0% Introduction To Accounting Full BookAdvertisements 1 / 40 1. A company recorded a credit sale of Rs. 200,000 with terms of 3/10, n/30. The customer paid within the discount period. What would be the journal entry to record this transaction? a) Debit Cash Rs. 200,000; Credit Sales Rs. 200,000 b) Debit Cash Rs. 194,000, Debit Sales Discounts Rs. 6,000; Credit Accounts Receivable Rs. 200,000 c) Debit Accounts Receivable Rs. 200,000; Credit Sales Rs. 200,000 d) Debit Cash Rs. 200,000; Credit Sales Discounts Rs. 6,000; Credit Accounts Receivable Rs. 194,000 2 / 40 2. A business owner withdrew Rs. 50,000 in cash from the business for personal use. How does this transaction affect the accounting equation? a) Decrease in assets, decrease in owner’s equity b) Increase in assets, decrease in liabilities c) Decrease in liabilities, increase in assets d) Increase in assets, increase in liabilities 3 / 40 3. During an accounting period, total assets increased by Rs. 120,000, and liabilities decreased by Rs. 40,000. How must the owner’s equity have changed? a) Increased by Rs. 160,000 b) Increased by Rs. 80,000 c) Decreased by Rs. 160,000 d) Decreased by Rs. 80,000 4 / 40 4. Which of the following accurately represents the double-entry effect of an owner introducing a personal vehicle valued at Rs. 300,000 into the business? a) Increase in assets and owner’s equity b) Increase in assets only c) Increase in liabilities only d) Increase in liabilities and owner’s equity 5 / 40 5. If a business purchases machinery on credit for Rs. 150,000, which of the following would be the immediate impact on the balance sheet? a) Increase in assets and increase in owner’s equity b) Increase in assets and increase in liabilities c) Increase in liabilities and decrease in assets d) No impact on the accounting equation 6 / 40 6. A customer returned goods worth Rs. 15,000 that had been previously sold on credit. How does this impact the trial balance? a) Decrease in sales and increase in accounts payable b) Increase in accounts receivable and decrease in inventory c) Decrease in accounts payable and increase in inventory d) Increase in sales returns and decrease in accounts receivable 7 / 40 7. Under the perpetual inventory system, which of the following journal entries would record a purchase return? a) Debit Purchase Returns; Credit Cash b) Debit Inventory; Credit Purchase Returns c) Debit Purchase Returns; Credit Accounts Payable d) Debit Inventory; Credit Accounts Receivable 8 / 40 8. An asset costing Rs. 500,000 is purchased, with Rs. 100,000 paid in cash and the remaining amount financed through a long-term loan. How does this affect the balance sheet? a) Increase in assets by Rs. 500,000; increase in liabilities by Rs. 400,000 b) Increase in assets by Rs. 500,000; decrease in liabilities by Rs. 400,000 c) Increase in liabilities by Rs. 500,000; decrease in assets by Rs. 100,000 d) Increase in liabilities by Rs. 100,000; increase in assets by Rs. 400,000 9 / 40 9. During an audit, it is found that office supplies worth Rs. 5,000 were mistakenly recorded as an asset instead of an expense. Which of the following would correct the error? a) Debit Office Supplies Expense Rs. 5,000; Credit Office Supplies Asset Rs. 5,000 b) Debit Office Supplies Asset Rs. 5,000; Credit Office Supplies Expense Rs. 5,000 c) Debit Office Supplies Expense Rs. 5,000; Credit Cash Rs. 5,000 d) Debit Office Supplies Asset Rs. 5,000; Credit Cash Rs. 5,000 10 / 40 10. A company uses the FIFO method for inventory. It sells 100 units at Rs. 10 per unit, with the earliest units purchased costing Rs. 8 per unit. What will be the gross profit? a) Rs. 2,000 b) Rs. 800 c) Rs. 1,200 d) Rs. 200 11 / 40 11. If an adjusting entry for accrued revenue of Rs. 10,000 is not made at the end of the period, what is the effect on the financial statements? a) Overstatement of liabilities and understatement of assets b) Understatement of revenues and assets c) Overstatement of revenues and assets d) No impact on financial statements 12 / 40 12. A business receives an interest-bearing note receivable from a customer. Interest accrues at a rate of 6% annually on the principal of Rs. 100,000. How much interest revenue should the business recognize after 3 months? a) Rs. 1,500 b) Rs. 6,000 c) Rs. 4,500 d) Rs. 3,000 13 / 40 13. Which of the following statements best describes the matching principle in accounting? a) Expenses are recognized in the period when the cash is paid b) Revenues are recognized when earned, and expenses when incurred to generate those revenues c) Expenses are recognized only when the income statement is prepared d) Revenues and expenses are recognized in the same fiscal year, regardless of timing 14 / 40 14. A company issued a long-term bond with a face value of Rs. 1,000,000 at an interest rate of 8%. If the market interest rate is 10%, how will the bond be issued, and what will be the effect on the company's financial statements? a) Issued at a discount, decreasing cash received and increasing interest expense over time b) Issued at a premium, increasing cash received and decreasing interest expense over time c) Issued at par, with no impact on cash received or interest expense d) Issued at a premium, with no impact on cash received but increasing liabilities 15 / 40 15. If a business incorrectly recorded a purchase of inventory for Rs. 200,000 as an expense, what would be the effect on net income and retained earnings? a) Net income overstated, retained earnings overstated b) Net income understated, retained earnings unaffected c) Net income understated, retained earnings understated d) Net income unaffected, retained earnings overstated 16 / 40 16. Which of the following transactions would result in an increase in the current ratio of a company? a) Borrowing long-term debt to finance the purchase of inventory b) Paying off an account payable c) Purchasing equipment by issuing shares d) Declaring a dividend payable 17 / 40 17. A business purchases a machine for Rs. 600,000, expecting it to last for 5 years with no residual value. Using straight-line depreciation, what is the book value of the machine at the end of year 3? a) Rs. 120,000 b) Rs. 240,000 c) Rs. 360,000 d) Rs. 600,000 18 / 40 18. If a business has total assets of Rs. 500,000, liabilities of Rs. 200,000, and equity of Rs. 300,000, which of the following changes would result in an increase in the debt-to-equity ratio? a) Paying off Rs. 50,000 in liabilities b) Increasing assets by Rs. 100,000 through equity financing c) Borrowing Rs. 50,000 in additional debt d) Repurchasing Rs. 100,000 of equity 19 / 40 19. When calculating the carrying value of a long-term asset under the reducing balance method of depreciation, which of the following factors does NOT impact the depreciation expense? a) Cost of the asset b) Useful life of the asset c) Residual value of the asset d) Salvage value of the asset 20 / 40 20. If a company uses a periodic inventory system, which of the following entries would it make at the end of the period to adjust for inventory shrinkage? a) Debit Inventory; Credit Cost of Goods Sold b) Debit Cost of Goods Sold; Credit Inventory c) Debit Inventory; Credit Purchases d) Debit Purchases; Credit Cost of Goods Sold 21 / 40 21. A company buys a patent for Rs. 500,000 with an expected useful life of 10 years. How will this transaction affect the financial statements? a) Increase in assets and decrease in owner’s equity b) Increase in assets and increase in liabilities c) Increase in assets and decrease in cash d) Increase in assets and amortization expense over 10 years 22 / 40 22. Which of the following is true about a company's financial leverage? a) Financial leverage is increased when a company issues more equity b) Financial leverage decreases when a company borrows more c) Financial leverage increases when a company borrows more, increasing risk and return d) Financial leverage has no impact on the company’s profitability 23 / 40 23. The cash flow statement shows a cash inflow from operating activities of Rs. 100,000, an outflow from investing activities of Rs. 50,000, and an outflow from financing activities of Rs. 30,000. What is the net cash flow for the period? a) Rs. 50,000 inflow b) Rs. 100,000 outflow c) Rs. 20,000 inflow d) Rs. 50,000 outflow 24 / 40 24. Which of the following best describes the nature of goodwill in accounting? a) An asset that is amortized over its useful life b) An intangible asset that represents the value of a company's brand c) An amount paid above the fair value of net assets during an acquisition d) A liability arising from future obligations of a business 25 / 40 25. A company has Rs. 500,000 in total assets and Rs. 200,000 in liabilities. What is the company’s equity? a) Rs. 700,000 b) Rs. 200,000 c) Rs. 300,000 d) Rs. 500,000 26 / 40 26. Which of the following transactions would NOT impact the balance sheet? a) A company issues shares to raise capital b) A company pays off a short-term loan c) A company recognizes an expense for an unpaid bill d) A company purchases inventory on credit 27 / 40 27. How is a deferred tax asset recognized? a) It is recorded as a liability on the balance sheet b) It represents an amount owed to the tax authorities c) It arises when taxable income exceeds accounting income d) It arises when accounting income exceeds taxable income 28 / 40 28. What is the correct formula for the acid-test ratio? a) (Current Assets – Inventory) / Current Liabilities b) (Current Assets + Inventory) / Current Liabilities c) (Current Liabilities – Inventory) / Current Assets d) (Cash + Accounts Receivable) / Current Liabilities 29 / 40 29. A company has prepaid Rs. 60,000 for a 12-month insurance policy. What would be the adjusting entry at the end of the first month? a) Debit Insurance Expense Rs. 60,000; Credit Prepaid Insurance Rs. 60,000 b) Debit Insurance Expense Rs. 5,000; Credit Prepaid Insurance Rs. 5,000 c) Debit Prepaid Insurance Rs. 60,000; Credit Insurance Expense Rs. 60,000 d) Debit Prepaid Insurance Rs. 5,000; Credit Insurance Expense Rs. 5,000 30 / 40 30. A company records a bad debt expense of Rs. 10,000 at year-end. What is the effect on the financial statements? a) Decreases assets and increases liabilities b) Decreases both assets and equity c) Increases liabilities and decreases equity d) Decreases liabilities and increases equity 31 / 40 31. A company issues bonds at a discount, and the discount is amortized over the life of the bonds. How does the discount affect the financial statements? a) It decreases the carrying value of the bonds over time b) It increases interest expense over time c) It increases the company's liabilities d) It has no effect on the company’s financial statements 32 / 40 32. A company borrows Rs. 100,000 from a bank at an interest rate of 6% per annum. What will be the interest expense for 3 months? a) Rs. 1,500 b) Rs. 6,000 c) Rs. 4,500 d) Rs. 3,000 33 / 40 33. Under the completed-contract method of revenue recognition, when is revenue recognized? a) When the contract is signed b) When payments are received c) When the contract is completed d) As work progresses 34 / 40 34. Which of the following financial ratios is most useful for evaluating a company’s ability to meet short-term obligations? a) Return on Assets (ROA) b) Current Ratio c) Price-to-Earnings Ratio (P/E) d) Debt-to-Equity Ratio 35 / 40 35. When calculating the cost of goods sold under the perpetual inventory system, which of the following factors is NOT considered? a) Beginning inventory b) Purchases during the period c) Ending inventory d) Operating expenses 36 / 40 36. A company has Rs. 50,000 of revenue and Rs. 40,000 of expenses. What is the company’s net income? a) Rs. 10,000 b) Rs. 50,000 c) Rs. 40,000 d) Rs. 0 37 / 40 37. A company applies the lower of cost or market rule to inventory. If the market value of an inventory item drops below its cost, what is the proper accounting treatment? a) Write down the inventory to market value b) Write up the inventory to market value c) Recognize a gain on the inventory d) No adjustment is needed 38 / 40 38. A company is accounting for a lease that qualifies as a finance lease. How should the lease be recorded on the balance sheet? a) As a liability with corresponding right-of-use asset b) As an operating lease with an expense recognized on a straight-line basis c) As a short-term liability only d) As a rental expense with no impact on assets or liabilities 39 / 40 39. What is the primary purpose of conducting a bank reconciliation? a) To calculate the company’s taxable income b) To assess the company’s liquidity position c) To prepare the company’s income statement d) To identify any discrepancies between the company's financial records and the bank’s records 40 / 40 40. Which of the following would be recorded as a contingent liability? a) A lawsuit with a probable loss b) A future tax obligation c) A discount on bonds payable d) An asset that is subject to depreciation Your score isThe average score is 39% 0% Restart quiz Advertisements
