Unit 1:Introduction to Accounting
### 1. Which of the following best describes the changing role of accountants in today's business environment?
- A) Only record financial transactions
- B) Provide information to assist decision-making
- C) Design financial software systems
- D) Enforce financial regulations
**Answer:** B) Provide information to assist decision-making
### 2. Forensic accounting is a growth area in accounting related to:
- A) E-commerce and payment systems
- B) Financial planning and budgeting
- C) Solving crimes like computer hacking
- D) Recording historical transactions
**Answer:** C) Solving crimes like computer hacking
### 3. Who is considered responsible for popularizing the double-entry bookkeeping system?
- A) Kautilya
- B) Luca Pacioli
- C) American Institute of Certified Public Accountants
- D) American Accounting Association
**Answer:** B) Luca Pacioli
### 4. What aspect of accounting has now become increasingly important, raising it to the level of an information system?
- A) Book-keeping
- B) Preparation of tax reports
- C) Provision of decision-making information
- D) Auditing processes
**Answer:** C) Provision of decision-making information
### 5. Which of the following describes "Reliability" in accounting information?
- A) Information is error-free and unbiased
- B) Information is timely and relevant
- C) Information is easy to understand
- D) Information is relevant to cost accounting
**Answer:** A) Information is error-free and unbiased
### 6. In 1966, how did the American Accounting Association (AAA) define accounting?
- A) The art of recording financial transactions
- B) The process of identifying, measuring, and communicating economic information
- C) The systematic study of management's decision-making process
- D) A method for calculating taxes owed by a business
**Answer:** B) The process of identifying, measuring, and communicating economic information
### 7. What is the purpose of "Cost Accounting"?
- A) To create financial reports for external stakeholders
- B) To calculate taxes for government agencies
- C) To analyze expenditures and ascertain product costs
- D) To determine the financial stability of a business
**Answer:** C) To analyze expenditures and ascertain product costs
### 8. According to the text, the "users" of accounting information are classified into which two broad categories?
- A) Managers and employees
- B) Investors and creditors
- C) Internal users and external users
- D) Financial analysts and accountants
**Answer:** C) Internal users and external users
### 9. What characteristic of accounting information allows different users to interpret information consistently?
- A) Reliability
- B) Comparability
- C) Understandability
- D) Relevance
**Answer:** C) Understandability
### 10. In which ancient civilization did accounting first develop, recording transactions on clay tablets?
- A) Greece
- B) Rome
- C) Babylonia
- D) India
**Answer:** C) Babylonia
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### MCQs on Accounting Concepts
11. **Which of the following is not a business transaction?**
a) Bought furniture of ₹10,000 for business
b) Paid salaries of employees ₹5,000
c) Paid son’s fees from personal bank account ₹20,000
d) Paid son’s fees from business ₹2,000
**Answer:** c) Paid son’s fees from personal bank account ₹20,000
12. **Which qualitative characteristic of accounting information is emphasized when it is clearly presented?**
a) Understandability
b) Relevance
c) Comparability
d) Reliability
**Answer:** a) Understandability
13. **Which of the following is considered a liability?**
a) Cash
b) Machinery
c) Sundry creditors
d) Debtors
**Answer:** c) Sundry creditors
14. **Use of a common unit of measurement and common format of reporting promotes:**
a) Comparability
b) Understandability
c) Relevance
d) Reliability
**Answer:** a) Comparability
15. **Which of the following is a primary objective of accounting?**
a) Providing confidential data to the public
b) Maximizing profits
c) Systematic record-keeping of financial transactions
d) Minimizing tax obligations
**Answer:** c) Systematic record-keeping of financial transactions
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### MCQs on Basic Terms in Accounting
16. **What term describes the amount invested by the owner in a firm?**
a) Revenue
b) Capital
c) Asset
d) Liability
**Answer:** b) Capital
17. **Goods purchased by a business for resale are classified as:**
a) Revenue
b) Expenditure
c) Purchases
d) Liabilities
**Answer:** c) Purchases
18. **Who is considered a debtor?**
a) A person to whom the business owes money
b) A person who owes money to the business
c) An investor in the business
d) The owner of the business
**Answer:** b) A person who owes money to the business
19. **Which term refers to the items of value used by a business in its operations?**
a) Liabilities
b) Capital
c) Assets
d) Revenue
**Answer:** c) Assets
10. **Which of the following refers to the total sales revenue from goods or services provided to customers?**
a) Assets
b) Stock
c) Sales
d) Capital
**Answer:** c) Sales
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### MCQs on Objectives and Roles of Accounting
21. **The primary purpose of a Profit and Loss account is to:**
a) Show liabilities of the business
b) Calculate profit or loss over an accounting period
c) Record day-to-day transactions
d) Show assets of the business
**Answer:** b) Calculate profit or loss over an accounting period
22. **Financial information provided by accounting is generally intended for:**
a) Internal users only
b) External users only
c) Both internal and external users
d) Government agencies only
**Answer:** c) Both internal and external users
23. **Which group is NOT considered a primary user of accounting information?**
a) Management
b) Competitors
c) Government regulators
d) Customers
**Answer:** b) Competitors
24. **Accounting as a language of business serves to:**
a) Prepare legal documents
b) Communicate financial information to users
c) Enhance revenue generation
d) Reduce business expenses
**Answer:** b) Communicate financial information to users
25. **The recording of financial data chronologically as a historical record is an example of accounting as a:**
a) Language
b) Commodity
c) Historical record
d) Control mechanism
**Answer:** c) Historical record
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### MCQs on Basic Terms Continued
26. **Assets that are expected to be converted to cash within a year are called:**
a) Non-current assets
b) Fixed assets
c) Current assets
d) Liabilities
**Answer:** c) Current assets
27. **Which of the following is not classified as a current liability?**
a) Trade payables
b) Short-term borrowings
c) Deferred tax liabilities
d) Short-term provisions
**Answer:** c) Deferred tax liabilities
28. **Revenue expenditure is one which:**
a) Benefits the business for more than a year
b) Increases capital
c) Is exhausted within the accounting period
d) Increases fixed assets
**Answer:** c) Is exhausted within the accounting period
29. **Discount offered to debtors to encourage early payment is known as:**
a) Cash discount
b) Trade discount
c) Expense
d) Revenue
**Answer:** a) Cash discount
30. **A transaction between two or more entities involving a value exchange is termed as:**
a) Liability
b) Asset
c) Transaction
d) Capital
**Answer:** c) Transaction
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