Introduction to Accounting MCQ Quiz With Answers

This multiple choice question (MCQ) test covers the topic of introduction to accounting. You can use these MCQs to help prepare for your exams, interviews, and professional qualifications.

To begin the quiz, simply quick on the “Start Quiz” button below. If you find any questions difficult, consider reading our introduction to accounting in the explanation section of the website.

1. The liability arising from the purchase of goods or services on credit is called:

Creditors
Accounts payable
Loan
Accounts receivable

2. Accounts that continuing existing even after the end of the accounting year are known as:

Nominal accounts
Real accounts
Permanent accounts
Revenue accounts

3. The financial information provided by an accounting system is needed by:

Owners
Creditors
Management
All of the above

4. A document prepared to authorize and describe an expenditure is termed:

Cash memo
Voucher
Bill
Debit

5. A percentage reduction from the list price of merchandise allowed to retailers by whole sellers is called:

Commission
Trade discount
Cash discount
Allowance

6. Current assets minus current liabilities is equal to:

Working capital
Profit
Capital
Loss

7. The assets that are used in the operation of the business but have no physical existence are usually known as:

Non-current assets
Fictitious assets
Intangible assets
Tangible assets

8. Double entry system of accounting means:

Entry in two sets of books
Entry on two dates
Entry for two aspects of the transaction
Entry for one aspect of transaction

9. The activities of selecting, processing and reporting the information can be described as:

Book-keeping
Accounting
Auditing
Costing

10. Resources minus capital equities is equal to:

Assets
Liabilities
Revenue
Equity

11. The complete process of accounting is called:

Journalizing
Posting
Accounting cycle
Business cycle

12. Stationery is classified as:

Factory supplies
Office supplies
Sales supplies
All of the above

13. Withdrawal of merchandise for personal use is classified as:

Drawings
Sale of merchandise
Personal expense
None of the above

14. The science and art of correctly recording business dealings in a set of books is called:

Accounting
Record keeping
Bookkeeping
Double entry bookkeeping

15. The modern system of recording business transactions in the books of accounts is known as:

Modern system
Single entry system
American system
Double entry system

16. A portion of the accounts receivable that proves to be uncollectible is termed:

Bad debts
Doubtful debts
Provision for bad debts
All of the above

17. The statement showing the financial position of a business at a particular time is known as the:

Financial statement
Balance sheet
Income statement
Bank statement

18. The properties owned by a business enterprise are called:

Capital
Assets
Liabilities
Owner's equity

19. The right or claim to the properties of a business enterprise is called:

Assets
Capital
Equity
Liabilities

20. Recording business data in a prescribed manner is called:

Accounting
Journalizing
Bookkeeping
Posting

21. Accounts receivable are considered as:

Income
Deferred receipts
Current assets
Fixed assets

22. The systematic recording of financial transactions of a business is known as:

Book-keeping
Record keeping
Accounting
None of the above

23. The assets that can be converted into cash within one year are called:

Current assets
Liquid assets
Tangible assets
Intangible assets

24. The art of measuring, communicating, and interpreting financial activities is called:

Management accounting
Cost accounting
Financial accounting
All of the above

25. The purchase account is used for goods that are for the purpose of:

Resale
Use in the business
Use in manufacturing process
None of the above

26. Bad debts arise from:

Sales on account or credit sales
Cash sales
Personal sales
All of the above

27. Which of the following best explains what is meant by 'Capital Expenditure'? Capital Expenditure is expenditure:

On non-current assets, including repairs and maintenance.
On expensive items over $10,000.
On the acquisition of non-current assets, or improvement in their earning capacity
On items relating to owners' capital.

28. Which of the following should be accounted for as capital expenditure?

The annual cost of painting a factory floor.
The repair of the window in a building.
The purchase of a vehicle by a garage for re-sale.
Legal fees incurred on the purchase of a building.

29. Which of the following items should be treated as capital expenditure in the financial statements of a sole trader?

$500 taken by the proprietor t buy himself a hi-fi system.
$400 spent on purchasing a new PC to replace his secretary's old one.
$2,000 on purchasing a machine for resale.
$150 paid to a painter for redecorating his office.

30. Which of the following is an aspect of relevance, according to the Conceptual Framework for Financial Reporting?

Neutrality
Free from error
Completeness
Materiality

31. According to the Conceptual Framework for Financial Reporting, which qualitative characteristics enhance the usefulness of information that is relevant and faithfully represented?

Comparability, understandability, timeliness, verifiability.
Consistency, prudence, measurability, verifiability.
Consistency, reliability, measurability, timeliness.
Materiality, understandability, measurability, reliability.

32. Which three of the following users of financial statements are likely to be interested in the financial statements of a small private company?

Stock market analysts
Company employees
The Company's bank
Institutional shareholders
Suppliers

33. Which two of the following information needs apply to the government and its agencies in relation to the business of a sole trader? The government and its agencies need the information to:

Establish levels of tax revenue.
Assess whether the business will continue in existence.
Produce national statistics.
Assess the owner's stewardship.
Take decisions about their investment.

34. Information about an entity's financial position is primarily provided in:

The income statement
The statement of financial position
Retained earnings
The statement of cash flows

35. According to the Conceptual Framework for Financial Reporting, information on which Two of the following areas can help users identify the reporting entity's financial strength and weaknesses?