General Financial Accounting MCQs

General Financial Accounting MCQs

Answer these 90+ General Financial Accounting MCQs and see how sharp is your knowledge of General Financial Accounting.
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1: You have a contra account for making allowances for doubtful Accounts. If the  balance in the Allowances account is 1000$ and the Account receivables account has a debit balance of 10000$. what is the net realizable value if the allowances account is further credited with 1000$?

A.   12000

B.   8000

C.   10000

D.   Cannot be determined

2: You are a seller and you purchased 20000 bats for selling for one accounting year. But you failed to sell all of them at the end of the accounting year. If you want to determine the gross profit or gross loss your selling has produced, what will you brought into the final accounts?

A.   Closing Stock

B.   Outstanding Expenses

C.   Prepaid Expenses

D.   Trial Balance

E.   Unearned Income

3: K is a product based company whose current ratio is very low . The company's board of directors assigns the task of improving the ratio to the accounting department . Which of these can be a probable measure taken by the accounts team to improve the current ratio?

A.   Acquiring a loan that is repayable after the next year

B.   decreasing current assets

C.   increasing current liabilities

D.   All of these

4: You have an asset account A worth 4000$  attached to a liability account B that is also worth 4000$. You perform a debit operation on the asset account for 500$ and repeat the same operation for the liability account what are the likely balances of both accounts ?













5: A company's balance sheet shows the following data.

Cash = 60 units
Stock's = 50 units
Fixed Assets = 150 units
Loan amount = 80 units
Wages to the employees = 10 units
Insurance Premiums = 1 unit
Accounts payable = 1 unit

Which of the following is the Shareholder's Equity of the company?

A.   348 units

B.   92 units

C.   256 units

D.   168 units

E.   None of These

6: You are a seller selling some kind of product. At the end of the accounting year, you are left with some closing stock. What will you do to show it in the final accounts?

A.   Show it on the asset side of balance sheet as a separate item under trading account

B.   Show it on the debit side of Trading account as a separate item

C.   Show it on the credit side of Trading account as a separate item

D.   Show it as a debit balance on expenses side as a separate item

E.   None of these

7: J is a service based company . J Bought a piece of real estate for 2000$ to set up their offices, the asset has an appreciation of 4% per annum .If the company pays 1%  extra as tax every year for the piece of real estate,What will be the value recorded for the asset on its financial statement after a period of two years?

A.   2160

B.   2164

C.   2000

D.   2138.4

8: Cost of the printing press: 60000 dollars
Cumulated depreciation of the printing press 15000 dollars

Assume that the printing press depreciates at 10% per annum

What could be the total year end adjustment that would need to be done due to depreciation? (in dollars)

A.   6000

B.   4500

C.   7500

D.   Cannot be determined

9: A good of Rs. 8000 was sold for Rs. 9200. Depreciation provision to date was Rs. 400; and commission paid to selling agent was Rs. 300. There were two workers that were paid wages for removing the machine which was Rs. 45 per worker. What is the net profit from the sale of good?

A.   Rs. 1200

B.   Rs. 1210

C.   Rs. 1600

D.   None of these

10: A company reported its annual balance sheet.

Total current liabilities =  A units
Total long-term liabilities = B units.
Total common stock = C units
Retained earnings = D units
Other stockholder equity of E units

What is the total assets of the company from the given data?

A.   A + B - C - D + E

B.   A - B + C + D - E

C.   A + B + C + D - E

D.   A + B + C + D + E

11: You have recently acquired a company for 8000$  .If you debit the amount from account receivables for 8000$ which of these corresponding accounts should be credited in the given scenario ?

A.   Inventory account

B.   Surplus account

C.   Expense account

D.   Asset account

12: For a company, you need to calculate the  working capital cycle while using the provided information.

A. Receivable days -180 days
B. Accounts payable days- 20days
C. Inventory days-100 days

A.   300 days

B.   100 days

C.   260 days

D.   200 days

13: While adjusting the depreciation of assets in the end of a year you come across a asset worth 10000$ that was bought in june .The asset has a  depreciation of 500$  and the less accumulated depreciation of 3100$.What will the book value for the asset mentioned be after year end adjustments are made to it?

A.   7000

B.   9500

C.   6900

D.   4500

14: You are an owner of an education startup. Your startup provides various kinds of services through the use of the single platform. While defining the master budget which of the following are taken into consideration?

A. Budgeted income statement
B. Budgeted balance sheet
C. Budgeted cash flow statement

A.   Only A and B

B.   Only B and C

C.   Only A and C

D.   All of the above

15: It is given that while performing the year end review of inventory, the Inventory had been overstated by 15000 dollars.

In order to perform the appropriate adjustments, a certain account was credited. Which of the following accounts could it be?

A.   Inventory account

B.   Inventory deficit account

C.   Inventory surplus account

D.   Inventory receivables

E.   Both A and C



At the beginning of the year, XYZ Company reported a $7,200 balance in its Prepaid Insurance account. At year end, the company reported Insurance Expense of $9,000 in its Income Statement and a balance of $3,800 in the Prepaid Insurance account. What was the cost of the additional insurance that was purchased during the year?


A.   $9,000

B.   $12,400

C.   $5,600

D.   $12,800



XYZ Company reported a balance in Accounts Receivable of $40,500 on January 1 of year 2. During Year 2, the company collected $127,500 from its customers who had purchased on account. On December 31 of Year 2, the company reported a balance in Accounts Receivable of $21,250. How much were XYZ Company's credit sales for Year 2?


A.   $108,250

B.   $129,500

C.   $146,750

D.   $148,750



The process of recording transactions in the general journal or in a special journal is called ________________.

A.   journalizing

B.   posting

C.   financial reporting

D.   cash reporting



Which of the following liabilities would be accounted for at the present value of future cash payments?

A.   Accounts Payable

B.   Bonds Payable

C.   Income Taxes Payable

D.   Advances from Customers



Which of the following is a type of liquid asset, such as a demand deposit?

A.   Cash

B.   Notes Receivable

C.   Accounts Receivable

D.   Fixed Assets



Amounts due from customers, for which the claim is in the form of a written promise to pay, are called ________________.

A.   Trade Payables

B.   Accounts Receivable

C.   Equity

D.   Notes Receivable



A right granted to an individual or company that excludes others from manufacturing, using, or selling a certain process or device is called a _____________.

A.   liability

B.   trademark

C.   tax liability

D.   patent



XYZ Company completed its second year of operations in Year 2. On January 1 of Year 2, the balance in Retained Earnings was $84,000. During the year, the company declared and paid a dividend of $65,000 to shareholders. The company reported net earnings of $105,000 in its Year 2 Income Statement. What was the balance in Retained Earnings on December 31 of Year 2?

A.   $189,000

B.   $170,000

C.   $149,000

D.   $124,000

A.   debit and credit respectively

B.   credit and debit respectively

C.   Both are debit

D.   Both are credit



XYZ Company publishes a monthly sports magazine. The company has fiscal year of Jan-Dec. On July 1 of Year 1, the company sold 1000 two-year subscriptions for $200 each. On December 31 of Year 1, the amount reported as a liability on the Balance Sheet and the amount reported as revenue on the Income Statement are, respectively:

A.   $0 and $200,000

B.   $50,000 and $150,000

C.   $100,000 and $100,000

D.   $150,000 and $50,000



Which of the following is a permanent account?

A.   Accumulated Depreciation

B.   Advances from Customers

C.   Both a and b

D.   Neither a nor b



From the following list of selected account balances, determine the total for the shareholders' equity section of the Balance Sheet for XYZ Company.

$2,500   - Investment in Stock of ABC Company
$5,000   - Retained Earnings
$3,000   - Cash 
$2,000   - Note Payable to Suppliers
$10,000 - Common Stock
$7,500   - 8% Preferred Stock 

A.   $20,500

B.   $22,500

C.   $24,500

D.   $25,500



The following entry was made on March 12 for XYZ Company:

Dr: Machinery
Cr: ACCounts Payable

For which of the following transactions was this entry made?

A.   Payment for purchase of machinery

B.   Sale of machinery

C.   Depreciation of machinery

D.   Purchase of machinery



XYZ Company failed to record the purchase of inventory on account at the end of 2008. In which of the following ways is the Balance Sheet misstated?

A.   Assets and liabilities are both understated.

B.   Assets are understated and liabilities are overstated.

C.   Assets and shareholders' equity are both understated.

D.   Assets, liabilities, and shareholders' equity are all correctly stated.



Temporary revenue and expense accounts may be closed _________________.

A.   individually by separate entries to Retained Earnings

B.   in a single entry to Retained Earnings

C.   to a temporary "Income Summary" account

D.   Any of the above methods is acceptable.



Payments made in advance for goods or services a firm will receive at a later date are called ______________.

A.   Deferred Income

B.   Deferred Tax liability

C.   Advances to Suppliers

D.   Unearned Revenue



Deduction or valuation accounts that accumulate amounts subtracted from other accounts are called _____________________.

A.   contra accounts

B.   depreciation accounts

C.   asset accounts

D.   Owners Equity2



XYZ Company purchased a 1-year insurance policy for $3,000 on April 1 of Year 1. The amount of prepaid insurance reported on the Balance Sheet and the amount of insurance expense reported on the Income Statement on December 31 of Year 1 are, respectively:

A.   $750 and $2,250

B.   . $2,250 and $750

C.   $1,000 and $2,000

D.   $2,000 and $1,000



Which of the following accounts is not closed during the closing process?

A.   Wage Expense

B.   Interest Expense

C.   Utility Expense

D.   Accumulated Depreciation



The balance in all asset accounts combined is $100,000 on December 1. During December, the following transactions took place:  

- Purchase of $10,000 of inventory for cash
- Purchase of $15,000 of machinery on account
- Retirement of $20,000 in bonds with cash

Given this information, what is the combined balance in the asset accounts on December 31?

A.   $80,000

B.   $115,000

C.   $105,000

D.   $95,000



Which of the journal entries below is incorrectly recorded?  

A.   Dr: Cash, Cr: Investment in ABC Co. - Sale of an investment for cash

B.   Dr: Prepaid Insurance, Dr: Cash - Paid in advance for a 1-year insurance policy

C.   Dr: Accounts Receivable, Cr: Merchandise Inventory - Returned defective merchandise for credit

D.   Dr: Machinery, Cr: Notes Payable - Gave a 1-year note to acquire machinery



Amounts received for the par value of a firm's voting stock are called 

A.   Common Stock

B.   Accounts Receivable

C.   Preferred Stock

D.   Retained Earnings



Amounts received for the par value of a firm's voting stock are called ___________.

A.   Equity

B.   Accounts Receivable

C.   Cash

D.   Accounts Payable



XYZ Company purchased some equipment for $120,000 on July 1 of Year 1. The equipment has an estimated useful life of 10 years and an estimated salvage value of $7,500. XYZ Company computes depreciation on a straight-line basis. How much depreciation should be recorded for Year 1?

A.   $12,000

B.   $11,250

C.   $6,000

D.   $5,625



XYZ Company is interested in disposing of one of its subsidiaries and is trying to decide on the maximum price it might be able to charge. Which valuation method below would the company be most likely to use?

A.   Acquisition Cost

B.   Net Realizable Value

C.   Present Value

D.   Replacement Cost



Which of the following statements about the rules of debit and credit is incorrect?

A.   Credits always mean decreases.

B.   Debits reduce shareholders' equity.

C.   Assets have debit balances.

D.   Debits are always recorded on the left.



The Accumulated Depreciation account reflects _____________________.

A.   depreciation for the current accounting period only

B.   cumulative depreciation on the asset since acquisition

C.   the amount of depreciation that can be taken in future periods

D.   None of the above



A manufacturing firm's cost of producing its product is called ______________.

A.   direct labor

B.   product costs

C.   indirect labor

D.   overhead



The Balance Sheet reflects the application of various valuation methods. Which of the following methods may be used on a Balance Sheet that follows generally accepted accounting principles?

A.   Acquisition cost

B.   Current cash equivalent value

C.   Present value of future cash flows

D.   All of the above



XYZ Company has assets and liabilities of $15,000 and $12,000, respectively. If the company issues an additional $1,500 of stock for cash, what will be the balance in shareholders' equity following the transaction?

A.   $15,000

B.   $25,500

C.   $4,500

D.   $16,500



Stocks and bonds that can be readily converted into cash are called _____________.

A.   Current Assets

B.   Current Liabilities

C.   Marketable Securities

D.   Treasury Stock



The balance in the ______ account reflects the cumulative depreciation of an asset since its acquisition.

A.   Depreciation Expense

B.   Income Tax Liability

C.   Rent Expense

D.   Accumulated Depreciation



Which of the following accounts is NOT an expense?

A.   Depreciation

B.   Sales Salaries

C.   Dividends Declared

D.   Delivery Expense



_____ refers to shares originally issued and outstanding that have been reacquired from the owners.

A.   Treasury Stock

B.   Common Stock

C.   Preferred Stock

D.   Retained Earnings



The estimated and unpaid liability for current income taxes is called ______________.

A.   Tax Expense

B.   Accounts Payable

C.   Income Taxes Payable

D.   Cash