Introduction to Accounting MCQs 2026

Intro accounting scenario 27: a Pakistani pharma distributor must correctly handle disclosure requirement

1. Aignore the transaction until next fiscal year✓
2. Bnote disclosure if amount is material to users✓
3. Crecord only one side of the entry✓
4. Dpost directly to retained earnings without analysis✓

Intro accounting scenario 34: a Pakistani construction contractor must correctly handle period-end adjustment

1. Aignore the transaction until next fiscal year✓
2. Brecord only one side of the entry✓
3. Caccrual or deferral entry before trial balance✓
4. Dpost directly to retained earnings without analysis✓

Intro accounting scenario 2: a Pakistani rice exporter must correctly handle internal control step

1. Aignore the transaction until next fiscal year✓
2. Brecord only one side of the entry✓
3. Csegregation of duties and authorization before recording✓
4. Dpost directly to retained earnings without analysis✓

Consistency principle requires

1. Amethods change every month randomly✓
2. Beach transaction uses a unique method✓
3. Csimilar accounting methods be used from period to period✓
4. DGAAP is optional for listed companies✓

Materiality in accounting implies

1. Aall errors must be corrected regardless of size✓
2. Bonly large firms may use estimates✓
3. Cinsignificant items may be treated pragmatically without affecting decisions✓
4. Dimmaterial items must always be capitalized✓

Historical cost means assets are initially recorded at

1. Acurrent market value always✓
2. Bthe amount paid to acquire them✓
3. Cfuture resale price estimate✓
4. Dzero until revaluation✓

The matching principle requires that

1. Aexpenses be recognized in the same period as related revenues✓
2. Ball cash outflows be capitalized✓
3. Crevenue be deferred until cash collection always✓
4. Dassets equal liabilities without equity✓

A debit in accounting notation

1. Aalways means cash received✓
2. Balways reduces all accounts✓
3. Cincreases assets and expenses and decreases liabilities and revenue✓
4. Dis the same as a credit always✓

The accrual basis of accounting records revenue when

1. Acash is received only✓
2. Bearned and expenses when incurred, regardless of cash timing✓
3. Ccash is paid only✓
4. Dthe audit is completed only✓

The going concern assumption means

1. Athe entity is expected to continue operations for the foreseeable future✓
2. Bthe firm will liquidate next month✓
3. Cassets must be valued at fire-sale prices always✓
4. Dliabilities are never recorded✓

Management accounting primarily serves

1. Aonly SECP filing requirements✓
2. Bonly bank loan documentation exclusively✓
3. Conly shareholder AGM speeches✓
4. Dinternal management for planning and control✓

Financial accounting primarily serves

1. Aonly internal production scheduling✓
2. Bexternal users such as investors and creditors✓
3. Conly payroll clerks exclusively✓
4. Donly marketing campaign design✓

Accounting is best defined as

1. Aonly cash counting at year end✓
2. Bonly tax filing with FBR✓
3. Conly inventory stock-taking✓
4. Dthe process of identifying, measuring, recording and communicating financial information✓

Prudence or conservatism suggests

1. Anot overstating assets or income when uncertainty exists✓
2. Balways maximize reported profit✓
3. Crecognize all possible gains immediately✓
4. Dignore all liabilities until paid✓

A credit in accounting notation

1. Aalways means cash paid out✓
2. Balways increases inventory only✓
3. Cis recorded only in the cash book✓
4. Dincreases liabilities, equity and revenue and decreases assets and expenses✓

The accounting cycle begins with

1. Apreparing the annual audit report✓
2. Bidentifying and analyzing transactions✓
3. Cdeclaring dividends to shareholders✓
4. Dclosing the factory permanently✓

GAAP stands for

1. AGovernment Approved Audit Procedures✓
2. BGenerally Accepted Accounting Principles✓
3. CGeneral Asset Allocation Policy✓
4. DGlobal Accounting Audit Protocol✓

Users of financial statements include

1. Ainvestors, creditors, regulators and management✓
2. Bonly warehouse staff exclusively✓
3. Conly competitors with no interest in reports✓
4. Donly customers buying one unit✓

Objectivity in accounting requires information to be

1. Abased solely on management wishes✓
2. Bsupported by verifiable evidence✓
3. Cfree from any documentation✓
4. Didentical to budget forecasts always✓

Separate entity assumption means

1. Aowner and business share one bank account always✓
2. Bpartnership assets belong to customers✓
3. Cbusiness transactions are kept distinct from owners personal affairs✓
4. Dcompany records include owner household expenses✓

Monetary unit assumption means

1. Aphysical quantities replace money values✓
2. Bbarter transactions need no conversion✓
3. Conly transactions measurable in money are recorded✓
4. Dmultiple currencies cannot be used✓

Periodicity assumption allows

1. Areporting only at liquidation✓
2. Binfinite life with no interim reports✓
3. Cskipping annual financial statements✓
4. Ddividing business life into artificial time periods for reporting✓

Relevance of accounting information means it

1. Ais always historical only with no forward use✓
2. Bmust be identical to competitor data✓
3. Chelps users make predictions and confirm past evaluations✓
4. Dexcludes all estimates✓

Reliability of accounting information means it is

1. Aalways optimistic for management✓
2. Bbased on unverifiable rumors✓
3. Cchanged each year without disclosure✓
4. Dfree from material error and bias, and faithfully represents events✓

Comparability enables users to

1. Aidentify similarities and differences across firms and periods✓
2. Bignore industry benchmarks✓
3. Cavoid reading notes to accounts✓
4. Duse only cash receipts data✓

Cost-benefit constraint in accounting means

1. Aall possible data must be disclosed always✓
2. Baudit fees are irrelevant✓
3. Cbenefits of reporting should exceed costs of providing information✓
4. Dsmall firms need no records✓

Full disclosure principle requires

1. Ahiding contingent liabilities always✓
2. Bmaterial information affecting decisions be reported in statements or notes✓
3. Creporting only the balance sheet✓
4. Domitting related-party transactions✓

The Institute of Chartered Accountants of Pakistan (ICAP) primarily

1. Asets ethical and professional standards for chartered accountants✓
2. Bprints currency notes✓
3. Cregulates stock exchange listing prices✓
4. Dcollects corporate income tax✓