Accounting Multiple Choice Questions with answers | Download PDF for MCQs


1. Point out correct accounting equation

a) Assets = Liabilities - Capital

b) Liabilities = Capital + Assets

c) Capital = Assets + Liabilities

d) Liabilities = Assets – Capital

2. A business has assets of Rs. 100000 and liabilities of Rs. 20000. What is the amount of capital.

a) 120000

b) 80000

c) None of these

3. Capital will reduce by

a) Purchase of goods on credit

b) Selling the goods for cash

c) Furniture purchase for personal use

4. Liabilities increased by

a) Purchasing goods on credit

b) Rent due

c) Taking of bank loan

d) All

5. Revenue will increase by

a) Purchase of assets for cash

b) Rent paid to landlord

c) Selling the goods on profit

d) Drawing goods for personal use

6. Assets increased by

a) Selling goods for cash

b) Selling goods on credit

c) Purchasing machinery for cash

d) Purchasing machinery on credit

7. Capital increased by

a) Interest on capital

b) Selling goods on profit

c) Additional capital introduced

d) All of these

8. Withdraws by proprietor would reduce

a) Owner equity and increase liabilities

b) Both assets and corner's equity

c) Assets and increase liability

d) none of these

9. Purchase of fixed assets for cash would

a) Reduce current and fixed assets

b) Keep current and fixed assets unchanged.

c) Reduce current asset and increase fixed assets.

d) Reduce current assets and current liabilities

10. Both assets and owner's equity would increase by

a) Proprietor's Drawings

b) Purchase Machine on credit

c) Payment to creditor

d) Retained earning

11. The favorable balance of profit and loss account should be

a) Added in liabilities

b) Subtracted from current assets

c) Subtracted from liabilities

d) Added on Capital

12. Purchase goods on credit and for cash with effect

a) Cash and good

b) Cash good and creditor

c) Cash and creditor

d) Cash credit and owner's equity

13. The liabilities of a firm are ₹3,000 and capital is ₹7000, Assets are?

a) ₹7000

b) ₹10000

c) ₹4000

d) None of these

14. Which of the following will cause owner's equity increase?

a) Expense

b) Owner Drawer

c) Revenue

d) Loss

15. Expense paid by a business decrease

a) Cash

b) Capital

c) Both (a) and (b)

d) None of these

16. Sale of fixed assets for cash would

a) Reduce current and fixed assets

b) Keep current and fixed assets unchanged

c) Increases current assets and decreases fixed assets

d) Reduce current assets and current liabilities

17. Find out value of account receivable from following cash Rs. 40000 Account payable Rs. 30000, office equipment Rs.20000, owner equity Rs.80000.

a) 170000

b) 50000

c) 10000

d) None of these

18. Borrowed money from bank, this transaction involves which one of following accounts

a) Cash and bank loan

b) Bank and debtor

c) Drawing and cash

d) Cash and bank

19. Assets – Liabilities = ?

a) Profit

b) Working Capital

c) Capital

d) Long term liability

20. Which of financial statement displays the revenues and expenses of a company for a period of time?

a) Income statement

b) Balance sheet

c) Cash flow statement

d) None of these

21. Which account is not a liability account

a) Account payable

b) Accrued Expenses

c) Cash

d) Notes payables

22. Which account decreases equity?

a) Expenses

b) Withdrawal

c) Both (a) and (b)

d) None of these

23. Capital of business is ₹300000, liabilities are ₹50000, loss ₹70000, then asset will be

a) ₹420000

b) ₹320000

c) ₹350000

d) ₹280000

24. Profit on sale of goods will be

a) Deducted from capital

b) Added to capital

c) Added in liabilities

d) None of these

25. Income received in advance will be

a) Added to liability and cash

b) Added to capital and cash

c) Deducted from liability and cash

d) Added to liabilities and deducted from cash

26. Withdrew goods for personal use will

a) Reduce stock and increase capital

b) Reduce stock and reduce capital

c) Increase stock and reduce capital

d) Increase stock and increase capital

27. If total assets of business are ₹130000 and net worth is ₹80000, creditor will be

a) ₹210000

b) ₹50000

c) ₹80000

d) none of these

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