Free Printable Chapter 1 - Nature of Accounting

1.

What is the traditional definition of Accounting?

a)

It is the systematic process of measuring and reporting relevant financial information about the activities of an economic organization or unit.

b)

It is the art of recording classifying and summarizing in a significant manner and in terms of money transactions and events which are in part at least of a financial character, and interpreting the result thereof.

c)

It is a service activity, that provides quantitative information primarily financial in nature about economic entities that is intended to be useful in making economic decisions.

d)

Accounting focuses on the preparation of financial statements, including the balance sheet, income statement, statement of cash flows, and statement of retained earnings, which provide information about the financial

2.

Definition of accounting by AICPA

a)

It is the art of recording classifying and summarizing in a significant manner and in terms of money transactions and events which are in part at least of a financial character, and interpreting the result thereof.

b)

It is a service activity, that provides quantitative information primarily financial in nature about economic entities that is intended to be useful in making economic decisions.

c)

Accounting focuses on the preparation of financial statements, including the balance sheet, income statement, statement of cash flows, and statement of retained earnings, which provide information about the financial

d)

It is the systematic process of measuring and reporting relevant financial information about the activities of an economic organization or unit.

3.

Definition of accounting by PICPA

a)

Accounting focuses on the preparation of financial statements, including the balance sheet, income statement, statement of cash flows, and statement of retained earnings, which provide information about the financial

b)

It is the systematic process of measuring and reporting relevant financial information about the activities of an economic organization or unit.

c)

It is a service activity, that provides quantitative information primarily financial in nature about economic entities that is intended to be useful in making economic decisions.

d)

It is the art of recording classifying and summarizing in a significant manner and in terms of money transactions and events which are in part at least of a financial character, and interpreting the result thereof.

4.

First Aspect of Accounting

a)

Recording

b)

Classifying

c)

Summarizing

d)

Interpreting

5.

Second Aspect of Accounting

a)

Summarizing

b)

Recording

c)

Classifying

d)

Interpreting

6.

Third Aspect of Accounting

a)

Recording

b)

Interpreting

c)

Classifying

d)

Summarizing

7.

Fourth Aspect of Accounting

a)

Classifying

b)

Reporting

c)

Summarizing

d)

Interpreting

8.

In which century did double-entry bookkeeping first appear?

a)

11th century

b)

15th century

c)

14th century

d)

19th century

9.

In which century did modern accounting standards evolve?

a)

21st century

b)

20th century

c)

19th century

d)

17th century

10.

In which century did modern accounting first emerge in Europe and America?

a)

19th century

b)

20th century

c)

17th century

d)

18th century

11.

When did Enron collapse?

a)

2000

b)

2001

c)

1999

d)

2002

12.

A branch of accounting primarily handles the recording of financial transactions of a business.

a)

Management Accounting

b)

Financial Accounting

c)

Cost Accounting

d)

Auditing

13.

Management Accounting

a)

Focuses on the preparation of financial reports used by managers in their day-to-day decision-making.

b)

It is an unbiased examination and evaluation of the financial statements of an organization

c)

Provides information for management accounting and financial accounting.

d)

A branch of accounting primarily handling the recording of financial transactions of a business.

14.

It is an objective analysis and assessment of an organization's financial statements.

a)

Government Accounting

b)

Tax Accounting

c)

Auditing

d)

Financial Accounting

15.

It is an objective analysis and assessment of an organization's financial statements.

a)

Government Accounting

b)

Tax Accounting

c)

Auditing

d)

Financial Accounting

16.

Which of the following are the internal users of Financial Information

a)

Investors-Suppliers-Employee

b)

Stockholders-Employee-Investors

c)

Investors-Employee-Potential Investors

d)

Owners-Managers-Suppliers

17.

Which of the following are the external users of Financial Information

a)

Stockholders-Potential investors-Government

b)

Creditors-Debitors-Investors

c)

Financial Institution-Stockholders-Creditors

d)

Government-Potential Investors- Creditors

18.

The standards and rules that accountants follow while recording and reporting financial activities.

a)

GASP

b)

GAAP

c)

GAPA

d)

GAGA

19.

A planned process for providing financial informationthat will be useful to management.

a)

Accounting equation

b)

Accounting Title

c)

Accounting System

d)

Accounting Balance

20.

The account used to summarize the owner’s equity in the business.

a)

Liability Account

b)

Summary Account

c)

Asset Account

d)

Capital Account

21.

The amount remaining after the value of all liabilities is subtracted from the value of all assets.

a)

asset

b)

liability

c)

owner's equity

d)

nothing

22.

A record summarizing all the information pertaining to a single item in the accounting equation.

a)

accounting

b)

account title

c)

account balance

d)

account

23.

Anything of value that is owned.

a)

asset

b)

liability

c)

owner's equity

d)

expenses

24.

A sale for which cash will be received at a later date.

a)

revenue

b)

on sale

c)

sale on account

d)

withdrawals

25.

Assets taken out of a business for the owner’s personal use.

a)

liabilities

b)

expenses

c)

assets

d)

withdrawals

26.

A formal written document that describes the nature of a business and how it will operate.

a)

proprietorship

b)

service business

c)

business plan

d)

financial statements

27.

An amount owed by a business.

a)

expense

b)

liability

c)

asset

d)

equity

28.

A person or business to whom a liability is owed.

a)

proprietor

b)

supervisor

c)

creditor

d)

business man

29.

A decrease in owner’s equity resulting from the operation of a business.

a)

equity

b)

ethics

c)

equality

d)

expense

30.

The accounting equation is most often stated as Assets + Liabilities = Owner’s Equity.

a)

True

b)

False

31.

After each transaction, the accounting equation must remain in balance.

a)

TRUE

b)

FALSE

32.

A negative amount for net worth would reflect more debt than assets, something a creditor would favor.

a)

TRUE

b)

FALSE

33.

When two asset accounts are changed in a transaction, there must be an increase and a decrease.

a)

TRUE

b)

FALSE

34.

A transaction for the sale of goods or services results in a decrease in owner’s equity.

a)

TRUE

b)

FALSE

35.

Keeping separate the financial records for a business and for its owner’s personal belongings is an application of the Business Entity accounting concept.

a)

TRUE

b)

FALSE

36.

Business ethics are the principles of right and wrong that guide an individual in making decisions.

a)

TRUE

b)

FALSE

37.

Payments for advertising, equipment repairs, utilities, and rent are liabilities.

a)

TRUE

b)

FALSE

38.

Withdrawals are assets taken out of a business for the owner’s personal use.

a)

TRUE

b)

FALSE

39.

When an owner withdraws cash from the business, the transaction affects both assets and owner’s equity.

a)

TRUE

b)

FALSE

40.

A withdrawal is an expense.

a)

True

b)

False

41.

A fiscal year is an accounting period starting on January 1 and ending on December 31

a)

True

b)

False

42.

When recording a business transaction, the amount is entered first

a)

True

b)

False

43.

What is the objective of financial statements?

a)

To provide information about the financial position, financial performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions.

b)

To prepare and present a statement of financial position, statement of comprehensive income, statement of cash flows and statement of changes in equity.

c)

To prepare and present relevant, reliable, comparable and understandable information to investors and creditors.

d)

To prepare and present financial statements in accordance with all applicable PFRS and Interpretations.

44.

Which of the following are Financial Statements for business?

a)

Trial Balance Account

b)

Ledger

c)

Income Statement

d)

Balance Sheet

45.

The users of accounting information are...

a)

Internal users

b)

External users

c)

Internal & External users

46.

Which one is the internal user?

a)

Potential investor

b)

Management of a company

c)

Creditor

47.

Which of the following is a calendar year accounting period?

a)

Jan 1 to Dec 31

b)

Feb 1 to Jan 31

c)

July 1 to Jun 30

d)

Apr 15 to March 31

48.

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

49.

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

50.

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

51.

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

52.

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

53.

Cash

a)

Asset

b)

Liability

c)

Equity

54.

Account Payable

a)

Asset

b)

Liability

c)

Equity

55.

Account Receivable

a)

Asset

b)

Liability

c)

Equity

56.

Note Payable

a)

Asset

b)

Liability

c)

Equity

57.

Supplies

a)

Asset

b)

Liability

c)

Equity

58.

Mortgage Payable

a)

Asset

b)

Liability

c)

Equity

59.

Unearned Revenue

a)

Asset

b)

Liability

c)

Equity

60.

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

61.

When goods are sold for cash which account is debited

a)

Cash

b)

Bank

c)

Sales

d)

Purchase

62.

Sold goods on credit 5000 to Mrs Mamta. Which account is debited

a)

Mamta

b)

Sales

c)

Cash

d)

Purchase

63.

Purchase a machinery worth 50000 and paid by check, which account is credited

a)

Cash

b)

Bank

c)

Machinery

d)

Purchase

64.

Goods 5000 distributed as free sample which account is debited

a)

Capital

b)

Drawings

c)

Sales

d)

Purchase

65.

Goods of 5000 distributed as free sample which account is credited

a)

Goods

b)

Cash

c)

Sales

d)

Purchase

66.

Sold goods to ramashankar worth 10000@10% trade discount on credit, which account and what amount will be debited

a)

Ramashankar 9000

b)

Ramashankar 10000

c)

Sales 90000

d)

Purchase 9000

67.

Paid salary 5000 wages 3000 in cash which account will be credited and by what amount

a)

Cash 3000

b)

Cash 5000

c)

Cash 8000

d)

Expenses 8000

68.

Purchase two cows worth rs 50000 each what account will be debited and with what amount

a)

Cow 100000

b)

Live stock 100000

c)

Purchase 100000

69.

Purchase shares of Tata limited which account will be debited

a)

Investment

b)

Shares

c)

Tata

d)

Cash

70.

Paid carriage Charges on behalf of Kiran 5000 in cash what account will be debited

a)

Carriage

b)

Kiran

c)

Cash

d)

Bank

71.

Paid Transport charges 5000 in cash for business to United transport which account will be credited

a)

Transport

b)

United transport

c)

Cash

d)

Bank

72.

Purchase laptop worth 40000 from Joshi electronics @ 18% GST calculate the CGST amount

a)

6300

b)

7200

c)

3600

d)

2700

73.

Started business with cash 50000 goods 10000 which account will be credit and by what amount

a)

Capital rs 50000

b)

Capital 10000

c)

Capital 60000

d)

Cash 50000

74.

Purchase goods of 25000@20% rate discount from Akash and paid of the amount, what account will be debited and by what amount

a)

Cash 10000

b)

Akash 10000

c)

Purchase 25000

d)

Purchase 20000

75.

Mohan a credit customer for 35000 is declared insolvent and he has paid 1/5 fof the amount as final settlement. Which of the following four option can be debited

a)

Bad debts 7000

b)

Bad debts 28000

c)

Cash 28000

d)

Mohan 35000

76.

Goods of 10000 taken for personal use, which account will be debited

a)

Capital account

b)

Drawings account

c)

Cash account

77.

Furniture work 10000 purchase from Akbar and sons@ 18% GST calculate the total GST amount

a)

1800

b)

8100

c)

900

78.

Business started with cash which account will be debited

a)

Cash account

b)

Bank account

c)

Capital account

79.

Goods were 10000 purchased for cash, which account will be credit

a)

Purchase account

b)

Cash account

c)

Sales account credited

d)

Bank account

80.

Cash sales 1000, which account will be credited

a)

Sales

b)

Cash

c)

Purchase

81.

Deposited into Bank 1000, which account will be

a)

Cash

b)

Bank

82.

Cash withdrawn from Bank 5000,which account will be debited

a)

Bank

b)

Cash

c)

Drawings

d)

Capital

83.

Loan taken from Bank rupees 10000, which account will be credit

a)

Cash

b)

Bank loan

c)

Purchase

d)

Sales

84.

Goods watch 3000 lost by fire, which account will be debited

a)

Loss by fire

b)

Purchase

c)

Sales

d)

Expenses

85.

Advantages of this business type are that the owner is their own boss and gets to keep all the profits.

a)

Partnership

b)

Sole Proprietorship

c)

Corporation

d)

Franchise

86.

Law firms and doctor's offices are examples of.....

a)

Sole Proprietorships

b)

Partnerships

c)

Corporations

d)

Franchises

87.

This type of business is owned by many people called stockholders.

a)

Sole Proprietorship

b)

Partnership

c)

Corporation

d)

Franchise

88.

Concept: When a business activity is large enough to impact business decisions, it should be recorded clearly in the financial statements

a)

realization of revenue

b)

materiality

c)

unit of measurement

d)

consistent reporting

89.

Concept: Financial statements are prepared with the expectation that business will remain in operation indefinately

a)

going concern

b)

materiality

c)

accounting period cycle

d)

matching revenue with expenses

90.

Concept: The same accounting procedures must be followed in the same way each accounting period

a)

accounting period cycle

b)

objective evidence

c)

consistent reporting

d)

materiality

91.

Concept: The actual amount paid for merchandise or other items purchased is recorded, even though the value of the asset may be different

a)

unit of measurement

b)

historical cost

c)

matching expenses with revenue

d)

consistent reporting

92.

When preparing Financial Statements which monetary measurement basis states that the accounting records should be based on the original cost of the transaction.

a)

Current Value

b)

Replacement Value

c)

Realisation Value

d)

Historical Cost

93.

Aling gempot sold a piece of cupcake to her neighbor. Apparently, her customer is out cash so Aling gempot had to consider it as credit but still recorded it in her books. What concept of accounting was observed?

a)

Accrual Accounting Principle

b)

Materiality Principle

c)

Historical Cost Principle

d)

Monetary Principle

94.

In your opinion, who do you think stole the president's wallet?

2 lines

95.

Bonus Round
the quiz maker's full name

(a)

Chapter 1 - Nature of Accounting

Total questions: 95

Worksheet time: 32mins

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