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Accounting Equation MCQ & Quiz

Q1. Which of the following statements is incorrect?

A. (b) Assets – Liabilities = Capital

B. Liabilities + Capital = Assets
C. Liabilities + Assets = Capital
D. Assets - Capital = Liabilities

Q2. Accounting principles are generally based on

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

Q3. Resources minus capital equals:

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

Q4. 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

Q5. A person or enterprise to whom a debt is owed

A. Accounts receivable
B. Note Payable
C. Note receivable
D. Accounts Payable
Q6. Assets are always equal to:

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

Q7. 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

Q8. 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)

Q9. 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

Q10. 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

Q11. 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

Q12. 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

Q13. Revenue of the business includes?

A. Cash sales only

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

Q14. A person who owes money to a business is known as:

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

Q15. 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

Q16. 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
Q17. 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

Q18. According to this convention, accounting practice should remain unchanged from
one period to another

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

Q19. Assets minus liabilities is

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

Q20. Capital + Liabilities – Assets = ?

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

Q21. 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.

Q22. 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

Q23. An asset must be _____by the business to be shown as an asset in its balance.

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

Q24. 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

Q25. ______ 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

Q26. Closing stock and sundry debtors are examples of:

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

Q27. 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
Q28. Identify the nominal account

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

Q29. 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

Q30. 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

Q31. 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

Q32. 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

Q33. The matching concept matches which of the following?

A. Revenues with expenses

 B. Expenses with capital
C. Asset with liabilities
D. Capital with income

Q34. 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

Q35. Which of the following is a biological asset?

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

Q36. All of the following are the methods of inventory costing except

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

Q37. 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

Q38. 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

Q39. 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

Q40. Bank passbook is also known as

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

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