Financial Management MCQs

NOTE: SOME OF MCQs ARE SOLVED AND SOME ARE NOT, SOLVED ARE
FROM ASSIGNMENTS SOLUTIONS. THANKS
1. The balance sheet is alternately known as :
(a) Assets statement
(b) Statement of financial position
(c) Statement of profit and loss
(d) None of the given options
2. Trading & Profit & loss account and balance sheet is prepared from:
(a) Ledger balance
(b) Ledger balances, cash and bank balances
(c) Cash book and bank book
(d) Trial balance
3. Interest on drawing is an:
(a) Expenditure for the business
(b) Expense for the business
(c) Gain for the business
(d) Loss for the business
4. The distinction between revenue account and capital account is necessary for the
preparation of:
(a) Final accounts
(b) Receipt and payment account
(c) Cash flow statements

(d) Funds flow statements
5. Capital expenditure is that expenditure which is:
(a) Paid in lump-sum
(b) Large in amount
(c) Intended to benefit the future period
(d) Intended to benefit the current period
6. Calculate the gross profit /loss if:
Sales Rs. 60,000; Cost of sales Rs. 50,000; Opening stock Rs. 10,000; Purchases Rs.
40,000; Wages Rs. 20,000 and Office rent Rs. 10,000.
(a) Loss Rs. 10,000
(b) Loss Rs. 20, 000
(c) Profit Rs. 10,000
(d) None of the given options
7. Balance Sheet shows the:
(a) Profit earned by the business
(b) Total capital employed
(c) Financial position of the business
(d) Trading results of the business
8. Net profit is equal to:
(a) Sales less cost of sales and operating expenses
(b) Gross profit less operating expenses
(c) Sales less operating expenses
(d) Both (a) & (b)
9. Selling expenses are shown in:

(a) Trading account
(b) Profit and loss account
(c) Profit and loss appropriation account
(d) Manufacturing account
10. Current liabilities are such obligations which are to be satisfied within:
(a) One year
(b) Two years
(c) Three years
(d) All of the given options
1) Depreciation is charged on land in case of:
A. Leased hold land
B. Land purchased by the owner himself
C. Depreciation is never being charged on land
D. None of the given options
2) Which of the following does not affect the cash balance of a business?
A. Increases in inventory
B. Changes in accounts receivables
C. Depreciation
D. Seasonality
3) Ongoing expenditures, such as general and administrative expenses, which

occur in the process of selling and managing a company are known as:
A. Cost of goods sold
B. Selling expenses
C. Gross margin
D. Operating expenses
4) Which of the following is not the same as the others?
A. Gain
B. Gross margin
C. Income
D. Revenue
5) The income statement records:
A. Sales
B. Cost of goods sold
C. Expenses
D. All of the above
6) The difference between assets and liabilities is called:
A. Balance sheet
B. Profit
C. Gross margin
D. Equity
7) Long-term liabilities are:
A. Debts or portions of debt due more than 12 months from the date of the balance
sheet
B. Bills for inventory
C. Amounts due for renovations
D. Amounts due for supplies
8) Which of the following is not a category used for assets on the balance sheet?
A. Current
B. Fixed
C. Other
D. Accrued
9) The _____________ compares the possessions of a company and the debts that
it owes on a specific day.
A. Income statement
B. Balance sheet
C. Cash flow projection
D. Completed-contract method
10) Which of the following accounting methods is the simplest and easiest to use?
A. Completed-contract method
B. Cash basis
C. Accrual basis
D. All of the above
1. If business purchases goods for resale purposes, such purchases are charged to
_____________
1) Expenses account
2) Purchases account
3) Sales account
4) None of the given options
2. The amount of resources supplied by the owner in business is called:
1) Investments
2) Assets
3) Capital
4) Reserves
3. Excess of sales over cost of goods sold in an accounting period is termed as:
1) Net Profit
2) Gross Profit
3) Retained earnings
4. At the end of the year, goods that are unsold are deducted from:
1) Finished goods
2) Closing stock
3) Cost of goods sold
4) Opening stock
5. Conversion cost is:
1) Total factory cost
2) The cost incurred in converting raw material into finished goods
3) The cost incurred in converting raw material into work in process
6. The cost of the asset after the expiry of its useful life is called___________
1) Written down value
2) Residual value
3) Expired value
When bank statement shows a debit balance, it means:
1) Overdraft balance as per cash book

2) Favorable balance as per cash book
3) Un Favorable balance as per bank book
4) None of the above
7. Closing stock is credited in the:
1) Balance sheet
2) Profit & Loss account
3) Cost of good sold statement
4) None of the given option
8. Depreciation of machinery will be shown in the profit & loss account under the head
of:
1) Selling expense
2) Administrative Expenses
3) Marketing expense
4) Financial expense
9. Assets and liabilities are presented in the balance sheet in the order of their:
1) Life
2) Classification
3) Maturity
4) None of the above
A Transaction caused a decrease of Rs. 10,000 in both total Assets and total
Liabilities. This Transaction could be:
1. Purchase of delivery Truck for Rs. 10,000 Cash

2. An asset worth Rs. 10,000 was destroyed by fire
3. Repayment of Rs. 10,000 bank loan
4. Collection of Rs. 10,000 from Debtors
The following Journal entry was recorded in Dixy stores’ accounting records:
Cash ---------------------------------------------------------- 12,000
Notes Receivables ------------------------------------------48,000
Land ---------------------------------------------------------------------60,000
This transaction:
1. Involves the purchase of land for Rs. 60,000

2. Involves a Rs. 12,000 Cash payment
3. Involves the sales of Land for Rs. 60,000
4. Causes an increase in total assets for Rs. 12,000
Identify which of the following statements does not correctly describe the Net
Income.
1. Net Income is computed in Income statement, appears in the statement of

Owner’s equity and increases Owner’s equity in the balance sheet.
2. Net income is equal to Revenue minus expenses.
3. Net Income is computed in Income statement, appears in the statement of
Owner’s equity and increases the amount of cash shown in the balance sheet.
4. Net Income can be determined using the account balances appearing in the
adjusted Trial balance.
Which of the following can not be classified as Account?
1. Assets.
2. Liabilities.
3. Income.
4. Proprietor
Given the following, what is the amount of Capital?
Premises Rs. 20,000
Stock Rs. 8,500
Cash Rs. 100
Creditors Rs. 3,000
Loan from Saqib Rs. 4,000.
1. Rs. 21,000
2. Rs. 21,600
3. Rs. 32,400
4. None of the given options
Which of the following is not an example of a current liability as at Dec. 31, 2005?
1. Management fees collected in advance in 2005, to be earned during 2006.

2. The portion of long-term debt due in 2006.
3. Warranty liability for products carrying two-year warranty and sold during 2005.
4. The interest due to creditors and bond holders for 2006, to be paid in 2006.
"The firm must be treated as separate and distinct, in its financial terms, from its'
owner(s)". This rule is known as:
1. The accounting equation
2. The dual aspect concept
3. The separate entity concept
4. The balance sheet
The system whereby we record dual effect of each transaction is known as:
1. Balance Sheet accounting

2. Double-entry book keeping
3. Dual aspects of transactions
4. Management accounting
Which of the following is an example of revenue expenditures?
1. Buying of a delivery van
2. Paying for a five-year lease on shop premises in city centre
3. Adding fuel to a delivery van
4. Re-paying a loan which was borrowed three years ago.

Which of the following statements is TRUE?
1. Assets = capital + liabilities
2. Capital = assets + liabilities
3.Assets + liabilities = capital
5. Assets = Liabilities - Capital
11) Depreciation is charged on land in case of:
E. Leased hold land
F. Land purchased by the owner himself
G. Depreciation is never being charged on land
H. None of the given options
12) Which of the following does not affect the cash balance of a business?
E. Increases in inventory
F. Changes in accounts receivables
G. Depreciation
H. Seasonality
13) Ongoing expenditures, such as general and administrative expenses, which

occur in the process of selling and managing a company are known as:
E. Cost of goods sold
F. Selling expenses
G. Gross margin
H. Operating expenses
14) Which of the following is not the same as the others?
E. Gain
F. Gross margin
G. Income
H. Revenue
15) The income statement records:
E. Sales
F. Cost of goods sold
G. Expenses
H. All of the above
16) The difference between assets and liabilities is called:
E. Balance sheet
F. Profit
G. Gross margin
H. Equity
17) Long-term liabilities are:
E. Debts or portions of debt due more than 12 months from the date of the balance
sheet
F. Bills for inventory
G. Amounts due for renovations
H. Amounts due for supplies
18) Which of the following is not a category used for assets on the balance sheet?
E. Current
F. Fixed
G. Other
H. Accrued
19) The _____________ compares the possessions of a company and the debts
that it owes on a specific day.
E. Income statement
F. Balance sheet
G. Cash flow projection
H. Completed-contract method
20) Which of the following accounting methods is the simplest and easiest to use?
E. Cash basis
F. Accrual basis
G. Completed-contract method
H. All of the above
1) Depreciation of machinery will be shown in the profit & loss account under the
heading of:
A. Selling expense
B. Administrative Expenses
C. Marketing expense
D. Financial expense
2) Advance insurance will be ___________ from Insurance expense.
A. Added
B. Deducted
C. Double charged
3) Money lying in our bank account is our:
A. Liability
B. Assets
C. Expense
D. None of the given option
4) Liquidity is:
A. The amount of cash to liquidate
B. The funds available for use
C. The ability of business to receive its cash
D. The ability of a business to pay its debts in time
5) If total liabilities decreased by $25,000 and stockholders’ equity increased by $5,000

during a period of time, then total assets must change by what amount and direction
during that same time period?
A. $20,000 increase
B. $20,000 decrease
C. $30,000 increase
D. $30,000 decrease
1) Rent receivable is our:
A. Income
B. Current Asset
C. Expense
D. Both A and B
2) Salaries and wages are our:
A. Direct expenses
B. Indirect expenses
C. Both direct and indirect expenses
3) Calculate the value of Cost of good sold if:

Rs.
Opening Stock 42,850
Purchases 137,190
Carriage inward 1,500
Closing Stock 51,060
A. Rs. 229600
B. Rs. 130,480
C. Rs. 232600
D. Rs. 146900
Calculation:
Cost of good sold= Opening stock + Purchases + Carriage Inward - Closing Stock
= 42,850 + 137,190 + 1,500 - 51,060
= 130,480
4) If Motor Van Costs Rs. 12,500, its accumulated depreciation is Rs. 4,200; depreciation
charged for the year is Rs. 2,500. What will be its Book value at the end of the
period?
A. Rs. 10,000
B. Rs. 8,300
C. Rs. 5,800
D. Rs. 10,800
Calculation
Book value = Cost - (Depreciation + Accumulated Depreciation)
= 12,500 – (4,200 + 2,500)
= 12,500 – 6,700 = 5,800

5) Mr. Abid is a partner in a partnership firm. His capital on July 1, 2001 was Rs.
150,000. He invested further capital of Rs. 50,000 on March 1, 2002. What will be
the mark up on capital if Mark up rate is 5%? The financial year is from July to June.
A. Rs.5833
B. Rs. 8,333
C. Rs. 833
D. None of the given options.
Calculation:
=150,000 x 5% = 7,500
= 50,000 x 5% x 4/12 = 833
= 7,500 + 833 = 8,333
6) Which of the following is an example of Non commercial organization?
A. Sole proprietorship
B. Partnership
C. Limited Company
D. Trusts
7) In case where actual increase or decrease in capital such as Drawing and Profit is not
recorded in capital account, such kind of account is called:
A. Fixed capital account
B. Fluctuating capital account
C. Current account
D. None of the given option
8) There should be a minimum of _________ members to form a public limited company.
A. Ten
B. Nine
C. Seven
D. Two
9) What amount of Provisions for bad debts will appear in Profit & Loss account if:
Total debtors Rs. 32,800
Bad debts Rs. 3,600
Provision for doubtful debts (old) Rs. 6,000
Current year provisions (New) Rs. 1,500
A. Rs. 11,100
B. Rs. 900
C. Rs. 8,100
D. Rs. 5,100
Calculation:
= New reserve - Old reserves +Old bad debts
= 1,500 – 6,000 + 3,600 = 900
10) Ascertain the amount of Current Assets from the following data.
Stock Rs. 51,060
Debtors Rs. 37,178
Provision for doubtful debts Rs. 870
Cash at bank Rs. 666
Advance rent Rs. 120
Rs. 88,154
A. Rs. 88,034
B. Rs. 88,238
C. Rs. 89108
Calculation:
Stock 51,060
Debtors 37,178
Less: Provision for doubtful debts (870)
Cash at bank 666
Advance rent 120
88,154
1. Memorandum of association contains which of the followings:
A. Place of registered office of the company
B. Objective of the company
C. Amount of registered share capital
D. All of the given options
2. The maximum amount with which a company gets registration/incorporation is called:
A. Authorized share capital
B. Issued share capital
C. Subscribed share capital
D. Paid up share capital
3. No entry is recorded for:
A. Issued share capital
B. Authorized share capital
C. Subscribed share capital

4. All preliminary expenses are incurred by _________ of the company.
A. Directors
B. Subscribers
C. Accountant
D. Managers
5. Share Premium Account account is used to:
A. Write off Preliminary Expenses of the company
B. Write off the balance amount, in issuing shares on discount
C. Issue fully paid Bonus Shares
6. Dividend is approved by the share holders in the __________at the recommendation of

the directors.
A. Annual general meeting
B. Directors meeting
C. Statutory meeting
D. Special meeting
7. In Pakistan, Financial Statements of limited companies are prepared in accordance

with:
A. International accounting standards adopted in Pakistan
B. Companies Ordinance 1984
C. Both A & B
8. Which of the following are explained in Notes to the accounts?
A. Nature of business of the company

B. Accounting Policies of the company
C. Details and explanation of items given in the Profit and Loss Account and
Balance Sheet
9. Both Debentures and Term Finance Certificates are usually issued by:
A. Public Companies
B. Private Companies
C. Listed Companies
D. Non listed companies
10. Which of the following is not a Component of Financial statement?
A. Balance Sheet
B. Notes to the Accounts
C. Comparative figures of Previous Period
1. A large organization with separate legal status is known as:
a) Limited Company
b) Sole proprietorship
c) Partnership
d) None of the given options
2. Which one of the following concept may be stated as "for every debit, there is a
credit"?
a. Separate Entity Concept

b. Dual Aspect Concept
c. Money Measurement Concept
d. Accounting Period Concept
3. The accounting system, in which accounting entries are made on the basis of amount
having become due for payment or receipt, is known as:
a) Cash system of accounting
b) Current accounting period
c) Accrual system of accounting
4. Assets which have no physical existence and which cannot be seen, touched or felt are
called:
a) Current assets
b) Tangible assets
c) Fictitious assets
d) Intangible assets
5. If the Gross profit is Rs. 5,000 and the net profit is 25% of the Gross profit. The
expenses must be:
a) Rs.3,750
b) Rs.1,250
c) Rs.4,150
d) Rs.6,250
6. If the profit is 1/4 of the sales then it is:
a) 1/4 of the cost price
b) 1/3 of the cost price
c) 1/5 of the cost price
d) 1/2 of the cost price
7. Excess of debit over credit is called:
a) Opening balance
b) Closing balance
c) Debit balance
d) Credit balance
8. Those liabilities which arise only on the happening of some event, are called:
a) Current Liabilities
b) Outstanding Liabilities
c) Deferred Liabilities
d) Contingent Liabilities
9. Which one of the following system of recording transaction has a dual aspect concept
of accounting?
a) Double entry system
b) Single entry system
c) Cash system of accounting
10. The arithmetical accuracy of books of account is verified through:
a) Journal
b) Trial Balance
c) Ledger
Mr. X, the sole proprietor of Company XY does not list his personal house on the
balance sheet of Company XY; Example shows which one of the following
concept?
a) Business Entity
b) Matching Concept
c) Going Concern Concept
d) Full Disclosure
2) Which one of the following is a current liability?
(a) Closing inventory
(b) Opening inventory
(c) Petty cash
(d) Bank overdraft
3) The primary purpose of the balance sheet is to
a) Report the financial position of the reporting entity at a particular
point of time
b) Measure the net income of a business up to a particular point in time
c) Determine cash flow for the period
d) Report the difference between cash inflows and cash outflows for the
period
4) In Accrual Accounting an expense is recorded when it is
a) Paid
b) Incurred
c) 15 days after receipt of invoice
d) Earned
5) Which one of the following items will appear on the balance sheet of a company
as current assets?
a) Prepaid expenses
b) Outstanding expenses
c) Furniture and equipment
d) Building
6) Which of the following is correct about the drawings?
They reduce the Gross profit
They reduce the capital & Net Profit
They increase in liabilities
They are treated as asset
7) For purposes of measuring business income, the life of a business is:
a) Divided into specific point of time
b) Divided into irregular cycles
c) Divided into discrete accounting periods
d) Considered to be a continuous cycle
8) Consider the following totals:
Revenues Rs. 100,000
Cost and expenses Rs. 45,000
Income taxes Rs. 18,000
Net income Rs. 42,000
What was the total of operating income?
a. Rs. 42,000
b. Rs. 55,000
c. Rs. 60,000
d. Rs. 37,000
9) Office salaries, insurance, advertising, sales commissions and rent are the
examples of:
a. Financial Expenses
b. Operating expenses
c. Marketing expenses
d. All of the given options
10) _______shows how much of a mark-up a company is achieving between the cost
of what it sells and the selling price
a. Cost of goods sold
b. Gross profit
c. Gross margin
d. Net profit
1. If Accumulated profit brought forward has credit nature, what will be its
treatment?
a. It will be added in net profit for the year
b. It will be subtracted from the net profit for the year
c. It will be deducted from current Assets
d. It will be added in current assets
2. Fixed Assets at WDV + working capital =?
a. Total shareholders equity
b. Net capital employed
c. Long term loan
d. Current liability
3. Keeping in view the following data, what will be Net Cash Flow from
Investing Activities?
Particulars Rs.
Purchases from short term borrowing 45,000
Purchases of marketable securities (65,000)
Proceeds from marketable securities 40,000
Loans made to borrowers (17,000)
Cash paid acquire plant assets (160,000)
Proceeds from sales of sales of plant Assets 75,000
Collection on loans 12,000
a. Rs. (115,000)
b. Rs. 100,000
c. Rs. 55,000
d. None of the given options
4. Keeping in view the following data, what will be Net cash provided by
operating activities?
Particulars Rs.
Net income 65,000
Depreciation expenses 40,000
Decrease in accrued interest receivable 1,000
Increase in accounts payable 15,000
Increase in accrued liabilities 7,000
Non operating loss on sales of marketable securities 4,000
Increase in accounts receivable 30,000

Increase in inventory 10,000
Decrease in accrued liabilities 8,000
Increase in prepayments 3,000
Non operating gain on sales of plant assets 31,000
Net cash provided by operating activities ?
a. Rs. 115,000
b. Rs. 100,000
c. Rs. 50,000
5. Advances from customers are shown in which of the following heads in
Balance Sheet?
a. Current Assets
b. Current liabilities
c. Fixed Assets
d. Long term liabilities
6. While preparing cash flow statements, the repayments of a loan during the
year should be included under the heading of:
a. Operating activities
b. Financing activities
c. Investing activities
7. Which of the following statement is also known as a source and use
statements?
a. Income Statements
b. Statement of Cash Flows
c. Balance Sheet
d. Statement of Retained Earnings
1. If Accumulated profit brought forward has credit nature, what will be its
treatment?
a. It will be added in net profit for the year
b. It will be subtracted from the net profit for the year
c. It will be deducted from current Assets
d. It will be added in current assets
2. Fixed Assets at WDV + working capital =?
a. Total shareholders equity
b. Net capital employed
c. Long term loan
d. Current liability
3. Keeping in view the following data, what will be Net Cash Flow from
Investing Activities?
Particulars Rs.
Purchases from short term borrowing 45,000
Purchases of marketable securities (65,000)
Proceeds from marketable securities 40,000
Loans made to borrowers (17,000)
Cash paid acquire plant assets (160,000)

Proceeds from sales of sales of plant Assets 75,000
Collection on loans 12,000
a. Rs. (115,000)
b. Rs. 100,000
c. Rs. 55,000
4. Keeping in view the following data, what will be Net cash provided by
operating activities?
Particulars Rs.
Net income 65,000
Depreciation expenses 40,000
Decrease in accrued interest receivable 1,000
Increase in accounts payable 15,000
Increase in accrued liabilities 7,000
Non operating loss on sales of marketable securities 4,000
Increase in accounts receivable 30,000
Increase in inventory 10,000
Decrease in accrued liabilities 8,000
Increase in prepayments 3,000
Non operating gain on sales of plant assets 31,000
Net cash provided by operating activities ?
a. Rs. 115,000
b. Rs. 100,000
c. Rs. 50,000
5. Advances from customers are shown in which of the following heads in
Balance Sheet?
a. Current Assets
b. Current liabilities
c. Fixed Assets
d. Long term liabilities
6. While preparing cash flow statements, the repayments of a loan during the
year should be included under the heading of:
a. Operating activities
b. Financing activities
c. Investing activities
7. Which of the following statement is also known as a source and use
statements?
a. Income Statements
b. Statement of Cash Flows
c. Balance Sheet
d. Statement of Retained Earnings
8. Calculate depreciation for the year.
Building at cost = Rs. 1, 00,000
Depreciation rate = 10%

a. Rs. 10,000
b. Rs. 1,000
c. Rs. 500
d. Rs. 0
9. Mr. A, Mr. B and Mr. C are three partners of a partnership firm. The profit
sharing ratio is 2:3:5. If company has distributable profit of Rs. 4, 90,000,
determine the profit of Mr. A.
a. Rs. 98,000
b. Rs. 1, 47,000
c. Rs. 2, 45,000
d. Rs. 3, 43,000
10. An example of financing activities in the context of cash flow statement is:
a. Fixed capital expenditure
b. Long-term deposit
c. Financial charges paid
d. Dividend paid
Advance insurance is an example of
1. Current Asset
2. Administrative expense
3. Insurance expense
4. Current Liability
Which of the following is not a component of Financial Statement?
1. Balance Sheet
2. Profit and Loss account
3. Bank Reconciliation Statement
4. Cash Flow statement
Cost of goods sold does not contain which of the following heads of Accounts:
1. Purchase of raw material/goods
2. Wages paid to employees for manufacturing of goods
3. Commission is paid on purchases from third parties
4. Any expense incurred on carriage/transportation of purchased items
Paid up Capital is:
1. The amount raised by the company by the issue of its shares to general public
2. The maximum amount with which a company gets Registration/Incorporation
3. Amount collected on issuance of prospectus and debentures
4. None of the given Options
Which one of the following assets could be described as a current asset?
Stock of goods for resale
Machinery to manufacture goods for resale
Buildings to house the machinery
Land on which the buildings stand
Operating Profit is equal to:
Sales - Gross Profit – Cost of goods sold – Operating expenses
Sales – Cost of goods sold – Operating expenses
Sales - Gross Profit
None of the given options

The accounting equation represents:
Resources in the business are equal to resources supplied by the owner and outsiders
Resources are allocated in the business on cost price
Owners give money for the business
Resources in the business are not equal to resources supplied by the owner and outsiders
Credit signifies:
Increase in asset account
Increase in liability account
Decrease in capital account
A business owned and run by one person is called:
Sole Proprietorship
Partnership
Limited Company
Any expenditure that benefits the business for several accounting years is regarded as:
Capital expenditure
Revenue expenditure
Revenue receipt
Which of the following option is true?
Increase in expense is Debit
Increase in asset is Debit

Increase in income is credit
All of the given option
The accounting equation is based on:
Dual aspect concept
Going concern concept
Business entity concept
The discount allowed by manufacturer or wholesaler at the time of selling goods to

retailer as a deduction from the listed-price or catalogue price, is called as:
Trade discount
Cash discount
Commission
None of the given option
If the original cost of an asset is Rs. 2,000 then the written down value of asset after two
years by using the diminishing balance method at the rate of 10% p.a. will be:
Rs. 1,600
Rs. 1,620
Rs. 380
Sales = Cost of goods sold + Gross profit.
True
False
Balance Sheet discloses the financial position of the business.
True
False
Budget is an Organization’s plan of future period expressed in money terms.
True
False
Cash Accounting is the accounting system in which events are recorded as and when they
occur.
True
False
In double entry system of book keeping, every business transaction affects the same side
of the same account.
True
False
Which is the best definition of Balance sheet?
o An account proving the Book balances
o A record of closing entries
o A listing of balances
o A statement of Assets
Depreciation is:
o The amount spent to buy a fixed asset
o The salvage value of a fixed asset
o The part of the cost of the fixed asset consumed during its period of use by
the firm
o The amount of money spent on replacing asset
Which of the following is not a Cash flow in Cash flow statement?

o A depreciation charge
o Dividend paid
o Proceeds on Sales of Fixed Assets
o Tax paid
Gross Profit is:
o Excess of sales over Cost of good sold
o Sales less Purchases
o Cost of good sold plus Opening Stock
o Net profit less expenses of the period
Which of the following is an intangible asset?
o Patents
o Copyrights
o Trade marks
o All of the given options
__________ is used to record transactions that do not affect cash or bank.
Payment voucher
Receipt voucher
Journal voucher
All of the given options
Question No: 2 ( Marks: 1 ) - Please choose one
Which one of the following item will appear on the balance sheet of a company as current
assets?
Prepaid expenses
Outstanding expenses
Furniture and equipment
Provision for depreciation
If bank statement shows a credit balance, it means __________balance for bank book.
Favorable
Unfavorable
Overdraft
Formula for Earning per Share is_______
Market value per share / Earning per share
Net profit after tax before appropriation / Number of shares
Operating Profit before financial charges / Financial charges
Liquidity is defined as:
The amount of cash to liquidate
The funds available for use
The ability of business to receive its cash
The ability of a business to pay its debts in time
Cash flow from operating activities is generated from:
The cash receipts and payments that arise from Fixed and Long Term assets of the
organization.
Cash generated from daily operations of organization
The cash receipts and payments that arise from Owners of the business and other long
term liabilities of the organization

Accumulated Profit & Loss is an example of:
Distributable reserves
Non distributable reserves
Both Distributive and non distributive reserve
According to________________, Fixed assets revaluation reserve is included in the

statement of changes in equity.
International Accounting Standards
Companies Ordinance
International Standards of Auditing
Share premium can be utilized:
To create non distributive reserves
To issue bonus shares
To increase the Owners Capital
To meet unexpected losses
Notes to the accounts explain which of the followings:
Nature of business of the company
Accounting Policies of the company
Details and explanation of items given in the Profit and Loss Account and Balance Sheet
Mark up ratio is better for:
Bankers
Debtors
Creditors
Owners
Debentures are a company’s:
Assets
Liability
Expenses
Investments
Subscribers / Sponsors are the persons who sign:
Articles of Association
Memorandum of the company
Contribute in the initial share capital of the company.
All expenses incurred up to the stage of incorporation of the company are called:
Preliminary Expenses
Installation expenses
Accrued expenses
Deferred expenses
The head of board of directors is called:
Chief executive
Manager
Subscriber
Shareholder
Which of the following would not be categorized as current assets?

1. Stocks
2. Debtors
3. Plant and Machinery
4. Cash in hand
Pak Motors buys a stock worth Rs. 30,000 on credit on the last day of his accounting
period and includes these items in Closing Stock. Which of the following figures in the
Accounts would be increased by Rs. 30,000?
1. Cost of Sales
2. Working Capital
3. Gross Profit
4. Current Assets.
An account titled Unearned Fees would be classified as which of the following?
1. Asset account
2. Liability account
3. Revenue account
4. Expense account
Asset depreciation is calculated to which of the nearest time periods?
1. Day
2. Week
3. Month
4. None of the Given Option
Capital expenditures are:
1. The extra Capital paid in by the proprietor
2. The cost of running the business on day to day basis

3. Money spend on buying Assets or adding value to them
4. Money spent on selling Fixed Assets.
A Balance Sheet discloses the financial position of a firm:
For a given period
On a particular point of time
On quarterly basis
Cost of sales is equal to:
Opening stock – Closing stock + Purchases – Return outwards
Sales – Purchases
Purchases – Return out + Closing stock
A loss will be considered as capital loss if it:
Relates to fixed assets
Arises due to abnormal reasons
Represents the withdrawal of capital
Expenditure will be considered as capital expenditure if:
The amount is paid in lump sum
It is intended to benefit the current period
It is intended to benefit the future period
A written evidence in support of a business transaction is called:

A business letter
Store ledger card
Voucher
Under diminishing balance method, depreciation is calculated on:
The original cost
The scrap value
Book value
The books of account in which business transactions are originally recorded in

chronological order is known as:
Ledger
Journal
Trial Balance
Balance sheet
A firm purchased marketable securities for Rs. 10,000. What would its effect be on
working capital?
Increased by Rs. 10,000
Decreased by Rs. 10,000
Increased by Rs. 20,000
Remain unchanged
If the profit is 25% of the cost price then it would be:
25% of the sale price

Current liabilities are such obligations which must be paid within:
One year
Two years
Three years
Five years
Book-keeping and accounting are synonymous terms.
True
False
The Accounting Equation is based on going concern concept of Accounting.
True
False
The ledger is the book of original entry.
True
False
Balance Sheet is the other name of Profit and Loss Account.
True
False
Capital expenditures incurred irregularly.
True
False

Financial Management MCQs

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NOTE: SOME OF MCQs ARE SOLVED AND SOME ARE NOT, SOLVED ARE

FROM ASSIGNMENTS SOLUTIONS. THANKS

1. The balance sheet is alternately known as :

(a) Assets statement

(b) Statement of financial position

(c) Statement of profit and loss

(d) None of the given options

(a) Ledger balance

(b) Ledger balances, cash and bank balances

(c) Cash book and bank book

(d) Trial balance

3. Interest on drawing is an:

(a) Expenditure for the business

(b) Expense for the business

(c) Gain for the business

(d) Loss for the business

(a) Final accounts

(b) Receipt and payment account

(c) Cash flow statements

5. Capital expenditure is that expenditure which is:

(a) Paid in lump-sum

(b) Large in amount

(c) Intended to benefit the future period

(d) Intended to benefit the current period

6. Calculate the gross profit /loss if:

(a) Loss Rs. 10,000

(b) Loss Rs. 20, 000

(c) Profit Rs. 10,000

(d) None of the given options

7. Balance Sheet shows the:

(a) Profit earned by the business

(b) Total capital employed

(c) Financial position of the business

(d) Trading results of the business

8. Net profit is equal to:

(a) Sales less cost of sales and operating expenses

(b) Gross profit less operating expenses

(c) Sales less operating expenses

(d) Both (a) & (b)

9. Selling expenses are shown in:

(b) Profit and loss account

(c) Profit and loss appropriation account

(d) Manufacturing account

(a) One year

(b) Two years

(c) Three years

(d) All of the given options

1) Depreciation is charged on land in case of:

A. Leased hold land

B. Land purchased by the owner himself

C. Depreciation is never being charged on land

D. None of the given options

B. Changes in accounts receivables

3) Ongoing expenditures, such as general and administrative expenses, which

A. Cost of goods sold

4) Which of the following is not the same as the others?

5) The income statement records:

B. Cost of goods sold

D. All of the above