## 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

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

30. Accounting principles are generally based on:
A. Theory
B. Practicability
C. Subjectivity
D. None of these

31. Accounting principles can be classified into
A. Two kinds
B. Three kinds
C. Four kinds
D. Five kinds

32. A person or enterprise to whom a debt is owed
A. Accounts receivable
B. Note Payable
C. Note receivable
D. Accounts Payable

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

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

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

36. Universally accepted customs, rules or traditions are called
A. Accounting Principles
B. Accounting rules
D. Accounting conventions

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

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

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

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

41. According to this convention, accounting practice should remain unchanged from one period to another
A. Conservatism
B. Materiality
C. Full Disclosure
D. Consistency

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

43. Assets minus liabilities is
A. Profit
B. Working Capital
C. Capital
D. Long-term liabilities

44. The excess of assets over liabilities is
A. Capital
B. Profit
C. Equities
D. Drawings

45. The accounting equation is
A. Liabilities = Assets + Capital
B. Assets = Liabilities + Capital
C. Liabilities = Assets – Capital
D. None of these

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

47. Assets must equal to
A. Capital
B. Liabilities
C. Liabilities + Capital
D. Liabilities + Bank Loan

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

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