Basic Accounting Terms (MCQs)
1. Which of the following is a liability?
a) Building
b) Cash
c) Creditors ✔
d) Debtors
2. Goods refer to:
a) All assets of the business
b) Articles purchased for resale ✔
c) All items owned by the proprietor
d) Stationery items
3. The amount invested by the owner in the business is called:
a) Liability
b) Expense
c) Capital ✔
d) Revenue
4. Which of the following is not an expense?
a) Rent paid
b) Salaries paid
c) Interest received ✔
d) Wages paid
5. Cash received from debtors is a:
a) Capital receipt
b) Revenue expense
c) Revenue receipt ✔
d) Liability
6. Drawings refer to:
a) Profit withdrawn by partners
b) Goods or cash taken by the owner for personal use ✔
c) Investments in the business
d) Loans taken by the business
7. Debtors are persons:
a) Who owe money to the business ✔
b) To whom the business owes money
c) Who work for the business
d) Who audit the accounts
8. Which of the following is an example of a fixed asset?
a) Cash
b) Stock
c) Furniture ✔
d) Debtors
9. Which of the following is not a feature of an asset?
a) It is a resource
b) It provides future economic benefit
c) It is a source of funds ✔
d) It is owned by the business
10. The term ‘Liability’ includes:
a) Only loans taken
b) All obligations payable in the future ✔
c) Only interest due
d) Only creditors
11. The money spent to carry out day-to-day business activities is called:
a) Capital
b) Income
c) Expenses ✔
d) Drawings
12. Income is equal to:
a) Revenue – Expenses ✔
b) Capital + Drawings
c) Assets – Liabilities
d) Capital + Liabilities
13. Ledger is a book in which:
a) Original entries are made
b) Transactions are classified and recorded ✔
c) Financial statements are prepared
d) Trial balance is recorded
14. Which of the following is a revenue income?
a) Sale of goods ✔
b) Sale of machinery
c) Loan from bank
d) Issue of shares
15. Profit is calculated as:
a) Revenue – Assets
b) Income – Expenses
c) Revenue – Expenses ✔
d) Capital – Drawings
16. Which of the following transactions is a credit transaction?
a) Cash sales
b) Purchase of goods by paying cash
c) Sale of goods on account ✔
d) Withdrawal of cash by the owner
17. Which one of the following is a current asset?
a) Building
b) Machinery
c) Inventory ✔
d) Furniture
18. Revenue means:
a) Income from non-recurring transactions
b) Income from regular business operations ✔
c) Capital contributed by the owner
d) Profit after tax
19. Which of the following is an intangible asset?
a) Cash
b) Land
c) Trademark ✔
d) Furniture
20. Which of the following is not shown in the balance sheet?
a) Capital
b) Drawings
c) Net profit ✔
d) Cash
21. Expenditure on purchase of machinery is:
a) Revenue expenditure
b) Deferred revenue expenditure
c) Capital expenditure ✔
d) Personal expenditure
22. Which of the following is an example of liability?
a) Land
b) Creditors ✔
c) Stock
d) Patents
23. Sales return is also known as:
a) Purchase return
b) Return inward ✔
c) Return outward
d) Gross sales
24. Purchase return is also known as:
a) Return inward
b) Return outward ✔
c) Sales return
d) Trade discount
25. Which of the following is a fictitious asset?
a) Prepaid Rent
b) Patents
c) Goodwill
d) Preliminary Expenses ✔
26. Cash deposited in the bank is:
a) An expense
b) A liability
c) An asset ✔
d) Income
27. Which of the following is not a current liability?
a) Outstanding salary
b) Creditors
c) Bank overdraft
d) Loan taken for 5 years ✔
28. Capital introduced by the owner is a:
a) Liability for the business ✔
b) Asset of the business
c) Loss for the business
d) Profit for the business
29. Which of the following is not a feature of accounting?
a) Recording of financial transactions
b) Classifying transactions
c) Preparing loan agreements ✔
d) Summarizing information
30. Bank balance is classified as:
a) Expense
b) Liability
c) Asset ✔
d) Income
31. Goods sold on credit will affect:
a) Only cash
b) Debtors and sales ✔
c) Sales and capital
d) Creditors
32. The person to whom goods are sold on credit is called:
a) Debtor ✔
b) Creditor
c) Lender
d) Borrower
33. Advance paid for rent is a:
a) Expense
b) Liability
c) Asset ✔
d) Loss
34. Which of the following is not a part of accounting?
a) Recording
b) Communicating
c) Interpreting
d) Manufacturing ✔
35. Loan given to employees is recorded as:
a) Liability
b) Expense
c) Asset ✔
d) Capital
