Financial Accounting Questions Answers Quiz

Below is Multiple choice type Financial accounting quiz with questions and answer options given above and answers given in the quiz answer key below. Feel free to share with friends if you find it useful.
  1. Which of the following would not be regarded as an asset ?
    1. A piece of equipment owned by a business
    2. A sum of money owed to the business
    3. An inventory of goods that have yet to be sold
    4. A building that has been rented for use by the business
  2. A building is purchased using cash for use by the business. Which of these would represent the entry for the transaction ?
    1. Debit a liability accountCredit an expense account
    2. Debit the bank accountCredit an expense account
    3. Debit an asset accountCredit an asset account
    4. Debit an asset accountCredit a sales account
  3. A business sells goods on credit. Which of the following statements are true ?
    1. A sale has not been made because the business has not been paid.
    2. The business owes money for the sale.
    3. The business is owed money from the sale.
    4. The liabilities of the business have increased.
  4. The owner of a business starts up using $5000 of her own money. The entry of this transaction is best shown as:
    1. A debit to an asset account and a credit to an expense account.
    2. A credit to a purchase account and a debit to a sales account.
    3. A debit to a liability account and a credit to an asset account.
    4. A credit to a capital account and a debit to an asset account
  5. Which of the following is true about a partnership ?
    1. All partners have invested an equal amount of capital.
    2. All partners are personally liable for the debts of the business.
    3. Partnerships do not get favourable tax treatment compared to corporations.
    4. A partnership requires at least three people.
  6. Select the correct word that describes the amount by which expenses exceed revenues.
    1. retained earnings
    2. assets
    3. cost principle
    4. net loss
  7. What is the correct accounting name given to distributions of cash or other assets from an incorporated business to its shareholders ?
    1. Drawings
    2. Business perks
    3. Dividends
    4. Bonuses
  8. What is the correct accounting name given to the net income which is kept in a corporation for future use and not distributed to shareholders ?
    1. Additional assets
    2. Reserve assets
    3. Preference shares
    4. Retained earnings
  9. Jolly Roger is owed $1000 by Buck O'Nere for lead shot that he has supplied. The figure of $1000 should be recorded as:
    1. A credit of $1000 to purchases.
    2. A debit of $1000 to sales
    3. A credit of $1000 to accounts receivable.
    4. A debit of $1000 to accounts receivable.
  10. What is owned by a business and used in carrying out its operating activities is best described as:
    1. Liabilities.
    2. Purchases.
    3. Revenues.
    4. Assets
  11. A financial statement to show what a business owes and owes at a particular point in time is:
    1. A cash flow statement.
    2. the bank statement for the business.
    3. A balance sheet.
    4. A statement of retained earnings.
  12. Jolly Roger sells $500 of red wine to the Flamingo Bar and is paid by check. The correct entry to the accounts is:
    1. Debit the purchases account with $500 and the sales account with $500
    2. Debit the sales account with $500 and the bank account with $500
    3. Debit the bank account with $500 and credit the sales account with $500
    4. Debit the bank account with $500 and the sales account with $500
  13. Buck O'Nere receives a bill (invoice) for use of his mobile phone. The correct entry for recording the liability of the bill is:
    1. Debit the telephone account and credit the bank account.
    2. Credit the purchases account and debit a loan account.
    3. Debit the telephone account and credit an accounts payable account.
    4. Credit an asset account and debit a liabilities account.
  14. A financial document that indicates the success or failure of abusiness trading over a period of time is called:
    1. A cash flow statement
    2. A retained earnings statement
    3. An income statement
    4. A balance sheet
  15. An asset is considered to be a current asset if:
    1. It has been bought recently and was bought new and not used
    2. It could be sold immediately by the business for other assets.
    3. It could be realized in cash or sold or consumed in the business within one year
    4. It is an piece of new machinery that is expected to last for at least ten years.
  16. Which of the following could be regarded as permanent assets (sometimes called fixed assets) that are used in the business and not intended for resale ?
    1.   Inventory
    2.   Plant
    3.   A rented building
    4.   Equipment
  17. How might you measure a company's liquidity and short-term debt paying ability ?
    1. Calculate current ratio
    2. Divide current assets by current liabilities
    3. Deduct accounts receivable from accounts payable
    4. Divide current ratio by current liabilities
  18. Jolly Roger transfers $6000 from the current bank account to the savings bank account. Which of the following statements are correct ?
    1.   The overall assets of his business have increased.
    2.   One type of asset has increased whilst another type of asset has decreased.
    3.   There has been no transaction in accounting records.
    4.   The overall assets of the business have remained the same.
  19. Which of the following are true ?
    1. There are more proprietorships than corporations in the United States.
    2. Revenue produced by corporations is less than that produced by partnerships.
    3. As soon as the turnover of a business exceeds a fixed sum it must become a corporation.
    4. Revenue produced by corporations exceeds the combined revenues produced by partnerships and proprietorships.
  20. Select the equations that represent the accounting equation.
    1. Assets plus liabilities equal Equity
    2. Assets less liabilities equal Equity
    3. Liabilities less Equity equal Assets
    4. Liabilities plus Equity equal Assets

Answers:
  1. 4
  2. 3
  3. 2
  4. 4
  5. 2
  6. 4
  7. 3
  8. 4
  9. 4
  10. 4
  11. 3
  12. 3
  13. 3
  14. 3
  15. 3
  16. 4
  17. 3
  18. 3
  19. 1
  20. 3