Top 50 Financial Accounting MCQS With Answers
1. What is the primary objective of financial accounting?
a) To record financial transactions
b) To prepare financial statements
c) To analyze financial data
d) To forecast future profits
2. Which financial statement reports a company’s financial position at a specific point in time?
a) Income statement
b) Statement of cash flows
c) Balance sheet
d) Statement of retained earnings
3. What is the accounting equation?
a) Assets = Liabilities + Equity
b) Assets = Liabilities – Equity
c) Assets = Equity – Liabilities
d) Liabilities = Assets + Equity
4. Which of the following is considered a current asset?
a) Land
b) Equipment
c) Accounts receivable
d) Buildings
5. What does GAAP stand for?
a) Generally Accepted Accounting Principles
b) Generally Acknowledged Accounting Practices
c) Generally Authorized Accounting Procedures
d) Generally Applied Accounting Protocols
6. Which financial statement shows a company’s revenues and expenses over a specific period?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
7. What is depreciation?
a) The increase in the value of an asset
b) The decrease in the value of an asset over time
c) The process of converting assets into cash
d) The process of valuing inventory
8. What is the formula for calculating net income?
a) Revenues – Expenses
b) Assets – Liabilities
c) Equity + Liabilities
d) Cash flows from operating activities
9. Which accounting principle requires companies to record expenses when they are incurred, regardless of when cash is exchanged?
a) Matching principle
b) Revenue recognition principle
c) Cost principle
d) Conservatism principle
10. Which financial statement shows changes in a company’s retained earnings over a specific period?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
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11. What is the formula for calculating return on equity (ROE)?
a) Net income / Total assets
b) Net income / Total equity
c) Net income / Total liabilities
d) Total equity / Total assets
12. Which of the following is considered a long-term liability?
a) Accounts payable
b) Short-term loans
c) Bonds payable
d) Accrued expenses
13. Which financial statement shows how a company’s cash position changed over a specific period?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
14. Which accounting principle requires companies to use the same accounting methods and procedures from period to period?
a) Matching principle
b) Consistency principle
c) Conservatism principle
d) Materiality principle
15. What is the purpose of the trial balance?
a) To prepare financial statements
b) To record transactions
c) To verify the accuracy of accounting records
d) To calculate depreciation expenses
16. Which financial statement shows a company’s cash inflows and outflows from operating, investing, and financing activities?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
17. What is the formula for calculating the current ratio?
a) Current assets / Current liabilities
b) Current liabilities / Current assets
c) Total assets / Total liabilities
d) Total liabilities / Total assets
18. Which accounting principle requires companies to record assets at their original cost?
a) Matching principle
b) Cost principle
c) Revenue recognition principle
d) Conservatism principle
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19. Which of the following is an example of an intangible asset?
a) Inventory
b) Land
c) Patent
d) Equipment
20. What is the purpose of the statement of cash flows?
a) To show a company’s profitability
b) To report changes in retained earnings
c) To explain the difference between net income and cash flow
d) To show how cash was generated and used during a period
21. Which financial statement shows a company’s revenues and expenses over a specific period?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
22. What is the accounting equation?
a) Assets = Liabilities + Equity
b) Assets = Liabilities – Equity
c) Assets = Equity – Liabilities
d) Liabilities = Assets + Equity
23. What is the purpose of the trial balance?
a) To prepare financial statements
b) To record transactions
c) To verify the accuracy of accounting records
d) To calculate depreciation expenses
24. Which financial statement reports a company’s financial position at a specific point in time?
a) Income statement
b) Statement of cash flows
c) Balance sheet
d) Statement of retained earnings
25. What does GAAP stand for?
a) Generally Accepted Accounting Principles
b) Generally Acknowledged Accounting Practices
c) Generally Authorized Accounting Procedures
d) Generally Applied Accounting Protocols
26. Which financial statement shows how a company’s cash position changed over a specific period?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
27. What is depreciation?
a) The increase in the value of an asset
b) The decrease in the value of an asset over time
c) The process of converting assets into cash
d) The process of valuing inventory
28. What is the formula for calculating net income?
a) Revenues – Expenses
b) Assets – Liabilities
c) Equity + Liabilities
d) Cash flows from operating activities
29. Which accounting principle requires companies to record expenses when they are incurred, regardless of when cash is exchanged?
a) Matching principle
b) Revenue recognition principle
c) Cost principle
d) Conservatism principle
30. Which financial statement shows changes in a company’s retained earnings over a specific period?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
31. What is the formula for calculating return on equity (ROE)?
a) Net income / Total assets
b) Net income / Total equity
c) Net income / Total liabilities
d) Total equity / Total assets
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32. Which of the following is considered a long-term liability?
a) Accounts payable
b) Short-term loans
c) Bonds payable
d) Accrued expenses
33. What is the accounting equation?
a) Assets = Liabilities + Equity
b) Assets = Liabilities – Equity
c) Assets = Equity – Liabilities
d) Liabilities = Assets + Equity
34. What does GAAP stand for?
a) Generally Accepted Accounting Principles
b) Generally Acknowledged Accounting Practices
c) Generally Authorized Accounting Procedures
d) Generally Applied Accounting Protocols
35. Which financial statement shows a company’s revenues and expenses over a specific period?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
36. What is depreciation?
a) The increase in the value of an asset
b) The decrease in the value of an asset over time
c) The process of converting assets into cash
d) The process of valuing inventory
37. What is the formula for calculating net income?
a) Revenues – Expenses
b) Assets – Liabilities
c) Equity + Liabilities
d) Cash flows from operating activities
38. Which accounting principle requires companies to record expenses when they are incurred, regardless of when cash is exchanged?
a) Matching principle
b) Revenue recognition principle
c) Cost principle
d) Conservatism principle
39. Which financial statement shows changes in a company’s retained earnings over a specific period?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
40. What is the formula for calculating return on equity (ROE)?
a) Net income / Total assets
b) Net income / Total equity
c) Net income / Total liabilities
d) Total equity / Total assets
41. Which of the following is considered a long-term liability?
a) Accounts payable
b) Short-term loans
c) Bonds payable
d) Accrued expenses
42. What is the accounting equation?
a) Assets = Liabilities + Equity
b) Assets = Liabilities – Equity
c) Assets = Equity – Liabilities
d) Liabilities = Assets + Equity
43. What does GAAP stand for?
a) Generally Accepted Accounting Principles
b) Generally Acknowledged Accounting Practices
c) Generally Authorized Accounting Procedures
d) Generally Applied Accounting Protocols
44. Which financial statement shows a company’s revenues and expenses over a specific period?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
45. What is depreciation?
a) The increase in the value of an asset
b) The decrease in the value of an asset over time
c) The process of converting assets into cash
d) The process of valuing inventory
46. What is the formula for calculating net income?
a) Revenues – Expenses
b) Assets – Liabilities
c) Equity + Liabilities
d) Cash flows from operating activities
47. Which accounting principle requires companies to record expenses when they are incurred, regardless of when cash is exchanged?
a) Matching principle
b) Revenue recognition principle
c) Cost principle
d) Conservatism principle
48. Which financial statement shows changes in a company’s retained earnings over a specific period?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
49. What is the formula for calculating return on equity (ROE)?
a) Net income / Total assets
b) Net income / Total equity
c) Net income / Total liabilities
d) Total equity / Total assets
50. Which of the following is considered a long-term liability?
a) Accounts payable
b) Short-term loans
c) Bonds payable
d) Accrued expenses