Financial Accounting MCQ Quiz - Objective Question with Answer for Financial Accounting - Download Free PDF

Last updated on Jun 12, 2025

Latest Financial Accounting MCQ Objective Questions

Financial Accounting Question 1:

You are an employee of Exelan Co and have been asked to help prepare the end of year statements for the period ended 30 November 20X9 by agreeing the figure for the total receivables.

The following figures, relating to the financial year, have been obtained from the books of

original entry.

  $

Purchases for the year

361,947
Sales

472,185

Returns inwards

41,226

Returns outwards

16,979

Irrecoverable debts written off

4,586

Discounts received

1,864

Cheques paid to suppliers

342,791

Cheques received from customers

429,811

Customer cheques dishonoured

626

You discover that at the close of business on 30 November 20X8 the total of the receivables amounted to $50,241. What is the balance on the receivables ledger control account at 30 November 20X9?

 

  1. $47,429
  2. $56,601
  3. $46,177
  4. $71,676

Answer (Detailed Solution Below)

Option 1 : $47,429

Financial Accounting Question 1 Detailed Solution

The Correct Option : 1

The correct answer is: $47,429

  $   $
Balance b/d 50,241 Returns inwards 41,226
Sales 472,185 irrecoverable debts written off 4,586
Cheques dishonoured 626 Cheques received 429,811
    Balance c/d 47,429
  523,052   523,052

Financial Accounting Question 2:

Which of the following costs should be included in valuing inventories of finished goods

held by a manufacturing company, according to IAS 2 Inventories?

(1) Carriage inwards

(2) Carriage outwards

(3) Depreciation of factory plant

(4) Accounts department costs relating to wages for production employees

  1. All four items
  2. 2 and 3 only
  3. 1, 3 and 4 only
  4. 1 and 4 only

Answer (Detailed Solution Below)

Option 3 : 1, 3 and 4 only

Financial Accounting Question 2 Detailed Solution

The Correct Option : 3

The correct answer is: 1, 3 and 4 only

Carriage outwards is a Distribution expense.

Financial Accounting Question 3:

Luis sold goods to Pedro in May 20X9 with a list price of $98,000. Luis allowed a trade discount of 10%. Pedro returned goods with a list price of $3,000 on 31 May and returned a further $5,000 of goods at list price on 6 June as they were found to be unsuitable.

How much should Luis record in the sales returns account at 31 May?

  1. $2,700
  2. $3,000
  3. $8,000
  4. $7,200

Answer (Detailed Solution Below)

Option 1 : $2,700

Financial Accounting Question 3 Detailed Solution

The Correct Option : 1

The correct answer is: $2,700

Make sure you read the dates carefully as some of the goods are returned after 31 May and we are only concerned with sales returns at that date, which is the goods with a list price of $3,000. The value of the original sale is after the trade discount of 10%, so the actual amount invoiced for those goods is $2,700 ($3,000 × 90%).

Financial Accounting Question 4:

A firm has the following transactions with its product R.

1 January 20X1 Opening inventory: nil
1 February 20X1 Buys 10 units at $300 per unit
11 February 20X1 Buys 12 units at $250 per unit
1 April 20X1 Sells 8 units at $400 per unit
1 August 20X1 Buys 6 units at $200 per unit
1 December 20X1 Sells 12 units at $400 per unit

The Firm uses FIFO to Value its inventory. What is the inventory value at the end of the year?

  1. $nil
  2. $1,700
  3. $2,400
  4. $2,007.20

Answer (Detailed Solution Below)

Option 2 : $1,700

Financial Accounting Question 4 Detailed Solution

The correct Ans is: $1,700
Closing inventory $1,700.

Purchases Sales Balance Inventory
$
Unit cost
$
Units Units Units    
10   10 3,000 300
12     3,000 250
  8   6,000  
      2,400  
    14 3,600  
6     1,200 200
    20 4,800  
  12   3,100  
    8 1,700  

Note. * 2@$300 + 10@$250 = $3,100

Financial Accounting Question 5:

At 1 January 20X6, a company's capital structure was as follows:

 

$

Ordinary share capital

 

2,000,000 shares of 50c each

1,000,000

Share premium account

1,400,000


In January 20X6 the company issued 1,000,000 shares at $1.40 each.

In September 20X6 the company made a bonus issue of one share for every three held

using the share premium account.

 

What were the balances on the company's share capital and share premium accounts

In January 20X6 the company issued 1,000,000 shares at $1.40 each.

In September 20X6 the company made a bonus issue of one share for every three held using the share premium account.

What were the balances on the company's share capital and share premium accounts after these transactions?

Share capital

$

Share premium

$

4,000,000 800,000
3,200,000

600,000

2,000,000 1,800,000
2,000,000 1,300,000

  1. 1
  2. 2
  3. 3
  4. 4

Answer (Detailed Solution Below)

Option 1 : 1

Financial Accounting Question 5 Detailed Solution

The Correct Option : 1

Share capital

$

Share premium

$

2,000,000 1,800,000

 

Share Capital
  $m   $m
    Bal b/f 1.0
    Share issue (note 1) 0.5
Bal c/f 2.0 Bonus (note 2) 0.5
  2.0   2.0

 

Share Premium
  $m   $m
Bonus (note 2) 0.5 Bal b/f 1.4
Bal c/f 1.8 Share issue (note 1) 0.9
  2.3   2.3

Notes.

1 Share issues of 1,000,000 shares raises $1,400,000. Shares are 50c each, so share capital is $500,000 and share premium $900,000.

2 Share capital is $1.5m or 3m shares. Therefore, the bonus issue is 1m shares.

Top Financial Accounting MCQ Objective Questions

Financial Accounting Question 6:

Which of the following is NOT a qualitative characteristic of accounting information?

  1. Relevance
  2. Reliability
  3. Comparability
  4. More than one of the above
  5. None of the above

Answer (Detailed Solution Below)

Option 5 : None of the above

Financial Accounting Question 6 Detailed Solution

The correct answer is - None of the above.

Key Points

  • Qualitative Characteristics of Accounting Information
    • Relevance: Accounting information is relevant if it can influence the economic decisions of users by helping them evaluate past, present, or future events or confirming or correcting their past evaluations.
    • Reliability: Reliable accounting information is free from significant error and bias and faithfully represents what it purports to represent. It should be verifiable, neutral, and provide a faithful representation of the transactions and events.
    • Comparability: This characteristic allows users to identify and understand similarities and differences among items. Comparability enables users to compare financial information of an entity over time or with other entities.
    • The given options (Relevance, Reliability, and Comparability) are all fundamental qualitative characteristics of accounting information.
    • Since all given options are qualitative characteristics, the correct answer is 'None of the above', making Option 5 the correct choice.

Additional Information

  • Other Key Qualitative Characteristics in Accounting:
    • Understandability: Information should be comprehensible to users who have a reasonable knowledge of business and economic activities. Complex matters should not be left out of financial reports simply because they are difficult to understand.
    • Timeliness: Timeliness refers to having information available to decision-makers before it loses its capacity to influence decisions. Information that is outdated is of little value.

Financial Accounting Question 7:

Which of the following best describes the prudence concept in accounting?

  1. Recognising income only when it is earned and expenses only when they are incurred
  2. Ensuring that financial statements are prepared in a consistent manner
  3. Exercising caution when making judgments under conditions of uncertainty to avoid overstating assets and income
  4. Ensuring that all financial information is free from bias and can be relied upon

Answer (Detailed Solution Below)

Option 3 : Exercising caution when making judgments under conditions of uncertainty to avoid overstating assets and income

Financial Accounting Question 7 Detailed Solution

Exercising caution when making judgments under conditions of uncertainty to avoid overstating assets and income

Financial Accounting Question 8:

Which of the following calculates a sole trader's net profit for a period?

  1. Closing net assets - drawings + capital introduced - opening net assets
  2. Closing net assets + drawings + capital introduced - opening net assets
  3. Closing net assets - drawings - capital introduced - opening net assets
  4. Closing net assets + drawings - capital introduced - opening net assets

Answer (Detailed Solution Below)

Option 4 : Closing net assets + drawings - capital introduced - opening net assets

Financial Accounting Question 8 Detailed Solution

Opening net assets + profit - drawings + capital introduced = Closing net assets

Therefore, Profit = Closing net assets + drawings - capital introduced - opening net assets

Financial Accounting Question 9:

qImage676821fe72e5ddc3ca54a3d2

  1. $331,670
  2. $331,760
  3. $321,760

  4. $335,760

Answer (Detailed Solution Below)

Option 2 : $331,760

Financial Accounting Question 9 Detailed Solution

The correct answer is option 2, i.e. $331,760

qImage676821ff72e5ddc3ca54a3d3

Financial Accounting Question 10:

Which accounting principle is described by the following statement?

‘Transactions and events are recorded so that assets and income are not overstated whereas and expenses and losses are not understated.’ 

  1. Prudence
  2. Materiality
  3. Going concern
  4. Business entity

Answer (Detailed Solution Below)

Option 1 : Prudence

Financial Accounting Question 10 Detailed Solution

The correct option is option 1.

Financial Accounting Question 11:

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  1. $395,200
  2. $309,500
  3. $307,100
  4. $304,300

Answer (Detailed Solution Below)

Option 3 : $307,100

Financial Accounting Question 11 Detailed Solution

qImage67683e2c7b8aadf70e1ebe3c

Financial Accounting Question 12:

qImage676826b3f67f5e26ef5bf774

  1. $460,900
  2. $486,500
  3. $501,500
  4. $475,900

Answer (Detailed Solution Below)

Option 4 : $475,900

Financial Accounting Question 12 Detailed Solution

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Financial Accounting Question 13:

Below are extracts of the trial balance of Ryan Co for the year ended 30 June 20X8:
qImage677b9b85565ccfb4f91b6f78

During the year ended 30 June 20X9 a new item of plant and machinery was purchased at a cost of  $50,000. Ryan Co. depreciates plant and machinery at 20% per annum using the reducing balance method.
What was the depreciation charge for the year ended 30 June 20X9?

  1. $33040
  2. $22040
  3. $34000
  4. $33140

Answer (Detailed Solution Below)

Option 1 : $33040

Financial Accounting Question 13 Detailed Solution

The correct answer is Option 1

($230,400 + $50,000 - $115,200) × 20% = $33,040

Financial Accounting Question 14:

When Bob’s trial balance was extracted, the total of the debit balances was INR 208,462 and the total of the credit balances was INR 208,642. He opened a suspense account for this difference and, upon investigation, he found that:

(i) A cash sale for INR 50 was debited to the cash account, but no entry was made in the sales account;
(ii) the opening inventory figure of INR 1,200 was omitted from the trial balance.

When Bob corrects these errors what was the balance on his suspense account?

  1. INR 1,070 debit
  2. INR 1,330 credit
  3. INR 1,280 debit
  4. INR 970 credit

Answer (Detailed Solution Below)

Option 4 : INR 970 credit

Financial Accounting Question 14 Detailed Solution

The correct answer is Option 4

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Financial Accounting Question 15:

In the previous year Simone had a gross profit margin of 10%. In the current year, this increased to 15%. Which one of the following reasons might explain this?

  1. The volume of sales has been higher in the current year
  2. Current year prompt payment discounts have been higher
  3. There have been higher levels of inventory obsolescence in the current year
  4. The mix of products sold in the current year has changed

Answer (Detailed Solution Below)

Option 4 : The mix of products sold in the current year has changed

Financial Accounting Question 15 Detailed Solution

The correct answer is Option 4
  • Increased volume of sales would have increased costs too. 
  • Settlement discounts aren’t part of the cost of sale calculation. 
  • Higher levels of inventory obsolescence would result in a lower gross profit margin %.
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