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Basics of Accounting

Total questions: 60

Worksheet time: 39mins

Name
Class
Date
1.
The process of keeping the financial records of a business is known as
a)
Accounting
b)
Controlling
c)
Financing
d)
Bookkeeping
2.
The overall purpose of accounting is to
a)
Maintain accurate reports
b)
Compile the business’s expenses
c)
Keep track of sales
d)
Control the finances of the business
3.
Why are accurate accounting records important to a business?
a)
They prevent any financial losses
b)
They show the business how it is doing.
c)
They increase the return on investments
d)
They give the business an image of success
4.
Which of the following groups makes regular use of a business’s managerial accounting information:
a)
Managers
b)
Customers
c)
Creditors
d)
Investors
5.
A creditor is most likely to examine a business’s financial accounting records if the business is
a)
Applying for a bank loan
b)
Selecting a new market
c)
Using cash accounting
d)
Complying with regulations
6.

Ritesh is an employee of the Central government who studies the financial reports of major businesses in a specific industry. The government’s purpose in assigning this task to Riley is to

a)
Verify compliance with laws
b)
Calculate the businesses’ income taxes
c)
Analyze employment statistics
d)
Identify trends in the industry
7.
For an accounting system to be useful to the business, the accounting information it contains must be
a)
Accurate and up to date
b)
Approved by the chief executive officer
c)
Posted by an accountant
d)
Recorded using the accrual method
8.
Which of the following is a requirement for a good accounting system:
a)
It should be updated annually
b)
It should provide needed information quickly
c)
It should eliminate the need for an accountant
d)
It should be replaced every two or three years
9.

Two employees used a business’s computerized accounting system to change some records. They were able to steal ₹ 50,000 from the business because the accounting system lacked which of the following:

a)
Protection from theft and fraud
b)
An affordable price
c)
A manual system as backup
d)
Printed financial statements
10.
Checks, receipts, invoices, and purchase orders are examples of
a)
Financial statements
b)
Department ledgers
c)
Source documents
d)
Accounting standards
11.
What type of accounting method would most likely be used by a small business owner who does not offer credit?
a)
Check method
b)
Accrual method
c)
COD method
d)
Cash method
12.
What type of accounting method would most likely be used by a large business that has a large number of outstanding loans and customer charge accounts?
a)
Check method
b)
Cash method
c)
COD method
d)
Accrual method
13.

Accounting records for a business show that the week’s total sales revenues were ₹125,000. Cash sales accounted for ₹50,000 and credit sales, ₹75,000. This is an example of

a)
Classifying financial information
b)
The cash accounting method
c)
An income statement
d)
The accrual method of accounting.
14.
Which of the following is a true statement:
a)
Bookkeeping is the same as accounting
b)
Bookkeeping does not use computers
c)
Bookkeeping is limited to information on sales
d)
Bookkeeping records business transactions
15.
Which of the following presents the first three steps in the accounting cycle in the correct order:
a)
Post, analyze, and journalize
b)
Analyze, post, and journalize
c)
Analyze, journalize, and post
d)
Post, journalize, and analyze
16.
Which of the following makes comparisons of the financial conditions at multiple organizations possible:
a)
Bookkeeping
b)
Source documents
c)
Accounting standards
d)
Trial balance
17.
Which of the following categories of information are found on a balance sheet:
a)
Income, expenditures, profit
b)
Assets, liabilities, owner’s equity
c)
Assets, liabilities, margin
d)
Revenues, expenses, profit
18.
A bank denies a business owner’s application for credit saying, “We feel that you would be unable to make the monthly payments because of your other debts.” What financial report did the bank review?
a)
Budget
b)
Balance sheet
c)
Income statement
d)
Operating budget
19.
What accounting record would summarize a business’s profit or loss for a previous year?
a)
Bank statement
b)
Inventory record
c)
Income statement
d)
Balance sheet
20.
Which of the following financial reports provides estimates of when, where, and how much money will come into and out of a business next year:
a)
Balance sheet
b)
Cash flow statement
c)
Income statement
d)
Bank statement
21.
What is one of the main reasons why businesses need to keep accurate accounting records?
a)
To follow procedures
b)
To control expenses
c)
To eliminate risks
d)
To regulate taxes
22.
Businesses would not be able to determine if they are meeting their financial goals without accurate:
a)
Production plans
b)
Marketing plans
c)
Distribution systems
d)
Accounting systems
23.
Businesses use the information collected through the accounting process to prepare accurate:
a)
Balance sheets
b)
Purchase orders
c)
Inventory forms
d)
Promissory notes
24.
The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the:
a)
Balance Sheet
b)
Income Statement
c)
Statement of Cash Flows
d)
None of These
25.
Under the accrual basis of accounting, revenues are reported in the accounting period when the:
a)
Cash is Received
b)
Service or Goods Have Been Delivered
c)
End of the Month Has Arrived
d)
Customer Pays
26.
Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on the balance sheet and are referred to as __________.
a)
Assets
b)
Liabilities
c)
Owner Equity
d)
Equity
27.
Assets are usually reported on the balance sheet at which amount?
a)
Cost
b)
Current Market Value
c)
Expected Selling Price
d)
None of These
28.
Obligations (amounts owed) are reported on the balance sheet and are referred to as __________.
a)
Assets
b)
Liabilities
c)
Debt
d)
Owner Equity
29.
Liabilities often have the word __________ in their account title.
a)
Assets
b)
Payable
c)
Paid
d)
Equity
30.
Unearned Revenues is what type of account?
a)
Asset
b)
Liability
c)
Stockholders' Equity
31.
Accounting entries involve a minimum of how many accounts?
a)
One
b)
Two
c)
Three
d)
Four
32.
The listing of all of the accounts available for use in a company's accounting system is known as the __________.
a)
Chart of Accounts
b)
Journal
c)
Ledger
d)
Credit Ledger
33.
Which term is associated with "right" or "right-side"?
a)
Debit
b)
Credit
c)
Plus
d)
Minus
34.
When cash is received, the account Cash will be
a)
Debited
b)
Credited
35.
When a company pays a bill, the account Cash will be
a)
Debited
b)
Credited
36.

Identify the type of the Asset - Plant and Machinery

a)

Fixed Asset

b)

Current Asset

c)

Fictitious Assets

37.

Identify the type of liability - Raw material purchased on credit from supplier

a)

Current Liability

b)

Non-Current Liability

c)

Internal Liability

38.

Goodwill is

a)
Intangible Asset
b)

Tangible Asset

c)

Fictitious Assets

d)

Owner's Capital

39.

Identify the type of asset - Copyrights

a)

Current Assets

b)

Fixed Assets

c)

Fixed Liability

d)

Current Liability

40.

Loan given to an employee

a)

Asset

b)

Liability

c)

Gift

d)

Expense

e)

Income

41.

Loan taken from bank

a)

Asset

b)

Liability

c)

Gift

d)

Donation

42.

Trademarks are

a)

Fixed Assets

b)

Current Assets

c)

Intangible liabilities

d)

Tangible Assets

43.

Select which of the following is/are Business Transactions.

a)

Raw Material purchased from Jain & sons worth Rs. 10,000 on credit.

b)

Rent paid to Landlord Rs. 20,000.

c)

Appointed the HR Manager on a monthly Salary of Rs. 25,000.

d)

Placed an order with M/s Mehta Associates for purchase of an equipment for Rs. 30,000

e)

Profit estimated in future Rs. 50,000.

44.

Bank Overdraft is a

a)

Non Current Liability

b)

Current Liability

c)

Current Asset

d)

Fixed Asset

45.

Unpaid Salary is

a)

Current Asset

b)

Current Liability

c)

Non Current Asset

d)

Non Current Liability

46.
The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the:
a)
Balance Sheet
b)
Income Statement
c)
Statement of Cash Flows
d)
None of These
47.
Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on the balance sheet and are referred to as __________.
a)
Assets
b)
Liabilities
c)
Owner Equity
d)
Equity
48.
Obligations (amounts owed) are reported on the balance sheet and are referred to as __________.
a)
Assets
b)
Liabilities
c)
Debt
d)
Owner Equity
49.
Revenues minus expenses equals:
a)
Assets
b)
Liabilities
c)
Owner Equity
d)
Net Income
50.
The accounting equation is
a)
Assets = Liabilities + Owner's Equity
b)
Assets = Liabilities - Owner's Equity
c)
Assets - Owner's Equity + Liability
51.
Accrual concept is based on :
a)
matching principle
b)
dual aspect principle
c)
cost principle
d)
going concern concept
52.

which category does depreciation fall under in the accounting system?

a)

assets

b)

owners equity

c)

liability

d)

expense/loss

53.

A balance sheet reports a business's financial

a)

Condition over a specific period of time

b)

Progress over a specific period of time

c)

Condition on a specific date

d)

Progress on a specific date

54.
______________________ is the transfer of journalized transactions to their accounts.
a)
Posting
b)
Recording
c)
Updating
d)
Journalizing
55.
To increase a liability account requires a
a)
credit
b)
debit
c)

not to do anything

d)

debit and credit both

56.
What is the normal balance for assets?
a)
DEBIT
b)
CREDIT 
c)

Zero

d)

Infinity

57.
Term to describe the amount of an expense due in an accounting period which is unpaid at the end of that period
a)
Prepayment
b)
Expense
c)
Accrual
d)
Unpaid income
58.
Depreciation method where a fixed percentage or fraction is written off the original cost, less any residual value, of the asset each year
a)
Carrying value
b)
Reducing balance
c)
Residual value
d)
Straight line
59.
A cash book with a credit balance indicates a bank _________
a)
Asset
b)
Loan
c)
Account
d)
Overdraft
60.
It represents advanced payments from customers which requires settlement through delivery of goods or services in the future.
a)
Sales Revenue
b)
Service Revenue
c)
Unearned Revenue
d)
Accrued Revenue

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