17th
Apr
Accounting Equation MCQ

Accounting Equation MCQ

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  • 17th Apr, 2021
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Accounting Equation MCQ & Quiz

Following are mostly asked Accounting equation MCQ test that are designed for professionals like you to crack you interviews. You can take this Accounting equation online test before appearing to you real interview. This Accounting equation quiz there are around 30+ multiple choice questions on Accounting equation with four options.

1) Which of the following statements is incorrect?

  • A. (b) Assets – Liabilities = Capital
  • B. Liabilities + Capital = Assets
  • C. Liabilities + Assets = Capital
  • D. Assets - Capital = Liabilities

2) Accounting principles are generally based on

  • A. Practicability
  • B. Subjectivity
  • C. Conveniences in recordings
  • D. All are Correct

3) Resources minus capital equals:

  • A. Assets
  • B. Liabilities
  • C. Revenue
  • D. Equity

4) The accounting equation should remain in balance because every transaction affects how many accounts?

  • A. Only one
  • B. Only two
  • C. Two or more
  • D. All of given options

5) A person or enterprise to whom a debt is owed

  • A. Accounts receivable
  • B. Note Payable
  • C. Note receivable
  • D. Accounts Payable
Download Free : Accounting Equation MCQ PDF

6) Assets are always equal to:

  • A. Capital
  • B. Liabilities
  • C. Liabilities + Capital
  • D. Liabilities + Accounts payable

7) Find out value of account receivable from following Cash Rs. 48,000 account payable Rs. 33,000 office equipment Rs. 21,000 owner equity Rs. 77,000?

  • A. Rs. 21,000
  • B. Rs. 41,000
  • C. Rs. 15,000
  • D. Rs. 110,000

8) Which one of the following equations correctly expresses the relationship between assets (A), liabilities (L), revenues (R), expenses (E) and capital (C)?

  • A. A = L + R + E + C
  • B. A = C - (R - E) + L
  • C. A = (L - C) + (R - E)
  • D. A = C + L + (R-E)

9) A business event which can be measured in terms of money and recorded in the books of accounts is called

  • A. Transaction
  • B. Owners equity
  • C. Equities
  • D. Assets

10) The system of recording transactions based on dual aspect concept is called

  • A. Double entry system
  • B. Single entry system
  • C. Double account system
  • D. Modern entry system

11) According to the money measurement concept, the following would be recorded in the books of accounts of the business

  • A. Health of director of the company
  • B. Value of plant machinery
  • C. Quality of company’s goods
  • D. All are Correct

12) Mr. “A” borrowed money from bank; this transaction involves which one of the following accounts?

  • A. Cash & Bank
  • B. Drawing & Cash
  • C. Bank & Debtors
  • D. Cash & Bank Loan

13) Revenue of the business includes?

  • A. Cash sales only
  • B. Credit sales only
  • C. Credit purchases only
  • D. Both cash sales and credit sales

14) A person who owes money to a business is known as:

  • A. Debtor
  • B. Creditor
  • C. Investor
  • D. Partner

15) Merchandise costing $1,000 are sold for $1,250. It will increase owner’s equity by:

  • A. $1,000
  • B. $1,250
  • C. $250
  • D. None of the above

16) Cash is received from Mr A (a debtor of the business). It will affect:

  • A. Cash and debtors
  • B. Cash and owner's equity
  • C. Cash and creditors
  • D. Cash and merchandise

17) According to this concept, business and owner both have separate identity

  • A. Realization concepts
  • B. Going Concern Concept
  • C. Business entity concept
  • D. Cost Concept

18) According to this convention, accounting practice should remain unchanged from one period to another

  • A. Conservatism
  • B. Materiality
  • C. Consistency
  • D. Full Disclosure

19) Assets minus liabilities is

  • A. Profit
  • B. Capital
  • C. Working Capital
  • D. Long-term liabilities

20) Capital + Liabilities – Assets = ?

  • A. zero
  • B. One
  • C. Two
  • D. three

21) Collected an amount due from customer would:

  • A. Increase both assets
  • B. Increase cash and increase liabilities
  • C. Increase assets and reduce owner’s equity
  • D. Increase one asset and reduced an other asset.

22) What is equity?

  • A. Cash from the business
  • B. Liability of a business
  • C. Owner's claim on total assets
  • D. Owner's claim on total liabilities

23) An asset must be _____by the business to be shown as an asset in its balance.

  • A. Controlled
  • B. Owned
  • C. Possessed
  • D. Used

24) Which is the most important characteristic that all assets of the business have?

  • A. Value of assets
  • B. Long life of assets
  • C. Future economic benefits
  • D. Intangible nature of assets

25) ______ is the withdrawal of cash and goods by the owner of the business for his/her personal use

  • A. Appreciation
  • B. Drawings
  • C. Depreciation
  • D. Outflow of cash

26) Closing stock and sundry debtors are examples of:

  • A. Fixed assets
  • B. Fictitious assets
  • C. Current assets
  • D. None of the above

27) The accounting equation can be written as:

  • A. Assets - Liabilities - Opening Capital + Drawings = Profit
  • B. Assets - Liabilities - Drawings = Opening Capital + Profit
  • C. Assets + Profits - Drawings - Liabilities = Closing Capital
  • D. Opening Capital + Profit - Drawings - Liabilities = Assets

28) Identify the nominal account

  • A. Building account
  • B. Machinery account
  • C. Creditors account
  • D. Rent expenses account

29) Using 'lower of cost and net realisable value for the purpose of inventory valuation is the implementation of which of which of the following concepts?

  • A. The prudence concept
  • B. The separate entity concept C.
  • C. The going concern concept
  • D. Matching concept

30) Dose prudence concept allow a business to build substantially higher reserves or provisions than that are actually required?

  • A. Yes
  • B. No
  • C. To some extent
  • D. It depends on the type of business

31) The capital of a sole trader would change as a result of:

  • A. A credit customer paying by cheque
  • B. Raw materials being purchased on credit
  • C. Non-current assets being purchased on credit
  • D. Personal petrol being paid for out of the business's petty cash

32) The purpose of the financial statement that lists an entity’s total capital/liabilities is to show:

  • A. The financial performance of the entity over a period of time.
  • B. The amount of the entity could be sold for in liquidation
  • C. The amount of the entity could be sold as a going concern
  • D. The amount of the entity could be sold as a going concern

33) The matching concept matches which of the following?

  • A. Revenues with expenses
  • B. Expenses with capital
  • C. Asset with liabilities
  • D. Capital with income

34) Net profit is computed in which of the following?

  • A. Balance sheet
  • B. Income statement
  • C. Cash flow statement
  • D. Statement of changes in equity

35) Which of the following is a biological asset?

  • A. Land
  • B. Building
  • C. Environment
  • D. Living plants and animals

36) All of the following are the methods of inventory costing except

  • A. FIFO
  • B. LIFO
  • C. Stock take
  • D. AVCO or average cost

37) NRV or net realizable value of inventory is the expected selling price or market value less

  • A. Carry value of the inventory
  • B. Cost of the stock
  • C. Replacement cost
  • D. Expenses necessary to complete sale

38) Term 'credit' means _____by the business

  • A. Receiving of benefits
  • B. It has no effect on business
  • C. Providing benefits
  • D. It depends upon items

39) When capital is increased by an amount it is recorded on the:

  • A. Left or credit side of the account
  • B. Right or debit side of the account
  • C. Right or credit side of the account
  • D. Left or debit side of the account

40) Bank passbook is also known as

  • A. Bank book
  • B. Bank statement
  • C. Bank column
  • D. Bank account

Accounting Equation Online Test Questions (Accounting Equation FAQs)

1) What is accounting equation?

The accounting equation is regarded as the foundation of the double-entry accounting system. It states that the assets of a company are the total sum of the companies equity and companies liabilities.

2) What is formula for the Accounting Equation?

The Formula for accounting equation can be simply represented as Assets = Liabilities + Equity.

3) What is voucher approach in accounting?

A voucher is an internal document used by the account payable department of the companies. A voucher is used as an invoice that tells about the bills of a company-issued for their vendors and suppliers.

4) What is Balance Sheet?

A Balance Sheet is a company's financial statement that includes assets, liabilities, equity capital, total debt, etc. at any particular point in time.

5) What is a Transaction in Accounting?

In Accounting, the transaction represents a business event that tells about the exchange of money with respect to goods or services among the sellers and buyers.

6) What is Cash flow?

The cash flow tells about the amount of cash or cash equivalent that the company receives or gives as payment to creditors.

7) What is Depreciation?

Depreciation is an accounting method that tells about the decrement of the monetary value of any physical asset over a period of time.

8) Explain Retained Earnings?

Whenever a company is in profit in any physical year then it distributes dividends to its shareholders. Thus after the distribution of dividend, the amount of earning left is retained by the company and this earning is known as Retained earning.

9) What is Trial Balance?

Trial balance is used to ensure the entries basically the credit and debit balance compiled in a ledger in a company's bookkeeping system are properly balanced and mathematically correct.

10) What is TDS?

TDS stands for Tax Deducted at Source i.e. the amount of tax deducted from an individual income which is collected by the Income Tax Department.

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