Accounting Equation MUltiple Choice Questions for CA
1. Capital increased by
A. Interest on capital
B. Selling goods on profit
C. Additional capital introduced
D. All of these
2. A business has assets of Rs. 100000 and liabilities of Rs. 20000. What is the amount of capital.
A. 120000
B. 80000
C. None of these
3. Capital will reduce by
A. Purchase of goods on credit
B. Selling the goods for cash
C. Furniture purchase for personal use
4. Liabilities increased by
A. Purchasing goods on credit
B. Rent due
C. Taking of bank loan
D. All
5. Revenue will increase by
A. Purchase of assets for cash
B. Rent paid to landlord
C. Selling the goods on profit
D. Drawing goods for personal use
6. Assets increased by
A. Selling goods for cash
B. Selling goods on credit
C. Purchasing machinery for cash
D. Purchasing machinery on credit
7. Point out correct accounting equation
A. Assets = Liabilities – Capital
B. Liabilities = Capital + Assets
C. Capital = Assets + Liabilities
D. Liabilities = Assets – Capital
8. Withdraws by proprietor would reduce
A. Owner equity and increase liabilities
B. Both assets and corner’s equity
C. Assets and increase liability
D. none of these
9. Purchase of fixed assets for cash would
A. Reduce current and fixed assets
B. Keep current and fixed assets unchanged.
C. Reduce current asset and increase fixed assets.
D. Reduce current assets and current liabilities
10. Both assets and owner’s equity would increase by
A. Proprietor’s Drawings
B. Purchase Machine on credit
C. Payment to creditor
D. Retained earning
11. The favorable balance of profit and loss account should be
A. Added in liabilities
B. Subtracted from current assets
C. Subtracted from liabilities
D. Added on Capital
12. Purchase goods on credit and for cash with effect
A. Cash and good
B. Cash good and creditor
C. Cash and creditor
D. Cash credit and owner’s equity
13. The liabilities of a firm are 3,000 and capital is 7000, Assets are?
A. 7000
B. 10000
C. 4000
D. None of these
14. Which of the following will cause owner’s equity increase?
A. Expense
B. Owner Drawer
C. Revenue
D. Loss
15. Expense paid by a business decrease
A. Cash
B. Capital
C. Both A and B
D. None of these
16. Sale of fixed assets for cash would
A. Reduce current and fixed assets
B. Keep current and fixed assets unchanged
C. Increases current assets and decreases fixed assets
D. Reduce current assets and current liabilities
17. Find out value of account receivable from following cash Rs. 40000 Account payable Rs. 30000, office equipment Rs.20000, owner equity Rs.80000.
A. 170000
B. 50000
C. 10000
D. None of these
18. Borrowed money from bank, this transaction involves which one of following accounts
A. Cash and bank loan
B. Bank and debtor
C. Drawing and cash
D. Cash and bank
19. Assets – Liabilities = ?
A. Profit
B. Working Capital
C. Capital
D. Long term liability
20. Which of financial statement displays the revenues and expenses of a company for a period of time?
A. Income statement
B. Balance sheet
C. Cash flow statement
D. None of these
21. Which account is not a liability account
A. Account payable
B. Accrued Expenses
C. Cash
D. Notes payables
22. Which account decreases equity?
A. Expenses
B. Withdrawal
C. Both (A. and (B.
D. None of these
23. Capital of business is 300000, liabilities are 50000, loss 70000, then asset will be
A. 420000
B. 320000
C. 350000
D. 280000
24. Profit on sale of goods will be
A. Deducted from capital
B. Added to capital
C. Added in liabilities
D. None of these
25. Income received in advance will be
A. Added to liability and cash
B. Added to capital and cash
C. Deducted from liability and cash
D. Added to liabilities and deducted from cash
26. Withdrew goods for personal use will
A. Reduce stock and increase capital
B. Reduce stock and reduce capital
C. Increase stock and reduce capital
D. Increase stock and increase capital
27. If total assets of business are 130000 and net worth is 80000, creditor will be
A. 210000
B. 50000
C. 80000
D. none of these
28. Accounting principles are generally based on
A. Practicability
B. Subjectivity
C. Conveniences in recordings
D. All of the above
Answer: A
29. Realization concepts implies
A. The receipts of the order
B. The delivery of the goods
C. The receipt of cash from customers
D. None of these
Answer: B
30. Accounting principles are generally based on:
A. Theory
B. Practicability
C. Subjectivity
D. None of these
Answer: B
31. Accounting principles can be classified into
A. Two kinds
B. Three kinds
C. Four kinds
D. Five kinds
Answer: B
32. A person or enterprise to whom a debt is owed
A. Accounts receivable
B. Note Payable
C. Note receivable
D. Accounts Payable
Answer: D
33. A business event which can be measured in terms of money and recorded in the books of accounts is called
A. Assets
B. Equities
C. Owners equity
D. Transaction
Answer: D
34. The expression of the equality of an entity’s assets with the claims against them is referred to as the
A. Accounting equations
B. Accounting transaction
C. Bookkeeping
D. None of these
Answer: A
35. The system of recording transactions based on dual aspect concept is called
A. Double account system
B. Double entry system
C. Single entry system
D. Modern entry system
Answer: A
36. Universally accepted customs, rules or traditions are called
A. Accounting Principles
B. Accounting rules
C. Accounting traditions
D. Accounting conventions
Answer: A
37. According to the money measurement concept, the following would be recorded in the books of accounts of the business
A. Health of director of the company
B. Quality of company’s goods
C. Value of plant machinery
D. All of the above
Answer: C
38. According to this concept, it is assumed that business will exist for indefinite time period
A. Realization concepts
B. Going Concern Concept
C. Business entity concept
D. None of the above
Answer: B
39. According to this concept, business and owner both have separate identity
A. Realization concepts
B. Going Concern Concept
C. Business entity concept
D. Cost Concept
Answer: C
40. According to this concept, expenses are matched with revenue to study the business result
A. Matching concepts
B. Dual Aspect Concept
C. Business entity concept
D. Cost Concept
Answer: A
41. According to this convention, accounting practice should remain unchanged from one period to another
A. Conservatism
B. Materiality
C. Full Disclosure
D. Consistency
Answer: D
42. According to this concept, “Accounting records only those transactions which can be expressed in terms of money”
A. Matching concept
B. Dual Aspect Concept
C. Business entity concept
D. Money Measurement Concept
Answer: D
43. Assets minus liabilities is
A. Profit
B. Working Capital
C. Capital
D. Long-term liabilities
Answer: C
44. The excess of assets over liabilities is
A. Capital
B. Profit
C. Equities
D. Drawings
Answer: A
45. The accounting equation is
A. Liabilities = Assets + Capital
B. Assets = Liabilities + Capital
C. Liabilities = Assets – Capital
D. None of these
Answer: B
46. If assets are Rs. 8000 and capital is Rs. 6000, liabilities will be
A. 8000
B. 2000
C. 14,000
D. None of these
Answer: B
47. Assets must equal to
A. Capital
B. Liabilities
C. Liabilities + Capital
D. Liabilities + Bank Loan
Answer: C
48. The accounting equation represents
A. Resources are allocated at cost price
B. Owner’s give money for business
C. Resources in the business are equal to the source of business
D. Resources in the business are not equal to the source of business
Answer: C
49. Purchase goods on credit and for cash will effect
A. Cash and Goods
B. Cash, goods and creditors
C. Cash and creditors
D. Cash, creditors and owner’s Equity
Answer: A
50. What is capital?
A. Capital is the equity of the stakeholders
B. Capital is the goods involved in the production
C. Capital is the total stock
D. Capital is profit
Answer: A