MCQ Collection
Accounting and Finance MCQs
Practice Accounting and Finance questions with answers and explanations.
Choose an option to check your answer.
A.
Income statement
B.
Trial balance
C.
General ledger
D.
Statement of cash flows
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Correct Answer: D. Statement of cash flows
Explanation:
The cash flow statement explains changes in cash and cash equivalents.
Choose an option to check your answer.
A.
Cash paid in advance for a future expense
B.
Revenue received in advance
C.
An asset purchased for cash
D.
An expense incurred but not yet paid or recorded
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Correct Answer: D. An expense incurred but not yet paid or recorded
Explanation:
Accrued expenses create both an expense and a liability.
Choose an option to check your answer.
A.
A calculation of gross profit
B.
A method of valuing inventory
C.
An audit opinion
D.
A comparison of the cash book with the bank statement
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Correct Answer: D. A comparison of the cash book with the bank statement
Explanation:
Bank reconciliation explains timing differences and errors between records.
Choose an option to check your answer.
A.
A present economic resource controlled by an entity
B.
A present obligation to transfer resources
C.
An owner's withdrawal
D.
A decrease in equity from expenses only
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Correct Answer: A. A present economic resource controlled by an entity
Explanation:
An asset is a resource expected to provide economic benefits.
Choose an option to check your answer.
A.
A payment made before the related benefit is consumed
B.
An unpaid expense
C.
Revenue earned but not received
D.
A bad debt
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Correct Answer: A. A payment made before the related benefit is consumed
Explanation:
A prepayment is initially recorded as an asset.
Choose an option to check your answer.
A.
A check recorded by the business but not yet cleared by the bank
B.
A bank fee not recorded by the business
C.
A deposit already recorded by both parties
D.
Interest earned and recorded
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Correct Answer: A. A check recorded by the business but not yet cleared by the bank
Explanation:
Outstanding checks reduce the book balance but have not yet reduced the bank statement balance.
Choose an option to check your answer.
A.
A future plan with no obligation
B.
A present obligation arising from past events
C.
An owner's investment
D.
A revenue account
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Correct Answer: B. A present obligation arising from past events
Explanation:
A liability requires the entity to transfer an economic resource.
Choose an option to check your answer.
A.
Revenue earned but not collected
B.
Cash received before goods or services are provided
C.
A capital contribution
D.
An accrued expense
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Correct Answer: B. Cash received before goods or services are provided
Explanation:
Unearned revenue is a liability until the performance obligation is fulfilled.
Choose an option to check your answer.
A.
A bank loan
B.
A deposit recorded by the business but not yet shown by the bank
C.
A bounced customer check
D.
An unrecorded bank charge
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Correct Answer: B. A deposit recorded by the business but not yet shown by the bank
Explanation:
Deposits in transit increase the book balance before appearing on the bank statement.
Choose an option to check your answer.
A.
Total revenue less expenses only
B.
Cash plus inventory
C.
The residual interest in assets after deducting liabilities
D.
All long-term debt
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Correct Answer: C. The residual interest in assets after deducting liabilities
Explanation:
Equity is the owners' residual claim on net assets.
Choose an option to check your answer.
A.
Cash collected before earning revenue
B.
A future expense
C.
Revenue earned but not yet received or recorded
D.
A decrease in inventory
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Correct Answer: C. Revenue earned but not yet received or recorded
Explanation:
Accrued revenue creates a receivable and revenue.
Choose an option to check your answer.
A.
To close bank accounts
B.
To record daily sales
C.
To transfer temporary account balances to equity and reset them
D.
To prepare purchase orders
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Correct Answer: C. To transfer temporary account balances to equity and reset them
Explanation:
Revenue, expense, and drawings accounts are temporary.
