FIN621 MidTerm 1100MCQs

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FIN621 Online Quiz#4…1100+ MCQS Solved….
By Hafiz Salman Majeed & Qazi(1-Nation)
Question # 1 of 20 ( Start time: 06:05:25 AM ) Total Marks: 1
End product of the accounting cycle is known as the__________
Select correct option:
Tax return
Financial statements
Auditor’s annual report
Annual general meeting

Which of the following expenses would normally be classified as Other or Non Operating
Expense on a multiple-step income statement?
Interest expense
Depreciation expense
Insurance expense
Salaries expense

The right side of an account is a:
Debit side
Credit side
Balance of that account
Carried to the next accounting period

Even though LIFO generally results in lower reported earnings, firms will use LIFO
which of the following reasons?
Decreased cash flows from higher taxes

Increased cash flows from lower taxes
Increased cash flows from higher taxes
Decreased cash flows from lower taxes

To find the value of closing stock at the end of a period we:
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Deduct opening stock from cost of goods sold

Look in the stock account
Deduct cost of goods sold from sales
Do this by stocktaking

Which of the following is true about "After closing trial balance"?
It may consist of balances of only Real and Personal accounts

It may consist of balances of only Nominal and Real accounts
It may consist of balances of Nominal, Real and Personal accounts
It may consist of balances of only Nominal and Personal accounts

Opinion of the auditor is termed as unqualified when the auditor concludes the following
points about the financial statements except:
Presented fairly and unbiased

Free from misleading information
Consistency in the accounting policies
Balance sheet showing sound position

Which of the following would be considered a cash-flow item from an "operating"
activity?
Cash outflow to the government for taxes

Cash outflow to shareholders as dividends
Cash inflow to the firm from selling new common equity shares
Cash outflow to purchase bonds issued by another company

Which of the following statement is NOT true?
Financial statements may be prepared soon after the adjusted trail balance
The owner’s equity is not up to the date until the closing entries are posted
Adjusting entries are prepared before the financial statements are prepared

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In the accounting cycle, closing entries are made before the adjusting entries

Krisle and Kringle's debt-to-total assets ratio is 4%. What is its debt-to-equity ratio?
2%
7%
6%
3%

Which of the following is NOT a cash outflow for the firm?
Dividends payments
Interest payments
Tax payments

If a firm has Rs. 100 in inventories, a current ratio equal to 1.2, and a quick ratio equal to
1.1, what is the firm's Net Working Capital?
Rs. 0
Rs. 100
Rs. 200
Rs. 1,000

The Drawing account is closed by which of the following entry?
Capital – Debit; Drawing - Credit

Drawing – Debit; Capital - Credit
Income Summary – Debit; Drawing - Crediting
Drawing – Debit; Income Summary - Crediting

Which of the following is (are) true about the Audit of financial statements?

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External audit is required for all companies established under Companies Ordinance
1984
External audit is necessary for the publicly owned companies
External audit is conducted by the financial analyst
All of the given options

The appropriate journal entry to record equipment depreciation expense would consist of
a debit to Depreciation Expense and a credit to which of the following accounts?
Equipment
Accumulated Depreciation: Equipment
Retained Earnings
Cash

Net current assets are equivalent to:
Stock plus debtors plus cash

Current liabilities less current assets
Working capital
Fixed assets plus current assets less current liabilities

Which of the following is the second name for the journal?
Book of default entries

Book of original entries
Book of detailed entries
Book of annual entries

Retained earnings will change over time because of several factors. Which of the
following factors would explain an increase in retained earnings?
Net loss
Net income
Dividends
Investments by stockholders

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How many types of audit certificate are there?
Two
Three
Four
Five

Which of the following helps to identify the reasons for difference between the net
income and net cash receipts and payment in the particular period?
Bank reconciliation statement

Cash book
Statement of cash flows
Receipts and payment account

Which of the following is the proper journal entry to record Ransom Company's billing
of clients for Rs. 500 of services rendered?
Debit Cash 500; Credit Accounts Receivable 500

Debit Accounts Receivable 500; Service Revenue 500
Debit Accounts Receivable 500; Credit Capital Stock 500
Cash 500; Credit Service Revenue 500

A complete set of financial statements for Hartman Company, at December 31, 2007,
would include each of the following, EXCEPT:
Balance sheet as at December 31, 2007

Income statement for the year ended December 31, 2007
Statement of projected cash flows for 2008
Notes containing additional information that is useful in interpreting the financial
statements

Which one of the following would be more important for a creditor?

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Profitability
Stability
Liquidity
Reliability

A journal entry that has more than one debit or credit is known as:
Double entry
Multiple entry
Compound entry
None of the given option

Which of the following explains the debit and credit rules relating to recording revenues
and expenses?
Realization and matching principle

The effect of revenues and expenses in the owner’s equity
Expenses appear on the left side of the income statement
Liabilities are recorded as debit on the balance sheet

The amount of current assets that varies with seasonal requirements is referred to as
which of the following?
Permanent Working Capital

Net Working Capital
Temporary Working Capital
Gross Working Capital

Identify the statement that is NOT true about the Incomes Account and Expenses
Account:
These are the temporary accounts

These are closed in Income summery account

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These may included in closing trial balance
These are also known as Nominal Accounts

Which of the following is NOT a qualitative characteristic of financial statements?
Understandability
Relevance
Full disclosure
Comparability

If a firm has Rs. 100 in inventories, a current ratio equal to 1.2, and a quick ratio equal to
1.1, what is the firm's Net Working Capital?
Rs. 0
Rs. 100
Rs. 200
Rs. 1,000

An account that will not be included in "After Closing Trial Balance" is:
Bank account
Depreciation account
Notes payable account
Unearned revenue account

Which one of the following is usually classified as an inventory item?
Goods purchased for resale to customers

Items purchased and used by the company such as office supplies
Items purchased for a specific customer job
Items purchased and the quantity on hand does not need to be tracked

In most cases, the payments you get from preferred stocks are taxed at which of the
following tax rate?

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Higher tax rate

Lower capital gain tax rate
Ordinary income tax rate
Sales tax rate

If the ending inventory is overstated in the year; the cost of goods sold will be _______
and gross profit__________ also.
Understated, Overstated
Overstated, Overstated
Understated, understated
Overstated, understated

Financial reporting process contains the following EXCEPT:
Auditors report
Financial Statements
Notes to the account
Three years projected financial statements

In simple words book value would be the amount of money that a holder of a common
share would get if a company were to:
Consolidate
Merged with another company
Acquired by another company
Liquidate

The cash flow from investing activities shows the cash effects of which of the following?
Income statement items

Long term assets items
Long term liability & stockholder’s equity

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Long term liability and long term assets

Journal entries are done at the end of the accounting period for which type of accounts?
Assets and liabilities

Office supplies and office equipment
Raw material and office supplies
Depreciation and expenses

How would the sale of merchandise on account be represented in the seller's records?
Increase assets and increase expenses

Increase assets and decrease liabilities
Increase assets and increase paid-in capital
Increase assets and decrease revenues

Which of the following type of reports is most frequently used by external users, such as
investors?
Tax Forms
Management Reports
Audit reports

Which of the following items are NOT added back to the net income figure (which is
found on the Income Statement) to arrive at cash flows from operations?
Depreciation
Deferred tax
Amortization
Investments
Question # 1 of 20 ( Start time: 06:05:45 PM ) Total Marks: 1

In isolation, which of the following is TRUE about a financial ratio?

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Useless piece of information
Useful piece of information
Useful only for past performance
Useful only for future predictions

Adjusting entries are used to:
Bring account balances up to date at year end

Close temporary accounts at year end
Close permanent accounts at year end
Bring account balances at zero

Which of the following is NOT an advantage of a partnership firm?
Ease of formation
High start-up costs
Additional sources of investment capital
Possible tax advantages

Bank account

Which group of ratios measures a firm's ability to meet short-term obligations?
Liquidity ratios
Debt ratios
Coverage ratios
Profitability ratios

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While preparing the cash flows statement, transactions involving production and
delivering goods or providing services must be classified as:
Business activities
Operating activities
Financing activities
Investing activities

The company XYZ purchased an asset for Rs. 40,000 paying 30,000 in cash and issuing a
long term note payable for remaining balance. The amount will be recorded in statement
of cash flows as:
Rs. 10,000 as investing activity


Which of the following is TRUE regarding the entry to recognize the depreciation
expense?
It is an application of matching principle

It is a closing entry
Usually includes an offsetting credit to cash
It is done only at the end of each month

Which of the following is the third step of accounting cycle?
Preparing financial statements

Preparing trial balance
Posting
Making adjusting entries


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Dividends payments
Interest payments
Tax payments

Which of the following is NOT one of the four basic financial statements?
Balance sheet
Audit report
Income statement

Which one of the following is the most common type of opinion given by the auditor?
Unqualified opinion
Qualified opinion
Adverse opinion
Disclaimer of opinion

Which one of the following transactions should be classified as a financing activity?
Purchase of equipment
Purchase of treasury stock
Sale of trademarks
Income tax refund

Which of the following is formula to measure the return on total assets?
Average total assets by operating income

Average total assets by net income
Operating income by average total assets
Net income by average total assets

Which of the following is the adjustment that is added during the reconciliation of net

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income to operating cash flows in indirect method?
An increase in Accounts Receivable

An increase in Prepaid Expenses
Gain on sale of capital assets
Amortization Expense

ABC Company has Rs. 150,000 cash, Rs. 80,000 as accounts receivables, Rs. 20,000 as
allowance for doubtful accounts, Rs. 10,000 as work in progress inventory, Rs. 55,000 as
prepaid expenses, Rs. 50,000 land purchased in the current year. Calculate the value of
current assets.
Rs. 275,000
Rs. 315,000
Rs. 365,000
Rs. 220,000

Return on Sales is also known as which of the following?
Gross profit margin

Operating profit margin
Return on total assets
Return on investment

Which of the following is a technique in accounting that can be used to present the
financial position of the company in a favorable light?
Good will
Relevance
Consistency
Window dressing

Primary purpose of the cash flows statement is to provide the information about:

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Errors or discrepancies between cash book and income statement
Receipts and payments of cash in the period
Non cash adjustment that effect the income statement
Cash paid to the customers and creditors of the business

Which of the following would be the proper journal entry to record Rs. 1,000 of
Dividends paid by ABC Corporation?
Debit Dividends 1,000; Credit Cash 1,000

Debit Accounts Payable 1,000; Credit Cash 1,000
Debit Dividends Expense 1,000; Credit Cash 1,000
Debit Dividends Expense 1,000; Credit Service Revenue 1,000

Which of the following is a special temporary account used to close all of the revenue
and expense accounts?
Close-out Summary
Owner’s Capital
Income Summary
Temporary Summary

Which of the following auditor's opinion shows the inability of the auditor to audit the
accounts of a business?
Qualified Opinion
Adverse Opinion
Unqualified Opinion
Disclaimer of Opinion

The purpose of recording depreciation on productive assets is to:
Reflect the decline in the market value of the assets each period
Reduce income when the company has an exceptionally profitable year
Be in conformity with the revenue recognition principle
Allocate the original cost of a productive asset to expense over its useful life

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investors?
Tax Forms
Management Reports
Audit reports

A company has declared and paid a cash dividend of Rs. 1 million among the share
holders. What will be its effect on the net working capital of the company?
Increase
Decrease
No effect
Depends upon the situation

Consolidate
Liquidate

Cash has been described as:
The lifebuoy of the business

The lifeboat of the business
The lifeline of the business
The lifeblood of the business

An advantage of the single-step income statement over the multi-step form is:

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Its use in computing ratios
Its simplicity
Its comprehensiveness
The amount of information it provides

The percentage change is computed by dividing the amount of the dollar change between
years and which of the follwing amount?
The base year

The current year
The average of past ten years
The average of past five year

Accelerated depreciation method is mostly used for ____________.
Assets valuation
Inventory valuation
Income tax returns

All of the following regarding perpetual inventory system is true EXCEPT:
It offers better inventory control than the periodic inventory system

At the time of sale, cost of goods sold is debited
A physical inventory count is not necessary
At the time of sale, the inventory account is credited


Cash book

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Which of the following is true about the “Profit” earned by the business?
It shows the amount that is received from the customer in cash only
It always results in increase in closing cash balance of a period
It affects the owner’s equity and liabilities in balance sheet
It may improves the liquidity position of a business

Which of the following is/are current asset?
Rent paid for next six months

Cash at bank
Investments in stock market for two weeks
All of the given option

Good will
Relevance
Consistency
Window dressing


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Which group of ratios measures a firm's ability to meet short-term obligations?
Liquidity ratios
Debt ratios
Coverage ratios

Which of the following account would be classified as a current asset on the balance
sheet?
Accumulated depreciation
Accounts receivable
Office equipment
Land

Which of the following terms present a cause and effect relationship with each other?
Income statement and balance sheet

Revenue and assets
Revenues and expenses

If we take goods for own use we should:
Debit - Drawings Account: Credit - Purchases Account

Debit - Drawings Account: Credit - Stock Account
Debit - Purchases Account: Credit - Drawings Account
Debit - Sales Account: Credit - Stock Account

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The error in the inventory evaluation during the current year will effect:
Closing inventory
Income of the year
Retained earning of the year



How is the gross profit margin calculated?
Sales less cost of sales

(Gross profit divided by investment) x 100
(Gross profit divided by sales) x 100
Gross profit less overheads

Book value is of limited use to the investment analyst since it is based on:
Market value
Historical costs
Future value
Fair value

Audit opinions can NOT be classified as which of the following?
Adverse opinion
Unqualified opinion
Qualified opinion
Disagreement of opinion

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Which of the following is the most common adjusting entry?
Un-earned revenue
Pre-paid expense
Accrued revenue

Which of the following is NOT the part of annual report?
Auditor’s report
Five year summary
Future investments report

A company has total current liabilities of Rs. 110,000 and total current assets of Rs.
150,000. Calculate the current ratio of the company.
0.73
1.36
1.41
1.39

A company has declared and paid a cash dividend of Rs. 1 million among the share
holders. What will be its effect on the net working capital of the company?

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Increase
Decrease
No effect

Which of the following is MOST likely to offer you the highest rate of return together
with the highest risk?
Cash in a building society deposit account

Preference shares
Ordinary shares
Government bonds

All of the following have an effect on ‘operating activities’ while preparing the statement
of cash flows except:
Provision for doubtful debts

Gain or loss on currency exchange rate
Depreciation charged on fixed asset
Amount received for disposal of a fixed asset

If the ending inventory is understated in the year; the cost of goods sold will be _______

Business activities

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Generally speaking, investors want to buy shares at which of the following price?
At face value
Below face value
Above face value
At market value

The local law restricts the number of partners in a partnership firm up to:
15 members
20 members
35 members
30 members

Which of the following is NOT one of the broad areas of a business?
Solvency
Profitability
Stability
Reliability

ABC Company sold a plant asset that originally cost Rs. 50,000 for Rs. 22,000 cash. If
the company correctly reports a Rs. 5,000 gain on this sale, the accumulated depreciation
on the asset at the date of sale must have been:
Rs. 33,000
Rs. 28,000
Rs. 27,000
Rs. 23,000

If the opening inventory is overstated in the year; the cost of goods sold will be _______

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For purpose of measuring business income, the life of a business is divided into which of
the following?
Divided into specific points in time

Divided into irregular cycles
Divided into discrete accounting periods
Considered to be a continuous cycle

Understandability
Relevance
Full disclosure
Comparability

current assets.
Rs. 275,000
Rs. 315,000
Rs. 365,000
Rs. 220,000

_______ will show high profits in the period of high inflation.
First in first out method

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Last in first out method
Weighted average cost method
Just in time method

Which of the following equations properly represents a derivation of the fundamental
accounting equation?
Assets + liabilities = owner's equity

Assets = owner's equity
Cash = assets
Assets - liabilities = owner's equity

Sale of trademarks
Income tax refund

Which of the following is NOT a profitability measure?
Accounts receivable turnover ratio

Return on sales
Dividend yield

Use the following information to calculate net cash from investing activities: sell a capital
asset for Rs. 10,000 cash and a Rs. 1,000 gain; purchase a bond investment for Rs.
16,000; receive Rs. 2,000 interest payment from the bond investment; and pay off a Rs.
3,000 mortgage payable.
Rs. 6,000 net cash

Rs. 4,000 net cash
Rs. 5,000 net cash
Rs. 9,000 net cash

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Which of the following is NOT a financial asset?
Marketable securities
Receivables
Inventory
Short-term investments

Assets of the business are valued and recorded at cost in the financial statement as these
are not for resale purposes, according to which of the following?
Going concern assumption

Cost Principle
Separate entity principle
Objectivity principle

Which of the following is TRUE about both sides of the trial balance?
Both sides are always positive

Both sides are negative
Both sides are equal
Both sides are not linked which each other

Which of the following is NOT an example of cash equivalents?
Certificates of Deposit
Money market accounts
Money market mutual funds
Euro Bond

Which of the following represent the length of time from the commitment of cash for
purchases until the collection of receivables resulting form the sale of services?

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Cash cycle
Accounting cycle
Cash conversion cycle
Operating cycle

Financial statement ratio analysis may be undertaken to study liquidity, turnover,
profitability, and other indicators. To which does the current ratio most relate?
Profitability
Liquidity
Stability
Solvency

Which one of the following would lead to the decrease in the owner’s equity?
Purchasing a piece of land

Paying dividends to shareholders
Purchasing equipment on account
Paying back the principal of a loan

How would the sale of merchandise on account be represented in the seller's records?
Increase assets and increase expenses

Increase assets and decrease liabilities
Increase assets and increase paid-in capital
Increase assets and decrease revenues

Company XYZ purchases Machinery on credit; Journal entry would be:
Accounts Payable debit; Machinery Credit

Accounts Receivable debit; Machinery Credit
Machinery Debit; Accounts Payable credit
Machinery Debit; Accounts Receivable credit

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Which of the following section of cash flow statement shows the cash effects of those
transactions reported in the income statement?
Cash flow from investing activities

Cash flow from financing activities
Cash flow from operating activities
All parts show effects of different transactions of income statement

Mr. A purchases a piece of land for cash and debit made to machinery account. What
would be the effect of this error on the trial balance?
Debit side would be decrease with the same amount

Credit side would be increase with the same amount
Total of the trial balance would be agree in all aspect
None of the given options

Which one of the following is NOT one of the broad areas of a business?
Solvency
Profitability
Stability
Reliability

Cash cycle
Accounting cycle
Operating cycle

sheet?

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Accounts receivable
Office equipment
Land

Suppose that an investor buys shares for Rs. 15 per share from a company whose stock's
par value is stated at Rs. 10 per share, then what will be the value of paid in capital for
each share sold?
Rs. 25
Rs. 5
Rs. 20
Rs. 30

The true and fair presentation of the financial statements depends, among other things,
upon which of the following?
Strong financial position

Concept of materiality
Matching principle
Realization principle

Which of the following term refers to each element of the Balance Sheet?
Ledger
Journal General
T- Account
Account

Which of the following is deducted from the net income while preparing cash flow
statement by indirect method?
Decrease in inventories
Increase in accounts payable
Depreciation

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Increase in inventories

Which one of the following is usually classified as an inventory item?
Goods purchased for resale to customers

Items purchased and used by the company such as office supplies
Items purchased for a specific customer job
Items purchased and the quantity on hand does not need to be tracked

Cash flow relating to investing activities does NOT present the cash effects of which of
the following?
Plant assets
Intangible assets
Investments
Debt financing

1984

A company purchased the land in exchange for the capital stock; it would affect which of
the following?

It would not affect any section


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expense?


In statement of cash flows, which of the following would not be considered an item from
an "investing" activity?
Collections on loan
Purchase of marketable securities
Purchase of fixed assets
Payments of dividends

What will be the effect on the day’s sales in accounts receivables of a company if it
closed during peak activity?
Accounts receivables will be understated

Accounts receivables will be understated for service firms
Accounts receivables will be overstated
Accounts receivables will have no effect

Which of the following is/are true about the journal entry?
It is recording before posting in a ledger

It always effect two sides of accounts
It is recorded chronologically

Bank account

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Current assets are those assets which management intends to convert into cash or
consume within:
The operating cycle

One year
The longer of operating cycle or one year
The shorter of operating cycle or one year

current assets.
Rs. 275,000
Rs. 315,000
Rs. 365,000
Rs. 220,000

Which of the following is an example of an accrual?
Equipment purchased for use in the business

Book-keeping fees collected but not yet earned
Six months’ rent paid in advance
Interest earned but not yet received

In the long run, a business must generate positive net cash flow from which of the
following activities, if it is to survive?
Non cash activities

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Which one of the following techniques can reduce the risks and disadvantages of share
purchase method in mergers and acquisitions?
Spin-off
Hive-down
Hubris
Off-shoot

Which of the following is NOT the part of the stockholder’s equity?
Paid-in-Capital
Additional Paid-in-Capital
Gross profit
Retained Earnings



All of the following accounts would be closed in Income Summery Account EXCEPT:
Commission earned account

Prepaid insurance
Salaries Expense account
Wages account

Which of the following is the first step of the accounting cycle?

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Preparation of the financial statements
Posting in the ledger accounts
Analyze and journalize transactions as they occur

Which of the following is the largest single expense of most merchandising firms?
Cost of goods sold

Rent Expense
Salaries Expense

When preparing a statement of cash flows under the indirect method, supplemental
disclosure should be made for which of the following?
Net cash consumed by operating activities

Cash dividend distributions
Cash paid for interest and taxes
Cash paid for wages


Cost Principle

Which of the following represents the aggregate value of a corporation’s issued shares?
Total book value of the company

Market value of the company
Market capitalization
Book value of the shares

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Which of the following would represent a non-cash expense for the business?
Cost of building
Cost of inventory
Cost of office equipment
Depreciation of building





In the period of inflation, which of the following method will result in the greatest value
of ending inventory?

Just in time method

Which of the following is NOT a limitation of financial statements?
They always present past

They always present the monetary terms
They help in assessment of future profitability

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They give no information about management and employee relations

Under which cost flow assumption is the ending inventory composed of the most recently
purchased merchandise?
FIFO
LIFO
Average cost
Specific identification

The base year

The current year

Short term investments in marketable securities and treasury bills that will mature within
ninety days from the date of acquisition, must be classified as:
Receivables
Receipts from Capital
Current and intangible assets
Cash equivalents

A company has interest expense of Rs. 35,000, its accrued liabilities are increased by Rs.
7000. Calculate the cash payments for the interest.
Rs. 28,000
Rs. 42,000
Rs. 30,000
Rs. 18,000

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Which of the following should NOT be called “Sales”?
Goods sold for cash

Office fixtures sold
Goods sold on credit
Sale of item previously included in ‘Purchases’

If a company has paid dividends on its preference shares, under which one of the cash
flow statement headings would they appear?
Returns on investments and servicing of finance

Financing
Equity dividends paid
Capital investment and financial investment



A company has total current liabilities of Rs. 110,000 and total current assets of Rs.
150,000. Calculate the current ratio of the company.
0.73
1.36
1.41
1.39

Consolidate

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Liquidate

expense?


If the opening inventory is understated in the year; the cost of goods sold will be _______

When cash flow statement is prepared by using indirect method, which part of it is
different from the direct method?

All parts are same in both methods



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Which of the following is NOT true about depreciation?
Depreciation causes perpetual and gradual fall in the value of asset

Depreciation does not depend upon on fluctuations in the market value of asset
Depreciation is a charged in case of fixed assets only
Depreciation is a charge against revenue of two or more accounting periods

Which of the following must be included in a company's summary of significant
accounting policies in the notes to the financial statements?
Description of current year equity transactions

Summary of long-term debt outstanding
Schedule of fixed assets
Revenue recognition policies

Account:



Revenue and assets


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Cash book

Pre-paid expense is a(n) _________ type of account.
Liability
Asset
Revenue
Expense

Which of the following is not true about the “Account”?
Accounts are only prepared by the business entities

Account always reflects the amount of the single transaction only
Account is effected both by economic and non economic events



Assets valuation
Inventory valuation
Income tax returns

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In the vertical analysis of income statement, all the accounts are expressed as a
percentage of which of the following?
Net sales
Gross sales
Net income
Total expenses

The local law restricts the number of partners in a partnership firm up to:
15 members
20 members
35 members
30 members


Cash at bank

The income statement of the UBL shows the interest revenue of Rs. 6,000, and the
amount of accrued interest receivable has increased from Rs. 3000 to Rs. 4000 during the
year. Calculate the amount of interest received.
Rs. 7000
Rs. 5000
Rs. 8000
Rs. 1000

the following?

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Plant assets
Intangible assets
Investments
Debt financing

Dividend must be approved by which of the following each time before they are paid to
shareholders?
Board of directors
Management
Common Stockholders
Preferred Stockholders

A type of preferred stock that carries the provision that the issuer has the right to
purchase back the stock at a certain price, and retire it whenever he wants is called:
In arrears preferred shares

Call able preferred shares
Cumulative preferred shares
Participating preferred shares



Sale of trademarks
Income tax refund

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All of the following are included in the operating activity section of the cash flows
statement except:
Gain or loss on sale of fixed assets
Loan received for the purchase of inventory

Statement of cash flows helps the investors and other stake holders to assess:
The ability to generate future cash flows

The liquidity of the business
Ability to pay cash dividends in the future

What will be the affect of dividends paid on the book value of a company?
Increase
Decrease
No effect

Retained earnings will change over time because of several factors. Which of the
following factors would explain an increase in retained earnings?
Net loss

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Net income
Dividends
Investments by stockholders

Which of the following principle is used for recording a revenue?
Matching Principle
Cost Principle
Realization Principle
Objectivity Principle




Cost Principle

Dividends payments
Interest payments
Tax payments


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Goods sold for cash


The information in statement cash flows assists the investors, creditors, and others in
assessing:
Enterprise’s ability to meet its obligations

Enterprise’s ability to pay dividends
Enterprise’s needs for external financing

Double entry
Multiple entry
Compound entry

How many parts does each account have?
Two
Four
Three
Five


Cash book

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the following?


Goods sold for cash




Consolidate
Liquidate

_______ will show high profits in the period of high inflation.

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Just in time method


1984

Return on Sales is also known as which of the following?
Firm's gross profit margin

Firm's operating profit margin
Firm's return on total assets
Firm's return on investment

Which of the following would NOT result in an improved overall gross margin of a
business?
A fall in raw material prices resulting in a lower cost of sales

Higher discounts offered to customers
Increased selling price of existing products

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Introduction of new products with a higher gross profit margin

Which one of the following statement shows the effects of cash inflows and outflows?
Balance Sheet
Statement of Owner’s Equity
Income Statement
Statement of Cash Flows

of cash flows as:


Equipment costing Rs. 3,000 with accumulated depreciation of Rs. 2,125 is exchanged
for another asset with a fair value of Rs. 625. The exchange has commercial substance.
How much is the gain or loss on this transaction?
A gain of Rs. 250 should be recognized

A loss of Rs. 250 should be recognized
A loss of Rs. 500 should be recognized
No gain or loss should be recognized.

Double entry
Multiple entry
Compound entry

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Which of the following people and groups are NOT interested in cash flow statements of
a company?
Accounting personnel
Potential customers
Potential creditors
Potential employees

Accounting is called the “language of business” because____________:
It communicates the financial information to the Management only

In order to run a business one must have knowledge about accounting
Different business accounts are involved in financial statements
It helps to organize and communicate financial information to end users

A business has purchased a building on cash, how it would be recorded in the journal?
Building - Debit; Cash - Credit

Cash - Debit; Building - Credit
Building - Debit; Owner’s equity - Credit
Building - Debit; Accounts Payable - Credit


Just in time method

At face value
Below face value

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Above face value
At market value

Good will
Relevance
Consistency
Window dressing








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Which of the following represents the value of shares in the market at any point in time?
Par value
Book value
Face value
Market value

Which one of the following remains intact and unaffected by the continuous changes in
business?
Capital Stock
Assets
Liabilities
Retained Earnings

Felton Farm Supplies, Inc., has 8 percent return on total assets of Rs. 300,000 and a net
profit margin of 5 percent. What are its sales?
Rs. 3,750,000
Rs. 480,000
Rs. 300,000
Rs. 1,500,000

All of the following regarding perpetual inventory system is true EXCEPT:
It offers better inventory control than the periodic inventory system

At the time of sale, cost of goods sold is debited
A physical inventory count is not necessary

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At the time of sale, the inventory account is credited

The base year

The current year

On November 30, 2008 ABC Company borrowed Rs. 4,000 from bank by issuing an
interest-bearing note payable. This loan is to be paid in three months along with interest
computed at an annual rate of 9%. What will be the entry on Nov 30 to record this
borrowing?
Cash – Debit; Notes payable – Credit

Notes payable – Debit; Cash – Credit
Interest expense – Debit; Cash – Credit
Interest payable – Debit; Notes payable - Credit

Which of the following company would like to use the accelerated depreciation method?
A company with large tax burdens

A company with low tax burdens
A company that wan to report high net income
A company that want to report huge assets

Sale of trademarks
Income tax refund

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Which one of the following is NOT the commonly used technique for analysis of
financial statements?
Horizontal analysis
Vertical analysis
Ratio analysis
Technical analysis

Which of the following is an inventory pricing procedure in which the oldest costs
incurred rarely have an effect on the ending inventory valuation?
FIFO
LIFO
Weighted-average

If the estimated amount of depreciation on equipment for a period is Rs.2000, the
adjusting entry to record depreciation would be:
Depreciation expense - Debit; Equipment - Credit

Depreciation expense - Debit; Accumulated depreciation - Credit
Equipment - Debit; Depreciation expense - Credit
Accumulated depreciation - Debit; Depreciation expense - Credit

a company?
Potential customers
Potential creditors
Potential employees

Financial reporting process contains the following EXCEPT:

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Auditors report
Notes to the account
Three years projected financial statements



1984

sheet?
Accounts receivable
Office equipment
Land

_______ will result in low profits and taxes in the period of high inflation

Just in time method

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Which of the following equations properly represents a derivation of the fundamental
accounting equation?
Assets + liabilities = owner's equity

Assets = owner's equity
Cash = assets
Assets - liabilities = owner's equity

Which of the following is NOT a disadvantage of a Sole proprietorship?
Limited capital
Unlimited liability
Strong managerial expertise
Lack of continuity

Balance sheet
Audit report
Income statement

Book value is of limited use to the investment analyst since it is based on:
Market value
Historical costs
Future value
Fair value

Unqualified opinion

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Qualified opinion
Adverse opinion

activity?





Matching principle

borrowing?


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Felton Farm Supplies, Inc., has 8 percent return on total assets of Rs. 300,000 and a net
profit margin of 5 percent. What are its sales?
Rs. 3,750,000
Rs. 480,000
Rs. 300,000
Rs. 1,500,000

Which of the following account would NOT be closed to the income summary account at
the end of a period?
Rent expense
Revenue earned
Wages expense

1984

In a period of rising prices, all of the following statements regarding LIFO are true
EXCEPT:
Net income is generally higher

Ending inventory is generally undervalued
It can be used to manipulate net income
Most recent inventory costs are allocated to cost of goods sold

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Which of the following is TRUE about the financial statements?
Are required only for publicly owned business organizations

Are required by corporations, but not for sole proprietorship or partnerships
Primarily for the benefit of persons outside of the business organization
In either monetary or no monetary terms, depending upon the need of the decision maker



The users of a statement of cash flows usually are interested in:
Net cash flow from operating activities

Net cash flow from investing activities
Net cash flow from financing activities
Net cash flow from non-cash transactions

Which of the following states that the financial statements are presented fairly and in
accordance with the generally accepted accounting principle?
Qualified opinion
Adverse opinion
Unqualified opinion

The investments made by the business for ten years in a saving scheme will be classified
as:
Fixed assets
Long term asset

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Liquid asset
Bonds

current assets.
Rs. 275,000
Rs. 315,000
Rs. 365,000
Rs. 220,000

Financial statement ratio analysis may be undertaken to study liquidity, turnover,
profitability, and other indicators. To which does the current ratio most relate?
Profitability
Liquidity
Stability
Solvency

Gross profit is:
Excess of sales over cost of goods sold

Sales less Purchases
Cost of goods sold + Opening stock
Net profit less expenses of the period


Posting

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Interest expense
Insurance expense
Salaries expense

The basic purpose of financial statements is to assist users in evaluating the________
Financial position
Profitability of an organization
Future prospects

sheet?
Accounts receivable
Office equipment
Land

Adverse opinion
Unqualified opinion
Qualified opinion


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Tax return

Debit side
Credit side

Close-out Summary
Owner’s Capital
Income Summary
Temporary Summary

Depreciation

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How would an increase in owner’s equity be recorded?
Debit
Credit
No effect
Statement is wrong

The financial statement that captures both the current operating result and the associated
changes in the statement of financial position is:
Statement of retained earnings

Statement of financial position
Statement of changes in equity

Which of the following indicates the relative size of each item included in a total?
Trend percentages
Component percentages
Relative percentages
Both trend and component percentages



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of cash flows as:


shareholders?
Board of directors
Management
Common Stockholders

Which group of ratios shows the extent to which the firm is financed with debt?
Liquidity ratios
Debt ratios
Coverage ratios

Which one of the following is NOT an objective of fundamental analysis?
To make projection on its business performance

To predict the future stock price
To evaluate its management and make internal business decisions
To calculate its credit risk

Nishat Corporation had net income of Rs. 100,000, paid income taxes of Rs. 30,000, and

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had interest expense of Rs. 8,000. What was Nishat's times interest earned ratio?
12.5
16.25
17.25
17.85




Matching principle

Receivables
Cash equivalents

In statement of cash flows, all of the following items are considered as financing activity,
except:

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Cash received from issuance of shares
Cash received from issuance of bonds
Payment made for short term debts
Collections on loans

Equipment
Retained Earnings
Cash



investors?
Tax Forms
Management Reports
Audit reports

At face value
Below face value
Above face value
At market value

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Nestle Pakistan Limited is an example of which of the following types of businesses?
Manufacturing
Service
Merchandise
Whole seller




Limited capital
Unlimited liability
Lack of continuity


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All of the followings are the objectives of statement of cash flows EXCEPT:
It is helpful for decision making by management

It is used for reporting the net profit of the period
It can be used for estimations for cash flows in future
It is used to determine the liquidity of the business

assessing:


How many types of audit certificate are there?
Two
Three
Four
Five

Which of the following refers to the term “posting”?
The recording of transactions

The system of giving numbers to the accounts
Transferring the debits and credits to ledger
Transferring the debits and credits to journal

Which of the following is NOT a financial ratio?

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Receivable turnover
Net profit margin
Return on capital employed
Staff turnover ratio

If the opening inventory is overstated in the year; the cost of goods sold will be _______


Just in time method

Which of the following is NOT a goal of analysis of financial statement?
Assess the past performance

Asses the current financial position
Predict the future performance of the company
Asses the working of management in the future



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Which of the following is NOT a profitability measure?
Accounts receivable turnover ratio

Return on sales
Dividend yield

Which one of the following is the part of the income statement?
Capital
Accounts receivables
Advertising expenses
Accounts payable

When dividends are declared by a corporation's board of directors, what will be its
journal entry on the declaration date?
Debit Dividends payable; Credit Retained Earnings

Debit Retained Earnings; Credit Cash
Debit Retained Earnings; Credit Dividends Payable
Debit Cash; Credit Retained Earnings

Which group of ratios relates profits to sales and investment?

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Liquidity ratios
Debt ratios
Coverage ratios

Consolidate
Liquidate

Qualified opinion
Adverse opinion
Unqualified opinion

Rs. 33,000
Rs. 28,000
Rs. 27,000
Rs. 23,000

Account:

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Which of the following is the basic purpose of an accounting system?
Develop financial statements in conformity GAAP

Provide as much useful information to decision makers as possible
Record changes in the financial position of an organization by applying the
Meet an organization's need for accounting information as efficiently and effectively as
possible

Which of the following is MOST likely to offer you the highest rate of return together
with the highest risk?
Cash in a building society deposit account

Preference shares
Ordinary shares
Government bonds

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Depreciation is added back to profit when arriving at the cash flow from operating
activities because:
Depreciation is only an estimated amount

Depreciation does not affect profit
Depreciation does not result in a flow of cash
Depreciation only affects the balance sheet, not the profit and loss account

A company can improve (lower) its debt-to-total asset ratio by doing which of the
following?
Borrow more
Shift short-term to long-term debt
Shift long-term to short-term debt
Sell common stock


Posting

Which of the following would be more important for a creditor?
Profitability
Stability
Liquidity
Solvency

Which of the following statement is NOT true?
Financial statements may be prepared soon after the adjusted trail balance

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The owner’s equity is not up to the date until the closing entries are posted
Adjusting entries are prepared before the financial statements are prepared
In the accounting cycle, closing entries are made before the adjusting entries

Qualified opinion
Adverse opinion
Unqualified opinion

Use the following information to compute gross margin. Sales price of merchandise sold
to customers Rs. 10,000, beginning inventory Rs. 1,000, inventory purchases Rs. 4,000,
and cost of inventory sold Rs. 3,000.
Rs. 2,000
Rs. 7,000
Rs. 5,000
Rs. 3000

sheet?
Accounts receivable
Office equipment
Land

In statement of cash flows, interest payment made on loan from bank is related to:
Investing activity
Financing activity
Operating activity
Net changes in working capital

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Transferring debits and credits from journal to ledger account known as:
Posting
Classification
Ledgerlizing




An entry that effects more than one accounts is knows as _____________.
Journal entry
Compound entry

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Adjusting entry
Reversing entry

Double entry
Multiple entry
Compound entry

Financial statements are a subset of which of the following?
Financial reporting
Financial statement analysis
Accounting information
Accounting system

current assets.
Rs. 275,000
Rs. 315,000
Rs. 365,000
Rs. 220,000


Cash book

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Capital assets of Rs. 120,000 were purchased for cash. A capital asset was sold at a gain
of Rs. 40,000. Amortization expense was Rs. 138,000. What amount would appear on the
Cash Flow Statement as "Sale of Capital Asset?"
Rs. 40,000
Rs. 130,000
Rs. 170,000
Rs. 225,000

Cash cycle
Accounting cycle
Operating cycle

Which of the following accounts would be increased by a debit?
Liabilities and expenses

Assets and equity
Assets and expenses
Equity and revenues

as:
Fixed assets
Long term asset
Liquid asset
Bonds

Which of the following is NOT an advantage of a partnership firm?

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Ease of formation
High start-up costs
Additional sources of investment capital
Possible tax advantages

Which one of the following remains intact and unaffected by the continuous changes in
business?
Capital Stock
Assets
Liabilities
Retained Earnings

Inventory accounts should be classified in which section of a balance sheet?
Current assets
Investments
Property, plant, and equipment
Intangible assets



Goods sold for cash


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Rs. 33,000
Rs. 28,000
Rs. 27,000
Rs. 23,000

Understandability
Relevance
Full disclosure
Comparability

Which of the following is NOT the part of annual report?
Auditor’s report
Five year summary
Future investments report



the following?

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___ will show high profits in the period of high inflation.

Just in time method

___ will result in low profits and taxes in the period of high inflation

Just in time method

How many basic types of adjusting entries are there?
Two types
Three types
Four types
Ten types
Matching principle

Limited capital

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Unlimited liability
Lack of continuity

In a period of rising prices, all of the following statements regarding LIFO are true
EXCEPT:
Net income is generally higher
Ending inventory is generally undervalued
It can be used to manipulate net income
Most recent inventory costs are allocated to cost of goods sold

Good will
Relevance
Consistency
Window dressing

Unqualified opinion
Qualified opinion
Adverse opinion

If the opening inventory is overstated in the year; the cost of goods sold will be _____
and gross profit________ also.

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Consolidate
Liquidate

The appropriate journal entry to record machinery depreciation of Rs. 1,000 is:
Debit - Depreciation Expense 1,000; Credit - Accumulated Depreciation 1,000

Debit - Depreciation Expense 1,000; Credit- Machine 1,000
Debit - Accumulated Depreciation 1,000; Credit - Depreciation Expense 1,000
Debit - Accumulated Depreciation 1,000; Credit – Machine 1,000

Manufacturing
Service
Merchandise
Whole seller

Which of the following is an inventory pricing procedure in which the oldest costs
incurred rarely have an effect on the ending inventory valuation?
FIFO
LIFO
Weighted-average


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Collections on loan



borrowing?






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Adverse opinion
Unqualified opinion
Qualified opinion



Qualified opinion
Adverse opinion
Unqualified opinion

According to _______ the personal expenses paid by Mr. A from his own pocket would
not be recorded in business books of account.
Matching principle
Materiality principle

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Prepaid insurance
Wages account




Financing





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Rs. 7000
Rs. 5000
Rs. 8000
Rs. 1000

Interest expense
Insurance expense
Salaries expense


Cash book

Qualified Opinion
Adverse Opinion
Unqualified Opinion

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Which of the following principle provides the definite and factual basis for assets
valuation?
Stable Currency principle

Matching Principle
Cost Principle

Which of the following is the next step after the preparation of trial balance?
Adjusted trial balance

Adjusting entries
Closing entries

consume within:
The operating cycle

One year




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Sale of trademarks
Income tax refund




Prepaid insurance
Wages account





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assessing:


Which of the following would represent a cash flow from financing activities?
Receipts from sale of plant and equipment

Dividends received on equity securities
Gain on sale of plant asset
Collections on loan principle

Which of the following is NOT one of the three items required to be shown in the
heading of a financial statement?
The preparation date of the financial statement

The title of the financial statement
The unit of measure in the financial statement
The name of the business entity

Which of the following account will appear in the post-closing trial balance?
Owner’s Capital
Service Fees Earned
Income Summary
Owner’s Withdrawals

Which of the following would be considered as cash flow from investing activities?
Expenditure for sale of plant and equipment

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Payments to suppliers
Proceeds from issuance of long-term debt
Receipts from sale of goods or services

The error in the inventory evaluation during the current year will effect:
Closing inventory
Income of the year
Retained earning of the year

Dividends payments
Interest payments
Tax payments

Which of the following financial statement is based on accounting equation?
Income Statement
Statement of Cash Flow
Balance Sheet



Using the following information calculate Net Income: Sales Revenue Rs.200, 000, Loss
on Sale of Equipment Rs.10, 000, Amortization Expense Rs.20, 000 and Cost of Goods

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Sold Rs.50, 000.
Rs. 170,000
Rs. 130,000
Rs. 120,000
Rs. 180,000



The owners of which of the following companies are personally liable for the debt of the
business?
Corporations
Sole proprietorship
General partnership
Limited liability Company

Equipment
Retained Earnings
Cash

Capital assets of Rs. 120,000 were purchased for cash. A capital asset was sold at a gain
of Rs. 40,000. Amortization expense was Rs. 138,000. What amount would appear on the
Cash Flow Statement as "Sale of Capital Asset?"

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Rs. 40,000
Rs. 130,000
Rs. 170,000
Rs. 225,000

Depreciation
Deferred tax
Amortization
Investments

Assets valuation
Inventory valuation
Income tax returns



If a company needs extra funds then it is allowed by the Companies Ordinance 1984 to
issue shares at:
Face value
On discount
On premium

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Both at face value and at discount

Which of the following represents the aggregate value of a corporation’s issued shares?
Total book value of the company

Market value of the company
Market capitalization
Book value of the shares



Resources owned by a business are called:
Owner’s equity
Assets
Reserves
Liabilities

Euro Bond


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Cash paid for wages

as:
Fixed assets
Long term asset
Liquid asset
Bonds


Its simplicity

investors?
Tax Forms
Management Reports
Audit reports

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Which of the following companies operating in Pakistan is a private limited company?
Dawood Hercules Limited

Ghani Float Limited
Sitara Chemicals Limited
Burger Paints Pakistan Limited

activity?


Dividends payments
Interest payments
Tax payments

Cost of goods sold

Rent Expense
Salaries Expense

Use the following information to compute gross margin. Sales price of merchandise sold
to customers Rs. 10,000, beginning inventory Rs. 1,000, inventory purchases Rs. 4,000,
and cost of inventory sold Rs. 3,000.

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Rs. 2,000
Rs. 7,000
Rs. 5,000
Rs. 3000

Account:


Which of the following is true about the qualified audit report?
It ensures that audit has been performed by qualified auditor

It ensures that fairness of financial statement
It damages the credibility of the auditor
It damages the reliability of the financial statements

Receivables
Cash equivalents

Rs. 6,000 net cash

Rs. 4,000 net cash

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Rs. 5,000 net cash
Rs. 9,000 net cash


Cash at bank

Investing activity
Financing activity
Operating activity

valuation?

Matching Principle
Cost Principle




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as:
Fixed assets
Long term asset
Liquid asset
Bonds


Financing



issue shares at:
Face value
On discount
On premium

Suppose that an investor buys shares for Rs. 15 per share from a company whose stock's
par value is stated at Rs. 10 per share, then what will be the value of paid in capital for
each share sold?

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Rs. 25
Rs. 5
Rs. 20
Rs. 30

except:



Working capital

business?
Corporations
Sole proprietorship
General partnership

Opinion of the external auditor such as unqualified audit opinion is assurance to the
stakeholders that:
The management is running the company efficiently

The internal auditor has done his duty efficiently last year
The company has the ability to pay debts easily

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Which of the following may include the “analyzing the transaction” the first step of the
accounting cycle?
Determining the transaction amount

Determining the effected accounts
Identifying the event as a transaction

activities because:




Which of the following company would like to use the accelerated depreciation method?

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A company with large tax burdens
A company with low tax burdens
A company that wan to report high net income
A company that want to report huge assets

Manufacturing
Service
Merchandise
Whole seller

Receivables
Inventory

If the ending inventory is understated in the year; the cost of goods sold will be _______

borrowing?


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Sold Rs.50, 000.
Rs. 170,000
Rs. 130,000
Rs. 120,000
Rs. 180,000

Decision makers compare net income to net cash from operating activities. To make these
amounts more comparable, the same accounts are included in each. The following
accounts are used to compute both net income and net cash from operating activities
EXCEPT:
Dividends declared and paid

Dividend revenue
Interest expense
Interest revenue


Cash book



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Which of the following would NOT represent the cash outflows for the business?
Purchase of building for cash

The sale of land for cash
Retirement of long term debt
The payment of cash for dividends

Which of the following is a legal entity having existence separate and distinct from that
of its owners?
Corporations
Sole proprietorship
General partnership






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business?
Corporations
Sole proprietorship
General partnership

Which of the following is NOT a part of the five-year summary of a company?
Net income/Loss
Total assets
Discontinued operations
Net sales


Prepaid insurance
Wages account



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sheet?
Accounts receivable
Office equipment
Land



Depreciation
Deferred tax
Amortization
Investments



Which of the following items are included in the financing activities section of the
statement of cash flows?

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Cash effects of transactions involving making and collecting loans
Cash effects of acquiring and disposing of investments and property, plant, and
equipment
Cash effects of transactions obtaining resources from owners and providing them with a
return on their investment
Cash effects of transactions that enter into the determination of net income

assessing:


Bank account



as:
Fixed assets
Long term asset

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Liquid asset
Bonds

Under which cost flow assumption is the ending inventory composed of the most recently
purchased merchandise?
FIFO
LIFO
Average cost



investors?
Tax Forms
Management Reports
Audit reports



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a company?
Potential customers
Potential creditors
Potential employees

In financial statement analysis, an increasing capital stock account tends to be a sign of
which of the following?
Weak financial health

Insolvency
Economic health
High liquidity



sheet?
Accounts receivable
Office equipment
Land


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Cash at bank

borrowing?


Which of the following represents the negative future cash flows for an enterprise?
Assets
Owner’s equity
Liabilities
Capital

Rs. 28,000
Rs. 42,000
Rs. 30,000
Rs. 18,000



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Cash paid for wages



Equipment
Retained Earnings
Cash

The definition of cash as used in “Cash Flow Statements” includes:
Only cash balances

Only bank balances
Bank balances and bank overdrafts
Cash in hand plus bank balances less bank overdrafts


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Financing


Prepaid insurance
Wages account

Business activities

Collections on loan


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a company?
Potential customers
Potential creditors
Potential employees

except:


Identifying that which two or more Accounts are affected by a particular financial
transaction refers to which of the following?
Analyzing the transaction

Recording a transaction
Vouchering a transaction
Posting a transaction





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Journal entry
Compound entry
Adjusting entry
Reversing entry

According to the statement of cash flows; following are the examples of investing
activities except:
Sales of machinery
Capital invested by the owners
Purchase of building for the business use
Cash received from the disposal of equipment

______is helpful for the investors and creditors to assess the cash and non cash aspects of
investing and financing transactions on an entity’s financial position?
Balance Sheet
Income Statement

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Un-earned revenue
Pre-paid expense
Accrued revenue

Income Statement
Balance Sheet

Posting
Classification
Ledgerlizing

Interest expense
Insurance expense
Salaries expense

as:
Fixed assets
Long term asset

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Liquid asset
Bonds

Which of the following principle states that the assets are purchased for the use and not
for resale purpose?

Going-concern principle
Cost Principle

Posting
Classification
Ledgerlizing

issue shares at:
Face value
On discount
On premium

the following?
Plant assets
Intangible assets
Investments
Debt financing

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Which of the following best describes the meaning of the term “Purchases”?
Goods bought on credit

Goods paid
Goods bought for resale
Items bought

1984

activities because:


In most cases, the payments you get from preferred stocks are taxed at which of the
following tax rate?
Higher tax rate

Lower capital gain tax rate
Ordinary income tax rate
Sales tax rate


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Which of the following is NOT true about depreciation?
Depreciation causes perpetual and gradual fall in the value of asset

Depreciation does not depend upon on fluctuations in the market value of asset
Depreciation is a charged in case of fixed assets only
Depreciation is a charge against revenue of two or more accounting periods



Gross profit is:





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Balance sheet
Audit report
Income statement







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Matching principle


Revenue and assets

Receivables
Inventory



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equipment

The most widely used means of estimating periodic depreciation expense is the
____________ method.
Straight line
Double declining balance
Sum of the year digit methods
Accelerated depreciation method




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Gross profit is:


Cost of goods sold

Rent Expense
Salaries Expense




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Income Statement
Balance Sheet


Posting

Financial position
Future prospects

Which of the following best describes the meaning of the term “Purchases”?
Goods bought on credit

Goods paid
Goods bought for resale
Items bought

activities because:


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Adverse opinion
Unqualified opinion
Qualified opinion

Which of the following is NOT a part of the shareholder’s equity?
Paid in capital
Additional paid in capital
Gross profit
Retained earnings

activity?


shareholders?
Board of directors
Management
Common Stockholders

Journal entry

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Compound entry
Adjusting entry
Reversing entry

Which of the following companies operating in Pakistan is a private limited company?
Dawood Hercules Limited

Ghani Float Limited
Sitara Chemicals Limited
Burger Paints Pakistan Limited



What will be the affect of dividends paid on the book value of a company?
Increase
Decrease
No effect

Qualified Opinion
Adverse Opinion
Unqualified Opinion


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Rent expense
Revenue earned
Wages expense



Journal entry
Compound entry
Adjusting entry
Reversing entry

Collections on loan

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Cash paid for wages

Close-out Summary
Owner’s Capital
Income Summary
Temporary Summary



borrowing?


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Closing entries result in net income being calculated in the income summary account and
then transferred to which of the following account?
Revenue account
Common Stock account
Dividends account
Retained Earnings account


Working capital


Cost Principle


Posting

Debit side

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Credit side

How the transactions in a journal are initially recorded?
Alphabetical order
Ascending order
Chronological order
Alphanumeric order


Adjusting entries
Closing entries


Cost Principle

sheet?
Accounts receivable
Office equipment
Land

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borrowing?


Euro Bond




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Financial position
Future prospects




Cash at bank

Assets
Owner’s equity
Liabilities
Capital

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In which of the following account, a credit balance would be an evidence for a mistake or
an error?
Mr. A Capital Account

Cash account
Drawings account
http://blog.accountingcoach.com/credit-balance-accounts/

Capital
Accounts payable

consume within:
The operating cycle

One year

activity?



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EXCEPT:

Dividend revenue
Interest expense
Interest revenue



Rs. 7000
Rs. 5000
Rs. 8000
Rs. 1000



except:

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activities because:




Which of the following represents the resources owned by a business?
Liabilities
Owner’s Equity
Assets
Revenue



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Investing activity
Financing activity
Operating activity

Capital
Accounts payable

Account:




Equipment

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Retained Earnings
Cash



valuation?

Matching Principle
Cost Principle

as:
Fixed assets
Long term asset
Liquid asset
Bonds



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Prepaid insurance
Wages account

Investing activity
Financing activity
Operating activity

Posting
Classification
Ledgerlizing


Posting

There are five main kinds of current assets. Which of the following is NOT among them?
Cash and equivalents

Deferred income
Accounts receivable
Prepaid expenses

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Liabilities
Owner’s Equity
Assets
Revenue



Tax return

the following?
Plant assets
Intangible assets
Investments
Debt financing

except:

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Ledger
Journal General
T- Account
Account

Rs. 6,000 net cash

Rs. 4,000 net cash
Rs. 5,000 net cash
Rs. 9,000 net cash



Collections on loan

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Non cash activities

When cash flow statement is prepared by using indirect method, which part of it is
different from the direct method?

All parts are same in both methods

sheet?

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Accounts receivable
Office equipment
Land



Sale of trademarks
Income tax refund

EXCEPT:

Dividend revenue
Interest expense
Interest revenue


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Euro Bond

Revenue account
Dividends account

Financial reporting
Accounting system

Which of the following would be affected by the difference between revenues and
expenses?
Assets
Owner’s equity
Liabilities
Capital

Journal entry
Compound entry
Adjusting entry
Reversing entry


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Liability
Asset
Revenue
Expense

Collections on loan

Capital
Accounts payable

Income Statement
Balance Sheet

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Cost of goods sold

Rent Expense
Salaries Expense






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Matching principle

consume within:
The operating cycle

One year



Liabilities
Owner’s Equity
Assets
Revenue

valuation?

Matching Principle
Cost Principle

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the following?
Plant assets
Intangible assets
Investments
Debt financing




Adjusting entries
Closing entries

Owner’s Capital

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Service Fees Earned
Income Summary



Ledger
Journal General
T- Account
Account



Non cash activities

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Rs. 7000
Rs. 5000
Rs. 8000
Rs. 1000

Posting
Classification
Ledgerlizing



Rent expense

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Revenue earned
Wages expense




Cash book



consume within:
The operating cycle

One year

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Financial position
Future prospects


Financing

Debit side
Credit side

Sale of trademarks

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Income tax refund

of cash flows as:


Cost of building
Cost of inventory

Revenue account
Dividends account

Matching Principle
Cost Principle


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an error?

Cash account
Drawings account
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Which of the following would NOT be the characteristics of current assets?
Likely to change before the next accounting period is over

Not bought for resale
Use as part of the firm's trading operations
Liquidity

Financial Statments are the end product of:
Accounting Department
Accounting Cycle
Accountant
Auditors

as:
Fixed assets
Long term asset
Liquid asset
Bonds

Debit side

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Credit side

accounting cycle?




investors?
Tax Forms
Management Reports
Audit reports



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Receivables
Cash equivalents


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Posting

Depreciation
Deferred tax
Amortization
Investments

Interest expense
Insurance expense
Salaries expense

Financial position
Future prospects

Capital
Accounts payable

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According to the statement of cash flows; following are the examples of investing
activities except:
Sales of machinery
Capital invested by the owners
Purchase of building for the business use
Cash received from the disposal of equipment

sheet?
Accounts receivable
Office equipment
Land



Cost of building
Cost of inventory



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Adjusting entries
Closing entries







Rent expense
Revenue earned
Wages expense


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Its simplicity

Investing activity
Financing activity
Operating activity

Cost of goods sold

Rent Expense
Salaries Expense

a company?
Potential customers
Potential creditors
Potential employees

consume within:
The operating cycle

One year

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valuation?

Matching Principle
Cost Principle


Collections on loan


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Depreciation

sheet?
Accounts receivable
Office equipment
Land

Equipment
Retained Earnings
Cash

EXCEPT:

Dividend revenue
Interest expense
Interest revenue

activities because:

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Cost of building
Cost of inventory



the following?
Plant assets
Intangible assets
Investments
Debt financing

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Liquidity

Assets
Owner’s equity
Liabilities
Capital



Dividends payments
Interest payments
Tax payments



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current assets.
Rs. 275,000
Rs. 315,000
Rs. 365,000
Rs. 220,000
150 + 80 – 20 + 10 + 55 = 275

Equipment
Retained Earnings
Cash

of cash flows as:

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Double entry
Multiple entry
Compound entry

the following?
Plant assets
Intangible assets
Investments
Debt financing

activities because:




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Sale of trademarks
Income tax refund



Matching principle


equipment


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for resale purpose?

Cost Principle



Debit side
Credit side

of cash flows as:

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Adjusting entries are required for which of the following accounts?
Income Summary accounts

Revenue and expense accounts
All types of accounts
Assets and liabilities accounts

Cost of building
Cost of inventory




Cash at bank


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Income Statement
Balance Sheet






Cost Principle

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Bank account





Business activities


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Debit
Credit
No effect
Statement is wrong

Tax return

Depreciation
Deferred tax
Amortization
Investments


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Receivables
Cash equivalents

Rs. 28,000
Rs. 42,000
Rs. 30,000
Rs. 18,000




Revenue and assets


Posting

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Double entry
Multiple entry
Compound entry

Depreciation


Deferred income
Accounts receivable
Prepaid expenses

All of the following are included in the operating activity section of the cash flows
statement except:
Gain or loss on sale of fixed assets
Loan received for the purchase of inventory


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current assets.
Rs. 275,000
Rs. 315,000
Rs. 365,000
Rs. 220,000

Non cash activities






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Interest expense
Insurance expense
Salaries expense

of cash flows as:




Liability
Asset
Revenue
Expense

as:
Fixed assets
Long term asset
Liquid asset

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Bonds

EXCEPT:

Dividend revenue
Interest expense
Interest revenue

Business activities

Rs. 28,000
Rs. 42,000
Rs. 30,000
Rs. 18,000

Debit
Credit
No effect
Statement is wrong

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Equipment
Retained Earnings
Cash

Rent expense
Revenue earned
Wages expense

Cost of goods sold

Rent Expense
Salaries Expense

Financial position
Future prospects


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Depreciation



Balance Sheet
Income Statement

Liability
Asset
Revenue
Expense

Capital
Accounts payable

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Rs. 6,000 net cash

Rs. 4,000 net cash
Rs. 5,000 net cash
Rs. 9,000 net cash

current assets.
Rs. 275,000
Rs. 315,000
Rs. 365,000
Rs. 220,000






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Cost of building
Cost of inventory









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Sale of trademarks
Income tax refund

Ledger
Journal General
T- Account
Account



______is helpful for the investors and creditors to assess the cash and non cash aspects of
investing and financing transactions on an entity’s financial position?
Balance Sheet
Income Statement


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Liquidity

Matching principle

Financial position
Future prospects

Dividends payments
Interest payments
Tax payments

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valuation?

Matching Principle
Cost Principle

expenses?
Assets
Owner’s equity
Liabilities
Capital






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Debit side
Credit side


Cash book


Deferred income
Accounts receivable
Prepaid expenses

borrowing?


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Posting

Capital
Accounts payable

Sale of trademarks
Income tax refund





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Working capital





except:


EXCEPT:

Dividend revenue
Interest expense
Interest revenue

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Bank account

Collections on loan




Tax return

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Debit
Credit
No effect
Statement is wrong

Rent expense
Revenue earned
Wages expense

Two
Four
Three
Five

Financial reporting

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Accounting system

Matching Principle
Cost Principle



Accounting is called the “language of business” because__________:



Cash at bank


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Posting

current assets.
Rs. 275,000
Rs. 315,000
Rs. 365,000
Rs. 220,000

Only cash balances

Only bank balances





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an error?

Cash account
Drawings account

activity?


sheet?
Accounts receivable
Office equipment
Land

Alphabetical order
Ascending order
Chronological order
Alphanumeric order

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Revenue and assets

Rs. 6,000 net cash

Rs. 4,000 net cash
Rs. 5,000 net cash
Rs. 9,000 net cash



Balance sheet
Audit report
Income statement


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Its simplicity


Adjusting entries
Closing entries




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Bank account

Rs. 6,000 net cash

Rs. 4,000 net cash
Rs. 5,000 net cash
Rs. 9,000 net cash

consume within:
The operating cycle

One year


Revenue and assets



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Equipment
Retained Earnings
Cash

Balance sheet
Audit report
Income statement


Adjusting entries
Closing entries




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Liability
Asset
Revenue
Expense



Close-out Summary
Owner’s Capital
Income Summary
Temporary Summary

Owner’s Capital
Service Fees Earned
Income Summary

Matching Principle
Cost Principle

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Owner’s Capital
Service Fees Earned
Income Summary



consume within:
The operating cycle

One year



Matching Principle

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Vu Askari Team
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Cost Principle

Interest expense
Insurance expense
Salaries expense


Cash at bank

an error?

Cash account
Drawings account

investors?
Tax Forms
Management Reports
Audit reports

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Composed & Solved
Vu Askari Team
www.vuaskari.com

Its simplicity

Cost of goods sold

Rent Expense
Salaries Expense

Balance sheet
Audit report
Income statement

Capital
Accounts payable



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Vu Askari Team
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Revenue account
Dividends account

Matching Principle
Cost Principle


Cash at bank

Income Statement
Balance Sheet


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Deferred income
Accounts receivable
Prepaid expenses

Capital
Accounts payable



Equipment
Retained Earnings
Cash

Debit side
Credit side

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Journal entry
Compound entry
Adjusting entry
Reversing entry

Cost of goods sold

Rent Expense
Salaries Expense





Close-out Summary
Owner’s Capital
Income Summary

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Temporary Summary


Revenue and assets





Financial position
Future prospects

Income Statement

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Balance Sheet




Ledger
Journal General
T- Account
Account

Owner’s equity
Assets
Reserves
Liabilities


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for resale purpose?

Cost Principle

Double entry
Multiple entry
Compound entry

expenses?
Assets
Owner’s equity
Liabilities
Capital

valuation?

Matching Principle
Cost Principle



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Vu Askari Team
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Bank account

an error?

Cash account
Drawings account

for resale purpose?

Cost Principle




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Vu Askari Team
www.vuaskari.com

Un-earned revenue
Pre-paid expense
Accrued revenue

Accounting Cycle
Accountant
Auditors

Bank account

expenses?
Assets
Owner’s equity
Liabilities
Capital

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Vu Askari Team
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Cash at bank

Owner’s equity
Assets
Reserves
Liabilities

Sold Rs.50, 000.
Rs. 170,000
Rs. 130,000
Rs. 120,000
Rs. 180,000




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Composed & Solved
Vu Askari Team
www.vuaskari.com





Revenue account
Dividends account

Only cash balances

Only bank balances

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Composed & Solved
Vu Askari Team
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valuation?

Matching Principle
Cost Principle

Double entry
Multiple entry
Compound entry

Journal entry
Compound entry
Adjusting entry
Reversing entry

investors?

www.vuaskari.com
Composed & Solved
Vu Askari Team
www.vuaskari.com
Tax Forms
Management Reports
Audit reports

Equipment
Retained Earnings
Cash

Debit
Credit
No effect
Statement is wrong

Euro Bond

activity?


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Vu Askari Team
www.vuaskari.com
Income Statement
Balance Sheet



expenses?
Assets
Owner’s equity
Liabilities
Capital



accounting cycle?

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Vu Askari Team
www.vuaskari.com

Bank account

Revenue account
Dividends account

Accounting Cycle
Accountant
Auditors




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Vu Askari Team
www.vuaskari.com

Equipment
Retained Earnings
Cash



Balance sheet
Audit report
Income statement

Tax return

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Posting



Assets
Owner’s equity
Liabilities
Capital

as:
Fixed assets
Long term asset
Liquid asset
Bonds


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Matching principle



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Close-out Summary
Owner’s Capital
Income Summary
Temporary Summary



Financial reporting
Accounting system


Cash at bank

Ledger
Journal General

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Vu Askari Team
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T- Account
Account



as:
Fixed assets
Long term asset
Liquid asset
Bonds


Working capital

consume within:
The operating cycle

One year

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Vu Askari Team
www.vuaskari.com


Euro Bond

Equipment
Retained Earnings
Cash

Balance sheet
Audit report
Income statement

Owner’s Capital
Service Fees Earned
Income Summary

www.vuaskari.com
Composed & Solved
Vu Askari Team
www.vuaskari.com

Income Statement
Balance Sheet

Sold Rs.50, 000.
Rs. 170,000
Rs. 130,000
Rs. 120,000
Rs. 180,000



Capital
Accounts payable


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Vu Askari Team
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Only cash balances

Only bank balances



borrowing?



Working capital



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Vu Askari Team
www.vuaskari.com

an error?

Cash account
Drawings account

Assets
Owner’s equity
Liabilities
Capital


Liquidity

Rent expense
Revenue earned
Wages expense


www.vuaskari.com
Composed & Solved
Vu Askari Team
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valuation?

Matching Principle
Cost Principle

Alphabetical order
Ascending order
Chronological order
Alphanumeric order


Deferred income
Accounts receivable
Prepaid expenses



for resale purpose?


www.vuaskari.com
Composed & Solved
Vu Askari Team
www.vuaskari.com
Cost Principle

Accounting Cycle
Accountant
Auditors





Double entry
Multiple entry
Compound entry


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Composed & Solved
Vu Askari Team
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Matching Principle
Cost Principle



activity?






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Revenue and assets


Working capital

Owner’s Capital
Service Fees Earned
Income Summary



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Vu Askari Team
www.vuaskari.com


Liquidity

Debit
Credit
No effect
Statement is wrong

Liabilities
Owner’s Equity
Assets
Revenue

Balance sheet
Audit report
Income statement

Account:

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Vu Askari Team
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Assets
Owner’s equity
Liabilities
Capital

Two
Four
Three
Five

sheet?
Accounts receivable
Office equipment
Land

Rent expense
Revenue earned
Wages expense

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Composed & Solved
Vu Askari Team
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Cost of building
Cost of inventory

Accounting Cycle
Accountant
Auditors

Liability
Asset
Revenue
Expense



Sold Rs.50, 000.
Rs. 170,000

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Composed & Solved
Vu Askari Team
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Rs. 130,000
Rs. 120,000
Rs. 180,000

Close-out Summary
Owner’s Capital
Income Summary
Temporary Summary




Its simplicity

sheet?
Accounts receivable
Office equipment
Land

www.vuaskari.com
Composed & Solved
Vu Askari Team
www.vuaskari.com
activity?


Matching Principle
Cost Principle

borrowing?


Cost of building
Cost of inventory


www.vuaskari.com
Composed & Solved
Vu Askari Team
www.vuaskari.com
current assets.
Rs. 275,000
Rs. 315,000
Rs. 365,000
Rs. 220,000

Debit side
Credit side

Un-earned revenue
Pre-paid expense
Accrued revenue

Owner’s Capital
Service Fees Earned
Income Summary

consume within:
The operating cycle

One year

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Vu Askari Team
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Matching Principle
Cost Principle


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Vu Askari Team
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Financial position
Future prospects

Liability
Asset
Revenue
Expense

Cost of building
Cost of inventory




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Composed & Solved
Vu Askari Team
www.vuaskari.com

Posting

Owner’s equity
Assets
Reserves
Liabilities


Prepaid insurance
Wages account

Balance Sheet
Income Statement



www.vuaskari.com
Composed & Solved
Vu Askari Team
www.vuaskari.com
valuation?

Matching Principle
Cost Principle

activity?


Financial reporting
Accounting system

Only cash balances

Only bank balances


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Vu Askari Team
www.vuaskari.com





Debit
Credit
No effect
Statement is wrong

Which of the following truly represents expenses?
Future benefits
Past results
Cost of doing business
Past receipts


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Cost Principle

Accounting Cycle
Accountant
Auditors

Ledger
Journal General
T- Account
Account



Income Statement
Balance Sheet

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FIN621 MidTerm 1100MCQs

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FIN621 MidTerm 1100MCQs

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Composed & Solved

Hafiz Salman Majeed & Qazi (1-Nation)

Question # 2 of 20 ( Start time: 06:05:43 AM ) Total Marks: 1

Question # 3 of 20 ( Start time: 06:05:54 AM ) Total Marks: 1

Question # 4 of 20 ( Start time: 06:06:01 AM ) Total Marks: 1

Decreased cash flows from higher taxes

Question # 5 of 20 ( Start time: 06:07:11 AM ) Total Marks: 1

Deduct opening stock from cost of goods sold

Question # 6 of 20 ( Start time: 06:07:38 AM ) Total Marks: 1

It may consist of balances of only Real and Personal accounts

Question # 7 of 20 ( Start time: 06:07:57 AM ) Total Marks: 1

Presented fairly and unbiased

Question # 8 of 20 ( Start time: 06:08:31 AM ) Total Marks: 1

Cash outflow to the government for taxes

Question # 9 of 20 ( Start time: 06:08:58 AM ) Total Marks: 1

Note: Solve these papers by yourself

Question # 10 of 20 ( Start time: 06:10:24 AM ) Total Marks: 1

Question # 11 of 20 ( Start time: 06:11:45 AM ) Total Marks: 1

Question # 12 of 20 ( Start time: 06:12:04 AM ) Total Marks: 1

Question # 13 of 20 ( Start time: 06:13:10 AM ) Total Marks: 1

Capital – Debit; Drawing - Credit

Question # 14 of 20 ( Start time: 06:13:27 AM ) Total Marks: 1

Note: Solve these papers by yourself

Question # 15 of 20 ( Start time: 06:13:35 AM ) Total Marks: 1

Question # 16 of 20 ( Start time: 06:13:51 AM ) Total Marks: 1

Stock plus debtors plus cash

Question # 17 of 20 ( Start time: 06:14:07 AM ) Total Marks: 1

Book of default entries

Question # 18 of 20 ( Start time: 06:14:14 AM ) Total Marks: 1

Note: Solve these papers by yourself

Question # 20 of 20 ( Start time: 06:15:44 AM ) Total Marks: 1

Bank reconciliation statement

Question # 1 of 20 ( Start time: 06:28:23 AM ) Total Marks: 1

Debit Cash 500; Credit Accounts Receivable 500

Question # 2 of 20 ( Start time: 06:29:38 AM ) Total Marks: 1

Balance sheet as at December 31, 2007

Question # 3 of 20 ( Start time: 06:31:01 AM ) Total Marks: 1

Note: Solve these papers by yourself

Question # 4 of 20 ( Start time: 06:32:05 AM ) Total Marks: 1

Question # 5 of 20 ( Start time: 06:32:13 AM ) Total Marks: 1

Realization and matching principle

Question # 6 of 20 ( Start time: 06:33:05 AM ) Total Marks: 1

Permanent Working Capital

Question # 7 of 20 ( Start time: 06:34:00 AM ) Total Marks: 1

These are the temporary accounts

Note: Solve these papers by yourself

Question # 8 of 20 ( Start time: 06:34:21 AM ) Total Marks: 1

Question # 9 of 20 ( Start time: 06:34:36 AM ) Total Marks: 1

Question # 10 of 20 ( Start time: 06:34:42 AM ) Total Marks: 1

Question # 11 of 20 ( Start time: 06:34:58 AM ) Total Marks: 1

Goods purchased for resale to customers

Question # 12 of 20 ( Start time: 06:36:25 AM ) Total Marks: 1

Note: Solve these papers by yourself

Higher tax rate

Question # 13 of 20 ( Start time: 06:36:45 AM ) Total Marks: 1

Question # 14 of 20 ( Start time: 06:37:33 AM ) Total Marks: 1

Question # 15 of 20 ( Start time: 06:38:55 AM ) Total Marks: 1

Question # 16 of 20 ( Start time: 06:40:11 AM ) Total Marks: 1

Income statement items

Note: Solve these papers by yourself

Question # 17 of 20 ( Start time: 06:41:09 AM ) Total Marks: 1

Assets and liabilities

Question # 18 of 20 ( Start time: 06:41:26 AM ) Total Marks: 1