ACCOUNTING 100 MCQS BY VYASA IAS

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 ACCOUNTING 100 MCQS BY VYASA IAS

Multiple Choice Questions (MCQs)

1. The Accounting Equation states 4. The Balance Sheet includes which

that: of the following elements?

A) Assets = Liabilities + Owner’s A) Assets, Liabilities, and Owner’s

Equity Equity
B) Liabilities = Assets + Owner’s B) Revenues, Expenses, and Profits
Equity C) Debtors, Creditors, and Bank
C) Assets = Owner’s Equity – Statements
Liabilities D) Income, Expenditure, and Capital
D) Owner’s Equity = Assets + Gains
Liabilities

5. What are "Creditors" in

2. What does "Accounts Payable" accounting?
refer to?
A) Individuals or companies who owe
A) Long-term debt of a company money to a business
B) A liability incurred from B) Individuals or companies to whom a
purchasing inventory business owes money
C) The revenue generated from C) Investors who provide equity
selling assets capital
D) The money owed by customers D) Bankers providing long-term loans

3. Which of the following is NOT a 6. What is another term for

characteristic of an Asset? "Equity" in financial statements?

A) The company must control or own it A) Owner’s Equity

B) It must provide value to the B) Liabilities
company C) Accounts Payable
C) Its value must be measurable D) Retained Earnings
D) It must always be a physical item

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A) Fixed and Variable

B) Gross and Net
7. "Historical Cost" in accounting C) Short-term and Long-term
refers to: D) Direct and Indirect

A) The market value of an asset

B) The cost of an asset at the time
of purchase 11. Short-term liabilities must be
C) The depreciation cost of an asset repaid within:
D) The value of an asset after
A) 6 months
appreciation
B) 1 year
C) 3 years
D) 5 years
8. Which of the following is an
example of an Intangible Asset?

A) Land 12. Which of the following is an

B) Patents example of a Long-Term Asset?
C) Machinery
A) Accounts Receivable
D) Inventory
B) Inventory
C) Cash in hand
D) Land
9. Inventory in a company refers
to:

A) Fixed assets used in production 13. Owner’s Equity represents:

B) Assets held for resale
A) The debts owed by a company
C) Cash reserves
B) The original and additional
D) The value of owner's equity
investments by the owner
C) The total revenue of a company
D) The liability portion of the balance
10. Liabilities can be classified as: sheet

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D) Short-term assets are intangible,

while long-term assets are tangible
14. Retained Earnings are best
described as:

A) The total profit earned by a 17. A mortgage payable beyond one

company year is an example of:
B) The amount of profit left after
A) A short-term liability
expenses and distributions
B) A current asset
C) The dividends paid to shareholders
C) A long-term liability
D) The sales revenue before tax
D) An intangible asset

15. Which of the following is NOT

18. In the bicycle company
a Short-Term Asset?
example, which of the following is
A) Cash classified as an Inventory?
B) Inventory
A) The land where bicycles are
C) Land
manufactured
D) Accounts Receivable
B) The cash reserves of the company
C) The bicycles intended for resale
D) The machinery used for
16. What is the main difference production
between Short-Term and Long-
Term Assets?

A) Short-term assets are only cash, 19. Which financial statement

while long-term assets are tangible shows the relationship between
B) Short-term assets are converted assets, liabilities, and owner’s
into cash within a year, long-term equity?
assets take longer
A) Profit and Loss Statement
C) Short-term assets depreciate
B) Cash Flow Statement
faster than long-term assets

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C) Balance Sheet 12. D) Land

D) Income Statement 13. B) The original and additional
investments by the owner
14. B) The amount of profit left
after expenses and
20. The Owner’s Equity is affected
distributions
by:
15. C) Land
A) Increase in liabilities 16. B) Short-term assets are
B) Retained earnings and additional converted into cash within a
investments year, long-term assets take
C) The historical cost of assets longer
D) Depreciation of inventory 17. C) A long-term liability
18. C) The bicycles intended for
resale
19. C) Balance Sheet
Answer Key
20. B) Retained earnings and
1. A) Assets = Liabilities + additional investments
Owner’s Equity
2. B) A liability incurred from
purchasing inventory Multiple Choice Questions (MCQs)
3. D) It must always be a physical
item 1. Debtor Accounts record what
4. A) Assets, Liabilities, and is owed to the entity by:
Owner’s Equity A) Suppliers
5. B) Individuals or companies to B) Employees
whom a business owes money C) Customers
6. A) Owner’s Equity D) Creditors
7. B) The cost of an asset at the
time of purchase 2. Discounts allowed are granted
8. B) Patents to:
9. B) Assets held for resale A) The entity’s suppliers
10. C) Short-term and Long-term B) The entity’s employees
11. B) 1 year C) The entity’s customers

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D) The government creditors

3. Discounts received refer to 7. Stock refers to:

discounts given by: A) Cash kept in the bank
A) Customers B) Goods unsold at the end of
B) The entity’s suppliers an accounting period
C) The company’s employees C) Money owed by customers
D) Shareholders D) Discounts received from
suppliers
4. Which account records cash
or goods withdrawn by the 8. Closing stock at the end of an
owner for personal use? accounting period becomes:
A) Petty Cash Account A) Cash reserves for the
B) Sales Account business
C) Drawings Account B) Opening stock for the next
D) Stock Account period
C) A liability on the balance
5. Petty Cash Account is sheet
primarily used for: D) Owner’s equity
A) Large business investments
B) Minor cash transactions 9. The term "inventory" is
C) Long-term asset purchases increasingly replacing which
D) Stock purchases accounting term?
A) Assets
6. Which of the following is B) Stock
recorded in the Sales C) Sales
Account? D) Purchases
A) The value of goods sold
during an accounting period 10. Purchases in accounting
B) The sale of fixed assets generally refer to goods that
C) The purchase of inventory are:
D) Payments received from A) Bought for business use only
B) Acquired primarily for

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resale 14. Trade Creditors are similar to

C) Not meant for resale Creditor Accounts but relate
D) Long-term assets specifically to:
A) Salaries and wages
11. Which of the following would B) Long-term liabilities
NOT usually be recorded in C) Trading items or purchases
the Purchases Account? D) Fixed asset investments
A) Goods bought for resale
B) Machinery purchased for 15. Which of the following is NOT
office use part of the definition of
C) Raw materials for "Debtors"?
production A) Customers owing money to
D) Inventory items the business
B) Goods sold on credit
12. If a business buys motor cars C) Suppliers providing
for internal use, how should it inventory
be recorded? D) Credit sales recorded in the
A) Purchases Account accounts
B) Sales Account
C) Fixed Assets Account 16. Discounts allowed reduce the
D) Trade Creditors Account total amount received from:
A) Creditors
13. Goods not intended for resale B) Debtors
are recorded in: C) Employees
A) The Sales Account D) Shareholders
B) The Trade Creditors
Account 17. Which of the following
C) Separate accounts from accounts records minor office
purchases expenses like tea or coffee?
D) The Discounts Received A) Sales Account
Account B) Drawings Account
C) Petty Cash Account

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D) Purchases Account 1. C) Customers

2. C) The entity’s customers
18. Which of these transactions 3. B) The entity’s suppliers
will NOT appear in the Sales 4. C) Drawings Account
Account? 5. B) Minor cash transactions
A) Selling inventory items 6. A) The value of goods sold
B) Selling a business vehicle during an accounting period
C) Credit sales to customers 7. B) Goods unsold at the end of
D) Cash sales of goods an accounting period
8. B) Opening stock for the next
19. If a business purchases goods period
that require further 9. B) Stock
processing before being sold, 10. B) Acquired primarily for resale
these purchases: 11. B) Machinery purchased for
A) Are recorded in a separate office use
account 12. C) Fixed Assets Account
B) Are immediately counted as 13. C) Separate accounts from
sales purchases
C) Are considered owner’s 14. C) Trading items or purchases
equity 15. C) Suppliers providing inventory
D) Are treated as expenses 16. B) Debtors
17. C) Petty Cash Account
20. A supplier who provides goods 18. B) Selling a business vehicle
on credit to a business is 19. A) Are recorded in a separate
known as a: account
A) Debtor 20. B) Creditor
B) Creditor
C) Owner Multiple Choice Questions (MCQs)

D) Employee
1. Which of the following is
considered a current asset?
A) Property
B) Goodwill
Answer Key C) Inventory

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D) Long-term debt 6. Which of the following is an

example of a non-current
2. Which of the following is NOT liability?
a current asset? A) Accrued expenses
A) Accounts receivable B) Deferred revenue (non-
B) Short-term marketable current)
securities C) Accounts payable
C) Cash and cash equivalents D) Short-term marketable
D) Property securities

3. Which asset category does 7. Which of these is NOT a

"Goodwill" fall under? liability?
A) Current asset A) Long-term lease obligations
B) Non-current asset B) Accrued expenses
C) Liability C) Treasury stock
D) Revenue D) Deferred revenue

4. Non-current assets typically 8. The section of the balance

include which of the following? sheet that includes common
A) Short-term marketable stock and preferred stock is:
securities A) Assets
B) Cash and cash equivalents B) Liabilities
C) Property C) Shareholders' Equity
D) Accounts payable D) Non-current liabilities

5. Accounts payable is classified 9. Retained earnings appear

as: under which section of the
A) Current liability balance sheet?
B) Non-current liability A) Current liabilities
C) Current asset B) Shareholders' equity
D) Non-current asset C) Non-current liabilities
D) Non-current assets

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10. To balance the balance sheet, D) To increase shareholder

total assets should be value
compared with:
A) Only shareholders’ equity 14. Which of the following is NOT
B) Only total liabilities a component of current
C) Total liabilities plus liabilities?
shareholders’ equity A) Deferred revenue
D) Only non-current liabilities B) Current portion of long-
term debt
11. Which of the following is NOT C) Accounts payable
included in Shareholders’ D) Goodwill
Equity?
A) Common stock 15. Why is deferred revenue
B) Preferred stock classified as a liability?
C) Accounts payable A) It represents future cash
D) Retained earnings flow
B) It is revenue that has been
12. Which of the following is a earned but not received
long-term liability? C) It is cash received for
A) Accrued expenses goods or services yet to be
B) Accounts payable delivered
C) Long-term debt D) It increases net profit
D) Cash and cash equivalents
16. Which of these is NOT an
13. What is the purpose of asset category?
classifying liabilities as A) Current assets
current and non-current? B) Non-current assets
A) To separate assets from C) Long-term assets
liabilities D) Current liabilities
B) To differentiate between
debts payable within a year and 17. Treasury stock represents:
those payable later A) Cash reserves for future
C) To adjust tax calculations expenses

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B) Shares repurchased by the Shareholders' Equity

company C) Liabilities = Assets +
C) Long-term debt obligations Shareholders' Equity
D) Investments in government D) Shareholders' Equity =
securities Assets + Liabilities

18. Which of the following is a

characteristic of non-current
assets?
Answer Key
A) Easily convertible into cash
within a year 1. C) Inventory
B) Held for long-term use 2. D) Property
C) Recorded under current 3. B) Non-current asset
liabilities 4. C) Property
D) Used only for paying short- 5. A) Current liability
term debts 6. B) Deferred revenue (non-
current)
19. Current and non-current 7. C) Treasury stock
assets should be: 8. C) Shareholders' Equity
A) Listed separately but 9. B) Shareholders' equity
totaled together 10. C) Total liabilities plus
B) Combined into a single asset shareholders’ equity
total 11. C) Accounts payable
C) Ignored in balance sheet 12. C) Long-term debt
calculations 13. B) To differentiate between
D) Deducted from total debts payable within a year and
liabilities those payable later
14. D) Goodwill
20. The balance sheet equation 15. C) It is cash received for goods
states that: or services yet to be delivered
A) Assets = Liabilities + 16. D) Current liabilities
Shareholders' Equity 17. B) Shares repurchased by the
B) Assets = Liabilities - company

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18. B) Held for long-term use B) Intellectual property or

19. A) Listed separately but creative work
totaled together C) Business profits
20. A) Assets = Liabilities + D) Real estate investments
Shareholders' Equity
5. Which of the following is NOT
Multiple Choice Questions (MCQs) an item of expenditure?
A) Rent/Mortgage Payment
1. Which of the following is
B) Business Profits
classified as an item of
C) Loan Repayments
income?
D) Utility Bills
A) Rent/Mortgage Payment
B) Salary/Wages
6. Taxes paid to the government
C) Taxes
are classified under:
D) Depreciation
A) Investment Income
B) Depreciation
2. Income from renting out a
C) Items of Expenditure
property is known as:
D) Royalties
A) Business Profits
B) Investment Income
7. Which of these is an example
C) Rental Income
of an operating expense?
D) Royalties
A) Utility Bills
B) Rental Income
3. Income earned from
C) Investment Income
investments such as dividends,
D) Common Stock
interest, and capital gains is
called:
8. Money paid regularly to repay
A) Salary Income
loans and interest is called:
B) Rental Income
A) Investment Income
C) Business Profit
B) Loan Repayments
D) Investment Income
C) Rental Income
D) Treasury Stock
4. Royalties are earned from:
A) Physical labor

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9. What does "Depreciation" D) Assets section

refer to in accounting?
A) Increase in the value of an 13. Where is expenditure
asset over time recorded in the Income and
B) Interest earned on bank Expenditure Account?
deposits A) Debit side
C) The decrease in value of an B) Credit side
asset over time C) Capital section
D) Revenue earned from D) Revenue section
business operations
14. The Income and Expenditure
10. The Income and Expenditure Account is similar to which
Account is prepared to: financial statement?
A) Determine net assets A) Balance Sheet
B) Find surplus or deficit for B) Trading and Profit & Loss
the accounting year Account
C) Calculate tax liability C) Cash Flow Statement
D) Record capital investments D) Statement of Retained
Earnings
11. The Income and Expenditure
Account follows which basis of 15. A nominal account follows
accounting? which rule in accounting?
A) Cash basis A) Debit all incomes and credit
B) Accrual basis all expenses
C) Hybrid basis B) Debit all expenses and
D) Modified cash basis losses, credit all incomes and
gains
12. Where is income recorded in C) Debit all assets and credit
the Income and Expenditure all liabilities
Account? D) Debit and credit both
A) Debit side income and expenses equally
B) Credit side
C) Liability section

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16. Which of the following is C) Treated as an asset

included in the Income and D) Ignored in accounting
Expenditure Account?
A) Only capital items 20. Which of the following is a
B) Only revenue items fundamental principle of the
C) Both revenue and capital Income and Expenditure
items Account?
D) None of the above A) It records both capital and
revenue income
17. If the credit side of the B) It records revenue income
Income and Expenditure and expenses only
Account exceeds the debit C) It records only non-cash
side, it indicates: transactions
A) A deficit D) It includes all capital
B) A surplus transactions of the business
C) A loss
D) A liability

18. If the debit side exceeds the

Answer Key
credit side in the Income and
Expenditure Account, it 1. B) Salary/Wages
results in: 2. C) Rental Income
A) A surplus 3. D) Investment Income
B) A deficit 4. B) Intellectual property or
C) An increase in assets creative work
D) A gain in investments 5. B) Business Profits
6. C) Items of Expenditure
19. How is the surplus in the 7. A) Utility Bills
Income and Expenditure 8. B) Loan Repayments
Account treated? 9. C) The decrease in value of an
A) Deducted from the capital asset over time
fund 10. B) Find surplus or deficit for
B) Added to the capital fund the accounting year

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11. B) Accrual basis A) Cumulative Preference

12. B) Credit side Shares
13. A) Debit side B) Non-Cumulative Preference
14. B) Trading and Profit & Loss Shares
Account C) Redeemable Preference
15. B) Debit all expenses and Shares
losses, credit all incomes and D) Convertible Preference
gains Shares
16. B) Only revenue items
17. B) A surplus 3. What distinguishes
18. B) A deficit redeemable preference shares
19. B) Added to the capital fund from other preference
20. B) It records revenue income shares?
and expenses only A) They can be converted into
equity shares
Multiple Choice Questions (MCQs) B) They accumulate unpaid
dividends
1. Which of the following
C) They must be repurchased
preference shares accumulate
by the company after a set
unpaid dividends to be paid in
period
future years?
D) They do not have a fixed
A) Non-Cumulative Preference
dividend
Shares
B) Convertible Preference
4. Which type of preference
Shares
shares can be converted into
C) Redeemable Preference
equity shares after a specific
Shares
period?
D) Cumulative Preference
A) Cumulative Preference
Shares
Shares
B) Convertible Preference
2. In which type of preference
Shares
shares do unpaid dividends
C) Non-Cumulative Preference
lapse if not paid in a
Shares
particular year?

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D) Redeemable Preference D) Issued Share Capital

Shares
8. What is the "Share Premium"
5. What does "Authorized Share in the context of share
Capital" refer to? capital?
A) The number of shares A) The total amount received
actually issued to shareholders from issued shares
B) The total value of shares B) The excess amount received
that have been paid for above the face value of issued
C) The maximum number of shares
shares a company is allowed to C) The portion of shares that
issue remain unsubscribed
D) The number of shares D) The discount given on
bought back by the company preference shares

6. Which of the following 9. What is a key requirement

represents the portion of under the disclosure of share
issued share capital that has capital regulations?
been subscribed by A) Companies must keep
shareholders? shareholder information
A) Paid-up Share Capital confidential
B) Subscribed Share Capital B) Companies must disclose
C) Issued Share Capital changes in share capital
D) Share Premium structure
C) Companies must limit the
7. Which capital component number of shares issued
consists of shares that have annually
been both subscribed and paid D) Companies must restrict
for by shareholders? convertible securities to
A) Authorized Share Capital preference shareholders only
B) Paid-up Share Capital
C) Share Premium 10. Which of the following
information is NOT typically

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included in share capital shareholders. This activity

disclosure? falls under:
A) Details of share buybacks A) Share issuance
B) Outstanding convertible B) Share premium adjustments
securities C) Share buybacks
C) Company dividend policy D) Convertible securities
D) Changes in share capital
structure 14. If a company issues new
shares, buys back existing
11. Convertible preference shares shares, or converts
provide shareholders with: securities, these are
A) A fixed dividend but no classified as:
conversion rights A) Shareholder privileges
B) The right to convert their B) Equity restructuring
shares into equity after a activities
specified period C) Non-capital transactions
C) The ability to redeem D) Dividend reinvestments
shares at any time
D) The benefit of accumulating 15. What is the key difference
unpaid dividends indefinitely between issued share capital
and subscribed share capital?
12. Which term best describes a A) Issued share capital
company's obligation to includes only fully paid shares
provide share capital B) Subscribed share capital
information in financial represents only a portion of
statements? issued shares that
A) Voluntary disclosure shareholders have agreed to
B) Legal requirement purchase
C) Investor preference C) Issued share capital is
D) Shareholder's discretion always higher than subscribed
share capital
13. A company wants to buy back D) Subscribed share capital
its own shares from

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includes unissued shares be redeemed by the company

after a set period
16. Which of the following is NOT D) Preference shares do not
a reason for share capital receive fixed dividends
disclosure?
A) To help investors assess 19. Which of the following shares
company ownership structure provide voting rights similar to
B) To provide regulatory equity shares after
authorities with necessary conversion?
financial data A) Non-Cumulative Preference
C) To maintain confidentiality Shares
of shareholder details B) Convertible Preference
D) To inform stakeholders Shares
about share-related changes C) Redeemable Preference
Shares
17. What happens to surplus or D) Deferred Preference
deficit in the Income and Shares
Expenditure Account?
A) It is added or deducted 20. What does the term "share
from the Capital Fund capital restructuring"
B) It is recorded as a liability primarily refer to?
C) It is distributed as A) The process of issuing new
dividends shares or altering existing
D) It is classified as revenue share classifications
expenditure B) The adjustment of share
prices in the stock market
18. Which statement about C) The consolidation of
preference shares is TRUE? retained earnings into capital
A) All preference shares reserves
accumulate unpaid dividends D) The regulation of stock
B) Preference shares always market trading activities
convert to equity
C) Some preference shares can

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issued shares that

shareholders have agreed to
Answer Key purchase
16. C) To maintain confidentiality
1. D) Cumulative Preference
of shareholder details
Shares
17. A) It is added or deducted
2. B) Non-Cumulative Preference
from the Capital Fund
Shares
18. C) Some preference shares can
3. C) They must be repurchased
be redeemed by the company
by the company after a set
after a set period
period
19. B) Convertible Preference
4. B) Convertible Preference
Shares
Shares
20. A) The process of issuing new
5. C) The maximum number of
shares or altering existing
shares a company is allowed to
share classifications
issue
6. B) Subscribed Share Capital
7. B) Paid-up Share Capital
8. B) The excess amount received
above the face value of issued
shares
9. B) Companies must disclose
changes in share capital
structure
10. C) Company dividend policy
11. B) The right to convert their
shares into equity after a
specified period
12. B) Legal requirement
13. C) Share buybacks
14. B) Equity restructuring
activities
15. B) Subscribed share capital
represents only a portion of

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