Accounting Quiz: Test Your Knowledge with Challenging Objective Questions
Accounting is an important subject that helps individuals and businesses record, analyze, and interpret financial information. A good understanding of accounting principles is necessary for managing money, preparing financial statements, and making informed business decisions. This quiz has been carefully designed to test your knowledge of accounting concepts. It will help you improve your accuracy, confidence, and problem-solving skills.
Accounting Quiz (60 Questions)
1. The main purpose of preparing final accounts is to
A. Record daily transactions
B. Determine profit or loss and financial position
C. Prevent fraud in business
D. Control business expenses
2. Which of the following is classified as a current asset?
A. Motor vehicle
B. Building
C. Debtors
D. Machinery
3. The book used for recording credit purchases is called
A. Sales day book
B. Purchases day book
C. Cash book
D. General journal
4. Depreciation is charged in order to
A. Increase asset value
B. Reduce tax liability
C. Spread cost of assets over useful life
D. Improve business reputation
Accounting Quiz
5. Capital introduced into a business is recorded as
A. Liability
B. Expense
C. Asset
D. Income
6. The trial balance is prepared mainly to
A. Detect all accounting errors
B. Determine profit
C. Test arithmetical accuracy
D. Prepare balance sheet
7. Which of the following is a real account?
A. Purchases account
B. Cash account
C. Capital account
D. Wages account
8. The double entry system states that
A. Every transaction has two effects
B. Every account has two sides
C. Every entry is recorded twice
D. Every transaction affects profit
9. Bad debts are recorded as
A. Assets
B. Liabilities
C. Expenses
D. Capital
10. The excess of assets over liabilities represents
A. Revenue
B. Capital
C. Profit
D. Expenditure
Accounting Quiz
11. Which document is issued to acknowledge goods returned?
A. Invoice
B. Debit note
C. Credit note
D. Receipt
12. The process of transferring balances from ledger to trial balance is called
A. Posting
B. Balancing
C. Casting
D. Ruling
13. Which of the following is an example of intangible asset?
A. Land
B. Machinery
C. Patent
D. Furniture
14. Outstanding expenses are classified as
A. Assets
B. Capital
C. Liabilities
D. Drawings
15. Goodwill arises mainly from
A. High expenses
B. Efficient management
C. Large capital
D. Poor sales
Accounting Quiz
16. Which account is debited when cash is paid for rent?
A. Cash account
B. Rent account
C. Capital account
D. Drawings account
17. The statement that shows financial position is the
A. Trading account
B. Profit and loss account
C. Balance sheet
D. Cash book
18. The reduction in the value of goodwill is known as
A. Depreciation
B. Amortization
C. Depletion
D. Appreciation
19. Which of the following is not a function of bookkeeping?
A. Recording transactions
B. Classifying accounts
C. Interpreting data
D. Summarizing records
20. When goods are withdrawn by the owner for personal use, it is called
A. Capital
B. Drawings
C. Discount
D. Expenditure
Advanced Accounting Quiz
21. The book used for recording cash received and paid is the
A. Journal
B. Cash book
C. Ledger
D. Trial balance
22. A nominal account records
A. Assets and liabilities
B. Income and expenses
C. Capital only
D. Cash transactions
23. Creditors are classified as
A. Assets
B. Liabilities
C. Expenses
D. Capital
24. Prepaid expenses are treated as
A. Assets
B. Liabilities
C. Income
D. Drawings
25. The account that shows owner’s contribution is
A. Capital account
B. Drawings account
C. Revenue account
D. Expense account
26. Accrued income refers to
A. Income received in advance
B. Income earned but not yet received
C. Capital introduced
D. Profit withdrawn
27. Bank overdraft is classified as
A. Current asset
B. Current liability
C. Fixed asset
D. Capital
28. Purchase returns are recorded in the
A. Purchase returns book
B. Sales returns book
C. Cash book
D. General journal
29. Closing stock is shown in
A. Trading account
B. Profit and loss account
C. Balance sheet only
D. Cash book
30. Carriage inwards is treated as
A. Revenue expenditure
B. Capital expenditure
C. Trading expense
D. Asset
Advanced Accounting Quiz
31. Carriage outwards is treated as
A. Trading expense
B. Selling and distribution expense
C. Capital expenditure
D. Asset
32. Provision for doubtful debts is shown as
A. Asset
B. Deduction from debtors
C. Liability
D. Expense
33. Drawing of goods by owner is recorded in
A. Capital account
B. Drawings account
C. Revenue account
D. Purchases account
34. An example of tangible asset is
A. Patent
B. Furniture
C. Trademark
D. Goodwill
35. Purchase of machinery is recorded as
A. Capital expenditure
B. Revenue expenditure
C. Expense
D. Liability
36. Rent paid in advance is classified as
A. Liability
B. Asset
C. Expense
D. Capital
37. Depreciation is
A. A capital loss
B. Allocation of asset cost over useful life
C. Revenue earned
D. Liability
38. Profit and loss account shows
A. Financial position
B. Trading results
C. Cash transactions
D. Capital
39. Trading account shows
A. Net profit
B. Gross profit
C. Capital balance
D. Cash balance
40. Cash discount allowed is recorded in
A. Purchases account
B. Sales account
C. Discount allowed account
D. Cash book
Advanced Accounting Quiz
41. Cash discount received is recorded in
A. Discount received account
B. Purchases account
C. Sales account
D. Cash book
42. Outstanding salaries are recorded as
A. Assets
B. Liabilities
C. Capital
D. Drawings
43. Bills receivable are classified as
A. Current asset
B. Current liability
C. Fixed asset
D. Expense
44. Bills payable are classified as
A. Asset
B. Liability
C. Capital
D. Expense
45. Revenue expenditure is
A. Expenditure on fixed assets
B. Expenditure for day-to-day running
C. Capital expenditure
D. Drawings
46. Capital expenditure is
A. Payment for day-to-day expenses
B. Payment to acquire fixed assets
C. Salaries
D. Rent
47. Ledger account has
A. Only debit side
B. Only credit side
C. Both debit and credit sides
D. No sides
48. Trial balance is prepared from
A. Journal
B. Ledger balances
C. Cash book
D. Profit and loss account
49. Accounting equation is
A. Assets = Liabilities + Capital
B. Assets + Liabilities = Capital
C. Capital = Assets – Expenses
D. Assets = Capital – Liabilities
50. The balance of capital account shows
A. Liability of business
B. Net profit
C. Owner’s equity
D. Asset
Advanced Accounting Quiz
51. Bank charges are treated as
A. Revenue expenditure
B. Capital expenditure
C. Asset
D. Liability
52. Discount allowed reduces
A. Sales
B. Profit
C. Capital
D. Purchases
53. Discount received increases
A. Expenses
B. Revenue
C. Liability
D. Purchases
54. Purchase of office supplies is treated as
A. Capital expenditure
B. Revenue expenditure
C. Asset
D. Liability
55. Sales returns are recorded in
A. Sales returns book
B. Purchase returns book
C. Cash book
D. General journal
56. Trial balance may not detect
A. Arithmetical errors
B. Errors of omission
C. Errors of commission
D. Errors of principle
57. Errors of principle occur when
A. Transaction is completely omitted
B. Amount is posted to wrong type of account
C. Posting is duplicated
D. Balance is incorrect
58. Accounting period refers to
A. Period for recording transactions
B. Period for preparing accounts
C. Period for taxation only
D. Period for budgeting
59. Ledger is prepared from
A. Journal entries
B. Cash book only
C. Balance sheet
D. Trading account
60. Accumulated depreciation is
A. Asset
B. Liability
C. Contra asset reducing the asset value
D. Expense
Answers and Explanations
1. B – Final accounts are prepared to determine profit or loss and show the financial position of the business.
2. C – Debtors are current assets because they are expected to pay within a short period.
3. B – The purchases day book records all credit purchases.
4. C – Depreciation spreads the cost of fixed assets over their useful life.
5. A – Capital is a liability because it represents what the business owes the owner.
6. C – The trial balance is prepared to check arithmetical accuracy, not all errors.
7. B – Cash account is a real account because it represents a tangible asset.
8. A – Double entry system means every transaction has two effects: debit and credit.
9. C – Bad debts are losses and are treated as expenses.
10. B – Assets minus liabilities equal capital.
11. C – A credit note is issued when goods are returned to a seller.
12. B – Balancing involves determining the final balance before transferring to trial balance.
13. C – A patent is an intangible asset because it has no physical form.
14. C – Outstanding expenses are liabilities because they are yet to be paid.
15. B – Goodwill is created through efficient management and good reputation.
16. B – Rent is an expense, so the rent account is debited.
17. C – The balance sheet shows the financial position of a business.
18. B – Amortization refers to the reduction in value of intangible assets like goodwill.
19. C – Interpreting data is the function of accounting, not bookkeeping.
20. B – Drawings refer to goods or cash taken by the owner for personal use.
21. B. Cash book – The cash book records all cash receipts and payments, serving as both a journal and ledger for cash transactions.
22. B. Income and expenses – Nominal accounts record revenue, gains, and losses, showing the results of business operations.
23. B. Liabilities – Creditors represent amounts owed by the business to suppliers or other parties, classified as liabilities.
24. A. Assets – Prepaid expenses are payments made in advance for goods or services, giving future economic benefit.
25. A. Capital account – The capital account records the owner’s investment or contribution to the business.
26. B. Income earned but not yet received – Accrued income is revenue that has been earned but is yet to be collected.
27. B. Current liability – Bank overdraft is a short-term liability representing money owed to the bank.
28. A. Purchase returns book – Returns of goods purchased on credit are recorded in the purchase returns book.
29. A. Trading account – Closing stock is shown in the trading account to calculate gross profit.
30. C. Trading expense – Carriage inwards is the cost of bringing goods to the business and is added to purchases in trading account.
31. B. Selling and distribution expense – Carriage outwards is the cost of delivering goods to customers and is treated as an expense.
32. B. Deduction from debtors – Provision for doubtful debts reduces the total value of debtors to reflect expected losses.
33. B. Drawings account – When the owner withdraws goods for personal use, it is recorded in the drawings account, reducing capital.
34. B. Furniture – Tangible assets are physical items owned by a business like furniture, buildings, or machinery.
35. A. Capital expenditure – Purchase of machinery is a long-term investment, improving business capacity and recorded as capital expenditure.
36. B. Asset – Rent paid in advance provides future benefit, so it is treated as a current asset.
37. B. Allocation of asset cost over useful life – Depreciation spreads the cost of fixed assets over the period they are used.
38. B. Trading results – Profit and loss account shows revenue and expenses to determine net profit or loss.
39. B. Gross profit – Trading account compares sales and cost of goods sold to determine gross profit before other expenses.
40. C. Discount allowed account – Cash discount allowed to customers is recorded separately as an expense reducing revenue.
41. A. Discount received account – Cash discounts received from suppliers are treated as income and recorded separately.
42. B. Liabilities – Outstanding salaries are obligations of the business to employees and are classified as current liabilities.
43. A. Current asset – Bills receivable represent amounts to be received in the short term and are considered current assets.
44. B. Liability – Bills payable are obligations to pay a certain amount to creditors and are classified as current liabilities.
45. B. Expenditure for day-to-day running – Revenue expenditure is for normal operations and does not increase long-term asset value.
46. B. Payment to acquire fixed assets – Capital expenditure is investment in assets that will benefit the business over multiple periods.
47. C. Both debit and credit sides – Ledger accounts record all debits on one side and credits on the other to show changes in balances.
48. B. Ledger balances – Trial balance is prepared from the balances of ledger accounts to check arithmetical accuracy.
49. A. Assets = Liabilities + Capital – The fundamental accounting equation shows the relationship between a business’s resources and claims.
50. C. Owner’s equity – The balance of the capital account represents the owner’s interest in the business after liabilities are deducted.
51. A. Revenue expenditure – Bank charges are recurring operating costs and reduce profit, so they are treated as revenue expenditure.
52. B. Profit – Discount allowed reduces revenue and therefore decreases net profit.
53. B. Revenue – Discount received is treated as income and increases net profit.
54. B. Revenue expenditure – Purchase of office supplies is part of day-to-day operations and recorded as revenue expenditure.
55. A. Sales returns book – Goods returned by customers are recorded in the sales returns book, reducing total sales.
56. B. Errors of omission – Trial balance cannot detect transactions that were completely omitted from books.
57. B. Amount is posted to wrong type of account – Errors of principle occur when amounts are recorded in the wrong category, e.g., capital expenditure recorded as revenue expenditure.
58. B. Period for preparing accounts – Accounting period is the specific time frame (monthly, quarterly, or yearly) for which financial statements are prepared.
59. A. Journal entries – Ledger accounts are prepared by posting transactions recorded in the journal.
60. C. Contra asset reducing the asset value – Accumulated depreciation is a contra asset that reduces the carrying value of fixed assets on the balance sheet.
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