the accounts 'rent receivable' and 'rent revenue'?

A.   'Rent revenue' is a balance sheet account and 'Rent receivable' is an income statement account

B.   'Rent receivable' is a balance sheet asset account and 'Rent revenue' is an income statement account

24: The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at a specific date is the

A.   Income Statement

B.   Statement of Expenses

C.   Balance Sheet

D.   Statement of Cash flows

E.   Statement of Shareholder's (Owner's) Equity

25: Which is an example of a Current Asset?

A.   Equity

B.   Accounts Payable

C.   Property, Plant and Equipment

D.   Depreciation

E.   Cash or Bank Balance

26: Which of the following is a category or element of the balance sheet?

A.   Liabilities

B.   Gains

C.   Expenses

D.   Losses

27: An ordinary share dividend is:

A.   Interest on money lent to the company by its shareholders.

B.   Part of the company profits used to reward the shareholders for their investment

C.   The directors’ remuneration

D.   None of these

E.   An expense of running the company

28: Payments made to the shareholders of a corporation for profit are called:

A.   Share of profits

B.   Payroll

C.   Salary

D.   Gain

E.   Distributions or Dividends

29: What does AICPA stand for?

A.   American Institute of Chartered Public Accountants

B.   American Institute of Credentialed Public Accountants

C.   American Institute of Certified Public Accountants

D.   American Institute of Chartered Private Accountants

E.   American Institute of Certified Private Accountants

30: What is NOT one of the sections of the Cash Flow statement?

A.   Cash flows from shareholder contribution

B.   Cash flows from operating activities

C.   Cash flows from investing activities

D.   Cash flows from financing activities

31: Which of the following is NOT an asset account?

A.   Accounts Payable

B.   Cash

C.   Inventory

D.   Accounts Receivable

E.   Goodwill

32: On the cash flow statement, buying of a stock is found in the _________ section.

A.   Investing

B.   Not located on the cash flow statement

C.   Operating

D.   Financing

E.   Income

33: As found on an income statement, revenue can best be defined as:

A.   Gross receipts earned by the company selling its goods or services

B.   Gross receipts earned by the company selling its intangible assets or services

C.   Gross receipts earned by the company selling its depreciated supplies or services

D.   Gross receipts earned by the company selling its shares or services

E.   Gross receipts earned by the company selling its goods or intangible assets

34: Which types of entities are considered "flow through" entities?

A.   All of these

B.   Limited Liability Corporation

C.   Sole Proprietership

D.   Partnership

35: What is the definition of FIFO for inventory valuation purposes?

A.   It is assumed that items purchased are valued at the greater of cost or market value

B.   It is assumed that items purchased last are sold first.

C.   It is assumed that items purchased first are sold first.

D.   The system updates inventory accounts after each purchase or sale.

36: Why are standard cost amounts not always equal to the actual cost amounts?

A.   Poor estimation efforts on the part of management.

B.   Extraordinary events recognized by the accounting reporting process.

C.   Standard cost is expected cost, actuals can be different.

D.   The variability of commodity inputs.

37: What is the bottom line of an income statement?

A.   Company's net worth

B.   Company's net earnings or losses

C.   Company's total expenses

D.   Company's total investments

E.   Company's total sales

38: What is Goodwill in financial reporting?

A.   Goodwill is an Asset account. When a company is purchased for more than the assets are worth the off setting account is called Goodwill.

B.   Goodwill is something you do without wanting anything in return.

C.   There is no such account that is considered Goodwill in accounting.

D.   Goodwill is a charitable donation place. You can take household items to Goodwill and get a tax dedution.

39: What does FIFO stand for?

A.   Final Inventory, First Out

B.   From Inventory For Orders

C.   Fast In, First Out

D.   Funds In For Outsiders

E.   First in, First out

40: Which of the following is the Control Account?

A.   Accounts Payable

B.   All of the listed accounts are Control Accounts

C.   Accounts Receivable

D.   Inventory

41: What is a journal?

A.   both of these

B.   a record of financial transactions in order by date

C.   book of original entry

42: Tangible, long lived assets used in the operations of the business are classified as ____.

A.   property, plant, and equipment

B.   inventories

C.   intangible assets

D.   other assets

43: What is the definition of Current Liabilities?

A.   The balancing account to Short Term Assets

B.   Liabilities that are expected to liquidate within a year or normal operating cycle, whichever is longer

C.   Debts that are callable by a creditor

D.   A contra account to Long Term Liabilities

44: Once a discontinued operation is disposed of, the gain or loss can be disclosed in the notes to the financial statements

A.   False

B.   True

45: Realized revenue means a transaction where goods and services are exchanged for cash or claims to cash.

A.   True

B.   False

46: The end product for an income statement is:

A.   Net profits or net gain

B.   Net income or net loss

C.   Net accumulation or net income

D.   Net dividends or net depreciation

E.   Net earnings or net interest

47: What does CPA stand for?

A.   Certified Professional Accountant

B.   Certified Public Accountant

C.   Chartered Public Accountant

D.   Commerce Public Accountant

48: Under US GAAP, what constitutes an audit?

A.   An examination of the financial reports to ensure that they represent what they claim and conform with GAAP.

B.   An examination of the financial reports to ensure that they represent what they claim and conform with USPAP.

C.   To make sure that the company does not get in trouble with the PCAOB.

D.   To ensure that management is not cheating shareholders.

49: To what account group does 'cash on hand' belong?

A.   Revenue

B.   Asset

C.   Liability

D.   Expense

E.   Shareholder Equity

50: What is the best definition for Salvage value?

A.   The estimated value that an asset will realize upon its sale at the end of its useful life

B.   An industry standard, published valuation

C.   The price that the parts of a piece of equipment could be sold for

D.   What the property could be sold for today