100 multiple choice accounting questions with answers

This set of 100 questions provides comprehensive coverage of accounting topics, suitable for study or testing purposes.

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# 100 Multiple-Choice Accounting Questions with Detailed Answers

## **Topic 1: Basic Accounting Concepts (10 Questions)**

1 **What is the basic accounting equation?**

a) Assets = Liabilities - Equity

b) Assets = Liabilities + Equity

c) Assets + Liabilities = Equity

d) Assets - Liabilities = Equity

**Correct Answer:** b

**Explanation:** The basic accounting equation states that Assets = Liabilities + Equity, reflecting the balance between what a company owns and what it owes plus the owners' stake

2 **Which account is considered a permanent account?**

a) Revenue

b) Expenses

c) Assets

d) Dividends

**Correct Answer:** c

**Explanation:** Permanent accounts (e.g., assets, liabilities,

equity) carry their balances forward to the next period, unlike temporary accounts (e.g., revenue, expenses, dividends) which are closed at the end

of the period

3 **Which principle requires revenue to be recognized when goods are delivered or services are performed?**

a) Consistency Principle

b) Revenue Recognition Principle

c) Conservatism Principle

d) Historical Cost Principle

**Explanation:** The Revenue Recognition Principle dictates that revenue is recorded when earned, typically at the point of delivery or service completion, not necessarily when cash is received

4 **What does double-entry accounting mean?**

a) Recording each transaction twice

b) Each transaction affects at least two accounts

c) Using two ledgers

d) Recording in two languages

**Explanation:** Double-entry accounting requires that every

transaction impacts at least two accounts, with equal debits and credits, maintaining the accounting equation's balance

5 **Which of the following is a liability account?**

a) Cash

b) Accounts Receivable

c) Bank Loan

d) Equity

**Explanation:** A bank loan represents an obligation the company must repay, classifying it as a liability

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6 **What distinguishes current assets from long-term assets?**

a) Current assets have lower value

b) Current assets are used or converted to cash within one year

c) Long-term assets cannot be converted to cash

d) Current assets are not depreciated

**Explanation:** Current assets (e.g., cash, inventory) are expected

to be used or converted to cash within one year, while long-term assets (e.g., buildings) have a longer lifespan

7 **What does the historical cost principle dictate?**

a) Record assets at market value

b) Record assets at their original purchase price

c) Record assets at present value

d) Record assets at estimated value

**Explanation:** The historical cost principle requires assets to be recorded at their original cost, providing a reliable and verifiable basis

8 **Which account does not appear on the balance sheet?**

a) Cash

b) Revenue

c) Liabilities

d) Equity

**Explanation:** Revenue appears on the income statement, not the balance sheet, which shows assets, liabilities, and equity at a specific point in time

9 **What does the conservatism principle imply?**

a) Recognize revenue early

b) Delay expense recognition

c) Do not recognize profits until certain

d) Record assets at the highest value

**Explanation:** The conservatism principle advises caution,

recognizing losses or liabilities as soon as probable, but delaying profit recognition until assured

10 **Which account is part of equity in the accounting equation?**

a) Accounts Payable

b) Revenue

c) Expenses

d) Retained Earnings

**Correct Answer:** d

**Explanation:** Retained earnings, the accumulated profits kept in the business, are a component of equity, while revenue and expenses affect it indirectly through net income

-## **Topic 2: Financial Statements (15 Questions)**

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11 **Which report shows a company’s financial position at a specific point in time?**

a) Income Statement

b) Balance Sheet

c) Cash Flow Statement

d) Statement of Changes in Equity

**Explanation:** The balance sheet provides a snapshot of assets, liabilities, and equity at a given date

12 **How is gross profit calculated?**

a) Revenue - Selling Expenses

b) Revenue - Cost of Goods Sold

c) Revenue - Administrative Expenses

d) Revenue - Financing Costs

**Explanation:** Gross profit is calculated as Revenue minus Cost of Goods Sold (COGS), representing the profit before operating expenses

13 **How many main sections does the cash flow statement have?**

a) 2

b) 3

c) 4

d) 5

**Explanation:** The cash flow statement is divided into three

sections: operating, investing, and financing activities

14 **What does current assets include?**

a) Cash, inventory, accounts receivable

b) Buildings, machinery, equipment

c) Trademarks, copyrights

d) Equity, long-term debt

**Correct Answer:** a

**Explanation:** Current assets are items expected to be converted to cash or used within one year, such as cash, inventory, and receivables

15 **What are short-term liabilities?**

a) Debts due within one year

b) Debts due after one year

c) Debts with no due date

d) Debts owed to shareholders

**Explanation:** Short-term liabilities (current liabilities) are obligations due within one year, like accounts payable or short-term loans

16 **How is net profit determined?**

a) Gross profit - Selling expenses - Administrative expenses

b) Revenue - Total expenses

c) Profit before tax - Income tax expense

d) All of the above

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**Explanation:** Net profit can be calculated by subtracting all expenses from revenue or by adjusting profit before tax for taxes,

encompassing all listed methods

17 **What does the statement of changes in equity show?**

a) Changes in assets

b) Changes in liabilities

c) Changes in equity from transactions with owners and profits

d) Changes in revenue and expenses

**Explanation:** This statement tracks changes in equity, including contributions, withdrawals, and retained earnings adjustments

18 **What does the quick ratio measure?**

a) Short-term liquidity excluding inventory

b) Long-term solvency

c) Asset efficiency

d) Profitability

**Explanation:** The quick ratio (acid-test ratio) assesses a

company’s ability to pay short-term obligations without relying on

inventory sales

19 **The indirect method of the cash flow statement starts with what?** a) Net profit

b) Revenue

c) Expenses

d) Assets

**Explanation:** The indirect method begins with net profit and adjusts for non-cash items and changes in working capital to derive cash flow from operations

20 **Which intangible asset is recorded on the balance sheet?**

a) Cash

b) Inventory

c) Goodwill

d) Accounts Receivable

**Explanation:** Goodwill, an intangible asset from business

acquisitions, is reported on the balance sheet, unlike tangible assets like cash or inventory

21 **Which financial statement shows cash inflows and outflows?**

a) Balance Sheet

b) Income Statement

**Explanation:** The cash flow statement details cash movements from operating, investing, and financing activities over a period

22 **What components make up equity?**

a) Contributed capital, retained earnings, dividends

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b) Contributed capital, retained earnings, reserves

c) Contributed capital, liabilities, assets

d) Contributed capital, revenue, expenses

**Explanation:** Equity typically includes contributed capital (from owners), retained earnings, and reserves or other equity funds

23 **Which cost does not appear on the income statement?**

a) Selling expenses

b) Administrative expenses

c) Depreciation expense

d) Cost of purchasing fixed assets

**Explanation:** The cost of fixed assets is capitalized on the balance sheet, not expensed on the income statement, unlike operating costs

24 **What does the debt-to-equity ratio measure?**

a) Profitability

b) Capital structure

c) Operational efficiency

d) Liquidity

**Explanation:** The debt-to-equity ratio (Total Debt / Equity) indicates the proportion of debt financing relative to equity, reflecting capital structure

25 **Which financial statement is needed to calculate the profit margin?

**

a) Balance Sheet

b) Income Statement

**Explanation:** Profit margin (Net Profit / Revenue) requires data from the income statement, which provides profit and revenue figures

-## **Topic 3: Journal Entries and Ledger Accounts (15 Questions)**

26 **What is the journal entry for a credit sale?**

a) Debit Cash, Credit Revenue

b) Debit Accounts Receivable, Credit Revenue

c) Debit Revenue, Credit Accounts Receivable

d) Debit Inventory, Credit Revenue

**Explanation:** A credit sale increases Accounts Receivable (Debit) and Revenue (Credit) since payment is deferred

27 **Which account records prepaid expenses?**

a) Prepaid Expenses

b) Operating Expenses

c) Fixed Assets

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d) Accounts Payable

**Explanation:** Prepaid expenses, an asset, represent payments made

in advance for future goods or services

28 **What is the entry when cash is received from a receivable?**

a) Debit Cash, Credit Accounts Receivable

b) Debit Accounts Receivable, Credit Cash

c) Debit Cash, Credit Revenue

d) Debit Revenue, Credit Accounts Receivable

**Explanation:** Receiving cash reduces Accounts Receivable (Credit) and increases Cash (Debit), with no revenue impact

29 **What is the purpose of a journal?**

a) Record transactions chronologically

b) Summarize account balances

c) Prepare financial statements

d) Calculate taxes

**Explanation:** Journals record transactions in chronological order

as the first step in the accounting process

30 **What is the entry for purchasing inventory with cash?**

a) Debit Inventory, Credit Cash

b) Debit Cash, Credit Inventory

c) Debit Inventory, Credit Accounts Payable

d) Debit Accounts Payable, Credit Cash

**Explanation:** Purchasing inventory increases Inventory (Debit) and decreases Cash (Credit)

31 **What shape does a T-account have?**

a) T-shape

b) U-shape

c) X-shape

d) O-shape

**Explanation:** A T-account is shaped like a “T,” with debits on the left and credits on the right

32 **What is the entry for recording payroll expense?**

a) Debit Payroll Expense, Credit Cash

b) Debit Payroll Expense, Credit Wages Payable

c) Debit Wages Payable, Credit Payroll Expense

d) Debit Cash, Credit Payroll Expense

**Explanation:** If unpaid, payroll expense increases Payroll Expense (Debit) and Wages Payable (Credit); if paid, Cash is credited

33 **What is a ledger?**

a) A record of transactions by date

b) A collection of all accounts and their balances

c) A tool for preparing financial statements

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d) A tax record

**Explanation:** The ledger compiles all accounts and their balances, summarizing journal entries

34 **What is the entry for receiving a cash bank loan?**

a) Debit Cash, Credit Equity

b) Debit Cash, Credit Loan Payable

c) Debit Loan Payable, Credit Cash

d) Debit Equity, Credit Cash

**Explanation:** A loan increases Cash (Debit) and Loan Payable (Credit), a liability

35 **Which account is typically credited when revenue is recorded?** a) Cash

b) Accounts Receivable

c) Revenue

d) Both a and b

**Explanation:** Revenue is credited when earned, with Cash or

Accounts Receivable debited depending on payment timing

36 **What is the entry for paying a supplier?**

a) Debit Accounts Payable, Credit Cash

b) Debit Cash, Credit Accounts Payable

c) Debit Inventory, Credit Cash

d) Debit Accounts Payable, Credit Inventory

**Explanation:** Paying a supplier reduces Accounts Payable (Debit) and Cash (Credit)

37 **How are expense accounts recorded?**

a) Increased with a debit

b) Increased with a credit

c) Unchanged

d) Depends on the expense type

**Explanation:** Expenses increase with debits, reducing equity through the income statement

38 **What is the entry for recording depreciation?**

a) Debit Depreciation Expense, Credit Fixed Assets

b) Debit Fixed Assets, Credit Depreciation Expense

c) Debit Depreciation Expense, Credit Accumulated Depreciation

d) Debit Accumulated Depreciation, Credit Depreciation Expense

**Explanation:** Depreciation increases Depreciation Expense (Debit) and Accumulated Depreciation (Credit), a contra-asset account

39 **What is the purpose of a subsidiary ledger?**

a) Record detailed transactions for specific accounts

b) Summarize all accounts

c) Prepare financial statements

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d) Record taxes

**Explanation:** Subsidiary ledgers provide detailed tracking (e.g., individual customer receivables) supporting the general ledger

40 **What is the entry for issuing stock for cash?**

a) Debit Cash, Credit Common Stock

b) Debit Common Stock, Credit Cash

d) Debit Revenue, Credit Common Stock

**Explanation:** Issuing stock increases Cash (Debit) and Common Stock (Credit), an equity account

-## **Topic 4: Adjusting Entries (10 Questions)**

41 **What is the adjusting entry for unpaid wages?**

a) Debit Wages Expense, Credit Wages Payable

b) Debit Wages Payable, Credit Wages Expense

c) Debit Cash, Credit Wages Expense

d) Debit Wages Expense, Credit Cash

**Explanation:** Unpaid wages increase Wages Expense (Debit) and Wages Payable (Credit) at period-end

42 **How is prepaid rent adjusted at the end of the period?**

a) Debit Rent Expense, Credit Prepaid Rent

b) Debit Prepaid Rent, Credit Rent Expense

c) Debit Cash, Credit Rent Expense

d) No adjustment needed

**Explanation:** The used portion of prepaid rent is transferred to Rent Expense (Debit) from Prepaid Rent (Credit)

43 **What is the adjusting entry for unearned revenue when earned?** a) Debit Revenue, Credit Unearned Revenue

b) Debit Unearned Revenue, Credit Revenue

d) Debit Revenue, Credit Cash

**Explanation:** When unearned revenue is earned, it decreases

Unearned Revenue (Debit) and increases Revenue (Credit)

44 **How is depreciation of fixed assets recorded?**

a) Debit Depreciation Expense, Credit Fixed Assets

b) Debit Depreciation Expense, Credit Accumulated Depreciation

c) Debit Accumulated Depreciation, Credit Depreciation Expense

d) Debit Fixed Assets, Credit Depreciation Expense

**Explanation:** Depreciation increases Depreciation Expense (Debit) and Accumulated Depreciation (Credit)

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45 **What is the adjusting entry for accrued interest receivable?** a) Debit Interest Receivable, Credit Interest Revenue

b) Debit Interest Revenue, Credit Interest Receivable

c) Debit Cash, Credit Interest Revenue

d) Debit Interest Revenue, Credit Cash

**Explanation:** Accrued interest increases Interest Receivable (Debit) and Interest Revenue (Credit) when earned but not yet received

46 **How is prepaid insurance adjusted?**

a) Debit Insurance Expense, Credit Prepaid Insurance

b) Debit Prepaid Insurance, Credit Insurance Expense

c) Debit Cash, Credit Insurance Expense

d) No adjustment needed

**Explanation:** The used portion of prepaid insurance is moved to Insurance Expense (Debit) from Prepaid Insurance (Credit)

47 **What is the adjusting entry for ending inventory in a periodic system?**

a) Debit Inventory, Credit Cost of Goods Sold

b) Debit Cost of Goods Sold, Credit Inventory

c) Debit Inventory, Credit Revenue

d) Debit Revenue, Credit Inventory

**Explanation:** In a periodic system, ending inventory reduces Cost

of Goods Sold (Debit) and increases Inventory (Credit)

48 **How is deferred revenue adjusted when earned?**

a) Debit Unearned Revenue, Credit Revenue

b) Debit Revenue, Credit Unearned Revenue

d) Debit Revenue, Credit Cash

**Explanation:** Earned deferred revenue decreases Unearned Revenue (Debit) and increases Revenue (Credit)

49 **What is the adjusting entry for accrued interest expense?**

a) Debit Interest Expense, Credit Interest Payable

b) Debit Interest Payable, Credit Interest Expense

c) Debit Cash, Credit Interest Expense

d) Debit Interest Expense, Credit Cash

**Explanation:** Accrued interest increases Interest Expense (Debit) and Interest Payable (Credit) when incurred but unpaid

50 **What is the purpose of adjusting entries at period-end?**

a) Update account balances for accuracy

b) Close temporary accounts

c) Prepare for the next accounting period

d) All of the above

**Explanation:** Adjusting entries ensure accounts reflect true financial positions by recognizing accrued or deferred items

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-## **Topic 5: Closing Entries (10 Questions)**

51 **What is the purpose of closing entries?**

a) Adjust account balances

b) Transfer temporary account balances to permanent accounts

c) Record new transactions

d) Prepare financial statements

**Explanation:** Closing entries move balances from temporary

accounts (e.g., revenue, expenses) to permanent accounts (e.g., retained earnings)

52 **What is the closing entry for revenue?**

a) Debit Revenue, Credit Retained Earnings

b) Debit Retained Earnings, Credit Revenue

c) Debit Revenue, Credit Income Summary

d) Debit Income Summary, Credit Revenue

**Explanation:** Revenue is closed to Income Summary (Credit) by debiting Revenue, summarizing the period’s earnings

53 **Which account does not require closing at period-end?**

a) Revenue

b) Expenses

c) Dividends

d) Cash

**Explanation:** Cash, a permanent account, carries its balance forward, unlike temporary accounts that are closed

54 **What is the closing entry for expenses?**

a) Debit Expenses, Credit Income Summary

b) Debit Income Summary, Credit Expenses

c) Debit Retained Earnings, Credit Expenses

d) Debit Expenses, Credit Retained Earnings

**Explanation:** Expenses are closed to Income Summary (Debit) by crediting Expenses, aggregating costs for the period

55 **What is the balance of temporary accounts after closing?**

a) Zero

b) Equal to the beginning balance

c) Equal to net profit

d) Equal to total revenue

**Explanation:** Closing entries reset temporary accounts to zero for the next period

56 **What is the entry to close net profit from Income Summary to

Retained Earnings?**

a) Debit Income Summary, Credit Retained Earnings

Tiêu đề	100 multiple-choice accounting questions with detailed answers
Trường học	Standard University
Chuyên ngành	Accounting
Thể loại	tài liệu
Thành phố	standard city

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