FA1-Recording Financial Transactions

MULTIPLE CHOICE QUESTIONS

1. Any valuable thing which a business owns is:
* Asset * Expense * Liability * Owner’s equity

2. The owner’s claim against the assets of the business is:

* Assets * Expense * Liabilities * Owner’s equity

3. Creditor’s claim against the assets of the business is:

* Assets * Owner’s equity * Expenses * Liabilities

4. Economic resources of the business that are expected to benefit a business in future
are referred to as:
*Assets * Owner’s equity * Expenses *Revenues

5. The amount remaining after deducting total liabilities from total assets of a business is
called:
*Expense * Assets * Owner’s equity * revenue
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6. Which of the following statement is incorrect?

* Assets – Capital = Liabilities
* Liabilities + Capital = Assets
* Liabilities + Assets = Capital
* Assets = Liabilities + Capital

7. The excess of total assets over total liabilities of a business is called:

*Expense * Assets * Owner’s equity * revenue

8. Which of the following statement is correct?

* Liabilities = Assets + Capital
* Liabilities + Assets = Capital
* Assets – Liabilities = Capital
* None of these

9. The following statement is correct :

* Accounting is a part of book keeping
* Accounting is a part of auditing
* Book keeping is a part of accounting
* Accounting and book keeping are same

10. The obligations that are owed by an enterprise against the business expenditures is
known as :
* Assets * Liabilities * Income * Expense

11. Cost against which enterprise has attained economic benefit and recorded in the period
when they are incurred are called :
* Assets * Liabilities * Income * Expense

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 FA1-Recording Financial Transactions

12. Net income will result during a time period when:

* assets exceed liabilities * assets exceed revenues
* expenses exceed revenues * revenues exceed expenses

13. Performing services on account will have the following effects on the components of the
basic
accounting equation:
* increase assets and decrease owner’s equity
* increase assets and increase owner’s equity.
* increase assets and increase liabilities.
* Increase liabilities and increase owner’s equity.

MULTIPLE CHOICE QUESTIONS

1. Purchase an asset on account affects:
* Assets account only * Asset and liability accounts
* Asset and expense accounts * Liability accounts only

2. Sale of furniture for cash would be recorded in which of the following journals:
*General journal * special journal * sales journal * purchase
journal

3. Which of the following is posted to the debit side of the bank account?
* Purchase of the furniture on credit * Payment to supplier by cheque
* Cash withdrew from bank for office use * Direct deposit by customer into bank

4. Income received in advance is recorded as:

* Prepaid account * Accrued account * Unearned income * None of them

5. The act/ process of recording a transaction in a journal:

* Journalizing * Posting * Analyzing *None of the above

6. A general journal is a book of:

* Original entry * second entry * prime entry * All of the above

7. A sum of the creditors’ equity and the owner’s equity is equal to:
* Expenses * Assets * liabilities * Revenues

8. Income earned but not received (receivable), is:

* Expense * Asset * liability * Revenue
9. Income received but not earned (unearned), is known as:
* Expense * Asset * liability * Revenue

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 FA1-Recording Financial Transactions

10. Which of the following describes assets?

* Sale of furniture on credit * Sale of furniture for cash
* Depositing cash into bank * Payment of account payable by cheque

11. These describe assets:

* Cash, Account receivable, bank overdrafts
*Cash, Note receivable, unearned commission
*Cash, Prepaid expenses, interest receivable
* None of these

12. The excess of total assets over total liabilities is:

* Income * Expense * Capital * liability

13. The excess of total assets over total capital is:

* Income * Expense * Capital * liabilities

14. What effect an event of cash deposited into bank will have on the accounting equation:
* Positive * No effect * Negative * None of these

15. Which of the following accounts will be affected by a transaction of credit sales?
* A/c receivable and sales * A/c payable and sales *Cash and sales * Sales only

16. The term revenue can be described as:

* Amount received from merchandise sold * receipts from merchandise sold
* Income from sale of merchandise and rendering services * Receipts from customers

17. An entry which has more than one debits or more than one credit is called:
* Double entry * Single entry * Simple entry * Compound entry

18. A Purchases account represents:

* Asset * Liability *Expense *Revenue

19. Sales is best described by:

* Sale of all items * Sale of merchandise * Sale of machinery * Sale of old furniture

20. Cash withdrawn by a proprietor for personal use is called:

* Gift * Drawing * Investment * None of these

21. Which of the following is not an asset?

* Cash * Notes receivable * Unearned rent * Building

22. Which of the following is a liability?

* Machinery * Sales * Notes payable * Account receivable

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 FA1-Recording Financial Transactions

23. Purchases are best described as:

* Purchases of furniture for use in business * Purchases of supplies for use in office
* Purchases of merchandise for resale *Purchases of computer for owner’s use

24. It is not an asset:

* Cash * Unexpired rent * Unearned commission * A/c receivable

25. The act of recording a transaction in a journal is called:

* Posting * Narration * Closing * Journalizing

26. Which of the following accounts should be debited for recording advance payment of rent?
* Rent expense account * Rent payable account
* Prepaid rent account * Unearned rent account

27. This account normally has a debit balance

*Account payable * Supplies * Unearned commission * Capital

28. If the seller reduces the prices of goods after shipment due to defective goods, this
reduction in price is called:
* Sales allowance * Sales discount
* Purchase return and allowance * Quantity discount

29. Narration is written:

* in between the entries *above the entry
* below each journal entry * anywhere

30. A Prepayment may initially be recorded as

* Expense or liability * Asset or income
* Asset or expense *Asset or liability

31. Sales can best be described as:

*Only cash sales of merchandise * Cash and credit sales of merchandise
* Sale of any asset on cash * Sale of any asset on credit

32. If the company’s policy is to record advance payment initially as an asset, payment of
insurance premium in advance will be recorded as:
* Prepaid insurance * Insurance expense
* Insurance payable * Unearned insurance

33. A debit increases the balance of:

* Assets and liabilities * Assets and owner’s equity
* Liabilities and expense * Assets and expenses

34. A credit decreases the balance of:

* Assets and liabilities * Liabilities and expenses
* Expenses and assets * Assets and owner’s equity

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 FA1-Recording Financial Transactions

35. Debit:
* increases both assets and liabilities * decreases both assets and liabilities
* increases assets and decreases liabilities * decreases assets and increases liabilities

36. A revenue account:

* is increased by debit * is decreased by credit.
* has a normal debit balance. * is increased by credit.
37. Accounts that normally have debit balances are:
* assets, expenses and revenues * assets, expenses and owner’s equity
* assets, liabilities and owner’s drawings. * assets, owner’s drawings and expenses

38. Which of the following is not a part of the recording process?

* Analyzing transactions * Preparing a trial balance.
* Entering transactions in a journal * Posting to ledger accounts.

39. Which of the following statements about a journal is false?

* It is not a book of original entry
* It provides a chronological record of transactions
* It helps to locate errors because the debits and credits amounts for each entry can be
readily compared
* It discloses in one place the complete effect of a transaction

40. To determine arithmetic accuracy of double entry accounting system. we can prepare:
* Income Statement * Balance Sheet * Cashbook * Trial Balance

41. Withdrawal of Merchandise, by owner for his personal use, is known as:
* Capital *Drawing * Personal Use * Merchandise

42. This account will be credited for recording advance receipt of Rent:
* Accrued Rent expense * Prepaid Rent * Unearned Rent * Rent Receivable

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 FA1-Recording Financial Transactions

MULTIPLE CHOICE QUESTIONS

1. A Ledger is :
*A process of accounting * A book of original
entry
* A secondary record of accounting / A book of second entry * None of the above
2. The posting is :
* Placing debit and Credit amounts
* Transferring Debit and Credit amounts from a general journal to relevant accounts in a
ledger.
* A record of accounting * None of the above
3. The process of posting creates which of the following records?
* General Journal * Ledger
* Purchases Journal * All of these
4. The process of journalizing creates which of the following records?
* Sales journal * Ledger
* General Journal * All of these
5. The process of pencil footing involves:
* Totalling amounts of individual accounts.
* Totalling debit and credit amounts of individual ledger accounts
* Only pencil working
* None of the above
6. The pencil balancing involves:
* Updating the Ledger accounts.
* Determining the difference between total debit amounts and total credit amounts of
an account.
* Finding present status of the Ledger accounts
* None of the above
7. If total debit amount in an account is more than its total credit amount, the account is
said to have:
* A debit balance * A credit balance
* A nil balance / zero balance * None of the above
8. If total credit amount in an account exceeds its total debit amount, the account is said
to have:
* A debit balance * A credit balance
* A nil balance/ zero balance * None of the above

9. If total credit amount in an account is just equal to its total debit amount, the account is
said to have:
* A debit balance * A credit balance * A nil balance * None of the above

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10. Which of the following accounts has normally a debit balance?

* Allowance for Bad Debts * Accounts Receivable
* Accounts Payable * Unearned Rent Income

11. Which of the following accounts has normally a credit balance?

* Allowance for Depreciation * Equipment
* Prepaid Insurance Expense * Sales Discount

12. Which of the following accounts has normally a debit balance?

* Purchases Discount * Sales Discount
* Purchases Returns and Allowances * Notes Payable

13. A trial balance can be described as:

* A part of financial statements
* A record of financial performance of business
* A list of ledger accounts and their balances
* A statement of financial position of business

14. In a pre-closing trial balance, drawing account balance is shown under:

* Debit column * Credit column
* Not shown in pre-closing trial balance * None of the above
15. The purpose of a trial balance is to;
* Show financial position of business
* Show profitability of business
* Test the equality of debit and credit balances of the ledger accounts
* All of the above

16. In a trial balance the balance of purchases account will be shown in which of the
following columns:
* Debit column * Credit column * Both * None of them

17. A trial balance proves:

* Accuracy of accounts and their balances.
* Business has earned a profit or incurred a loss
* Accounting record is free from errors
* The total debit balances are equal to the total credit balances of the ledger accounts

18. In a pre-closing trial balance, expense accounts are shown under;

* Debit column * Credit column
* Not shown in pre-closing trial balance * None of the above
19. Footing is made just:
* After recording * after balancing
* Prior to balancing * before recording

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20. The term ‘Balancing means:

* To tally both sides of a trial balance
* Tally both sides of a trial balance
* Reconciling cash book and bank statement balance
* Determining and writing down account balances

21. A ledger consists of:

* Financial statements * Journal entries
* Special journal * All the accounts maintained by a business.

22. List of balances of accounts having debit and credit balances is called:
* Special journal * General Journal * General ledger * Trial balance

23. The act of totalling of money column of an account is called:

* Posting * Ruling * Footing * Balancing

24. Posting means:

* making an entry in a general journal
* Making an entry in a special journal
* Transferring entries from a journal to ledger accounts
* determining balance of an account

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