Basic Accounting Quiz With Answer Keys – 45 Items

This basic accounting quiz consists of 45 items designed to test your knowledge and help you in your accounting studies. Enjoy!

Set A – Accounting Basics

True or False

1. Hiring a new company treasurer is an economic event recorded in the accounting system.
2. The management of a business enterprise is the primary internal user of accounting information.
3. Bookkeeping and accounting are the same because the bookkeeping function includes the accounting process.
4. Financial statements are the major means of communicating accounting information to interested parties.
5. The owners of the business are the only ones who need financial information.
6. Transactions that can be measured in currency are recorded in the financial information system.
7. Luca Pacioli, a famous mathematician, is the father of accounting.
8. Private accountants are not employees of a business entity.
9. Accounting is only helpful for a profit-based business.
10. Expressing an opinion as to the fairness of the information in financial statements is a service performed by CPAs.

Answer Key

1. False
2. True
3. False
4. True
5. False
6. True
7. True
8. False
9. False
10. True

Set B – Accounting Basics

Multiple Choice Questions

1. Accountants refer to an economic event as a:

a. Sale
b. Purchase
c. Transaction
d. Ownership

2. The accounting process is sequenced as:

a. Identification, recording, communication
b. Communication, recording, identification
c. Recording, identification, communication
d. Identification, communication, recording

3. A private accountant’s scope can include the following, except:

a. budgeting.
b. accounting information systems.
c. external auditing.
d. tax accounting.

4. The internal users of accounting information include all of the following, except

a. company management.
b. investors.
c. marketing managers.
d. production supervisors.

5. The organization(s) primarily responsible for establishing generally accepted accounting principles is(are) the

FASB SEC
a. No No
b. Yes No
c. No Yes
d. Yes Yes

6. The primary accounting standard-setting body in the United States is the
a. Financial Accounting Standards Board.
b. International Accounting Standards Board.
c. Internal Revenue Service.
d. Securities and Exchange Commission.

7. All of the following are services offered by public accountants except
a. budgeting.
b. auditing.
c. tax planning.
d. consulting.

8. A net loss will result during a period when the

a. revenues exceed expenses.
b. assets exceed owner’s equity.
c. assets exceed liabilities.
d. expenses exceed revenues.

9. Which of the following is not an accounting process?

a. Recording
b. Identifying
c. Financial Decision-making
d. Communicating

10. The ending owner’s equity amount is shown on the

a. financial position only.
b. the owner’s equity statement only.
c. both the income statement and the owner’s equity statements.
d. both the financial position and the owner’s equity statements.

Answer Key

1. C
2. A
3. C
4. B
5. D
6. A
7. A
8. D
9. C
10. D

Set C – Accounting Basics

Multiple Choice Questions

1. The accounting equation is?

a. Assets = Liabilities + Equity
b. Liabilities = Equity – Assets
c. Assets = Liabilities – Equity
d. Equity = Liabilities – Equity

2. Item owned by a business that has a value?

a. Asset
b. Liabilities
c. Equity
d. Reserves

3. Money owed to outsiders is?

a. Asset
b. Liabilities
c. Equity
d. Reserves

4. The share of owners in a business is?

a. Asset
b. Liabilities
c. Equity
d. Reserves

5. The company paid its creditor amounting to $100.

a. Payable increased by $100 and Cash decreased by $100.
b. Payable decreased by $100 and Cash decreased by $100.
c. Payable increased by $100 and Cash increased by $100.
d. Payable decreased by $100 and Cash increased by $100.

6. The owner took a computer for personal use.

a. Equipment increased and Capital increased.
b. Equipment decreased and Capital increased.
c. Equipment decreased and Capital decreased.
d. Equipment increased and Capital decreased.

7. The owner infused additional cash into the business.

a. Cash increased and Capital increased.
b. Cash decreased and Capital increased.
c. Cash decreased and Capital decreased.
d. Cash increased and Capital decreased.

8. Under the accrual method of account, expenses are recorded:

a. When they are paid
b. Whey they are incurred
c. When invoices are received
d. Based on management’s decision.

9. What is an example of an expense?

a. Intangibles
B. Cash
C. Reserves
D. Payroll

10. What is an example of a liability?

a. Cash
b. Common equity
c. Property, plant and equipment
d. Retirement benefit obligation

Answer Key

1. A
2. A
3. B
4. C
5. B
6. C
7. A
8. B
9. D
10. D

Set D – Accounting Equation and Double Entry Bookkeeping System

Multiple Choice Questions

1. Debit in an account means?

a. Right side of an account
b. Left side of an account
c. Increase
d. Decrease

2. Which of the following has a normal debit balance?

a. Notes payable
b. Prepaid expense
c. Owners equity
d. Retirement benefit obligation

3. If total assets are $900 and total liabilities are $400, how much is net assets?

a. $900
b. 400
c. 500
d. None of the above

4. Which of the following accounts are increased when the owner invests additional capital?

a. Cash
b. Property, plant, and equipment
c. Receivables
d. Memo to FS

5. Which of the following is true?

a. A debit will increase the liability account.
b. A debit will increase the equity account.
c. A debit will increase the asset account.
d. A debit will increase the brand account.

Answer Key

1. B
2. B
3. C
4. A
5. C

Set E – Code of Ethics for Professional Accountants

Multiple Choice Questions

1. A professional accountant should be straightforward and honest in all professional and business relationships. This fundamental principle relates to?

a. Integrity
b. Objectivity
c. Professional competence and due care
d. Confidentiality

2. A professional accountant has a duty to maintain professional knowledge and skill at the level required to ensure that the client receives competent professional service based on current developments in legislation, practice, and techniques.

a. Integrity
b. Objectivity
c. Professional competence and due care
d. Confidentiality

3. A professional accountant should comply with relevant laws and regulations and avoid any action that discredits the profession.

a. Professional behavior
b. Objectivity
c. Professional competence and due care
d. Confidentiality

4. A professional accountant should respect the confidentiality of information obtained as a result of professional and business relationships and should not disclose such to any third parties without proper and specific authority unless there is a legal to disclose.

a. Professional behavior
b. Objectivity
c. Professional competence and due care
d. Confidentiality

5. A professional accountant should not allow bias, conflict of interest, or undue influence of others to override professional or business judgments.

a. Professional behavior
b. Objectivity
c. Professional competence and due care
d. Confidentiality

6. A threat to what fundamental principle is created when a professional accountant in public practice competes directly with a client or has a joint venture or similar arrangement with a major competitor of a client?

a. Professional behavior
b. Objectivity
c. Professional competence and due care
d. Confidentiality

7. A threat to what fundamental principle is created when a professional accountant or his engagement team does not possess, or can’t acquire, the competencies necessary to properly carry out an engagement.

a. Professional behavior
b. Objectivity
c. Professional competence and due care
d. Confidentiality

8. Where the threats cannot be eliminated or reduced to an acceptable level through the application of safeguards, a professional accountant in public practice should, unless there is satisfaction as to necessary facts by other means?

a. Continue and hide the related threats
b. Decline the engagement
c. Communicate the threats to authorities
d. Review if threats can be determined by the public

9. Engagement-specific safeguards in the work environment may include, except?

a. Involving an additional professional accountant to review the work done or otherwise advise as necessary.
b. Consulting an independent third party, such as a committee of independent directors, a professional regulatory body, or another professional accountant.
c. Discussing ethical issues with those charged with governance of the client.
d. Increasing fees to perform the engagement.

10. The following are circumstances that may create intimidation threats, except?

a. Being threatened with dismissal or replacement in relation to a client engagement,
b. Being threatened with litigation,
c. Being pressured to reduce inappropriately the extent of work performed in order to reduce fees.
d. Accepting gifts in the normal course of business without an intent to influence decision making.

Answer Key

1. A – Integrity is one of the fundamental principles within the Code of Ethics for Professional Accountants. A professional accountant should not be associated with reports, returns, or information that: a. contains materially false or misleading content, b. contains information furnished recklessly, and/or c. omits or obscures information required to be included where such omission or obscurity would be misleading.
2. C – Professional competence starts with the attainment of high standard general education followed by specific education, training, and examination in professionally relevant courses, and a period of work experience. It is then maintained through a continuing awareness and an understanding of relevant technical, professional, and business developments.
3. A – A professional accountant shall not knowingly engage in any business, occupation, or activity that impairs or might impair the integrity, objectivity, or good reputation of the profession, and as a result, would be incompatible with the fundamental principles.
4. D – Confidentiality serves the public interest because it facilitates the free flow of information from the professional accountant’s client or employing organization to the accountant in the knowledge that the information will not be disclosed to a third party.
5. B – The principle of objectivity imposes an obligation on all professional accountants not to compromise their professional or business judgment because of bias, conflict of interest, or the undue influence of others.
6. B – The principle of objectivity imposes an obligation on all professional accountants not to compromise their professional or business judgment because of bias, conflict of interest, or the undue influence of others.
7. C – Professional competence starts with the attainment of high standard general education followed by specific education, training, and examination in professionally relevant courses, and a period of work experience. It is then maintained through a continuing awareness and an understanding of relevant technical, professional, and business developments.
8. B – When the conflict of interest poses a threat to one or more of the fundamental principles that cannot be eliminated or reduced to an acceptable level through appropriate safeguards, the professional accountant should decline the engagement.
9. D – Increasing fees will not reduce the threat to an acceptable level and is not an engagement-specific safeguard.
10. D – In this threat, the professional accountant may reasonably conclude that there is no significant threat to compliance with fundamental principles and correspondingly, there is no intimidation threat.

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