MGT101 Final Term MCQs Chapter-wise by Study with BRD

MGT101-Financial Accounting Chapter Wise MCQs for Final Term Mega File (CH 8 to 18) By Study with BRD

CHAPTER 8: ACCRUAL ACCOUNTING

Q1. Which accounting method recognizes expenses when they are incurred and revenues when they are earned, regardless of when the cash is received or paid?

• a) Cash-based accounting
• b) Accrual-based accounting
• c) Tax-based accounting
• d) Expense-based accounting

Q2. What is the primary objective of accrual-based accounting?

• a) To match expenses with revenues in the period they are incurred
• b) To record cash transactions only
• c) To delay tax payments
• d) To simplify accounting procedures

Q3. Which of the following is included when calculating expenses for the year under accrual accounting?

• a) Only cash payments made during the year
• b) Expenses paid in advance for future years
• c) Expenses incurred but not yet paid by year-end
• d) All of the above

Q4. If a company pays rent in advance for the next year, how is this recorded in accrual- based accounting?

• a) As an expense for the current year
• b) As a prepaid expense (asset)
• d) It is not recorded until the next year

Q5. How is revenue recognized in accrual-based accounting?

• a) When the payment is received
• b) When the revenue is earned
• c) At the end of the fiscal year
• d) When the invoice is sent

Q6. Which of the following is true about accrued income?

• a) It is income that has been received in advance
• b) It is income that has been earned but not yet received
• c) It is recorded as a liability
• d) It is not included in the income statement

Q7. In the one account method, how is an expense in arrear typically recorded?

• a) As a prepaid expense
• b) As an accrued expense
• c) As a deferred revenue
• d) As a current asset

Q8. What does the two account method for expense in arrear involve?

• a) Recording the expense only when paid
• b) Using separate accounts for expenses and liabilities
• c) Combining income and expenses in one account
• d) None of the above

Q9. How are expenses paid in advance treated in the one account method?

• a) As expenses for the current year
• b) As liabilities
• c) As prepaid expenses (assets)
• d) As income

Q10. In the two account method, how is an expense in advance recorded at the time of payment?

• a) As a direct expense
• b) As a prepaid expense and then as an expense when incurred
• c) As income
• d) As a liability

Q11. What is the main characteristic of accrued income?

• a) Income received before it is earned
• b) Income earned but not yet received
• c) Income received and earned simultaneously
• d) Income that is not recognized in financial statements

Q12. Where is accrued income reported on the balance sheet?

• a) As a current asset
• b) As a current liability
• c) As equity
• d) It is not reported on the balance sheet

Q13. How is income received in advance classified in accrual accounting?

• a) As an expense
• b) As income
• d) As an asset

Q14. What happens to advance income when it is earned?

• a) It remains as a liability