MCQs on Bookkeeping and Accountancy

Accountancy is the process of recording, classifying and reporting business transactions to prepare statements and assess the financial health of an organisation. Bookkeeping is a part of the accountancy process that deals solely with recording and classification of financial transactions of a business.

Below is a list of multiple-choice questions and answers on Bookkeeping and Accountancy to help students understand the topic better.

1. The rules of debit and credit for a balance sheet says that _______.
   1. A decrease in asset and liability accounts is recorded as a credit transaction
   2. An increase in asset and owner’s equity accounts is recorded as a debit transaction
   3. A decrease in liability and owners’ equity accounts is recorded as a credit transaction
   4. An increase in asset, liability and owners’ equity accounts is recorded as a debit transaction

Answer: c

2. Company B had Rs.30000 account receivable from Company D. On 26th February, Company D made a partial payment of Rs. 21000 to Company B. The journal entry made by Company B to record this transaction is _________.
   1. A credit to the accounts receivable account of Rs. 21000
   2. A credit to the cash account of Rs. 21000
   3. A debit to the accounts receivable account of Rs. 21000
   4. A debit to the cash account of Rs. 21000

Answer: c

3. In the accounting cycle _______.
   1. Journal entries get posted to the appropriate ledger accounts
   2. Transactions are posted before they are journalised
   3. A trial balance is prepared after journal entries get posted
   4. Both a and c are correct

Answer: d

4. Dividends _______.
   1. Are a business expense
   2. Are recorded by debiting the dividend account
   3. Decrease owners’ equity
   4. Both b and c are correct

Answer: d

5. Which of the financial statements gets prepared first?
   1. Statement of cash flows
   2. Statement of retained earnings
   3. Balance sheet
   4. Income statement

Answer: d

6. Which of the following accounts is never reported in the income statement as an expense?
   1. Dividend expense
   2. Interest expense
   3. Income tax expense
   4. Depreciation expense

Answer: a

7. Which of the following accounts will never appear in the trial balance?
   1. Income tax expense
   2. Dividends
   3. Both a and b are incorrect
   4. Both a and b are correct

Answer: d

8. The long-term assets that have no physical existence but are rights that have value are known as _______.
   1. Investments
   2. Intangible assets
   3. Fixed assets
   4. None of the above

Answer: b

9. The assets that can be converted into cash within a year are known as _______.
   1. Investments
   2. Intangible assets
   3. Current assets
   4. None of the above

Answer: c

10. The debts which are repaid within a year are known as _______.
    1. Contingent liabilities
    2. Fixed liabilities
    3. Current liabilities
    4. None of the above

Answer: c

11. _______ is the first phase of the accounting cycle.
    1. Making a decision about the business
    2. Posting entries to ledger accounts
    3. Preparing journal
    4. Identifying an economic event or transaction

Answer: d

12. The sales income (both credit and cash) during a given period is called _______.
    1. Purchase returns
    2. Turnover
    3. Sales returns
    4. None of the above

Answer: b

13. The account that records expenses, gains and losses is called _______.
    1. Nominal account
    2. Personal account
    3. Real account
    4. None of the above

Answer: a

14. The process of entering all transactions from the journal to the ledger is called _______.
    1. Accounting
    2. Posting
    3. Entry
    4. None of the above

Answer: b

15. The _________ is a statement that shows the financial status of a company at any given time.
    1. Balance sheet
    2. Trading account
    3. Profit and loss statement
    4. Trial Balance

Answer: a

16. The ratio that refers to a firm’s ability to meet its short term obligations out of its short term resources is called _________.
    1. Profitability ratio
    2. Activity ratio
    3. Leverage ratio
    4. Liquidity ratio

Answer: d

17. Which of the following is a current liability for the firm?
    1. Bank overdraft
    2. Bills payable
    3. Outstanding expenses
    4. All of the above

Answer: d

18. Current Ratio = ________.
    1. Current assets / Current liabilities
    2. Fixed assets / Current liabilities
    3. Debt / Current assets
    4. Debt / Equity

Answer: a

19. A higher inventory ratio indicates ________.
    1. Quick inventory turnover
    2. Better inventory management
    3. Both a and b are incorrect
    4. Both a and b are correct

Answer: d

20. Bookkeeping mainly consists of ____________ part of the accounting process.
    1. Auditing the books of accounts
    2. Recording financial information
    3. Preparing financial statements
    4. Analysing

Answer: b

Also See:

• What is a Balance Sheet?
• Scope of Financial Management