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50 Important accounting MCQs



  1. Which method of inventory valuation matches recent costs with current revenues?

    1. A. FIFO (First In, First Out)
    2. B. LIFO (Last In, First Out)
    3. C. Weighted Average
    4. D. Specific Identification
    5. Answer: B
  2. Which type of account is prepaid insurance?

    1. A. Asset
    2. B. Liability
    3. C. Equity
    4. D. Revenue
    5. Answer: A
  3. Which of the following is not a current liability?

    1. A. Accounts Payable
    2. B. Short-term Loans
    3. C. Bonds Payable
    4. D. Unearned Revenue
    5. Answer: C
  4. Which principle states that expenses should be recognized in the period in which they help generate revenues?

    1. A. Matching Principle
    2. B. Revenue Recognition Principle
    3. C. Cost Principle
    4. D. Full Disclosure Principle
    5. Answer: A
  5. What type of account is unearned revenue?

    1. A. Asset
    2. B. Liability
    3. C. Equity
    4. D. Expense
    5. Answer: B
  6. Which of the following costs are included in manufacturing overhead?

    1. A. Direct materials and direct labor
    2. B. Indirect materials and indirect labor
    3. C. Selling and administrative expenses
    4. D. Interest expenses
    5. Answer: B
  7. Which of the following best describes a contingent liability?

    1. A. A liability that will be settled within the next year
    2. B. A potential liability that depends on the outcome of a future event
    3. C. A liability that is already incurred but not yet paid
    4. D. A liability that is not reported on the balance sheet
    5. Answer: B
  8. Which of the following accounts would appear on the income statement?

    1. A. Cash
    2. B. Accounts Receivable
    3. C. Sales Revenue
    4. D. Inventory
    5. Answer: C
  9. The principle of conservatism in accounting means:

    1. A. Revenues and expenses should be recorded when they are incurred
    2. B. All expenses and losses should be recognized as soon as possible
    3. C. Financial statements should be presented conservatively
    4. D. Assets should be recorded at their market value
    5. Answer: B
  10. What does a credit balance in the bank statement indicate?

    1. A. The bank account is overdrawn
    2. B. The bank owes money to the company
    3. C. The company owes money to the bank
    4. D. There is an error in the bank statement
    5. Answer: B
  11. What is the main purpose of managerial accounting?

    1. A. To provide information for external users
    2. B. To provide information for internal decision-making
    3. C. To prepare tax returns
    4. D. To ensure compliance with GAAP
    5. Answer: B
  12. Which of the following is a fixed cost?

    1. A. Direct materials
    2. B. Factory rent
    3. C. Sales commissions
    4. D. Direct labor
    5. Answer: B
  13. In which section of the cash flow statement would you find the purchase of equipment?

    1. A. Operating activities
    2. B. Investing activities
    3. C. Financing activities
    4. D. None of the above
    5. Answer: B
  14. Which of the following is an example of a tangible asset?

    1. A. Patents
    2. B. Trademarks
    3. C. Equipment
    4. D. Goodwill
    5. Answer: C
  15. Which financial statement shows the changes in equity during a period?

    1. A. Income Statement
    2. B. Balance Sheet
    3. C. Statement of Cash Flows
    4. D. Statement of Retained Earnings
    5. Answer: D
  16. Which method of depreciation is most appropriate for an asset that is expected to produce equal benefits over its useful life?

    1. A. Double Declining Balance Method
    2. B. Units of Production Method
    3. C. Sum of the Years' Digits Method
    4. D. Straight Line Method
    5. Answer: D
  17. Which of the following costs are included in the cost of goods manufactured?

    1. A. Direct materials, direct labor, and manufacturing overhead
    2. B. Direct materials, direct labor, and administrative expenses
    3. C. Direct labor, manufacturing overhead, and selling expenses
    4. D. Manufacturing overhead, selling expenses, and administrative expenses
    5. Answer: A
  18. Which of the following is a contra revenue account?

    1. A. Sales Discounts
    2. B. Sales Revenue
    3. C. Cost of Goods Sold
    4. D. Accounts Receivable
    5. Answer: A
  19. What is the primary purpose of the statement of cash flows?

    1. A. To show the company's financial position at a specific point in time
    2. B. To show the company's revenues and expenses
    3. C. To show the changes in cash during a period
    4. D. To show the company's retained earnings
    5. Answer: C
  20. Which of the following is an example of a financing activity?

    1. A. Payment of salaries
    2. B. Purchase of inventory
    3. C. Issuance of bonds
    4. D. Sale of equipment
    5. Answer: C
  21. Which of the following is considered an operating activity?

    1. A. Borrowing funds
    2. B. Paying dividends
    3. C. Selling goods
    4. D. Purchasing equipment
    5. Answer: C
  22. Which of the following is not a characteristic of a partnership?

    1. A. Unlimited liability
    2. B. Limited life
    3. C. Mutual agency
    4. D. Separate legal entity
    5. Answer: D
  23. Which financial statement provides information about the profitability of a company over a period?

    1. A. Balance Sheet
    2. B. Income Statement
    3. C. Statement of Cash Flows
    4. D. Statement of Retained Earnings
    5. Answer: B
  24. Which of the following is a product cost?

    1. A. Advertising expense
    2. B. Sales commissions
    3. C. Factory utilities
    4. D. Office supplies
    5. Answer: C
  25. Which of the following is an investing activity?

    1. A. Paying interest
    2. B. Issuing common stock
    3. C. Purchasing a building
    4. D. Receiving dividends
    5. Answer: C
  26. The term 'liquidity' refers to:

    1. A. The ability to meet short-term obligations
    2. B. The ability to generate profits
    3. C. The ability to control costs
    4. D. The ability to pay dividends
    5. Answer: A
  27. Which of the following is not included in the calculation of gross profit?

    1. A. Sales revenue
    2. B. Cost of goods sold
    3. C. Operating expenses
    4. D. None of the above
    5. Answer: C
  28. Which of the following is a variable cost?

    1. A. Factory rent
    2. B. Sales commissions
    3. C. Property taxes
    4. D. Depreciation
    5. Answer: B
  29. What type of account is accumulated depreciation?

    1. A. Asset
    2. B. Liability
    3. C. Contra asset
    4. D. Equity
    5. Answer: C
  30. Which of the following is not a manufacturing cost?

    1. A. Direct materials
    2. B. Direct labor
    3. C. Manufacturing overhead
    4. D. Administrative expenses
    5. Answer: D
  31. Which method of inventory valuation results in the lowest income tax during periods of rising prices?

    1. A. FIFO (First In, First Out)
    2. B. LIFO (Last In, First Out)
    3. C. Weighted Average
    4. D. Specific Identification
    5. Answer: B
  32. Which financial statement shows a company's retained earnings at the end of a period?

    1. A. Income Statement
    2. B. Balance Sheet
    3. C. Statement of Cash Flows
    4. D. Statement of Retained Earnings
    5. Answer: D
  33. Which of the following is a measure of profitability?

    1. A. Current Ratio
    2. B. Quick Ratio
    3. C. Gross Profit Margin
    4. D. Debt to Equity Ratio
    5. Answer: C
  34. Which of the following is not a component of stockholders' equity?

    1. A. Common Stock
    2. B. Retained Earnings
    3. C. Bonds Payable
    4. D. Additional Paid-in Capital
    5. Answer: C
  35. The matching principle is closely related to:

    1. A. Accrual Accounting
    2. B. Cash Basis Accounting
    3. C. Tax Accounting
    4. D. Managerial Accounting
    5. Answer: A
  36. Which of the following is not a financial statement?

    1. A. Income Statement
    2. B. Balance Sheet
    3. C. Statement of Cash Flows
    4. D. Trial Balance
    5. Answer: D
  37. Which of the following best describes retained earnings?

    1. A. Cash held by the company
    2. B. Profits not distributed to shareholders
    3. C. Total revenue of the company
    4. D. Total equity of the company
    5. Answer: B
  38. Which of the following is an internal user of accounting information?

    1. A. Investors
    2. B. Creditors
    3. C. Managers
    4. D. Customers
    5. Answer: C
  39. Which type of account is salaries payable?

    1. A. Asset
    2. B. Liability
    3. C. Equity
    4. D. Expense
    5. Answer: B
  40. What is the primary purpose of a trial balance?

    1. A. To prepare the financial statements
    2. B. To prove the equality of debits and credits
    3. C. To calculate net income
    4. D. To determine the financial position of the company
    5. Answer: B
  41. Which of the following is a period cost?

    1. A. Direct materials
    2. B. Factory rent
    3. C. Sales commissions
    4. D. Direct labor
    5. Answer: C
  42. Which of the following is not a characteristic of managerial accounting?

    1. A. Future-oriented
    2. B. Provides detailed segment reports
    3. C. Mandatory for external reporting
    4. D. Used by internal management
    5. Answer: C
  43. Which of the following is a measure of liquidity?

    1. A. Return on Equity
    2. B. Debt to Equity Ratio
    3. C. Current Ratio
    4. D. Gross Profit Margin
    5. Answer: C
  44. Which principle states that revenue should be recognized when it is earned?

    1. A. Matching Principle
    2. B. Consistency Principle
    3. C. Prudence Principle
    4. D. Revenue Recognition Principle
    5. Answer: D
  45. Which of the following is a fixed cost?

    1. A. Direct materials
    2. B. Factory rent
    3. C. Sales commissions
    4. D. Direct labor
    5. Answer: B
  46. What type of account is prepaid rent?

    1. A. Asset
    2. B. Liability
    3. C. Equity
    4. D. Expense
    5. Answer: A
  47. Which of the following is not an element of the statement of cash flows?

    1. A. Operating Activities
    2. B. Investing Activities
    3. C. Financing Activities
    4. D. Marketing Activities
    5. Answer: D
  48. Which of the following is an indirect cost?

    1. A. Direct materials
    2. B. Direct labor
    3. C. Factory overhead
    4. D. Sales commissions
    5. Answer: C
  49. The term 'current liabilities' refers to liabilities that are:

    1. A. Expected to be settled within one year
    2. B. Expected to be settled within the operating cycle
    3. C. Fixed liabilities
    4. D. Both A and B
    5. Answer: D
  50. Which financial statement would you refer to in order to find the total liabilities of a company? - A. Income Statement - B. Balance Sheet - C. Statement of Cash Flows - D. Statement of Retained Earnings - Answer: B


-By Commerce Ka Ladka

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