Accounting and Finance MCQs Test 1

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 12, 2023

About This Quiz:

  • Chapter: Accounting and Finance
  • Quiz Type: Multiple choice questions (MCQs)
  • Number of MCQs: 40
  • Total Points: 40
  • Approximate Time Required: 25 – 30 minutes

1. H buys goods on credit from J. The goods are unsuitable and H returns them to J. What is the name of the document that H sends to J with the goods?
2. Why is the general journal used to correct errors in the ledger?
3. Which book of prime entry is part of the double-entry system?
4. In which of the following will cash discount allowed be first recorded?
5. A cash book has separate columns for bank and cash transactions. On 1 March, the balance in the cash account was $200. Transactions during March were:
Cash banked $30
Check drawn for cash $70
What is the balance on the cash account at the end of March?
6. A cash book (bank column) showed a balance of $1,973 (credit) on 31 March. The following items did not appear in the bank statement on that date:
Unpresented checks $942
Checks banked $865
What was the balance on the bank statement on 31 March?
7. The discount column on the debit side of the cashbook adds up to $842. It was posted to the Discount Received Account. The discount column on the credit side of the cashbook adds up to $613. It was posted to the Discount Allowed Account. Which entries correct these errors?
8. The owner of a business takes inventory for her own use. What are the ledger account entries to record this?
9. In a business's books, the ledger account of J. Brown, a customer, shows a debit balance of $450. What does this mean?
10. A suspense account was opened with a credit balance of $840. Which error caused this?
11. A truck cost $8,000. The price included $36 for petrol. The total payment of $8,000 was debited to the Truck Account. What is the effect on the income statement and balance sheet?
12. A bookkeeper mistakenly treats a capital expenditure item as revenue expenditure. What is the effect of this error?
13. X and C need to obtain two machines to make one of their products. Machines P and Q may be purchased or, if preferred, similar machines may be hired. The table below shows the details of the machines. Accounting Mcqs test All the machines will produce the same revenue each year. Which choice of machines will produce the greatest net profit in the first year?
14. A vehicle costing $20,000 is depreciated by 20% per annum on the diminishing balance method. What is the depreciation charge at the end of the second year?
15. A machine bought two years ago for $20,000 is sold for $13,000. Plant and Machinery is depreciated by 10% on cost. What is the balance on the Provision for Depreciation of Plant and Machinery Account after this sale, if provision for depreciation before this sale was $28,000?
16. What happens to the balance of the Bad Debts Account at the end of a financial year?
17. A social club's receipts and payments account for 1996 showed rent paid as $4,000. On 1 January 1996, rent owed by the club was $800. On 31 December 1996, rent owed by the club was $1,000. What is the amount charged for rent in the income and expenditure account for 1996?
18. A business rented premises to a tenant from 1 April 2018 for $10,000 a year. Rent received by the business was $5,000 on 1 May 2018 and $5,000 on 1 November 2018. In the business's income statement for the year ended 31 December 2018, what is the amount shown for rent?
19. A business allowed Smith, a customer, a cash discount of $30. This was entered correctly in the Discount Allowed Account, but omitted from Smith's account. A suspense account was opened. Which correcting entries are required to close the suspense account?
20. Which item would not appear in a sales ledger control account?
21. What is the purpose of control accounts?
22. Inventory at 31 December 2017 overstated by $6 000. What was the effect on the gross profit for the year to 31 December 2018?
23. The table shows data relating to two departments of the same business. Accounting mcqs tests Head office expenses will not be reduced by the closure of a department. Which action will result in the highest profit?
24. A Trial Balance showed: Accounting mcqs Tests The Provision is to be maintained at 5% of Trade receivables. How would the Provision be shown in the Balance Sheet?
25. A business had working capital of $6 000 at 31 January. On 2 February, trade receivables paid $1 150 in full settlement of debts $1 200, and damaged inventory costing $200 was written off. What was the working capital at close of business on 2 February?
26. How is an invoice for an expense owing shown in the Balance Sheet?
27. How are non-current assets normally recorded in a balance sheet?
28. If partners do not have any agreement, how should profits or losses be shared?
29. A manufacturer buys a machine for $20 000. Its estimated life is five years with a scrap value of $10 000. Depreciation is charged on the straight-line method. What is the percentage rate of depreciation on an annual basis?
30. Bill and Ben are in partnership sharing profit; and losses in the ratio 3:2. Bill receives a salary of $12,000 per year. The firm's net profit for the year is $52,000. What are the amounts to be credited to the partners' Current Accounts?
31. Which of the following is similar to a club's receipts and payments account?
32. The following information is taken from a sole trader's accounts: Opening Capital $12 000 Closing Capital $13 800 Net Profit $3 000 What are the trader's drawings?
33. What is a limited company's authorized capital?
34. What is the main reason for preparing a manufacturing account?
35. A manufacturing business extracts the following information from its books: Direct materials $14 000 Direct labour $11 000 Indirect expenses $4000 What is the amount of prime cost?
36. The policy of a manufacturing company is to state its profit fairly. On which basis should its inventory of finished goods is valued in its accounts?
37. A firm's sales are $100 000, the expenses are $30 000 and the net profit is $20 000. What is the gross profit as a percentage of the sales?
38. A trader made the following forecasts for the business for the next financial year: Average inventory at cost: $80 000 Rate of inventory turnover: 6 times Gross profit margin as a percentage of cost: 25% What are the forecast sales for the next financial year?
39. Business X is managed by its owner. It pays rent for its premises. Business Y owns its premises. The owner employs a manager to run the business for him. The table shows data relating to the two businesses. Accounting mcqs test Which profit figures allow a proper comparison of the two businesses to be made?
40. What is the meaning of the money measurement concept?

Accounting and Finance MCQs Test 1 FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.