Introduction to Accounting MCQ

Introduction to Accounting MCQ: 

Accounting is like keeping track of your money in a smart and organized way. Imagine you have a piggy bank, and every time you get some money, you put it in. Now, accounting is a bit like that, but on a larger scale. Instead of a piggy bank, it's about keeping track of all the money coming in and going out of a business or organization.

There are a few key things to understand:
  • Assets: These are things the business owns, like cash, inventory (stuff to sell), or equipment.
  • Liabilities: These are debts or obligations the business owes, like loans or bills to pay.
  • Income: This is the money the business earns from selling goods or services.
  • Expenses: These are the costs the business incurs to run, like rent, salaries, or buying supplies.

The basic idea is to make sure that everything balances out. That means the money going out matches the money coming in, and you're keeping track of where it all goes. Accounting uses tools like balance sheets, income statements, and cash flow statements to organize and report this information. These documents help businesses understand their financial health and make smart decisions about their money.

Introduction to Accounting MCQ with Answers

1. What is accounting in simple words?
(1) the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results.
(2) the principles and procedures of this system studied accounting as a freshman.
(3) work done in accounting or by accountants.
(4) All of these 
Answer: (4) All of these
Explanation: Accounting involves the systematic recording, summarizing, analyzing, verifying, and reporting of financial transactions and results. It encompasses both the system of recording transactions (bookkeeping) and the principles and procedures governing this system.

2. The Golden rule for Personal, Real and Nominal Accounts are________
(1) Debit what comes in.
(2) Credit the giver.
(3) Credit all Income and Gains.
(4) All of these 
Answer: (4) All of these
Explanation: The Golden rules of accounting state:
Personal Accounts: Debit the receiver, credit the giver.
Real Accounts: Debit what comes in, credit what goes out.
Nominal Accounts: Debit all expenses and losses, credit all incomes and gains.

3. Bookkeeping is ______.
(1) An art
(2) A science
(3) Both an art as well as science
(4) None of these
Answer: (3) Both an art as well as science
Explanation: Bookkeeping is considered both an art and a science. It involves the systematic recording, classifying, and summarizing of financial transactions using established principles and procedures.

4. What are the 3 types of accounts?
(1) Real, 
(2) Personal 
(3) Nominal Account.
(4) all of the above 
Answer: (4) all of the above
Explanation: The three types of accounts in accounting are real accounts (assets and liabilities), personal accounts (individuals or organizations), and nominal accounts (revenues and expenses).

5. Which of following is a basic rule of accounting?
(1) Debit the receiver and credit the giver.
(2) Debit what comes in and credit what goes out.
(3) Debit expenses and losses, credit income and gains.
(4) All of these 
Answer: (4) All of these
Explanation: Basic rules of accounting include principles like "debit the receiver, credit the giver" for personal accounts, "debit what comes in, credit what goes out" for real accounts, and "debit expenses and losses, credit income and gains" for nominal accounts.

6. ___________ is the last step of accounting as a process of information.
(a) Recording of data in the books of accounts
(b) Preparations of summaries in the form of financial statement
(c) Communication of information
(d) Analysis and interpretation of information
Answer: (c) Communication of information
Explanation: Communication of financial information through financial statements and reports is the final step in the accounting process.

7. Which of the following is a type of accounting?
(1) tax accounting, 
(2) financial accounting
(3) management accounting. 
(4) All of these 
Answer: (4) All of these
Explanation: Types of accounting include tax accounting (dealing with tax-related matters), financial accounting (reporting financial information to external stakeholders), and management accounting (providing internal management information for decision-making).

8. Which of the following is a basic principles of accounting?
(1) Revenue Recognition Principle.
(2) Cost Principle. 
(3) Matching Principle. 
(4) All of these 
Answer: (4) All of these
Explanation: Basic principles of accounting include the Revenue Recognition Principle, Cost Principle (or Historical Cost Principle), and Matching Principle (or Expense Recognition Principle).

9. The art of recording all business transactions in a systematic manner in a set of books is called______
(1) Accounting
(2) Bookkeeping
(3) Ledger
(4) None of these.
Answer: (2) Bookkeeping
Explanation: Bookkeeping involves the systematic recording of all business transactions in appropriate books of accounts.

10. What is accounting cycle?
(1) The accounting cycle is the process of accepting, recording, sorting, and crediting payments made and received within a business during a particular accounting period.
(2) The accounting cycle is a collective process of identifying, analyzing, and recording the accounting events of a company.
(3) Both 
(4) None of these 
Answer: (3) Both
Explanation: The accounting cycle is a collective process that involves identifying, analyzing, recording, summarizing, and reporting the financial events of a business within a specific accounting period.

11. Which of the following is a functions of accounting?
(1) inventory management, budgeting, 
(2) reports and financial statements, 
(3) legal compliance and financial control, and record-keeping
(4) All of these 
Answer: (4) All of these
Explanation: Functions of accounting include inventory management, budgeting, preparation of reports and financial statements, legal compliance, financial control, and record-keeping.

12. The person, firm or institution who does not pay the price in cash for the goods purchased or the services received is called-
(1) Creditor
(2) Proprietor
(3) Debtor
(4)None of these.
Answer: (3) Debtor
Explanation: A debtor is someone who owes money to another party for goods or services received but has not paid for them in cash yet.

13. Cash, goods, or assets invested by the proprietor in the business for earning profit is called ______.
(1) Profit
(2) Capital
(3) Fixed assets
(4) None of these
Answer: (2) Capital
Explanation: Capital refers to the cash, goods, or assets invested by the proprietor or owner into a business to finance its operations and earn profits.

14. What are the basic of accouting?
(1) Basic accounting refers to the process of recording a company's financial transactions. 
(2) It involves analyzing, summarizing and reporting these transactions to regulators, oversight agencies and tax collection entities
(3) Both 
(4) None of these 
Answer: (3) Both
Explanation: Basic accounting involves recording, analyzing, summarizing, and reporting financial transactions to various stakeholders, including regulators, oversight agencies, and tax authorities.

15. What is the heart of accounting?
(1) Debits and credits
(2) Banks
(3) Investors 
(4) None of these 
Answer: (1) Debits and credits
Explanation: Debits and credits form the fundamental basis of double-entry bookkeeping, where every transaction affects at least two accounts.

16. Which of the following is not a function of accounting?
(1) Analysis of financial data. 
(2) The budget planning.
(3)Prevention of frauds and errors
(4) Making Profit
Answer: (4) Making Profit
Explanation: Accounting does not directly involve making a profit but rather focuses on recording, analyzing, and reporting financial information for decision-making and compliance.

Related Posts

Subscribe Our Newsletter