OBJECTIVE QUESTIONS [UNIT-1] Multiple Choice Questions 1. A profit making business that is a separate legal entity and in which ownership is in the form of shares is known as : (a) Sale proprietorship (b) Trust (c) Partnership (d) Company 2. The properties owned by a business enterprise are called : (a) Assets (b) Liabilities (c) Capital (d) Owner's equity 3. A list of assets, liabilities and owner's equity of a business enterprise as of a specific date is : (a) Balance Sheet (b) Income Statement (c) Cash flow Statement (d) None of the above 4. Which of the following is an important is reason for studying accounting? (a) The information provided by accounting is useful in making many economic decisions. (b) Accounting plays an important role in society. (c) The study of accounting could lead to a challenging career (d) All of the above are important reasons 5. Which of the following groups uses accounting information for planning a company's profitability? (a) Investors (b) Creditors (c) Management (d) Regulatory agencies
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OBJECTIVE QUESTIONS
[UNIT-1]
Multiple Choice Questions
1. A profit making business that is a separate legal entity and in which ownership is in the
form of shares is known as :
(a) Sale proprietorship (b) Trust
(c) Partnership (d) Company
2. The properties owned by a business enterprise are called :
(a) Assets (b) Liabilities
(c) Capital (d) Owner's equity
3. A list of assets, liabilities and owner's equity of a business enterprise as of a specific date
is :
(a) Balance Sheet (b) Income Statement
(c) Cash flow Statement (d) None of the above
4. Which of the following is an important is reason for studying accounting?
(a) The information provided by accounting is useful in making many economic decisions.
(b) Accounting plays an important role in society.
(c) The study of accounting could lead to a challenging career
(d) All of the above are important reasons
5. Which of the following groups uses accounting information for planning a company's
profitability?
(a) Investors (b) Creditors
(c) Management (d) Regulatory agencies
6. Economic events that effect the financial position of a business are called:
(a) Separate entities (b) Business transactions
(c) Money measures (d) Financial actions
7. Which of the following forms of organization is not treated as a separate economic unit in
accounting?
(a) Sale proprietorship (b) Committee
(c) Partnership (d) Company
8. If a company has liabilities of Rs. 19,000 and owner's equity of Rs. 57,000, the assets of
the company are :
(a) Rs. 38,000 (b) Rs. 76,000
(c) Rs. 57,000 (d) Rs. 19,000
9. The payment of a liability will :
(a) Increase both assets and liabilities (b) Increase assets and decrease
liabilities
(c) Decrease assets and increase liabilities (d) Decrease assets and decrease
liabilities
9. The payment of a liability will :
(a) Increase both assets and liabilities (b) Increase assets and decrease
liabilities
(c) Decrease assets and increase liabilities (d) Decrease assets and decrease
liabilities
10. The purchase of an asset for cash will :
(a) Increase both assets at the same time (b) Increase both assets and liabilities
(c) Decrease assets and owner's equity (d) Increase assets and decrease
liabilities
11. The balance sheet is related to the income statement is the same way that :
(a) A point in time is related to a period of time
(b) A period of time is related to a point in time.
(c) A point in time is related to another point in time.
(d) A period of time is related to another period of time.
12. Expenses and withdrawals appear, respectively, on which of the following financial
statements?
(a) Balance sheet and Income Statement (b) Income statement and Balance Sheet
(c) Statement of owner's equity and balance sheet
(d) Income statements and Statement of owner's equity
13. Which of the following types of accounts should be completely independent of the firm
organization whose financial data is being exacted?
(a) Controller (b) Chartered accountant
(c) Internal auditor (d) Firm's budget direction
14. The accounting principle of matching is best demonstrated by:
(a) Not recognizing any expense unless some revenue is realized
(b) Associating effort with accomplishment
(c) Recognizing prepaid rest received as revenue.
(d) Establishing a reserve for possible future market decline in inventory account
15. Which of the following cost items would be matched with correct revenues as a basis
other other than association of cause and effect?
(a) Goodwill (b) Sales commission
(c) Cost of goods sold (d) Purchases on credit.
16. The immediate recognition of loss is supported by the underlying principle of :
(a) Matching (b) Consistency
(c) Judgement (d) Conservation
17. The entity posulate :
(a) Refers to the name of the company required in the heading of the balance sheet
(b) Refers to the owner's of the entity, who must account for their interest in the entity in
their
personal holdings.
(c) Indicates that the accounting unit as which the financial reports are based is the business
is
made up of many separate from its owners.
(d) Holds that the business is made up of many separate components that are accounted for
separately but reported collectively in the financial statements
18. The time period postulate:
(a) Refers to the limited life of a joint venture
(b) Suggests that companies need to prepare financial reports on a periodic basic, when all
operating cycles are complete.
(c) Suggestion that companies prepare financial reports on the basis of a systematic time
internal,
even though the operating cycles of the entity may be incomplete.
(d) Refers to the fact that adjusting entries must be made before financial statements are
prepared
periodically.
19. The valuation of a promise to receive cash in the future at present value on the financial
statements of a business entity is valid by virtue of which accounting postulate on
principle?
(a) Entity (b) Materiality
(c) Matching (d) Going concern
20. The determination of the exposes for as accounting period is based largely on the
application is which principle?
(a) Cost (b) Consistency
(c) Matching (d) Time period
21. A sle proprietor decided to use the same book account for his personal affairs as for his
business. Which of the following accounting principle is violated?
(a) Going concern (b) Entity
(c) Measuring (d) Objectivity
22. Generally accepted accounting principles:
(a) Define accounting practice at a point in time
(b) Are similar in nature to the principles of chemistry or phyics.
(c) Are rarely charged. (d) Are not effected by charges in the way business
operate
23. Assigning revenues to the accounting period in which the goods were delivered on the
services performed and expresses to the accounting period in which they were used to
produce revenues is known as the :
(a) Accounting period problem (b) Continuity assumption
(c) Matching rule (d) Recognition
24. The prime function of accounting is to :
(a) Record economic data (b) Provide the international basis for action
(c) Classifying and recording business transaction (d) Attain non-economic goals
25. The basis function of financial accounting is to :
(a) Record all business transactions (b) Interpret the financial data
(c) Assist the management in performing function effectively
26. Management accounting provides invaluable services & management in performing:
(a) All management functions (b) Interpret the financial data
(c) Contouring functions
27. Book-keeping is mainly concerned with :
(a) Recording of financial data relative to business operation
(b) Designing the systems in recording classifying, summarizing the recorded data
(c) Interpreting the data for internal and external end users.
28. Accounting principles are generally based on :
(a) Practicability (b) Subjectinity
(c) Convenience in recording
29. The system of recording transactions bases an dual aspect concept is called:
(a) Double account system (b) Double entry system
(c) Single entry system
30. The practice of appending notes regarding contigent liasilies:
(a) Convention of consistency (b) Money measurement concept
(c) Convention of conservation (d) Convention of disclosure
31. According to the money measurement concept, the following will be recorded in the basis
of account of the business :
(a) Health of managing direction of the company
(b) Quality of company's goods
(c) Value of plant and Machinery
32. The convention of conservatism is applicable
(a) In providing for discount an creditors
(b) In making provision for bad and doubtful debts.
(c) Providing for depreciations.
33. The convention of conservatism, when applied to the balance sheet, results in :
(a) Understatement of assets (b) Understatement of liabilities
(c) Overstatement of capital
34. Revenue is usually recognized as earned at the point of time
(a) Production is done (b) Sale is made
(c) Cash is obtained
35. Contigent liability as shown in the balance sheet, arises out of :
(a) Consisting of convention (b) Disclosure convention
(c) Materiality convention
36. The policy of 'Recognize all losses and anticipate no gains" arises outline to :
23) Cost price of goods which is taken out from the business by its owner for his personal
use should be debited : to
(a) Sales account (b) Capital account
(c) Drawings account
24) Cost of materials consumed plus direct expenses plus direct labour indicates:
(a) Net works cost (b) Gross work cost
(c) Prime cost
25) Good will is :
(a)Tangible (b) Currents assets
(c) Intangible
26) Fixed assets are :
(a) For resale
(b) Retained in the business for use over a long time for earning income
(c) For conversion into cash as early as possible
27) Gross profit is represented by the difference between
a) Sales and purchases (b) Sales and cost of sales
(c) Sales and total expenses
28) A contingent liability:
(a) Is usually associated with operating loss carry forwards
(b) Definitely exists as a liabilities but its amount and/or due date is not definitely known
(c) as almost probable value of zero but may need to be paid if a gives future even occurs
29) Which one is the Capital Expenditure? a] Capital invested by the owner b] Selling expense for machine c] Machine purchased d] Daily expenses to operate business
30) If capital expense is recorded as revenue expense then which calculation will be wrong? a] Bank balance b] Debtors c] Creditors d] Net profit
31) Capital expenditure – a) Car purchased for sale b) Machine purchased for business use c) Road tax and insurance premium of delivery van
32) Sale of machine of machine merchandising business – a] Capital receipt b] Capital income c] Revenue income d] Revenue receipt
33) Ramjan Mia import goods for his business. Import duty of goods is – a] Capital expenditure b] Revenue expenditure c] Non-trading expenditure d] Revenue income
34) Shukomol Borua purchased a land for his business. He paid tk.5,000 for land’s .This registration expenses is – a] Revenue expenditure b] Capital expenditure c] It can be both capital and revenue expenditure d] Deferred revenue expenditure
35) In comprehensive income statement we record - a)Revenue receipt b) Revenue income c) Capital expenditure
36) In statement of financial position we record a) Capital receipt b) Revenue expenditure c) Deferred Revenue expenditure
37) What type of transaction is Freight in word- [a] Revenue [b] Capital [c] Deferred revenue [d] Operating
38) Deferred Revenue expenditure ---- a) Paid tk.1,00,000 to Adv. Firm for publicity of goods for 3 years b) Paid rent in advance for 3 months tk.15,000 c) Cost of Business transfer cost tk.25,000 from Dhanmondi to Motijheel 39) Amount spent tk.45,000 of Plabon Voumik considered as - a) Capital receipt b) Capital expenditure c) Deferred Revenue expenditure
40) What was the total amount of depreciation charged in 4 years? [a] tk. 15,000 [b] tk. 16,000 [c] tk. 20,000 [d] tk. 21,000
41) The difference between selling price and present book value of machinery is called. [a] Capital income [b] Revenue income [c] Revenue receipt [d] Capital receipt
1. Which of the following is a nominal account?a. Prepaid Insuranceb. Unearned Revenuec. Insurance Expensed. Interest Receivable
2. Which of the following errors will cause an imbalance in the trial balance?a. Omission of a transaction in the journalb. Posting an entire journal entry twice to the ledgerc. Posting a credit of $ 720 to Accounts Payable as a credit of $ 720 to Accounts
Receivable.d. Listing the balance of an account with a debit balance in the credit column of
the trial balance.
3. Which of the following statements is associated with the accrual basis of accounting?a. The timing of cash receipts and disbursements is emphasized.b. A minimum amount of record keeping is required.c. This method is used less frequently by businesses than the cash method of
accounting.d. Revenues are recognized in the period they are earned, regardless of the time
period the cash is received.
4. An accrued expense is an expense that:a. Has been incurred but has not been paid.b. Has been paid but has not been incurred.c. Has been incurred for which payment is to be made in installments.d. Will never be paid.
5. In reviewing some adjusting entries, you observe an entry which contains a debit to Prepaid Insurance and a credit to Insurance Expense. The purpose of this journal entry is to record a(n):a. Accrued expenseb. Deferred expensec. Expired Costd. Prepaid Revenue
6. An adjusting entry to record an accrued expense involves a debit to a (n):a. Expense account and a credit to a prepaid accountb. Expense account and a credit to cash.c. Expense account and a credit to a liability account
d. Liability account and a credit to an expense account.
7. The failure to properly record an adjusting entry to accrue an expense will result in an:a. Understatement of expenses and an understatement of liabilitiesb. Understatement of expenses and an overstatement of liabilitiesc. Understatement of expenses and an overstatement of assetsd. Overstatement of expenses and an understatement of assets.
8. Which of the following properly describes a deferral?a. Cash is received after revenue is earned.b. Cash is received before revenue is earned.c. Cash is paid after expense is incurredd. Cash is paid in the same period that an expense is incurred.
9. An adjusting entry to allocate a previously recorded asset to expense involves a debit
to an:a. Asset account and a credit to cash.b. Expense account and a credit to cashc. Expense account and a credit to an asset account.d. Asset account and a credit to an expense account.
10. Which of the following adjusting entries will cause an increase in revenues and a decrease in liabilities?a. Entry to record an accrued expenseb. Entry to record an accrued revenuec. Entry to record the consumed portion of an expense paid in advance and initially
recorded as an asset.d. Entry to record the earned portion of revenue received in advance and
initially recorded as unearned revenue.
11. The failure to properly record an adjusting entry to accrue a revenue item will result in an:a. Understatement of revenues and an understatement of liabilitiesb. Overstatement of revenues and an overstatement of liabilitiesc. Overstatement of revenues and an overstatement of assets.d. Understatement of revenues and an understatement of assets.
12. The failure to properly record an adjusting entry for the expiration of insurance coverage will result in an (assume the account Prepaid Insurance) was charged when the premiums were paid.):a. Overstatement of assets and an overstatement of owners’ equity.b. Understatement of assets and an understatement of owners’equity.c. Overstatement of assets and an overstatement of liabilitiesd. Overstatement of liabilities and an understatement of owners’equity.
13. The omission of the adjusting entry to record depreciation expense will result in an:a. Overstatement of assets and an overstatement of owners’ equity.b. Understatement of assets and an understatement of owners’ equity.c. Overstatement of assets and an overstatement of liabilitiesd. Overstatement of liabilities and an understatement of owners’ equity.
14. An auditor is examining an adjusting entry that reduces liabilities and increases owners’ equity. Which of the following adjusting entries could that be?a. Entry to record an accrued revenue.b. Entry to record the earned portion of revenue received in advance and
previously recorded as Unearned Rent Revenue.c. Entry to record an accrued expense.d. Entry to record the expired portion of expense paid in advance and previously
recorded as Prepaid Expense.e. Entry to record bad debts expense.
15. The Office Supplies on Hand account had a balance at the beginning of year 3 of $ 1,600. Payments for acquisitions of office supplies during year 3 amounted to $ 10,000 and were recorded by a debit to the asset account. A physical count at the end of year 3 revealed supplies costing $ 1,900 were on hand. The required adjusting entry at the end of year 3 will include a debit to:
a. Office supplies expense for $ 300b. Office supplies on hand for $ 300c. Office supplies expense for $ 9,700d. Office supplies on hand for $ 1,900
16. The book value of a piece of equipment is the :a. Original cost of the equipment.b. Current replacement cost of the used equipment.c. Current market value of the used equipment.d. Difference between the original cost of the equipment and its related
accumulated depreciation.
17. The purpose of recording closing entries is to:a. Reduce the number of nominal accounts.b. Enable the accountant to prepare the financial statements at the end of an
accounting period.c. Prepare revenue and expense accounts for recording the next period’s
revenues and expenses.d. Establish new balances in some asset and liability accounts.
18. If ending accounts receivable exceeds beginning accounts receivable:a. Cash collections during the period exceed the amount of revenue earned.
b. Net income for the period is less than the amount of cash basis income.c. No cash was collected during the period.d. Cash collections during the year are less than the amount of revenue earned.
19. What is the purpose of making a provision for depreciation in the accounts?
A. To make a provision for repairs
B. To make cash available to replace fixed assets
C. To show the current market value of fixed asset
D. To charge the cost of fixed assets against profits
20. What is depreciation?
A. The residual value of a fixed asset plus its original cost
B. The cost of a replacement for a fixed asset
C. The cost of an asset wearing away
D. The part of the cost of the fixed asset consumed during the period of use by the business
21. What is ignored in the computation of depreciation of a fixed asset?
A. its length of expected useful economic life to the business
B. its cost
C. its cost of repairs
D. its estimated residual value at the end of its useful life in the business
22. What does it mean by the yearly method of depreciation
A. No depreciation in the year of purchase and full year's depreciation in year of sale
B. Full year's depreciation in year of purchase and no depreciation in y
C. Full year's depreciation in year of purchase and sale
D. Monthly depreciation in year of purchase and sale
23. In the accounting records, the fixed assets are normally recorded
A. At cost
B. At book value
C. At scrap value
D. At replacement value
24. Salvage value means
A. cash to be paid when asset is disposed off
B. estimated disposal value
C. definite sale price of the asset
D. cash to be received when life of the asset ends
25. Depreciation follows which accounting concept
A. Historical cost concept
B. Matching concept
C. Money measurement concept
D. Going concern concept
26. Which of the following is not a method of depreciation?
A. Revaluation
B. Reducing balance
C. Replacement method
D. Straight line
27. What method do we use for depreciating tools, crates
A. Diminishing balance method
B. Revaluation method
C. Straight line method
D. Reducing balance method
28. Which item may be included in a Balance Sheet at more than historical cost
A. Work-in-progress
B. Goodwill
C. Research expenditure
D. Land and Building
29. In Straight line method of depreciation, which is excluded
A. Useful life of the assets
B. Cost of the assets
C. Annual cost of repairs
D. Expected salvage value
30. A motor van was bought for 20,000 on 1 September 2005 with a residual value of
2,000. Depreciation was charged at 20% by the reducing balance method on yearly basis. It
was sold for 18,000 after three years of use on 30 September 2008.
Compute the profit on sale of asset.
A. 7,760
B. 505
C. 5,201
D. 990
31. A fixed asset cost $100,000, had a book value of $40,000. It was sold for $10,000.
What is the provision for depreciation sold?
A. 30,000
B. 60,000
C. 10,000
D. 50,000
32. A company is exploring the impact of the two method of depreciation. On 1 January, it
bought machinery for $15,000. The methods are (i) straight line where useful life is 4 years
and residual value is $2,000 and (ii) Reducing balance method -at the rate of 20% per
annum. Show how the company's profit be affected if the straight line method is used
rather than the reducing method?
A. Profit increased by $250
B. Profit increased by $300
C. Profit decreased by $500
D. Profit decreased by $1,100
33. The cost of the fixed asset is $100,000, provision for depreciaiton is $10,000, depreciating
on charge for the year are $2,000. Show the net book value of the fixed asset in the
Balance sheet
A. 74,000
B. 55,000
C. 24,000
D. 78,000
34. A machine was bought for $100,000. Its estimated useful life is four years with a residual
value of $10,000. Depreciation is charged on the straight line method. What is the
percentage of depreciation rate on an annual basis?
A. 15%
B. 22.50%
C. 35%
D. 25%
35. What is depreciation?
A) Cost of a fixed asset
B) Cost of a fixed asset’s repair
C) The residual value of a fixed asset
D) Portion of a fixed asset’s cost consumed during the current accounting period
36. Under which depreciation method the amount of depreciation expenses remains same throughout the