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
  2. Answer: c

  3. 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
  4. Answer: c

  5. 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
  6. Answer: d

  7. 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
  8. Answer: d

  9. Which of the financial statements gets prepared first?
    1. Statement of cash flows
    2. Statement of retained earnings
    3. Balance sheet
    4. Income statement
  10. Answer: d

  11. 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
  12. Answer: a

  13. 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
  14. Answer: d

  15. 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
  16. Answer: b

  17. 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
  18. Answer: c

  19. 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
  20. Answer: c

  21. _______ 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
  22. Answer: d

  23. 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
  24. Answer: b

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

  27. 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
  28. Answer: b

  29. 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
  30. Answer: a

  31. 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
  32. Answer: d

  33. 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
  34. Answer: d

  35. Current Ratio = ________.
    1. Current assets / Current liabilities
    2. Fixed assets / Current liabilities
    3. Debt / Current assets
    4. Debt / Equity
  36. Answer: a

  37. 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
  38. Answer: d

  39. 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
  40. Answer: b

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