Part 1: MCQ Basics of Financial Accounting Objective Questions

Given below are financial accounting MCQs with answers. This updated quiz is useful for MBA, BBA, B Com, M Com, MMS, PGDM, and CA students and researchers. These Financial Accounting multiple choice questions can be used for UGC NET, SET, UPSC, MPSC and other competitive entrance exams. These MCQs can also be used for sub-topics like financial statements, financial accountancy, cash flow statements, balance sheet etc.

__________ is a specialized branch of accounting that keeps track of a company’s financial transactions.

A. Cost accounting

B. Management Accounting

C. Financial Accounting

D. Corporate accounting

Ans: C. Financial Accounting

 

Financial accountancy is governed by ___________

A. local standards only

B. international standards

C. local as well as international accounting standards

D. company’s internal top management only

Ans: C. local as well as international accounting standards

 

_____ is the scope of financial accounting.

A. Collection and processing of data

B. Verifying or auditing data

C. Publishing data

D. All of the above

Ans: D. All of the above

 

Which is not a benefit of financial accounting?

A. Maintaining systematic records

B. Protecting and safeguarding business assets

C. Historical in nature

D. Facilitates rational decision-making

Ans: C. Historical in nature

 

Which is not a limitation of financial accounting?

A. Inadequate information to fix up the price of products manufactured

B. Lack of data for comparison of cost of operation of the firm with other firms in the industry

C. The data available is historical in nature

D. Complies with the various legal requirements

Ans: D. Complies with the various legal requirements

 

The overriding purpose of financial accounting is to summarize financial activity in business in the ______

A. profit and loss statement

B. balance sheet

C. cash flow statement

D. all of the above

Ans: D. All of the above

 

_________ are the basis of the business’s financial accounting.

A. Accounting records

B. Bookkeeping

C. Sales Volume

D. Both A & B

Ans: D. Both A & B

 

Financial accounting provides accounting information to the ________ though the information is useful for internal purposes also.

A. external users

B. internal users

C. company

D. competitors

Ans: A. external users

 

Financial accounting reports to the ________ after the completion of the accounting year.

A. internal management

B. external parties

C. Media

D. rivals

Ans: B. external parties

 

Financial accounting reports include _____

A. profit and loss account

B. directors report

C. balance sheet and auditors report

D. all of the above

Ans: D. All of the above

 

Financial accounting cover overall performance of the _______

A. Competitors

B. Market

C. Company

D. Finance department

Ans: C. Company

 

Financial accounting reports lay greater emphasis on the _______

A. objectivity of data

B. Flexibility of data

C. Relevancy of data

D. Subjectivity of data

Ans: A. objectivity of data

 

Presentation of of financial accounting reports is mandatory under the provisions of of section 209 (1), 210 (1) and 216, 217 of __________

A. The Business act 1956

B. The Companies Act 1956

C. The Companies Act 1965

D. the company 2016

Ans: B. The Companies Act 1956

 

Select the correct answer.

A. financial accounting reports generally govern accepted accounting principles

B. Generally accepted accounting principles governing financial accounting reports

C. Generally accepted accounting principles does not governing financial accounting reports

D. There is no relation between Generally accepted accounting principles and financial accounting reports

Ans: B. Generally accepted accounting principles governing financial accounting reports

 

Financial accounting statements are subject to ______

A. Cost audit

B. Forensic audit

C. Statutory audit

D. Non statutory audit

Ans: C. Statutory audit

 

The annual reports are to be prepared and published for circulation among the external end users such as __________

A. Company, competitors, contributors and colleagues

B. Customers. creators, collaborators and contractors

C. Government, competitors, owners and top management

D. shareholders, investors, bankers, debenture holders and creditors

Ans: D. shareholders, investors, bankers, debenture holders and creditors

 

____________ is a structured representation of the financial performance and financial position of a business and changes over a period of time.

A. Profit and loss account

B. Financial statement

C. Balance sheet

D. Internal audit

Ans: B. Financial statement

 

________ are the components of financial statements.

A. profit and loss account and balance sheet

B. cash flow and fund flow statement

C. notes and schedules

D. All of the above

Ans: D. All of the above

 

_______ explain the financial position of the reporting entity at the end of the accounting period.

A. Balance sheet

B. Income statement

C. ledger

D. Notes & schedules

Ans: A. Balance sheet

 

_______ helps to find out the profit made on loss sustained in a particular accounting period through transactions and events.

A. Income statement

B. Profit and loss account

C. Trading account

D. None of the above

Ans: B. Profit and loss account

 

______ is not a primary source of long-term debt financing.

A. Accounts payable

B. Notes payable

C. Leases

D. Bonds

Ans: A. Accounts payable

 

Cash flow is also known as _____

A. balance sheet flow

B. profit and loss account

C. fund flow statement

D. notes and schedules

Ans: C. Fund Flow statement

 

______ is used to analyse the pattern of movement or activity during the period to identify the way the enterprise has generated cash and the way they have been used in an accounting period.

A. Balance sheet

B. Cash flow

C. Profit & Loss a/c

D. income statement

Ans: B. Cash flow

 

Notes and schedules is used to present supplementary information explaining different items of financial statements.

A. Balance sheet flow

B. Profit and loss account

C. Fund flow statement

D. Notes and schedules

Ans: D. Notes and schedules

 

______ is a written evidence in support of a business transaction.

A. Ledger

B. Voucher

C. Ledger Posting

D. Journal

Ans: B. Voucher

 

Notes and schedules include disclosures about the risk and uncertainties affecting the enterprise and such items as disclosure of _______

A. accounting policies segment reports

B. report of operations in the process of discontinuation

C. Both A & B

D. None of the above

Ans: C. Both A & B

 

Trademark, Copyrights & Patents are _____ assets.

A. Intangible

B. Fixed

C. Current

D. Tangible

Ans: A. Intangible

 

Capital increases if ______

A. cost increases

B. Expenses increases

C. Revenue increases

D. Interest on capital increases

Ans: C. Revenue increases

 

Current assets minus current liabilities is equal to ______

A. losing capital

B. gaining capital

C. fixed capital

D. working capital

Ans: D. working capital

 

A _______ can also be referred to as a tangible asset.

A. liquid asset

B. fixed asset

C. current asset

D. other asset

Ans: B. fixed asset

 

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