Introduction to Accounting MCQs 2026

Management accounting primarily serves

1. A only SECP filing requirements ✓
2. B only bank loan documentation exclusively ✓
3. C only shareholder AGM speeches ✓
4. D internal management for planning and control ✓

Accounting is best defined as

1. A only cash counting at year end ✓
2. B only tax filing with FBR ✓
3. C only inventory stock-taking ✓
4. D the process of identifying, measuring, recording and communicating financial information ✓

Financial accounting primarily serves

1. A only internal production scheduling ✓
2. B external users such as investors and creditors ✓
3. C only payroll clerks exclusively ✓
4. D only marketing campaign design ✓

The going concern assumption means

1. A the entity is expected to continue operations for the foreseeable future ✓
2. B the firm will liquidate next month ✓
3. C assets must be valued at fire-sale prices always ✓
4. D liabilities are never recorded ✓

The accrual basis of accounting records revenue when

1. A cash is received only ✓
2. B earned and expenses when incurred, regardless of cash timing ✓
3. C cash is paid only ✓
4. D the audit is completed only ✓

The matching principle requires that

1. A expenses be recognized in the same period as related revenues ✓
2. B all cash outflows be capitalized ✓
3. C revenue be deferred until cash collection always ✓
4. D assets equal liabilities without equity ✓

Historical cost means assets are initially recorded at

1. A current market value always ✓
2. B the amount paid to acquire them ✓
3. C future resale price estimate ✓
4. D zero until revaluation ✓

Materiality in accounting implies

1. A all errors must be corrected regardless of size ✓
2. B only large firms may use estimates ✓
3. C insignificant items may be treated pragmatically without affecting decisions ✓
4. D immaterial items must always be capitalized ✓

Consistency principle requires

1. A methods change every month randomly ✓
2. B each transaction uses a unique method ✓
3. C similar accounting methods be used from period to period ✓
4. D GAAP is optional for listed companies ✓

Prudence or conservatism suggests

1. A not overstating assets or income when uncertainty exists ✓
2. B always maximize reported profit ✓
3. C recognize all possible gains immediately ✓
4. D ignore all liabilities until paid ✓

A debit in accounting notation

1. A always means cash received ✓
2. B always reduces all accounts ✓
3. C increases assets and expenses and decreases liabilities and revenue ✓
4. D is the same as a credit always ✓

A credit in accounting notation

1. A always means cash paid out ✓
2. B always increases inventory only ✓
3. C is recorded only in the cash book ✓
4. D increases liabilities, equity and revenue and decreases assets and expenses ✓

The accounting cycle begins with

1. A preparing the annual audit report ✓
2. B identifying and analyzing transactions ✓
3. C declaring dividends to shareholders ✓
4. D closing the factory permanently ✓

GAAP stands for

1. A Government Approved Audit Procedures ✓
2. B Generally Accepted Accounting Principles ✓
3. C General Asset Allocation Policy ✓
4. D Global Accounting Audit Protocol ✓

Users of financial statements include

1. A investors, creditors, regulators and management ✓
2. B only warehouse staff exclusively ✓
3. C only competitors with no interest in reports ✓
4. D only customers buying one unit ✓

Objectivity in accounting requires information to be

1. A based solely on management wishes ✓
2. B supported by verifiable evidence ✓
3. C free from any documentation ✓
4. D identical to budget forecasts always ✓

Separate entity assumption means

1. A owner and business share one bank account always ✓
2. B partnership assets belong to customers ✓
3. C business transactions are kept distinct from owners personal affairs ✓
4. D company records include owner household expenses ✓

Monetary unit assumption means

1. A physical quantities replace money values ✓
2. B barter transactions need no conversion ✓
3. C only transactions measurable in money are recorded ✓
4. D multiple currencies cannot be used ✓

Periodicity assumption allows

1. A reporting only at liquidation ✓
2. B infinite life with no interim reports ✓
3. C skipping annual financial statements ✓
4. D dividing business life into artificial time periods for reporting ✓

Relevance of accounting information means it

1. A is always historical only with no forward use ✓
2. B must be identical to competitor data ✓
3. C helps users make predictions and confirm past evaluations ✓
4. D excludes all estimates ✓

Reliability of accounting information means it is

1. A always optimistic for management ✓
2. B based on unverifiable rumors ✓
3. C changed each year without disclosure ✓
4. D free from material error and bias, and faithfully represents events ✓

Comparability enables users to

1. A identify similarities and differences across firms and periods ✓
2. B ignore industry benchmarks ✓
3. C avoid reading notes to accounts ✓
4. D use only cash receipts data ✓

Cost-benefit constraint in accounting means

1. A all possible data must be disclosed always ✓
2. B audit fees are irrelevant ✓
3. C benefits of reporting should exceed costs of providing information ✓
4. D small firms need no records ✓

Full disclosure principle requires

1. A hiding contingent liabilities always ✓
2. B material information affecting decisions be reported in statements or notes ✓
3. C reporting only the balance sheet ✓
4. D omitting related-party transactions ✓

The Institute of Chartered Accountants of Pakistan (ICAP) primarily

1. A sets ethical and professional standards for chartered accountants ✓
2. B prints currency notes ✓
3. C regulates stock exchange listing prices ✓
4. D collects corporate income tax ✓

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

1. A ignore the transaction until next fiscal year ✓
2. B record only one side of the entry ✓
3. C segregation of duties and authorization before recording ✓
4. D post directly to retained earnings without analysis ✓

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

1. A ignore the transaction until next fiscal year ✓
2. B note disclosure if amount is material to users ✓
3. C record only one side of the entry ✓
4. D post directly to retained earnings without analysis ✓

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

1. A ignore the transaction until next fiscal year ✓
2. B record only one side of the entry ✓
3. C accrual or deferral entry before trial balance ✓
4. D post directly to retained earnings without analysis ✓