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1.
A. Capital is the equity of the stakeholders
B. Capital is the goods involved in the production
C. Capital is the total stock
D. Capital is profit

Answer – A)

Q2. What are the constituents of the Accounting equation?

1.
A. A = L + C where A is assets, L is a liability and C is capital
B. A = I + E where A is assets, I is the income and E is the equity
C. A = L + E where A is assets, L is liability and E is equity
D. L = A + E where L is Liability, A is assets and E is equity

Answer – C)

Q3. Why must both sides of the balance sheet be equal?

1.
A. because of transactions
B. because of income and expenditure
C. because of the accounting equation
D. because purchases are made based on capital or debts which is reflected in the accounting equation

Answer – D)

Q4. Which of the following options is correct?

A. Assets – Inventory, Cash, Equipment, Accounts Receivable

Shareholders’ Equity – Retained Earnings and Share Capital

Liabilities – Long term and short-term debts, Accounts payable

Shareholders’ Equity – Retained earnings and Share Capital

Liabilities – Inventory, Equipment, and Retained Earnings

C. Assets – Inventory, Cash, Equipment, Accounts Receivable

Shareholders’ Equity – Retained Earnings and Share Capital

Liabilities – income and expenditure

D. Assets – Retained earnings and Share Capital

Shareholders’ Equity – Long term and short-term debts

Liabilities – Inventory

Answer – A)

Q5. What is the meaning of bankruptcy when it comes to the assets of a business
organisation?

1.
A. Bankruptcy means an organization has lost its money
B. Bankruptcy means an organisation can no longer earn any profits
C. Bankruptcy means the assets that the company owned are sold and the funds obtained are used to
clear debts
D. none of the above

Answer – C)

Q6. If a company named GHY is thinking about purchasing $300 machine parts by cash, the
transaction would lead to debit (+ $300) in equipment and cash (-$300). What will be the
liability or equity in this scenario?

1.
A. equity and liabilities will be 0
B. equity will be $300 but liabilities will be 0
C. Liabilities will be $300 but equity will be 0
D. No changes
 Answer – A)

Q7. If a company UID purchases machine parts worth $300, but only has $200 in cash. The
company could purchase by initially paying $200 but the remaining amount is still owed to
the dealer. The debit that would result from lead in Equipment (+300) and Account Payable
will be credited (+$200) and Cash will get a credit of (-$200). What will the balance sheet look
like?

1.
A. no changes will be recorded
B. transaction results in changes on both sides of the equation so there will be an increase of $200 on
both sides
C. There will be an increase in Liabilities alone
D. There will be an increase in Assets alone

Answer – B)

Q8. Which of these combinations are correct?

1.
A. Total Liabilities – Current Liabilities and Non-Current Liabilities

Total Assets – Non-Current Assets and Current Assets

Total Shareholder’s Equity – Share Capital and Retained Earnings

B. Total Liabilities – Current Liabilities

Total Assets – Current Assets

Total Shareholder’s Equity – Share Capital

C. Only a is correct

D. a and b are both correct

Answer – C)

Q9. Why is accountancy important in businesses?

1.
A. because it ensures compliance with statutes and gathers financial performance information for
stakeholders
B. because it helps in keeping track of expenditures and income
C. because it helps in gathering quantitative information
D. all of the above

Answer – D)

Q10. The skills essential for being an accountant are:

1.
A. good communications, proficiency in accounting practices, preparing financial statements, analysing
data
B. time management, critical thinking, accounting organisation capacities
C. none of the above
D. only a and b are true

Answer- D)

Q11. How many steps are there in an accounting cycle?

1.
A. 7 steps
B. 8 steps
C. 10 steps
D. 5 steps

Answer – B)

Q12. This is important for keeping track of changes made to accounts over time, ensuring
entries are derived correctly, and modeling as well analyse account balances.

1.
A. accounting worksheet
B. ledger
C. bill
D. cash book

Answer – A)
 Q13. It is a kind of document that is integral to accounting for its function as the financial
statement reporting a business organisation’s shareholder equity, assets, and liabilities.

1.
A. cash book
B. accounting worksheet
C. balance sheet
D. ledger

Answer – C)

Q14. If the company GHT has reported that its total equity in the previous financial year was
$40 billion with total liabilities being $100 billion. Then what are the total assets?

1.
A. $60 billion
B. $100 billion
C. $120 billion
D. $140 billion

Answer – D)

Q15. If a company’s IOP has total assets of $350 billion with a total liability of $130 billion.
What is the total equity?

1.
A. $220 billion
B. b) $480 billion
C. c) $300 billion
D. d) $500 billion

Answer – A)

Q16. If a business purchases raw cotton and pays for the product in cash, it leads to an
increase in the Inventory but reduces Cash Capital. Since in this scenario, more than two or
two accounts experience changes when a transaction is made, the accounting system that
operates in the business organisation is referred to as the:

1.
A. Accounting equation
B. Balance sheet
C. Double – Entry
D. Accounting

Answer – C)

Q17. Investors have to analyse and interpret the information given by the balance sheet and
the accounting equation to understand if a given company has low liabilities or assets or has
too many assets. The investors cannot directly gain long-term indication from analysing the
accounting equation and have to consider other options as well. This is considered a:

1.
A. advantage
B. feature
C. limitation
D. aspect

Answer – C)

Q18. This is the total value of an organisation that is expressed as dollars. It is essentially the
amount that a company must be left with when that company has liquidated every asset that
it owns and has cleared its dues or debts. The amount that is left is returned to stakeholders.

1.
A. assets
B. liabilities
C. equity
D. none of the above

Answer – C)

Q19. What is the rearrangement of the accounting equation in accounting practice nowadays
in most modern business organisations?

1.
A. A = L + E
B. A = L + E + Owner’s Drawings
C. A = L + E + Owner’s Drawings + Expenses
D. A = L + E – Owner’s Drawings + Revenues – Expenses

Answer – D)

Q20. Assets, Expenses, The Owner’s Equity, and the Revenue, as well as the Liabilities, are
all parts of which of the following given below:

1.
A. types of accounting
B. types of balances of sheet
C. types of constituents of the accounting equation
D. none of the above

Answer – A)
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