Faculty of management science student association(FMSSA)

Leg by comr. ayodeji facul ty president

MCQ LIKELY QUESTION OF ACC 101

1. Which of the following best defines accounting?

a) The process of recording financial transactions

b) The art of keeping financial secrets

c) The process of saving money in banks

d) The study of mathematical equations

2. The primary objective of accounting is to:

a) Prepare budgets

b) Provide financial information for decision-making

c) Record only profits

d) Hide company losses

3. The two main branches of accounting are:

a) Business and financial accounting

b) Financial and managerial accounting

c) Private and public accounting

d) Banking and investment accounting

4. Which of the following is NOT a function of accounting?

a) Recording financial transactions

b) Preparing financial statements

c) Hiring employees
d) Analyzing business performance

5. The role of an accountant includes:

a) Making business laws

b) Preparing and interpreting financial reports

c) Selling company products

d) Marketing financial services

6. Financial accounting primarily deals with:

a) Future projections of profits

b) Recording, summarizing, and reporting financial transactions

c) Managing employees

d) Selling goods and services

7. Which of these statements about accounting is true?

a) It is only used in large corporations

b) It is not necessary for small businesses

c) It helps in tracking financial activities

d) It only applies to government organizations

8. The three main types of accounting information are:

a) Financial, managerial, and tax accounting

b) Legal, administrative, and financial accounting

c) Domestic, international, and external accounting

d) Private, public, and social accounting

9. The fundamental accounting equation is:

a) Revenue = Expenses + Profit

b) Assets = Liabilities + Owner’s Equity

c) Profit = Revenue - Liabilities

d) Assets = Expenses + Revenue

10. The relevance of accounting to an organization’s information system includes:

a) Ensuring proper decision-making

b) Preventing business growth

c) Avoiding tax payments

d) Hiding financial losses

11. Bookkeeping differs from accounting because it:

a) Only records financial transactions

b) Involves complex decision-making

c) Deals with budgeting

d) Focuses on investments

12. Which of these is NOT an essential quality of good accounting information?

a) Relevance

b) Timeliness

c) Accuracy

d) Complexity

13. Accounting reports are primarily used by:

a) Government agencies

b) Business owners, investors, and stakeholders

c) Only bank managers

d) Only employees

14. The two major types of accounting users are:

a) External and internal users

b) Public and private users

c) Investors and accountants

d) Bankers and managers

15. Which of the following is an example of an external user of accounting information?

a) Company managers

b) Investors

c) Internal auditors

d) Employees

16. What is the main purpose of financial statements?

a) To report a company’s financial position

b) To calculate employee salaries

c) To determine the company’s tax payments

d) To list customers’ purchases

17. A balance sheet shows:

a) A company’s revenue and expenses

b) A company’s assets, liabilities, and equity

c) Only a company’s profits

d) The list of employees in an organization

18. What does GAAP stand for?

a) General Analysis and Accounting Principles

b) Generally Accepted Accounting Principles

c) Government Approved Accounting Practices

d) Generalized Accounting and Auditing Principles

19. The financial statement that shows revenues and expenses is:

a) Income Statement

b) Balance Sheet

c) Cash Flow Statement

d) Audit Report

20. The accounting cycle begins with:

a) Preparing financial statements

b) Recording transactions in journals

c) Preparing a trial balance

d) Closing the books

21. The key elements of financial statements include:

a) Assets, liabilities, and equity

b) Revenue, expenses, and profit

c) Cash, sales, and expenses

d) Assets, customers, and profits

22. A financial report prepared at the end of an accounting period is known as:

a) Monthly budget

b) Yearly forecast

c) Final account

d) Trial balance

23. Accounting ensures compliance with:

a) Government regulations and tax laws

b) Marketing strategies

c) Production policies

d) Business advertisements

24. Which of the following is NOT a financial statement?

a) Profit and Loss Statement

b) Bank Statement

c) Balance Sheet
d) Cash Flow Statement

25. One of the major accounting principles is:

a) Profit maximization

b) Business entity concept

c) Random recording of transactions

d) Eliminating all financial risks

26. Accounting information is primarily used for:

a) Making managerial decisions

b) Increasing business expenses

c) Promoting employee salaries

d) Reducing company revenue

27. The main financial statements include:

a) Cash Flow Statement, Balance Sheet, Income Statement

b) Profit Report, Revenue Summary, Trial Balance

c) Payroll Report, Income Summary, Capital Statement

d) Market Report, Cash Register, Financial Journal

28. The process of summarizing, analyzing, and reporting financial transactions is known as:

a) Budgeting

b) Auditing

c) Accounting

d) Bookkeeping

29. The key users of accounting information include:

a) Customers and suppliers

b) Management, investors, and creditors

c) Advertisers and marketers

d) Politicians and media houses

30. The financial statement that shows the financial position of a business at a specific time is
called:

a) Balance Sheet

b) Income Statement

c) Cash Flow Statement

d) General Ledger

31. What is the primary role of an accountant in an organization?

a) Managing financial records and preparing reports

b) Selling company products

c) Supervising company staff

d) Monitoring customer satisfaction

32. The purpose of financial accounting is to:

a) Provide information to external users

b) Track daily sales only

c) Hide business performance from investors

d) Predict future profits

33. The accounting concept that requires business finances to be kept separate from personal
finances is called:

a) Accrual concept

b) Business entity concept

c) Going concern concept

d) Matching concept

34. An investor primarily uses accounting information to:

a) Determine the profitability of a business

b) Pay company salaries

c) Advertise business products

d) Decide on employee recruitment

35. The principle of consistency in accounting means that:

a) Accounting methods should be changed regularly

b) The same accounting methods should be used consistently

c) Financial statements should not be compared

d) Business owners can alter reports anytime

36. Which of the following is NOT an accounting principle?

a) Prudence

b) Materiality

c) Randomization

d) Accrual

37. The term “accrual accounting” refers to:

a) Recording transactions when cash is received or paid

b) Recognizing revenues and expenses when they occur, regardless of cash transactions

c) Recording only large financial transactions

d) Ignoring expenses until profits are declared

38. The matching principle ensures that:

a) Revenues and related expenses are recorded in the same accounting period

b) Financial records are adjusted yearly

c) Profits are always maximized

d) Only expenses are recorded

39. What does the “going concern” assumption mean in accounting?

a) A business will continue to operate indefinitely

b) A business is expected to shut down soon

c) The government owns all businesses

d) Businesses must always report losses

40. The main objective of management accounting is to:

a) Assist internal decision-making

b) Provide information to external auditors

c) Help employees receive promotions

d) Track government taxes

41. Which of these is NOT a purpose of accounting?

a) Determining business financial status

b) Helping in decision-making

c) Increasing business losses

d) Keeping financial records

42. Which of the following is an intangible asset?

a) Machinery

b) Land

c) Trademark

d) Inventory

43. The ability to compare accounting information across different periods is called:

a) Relevance

b) Comparability

c) Objectivity

d) Accuracy

44. The historical cost principle states that:

a) Assets should be recorded at their original purchase price

b) Assets should be valued at market price

c) Liabilities should always be ignored

d) Depreciation should not be recorded

45. Which of the following is an example of financial accounting information?

a) Employee performance report

b) Balance sheet

c) Market research report

d) Customer feedback

46. The primary purpose of an income statement is to:

a) Show a company’s financial performance over a period

b) List all company expenses

c) Summarize business investments

d) Track only profits

47. Which financial statement helps in analyzing a company’s liquidity position?

a) Cash Flow Statement

b) Income Statement

c) Trial Balance

d) Ledger

48. The accounting equation must always:

a) Balance

b) Change frequently

c) Show profits only

d) Ignore liabilities

49. One of the main advantages of accounting is that it:

a) Helps businesses make informed decisions

b) Prevents businesses from making profits

c) Reduces business transparency

d) Makes financial data difficult to understand

50. Accounting ensures that:

a) Financial records are accurate and reliable

b) Business activities remain secret

c) Employees receive higher salaries

d) Companies avoid paying taxes

Topic 2:-
1. The origin of accounting can be traced back to which civilization?

a) Roman Empire

b) Ancient Egypt

c) Mesopotamia

d) The British Empire

2. The Italian mathematician who developed the double-entry bookkeeping system was:

a) Albert Einstein

b) Luca Pacioli

c) Adam Smith

d) Isaac Newton

3. In double-entry bookkeeping, every debit entry must have:

a) A higher credit entry

b) A corresponding credit entry of the same amount

c) A lower credit entry

d) No credit entry at all

4. If a business purchases equipment worth ₦50,000 on credit, how will this transaction be
recorded?

a) Debit Equipment Account ₦50,000; Credit Cash Account ₦50,000

b) Debit Cash Account ₦50,000; Credit Equipment Account ₦50,000

c) Debit Equipment Account ₦50,000; Credit Accounts Payable ₦50,000

d) Debit Accounts Payable ₦50,000; Credit Equipment Account ₦50,000

5. The first book on double-entry bookkeeping was published in which year?

a) 1400

b) 1494

c) 1776

d) 1880

6. If a company’s total assets are ₦500,000 and its total liabilities are ₦200,000, what is the
owner’s equity?

a) ₦200,000

b) ₦300,000

c) ₦500,000

d) ₦700,000

(Solution: Equity = Assets - Liabilities = ₦500,000 - ₦200,000 = ₦300,000)

7. A business purchased goods worth ₦80,000 and paid ₦50,000 in cash while the remaining
was on credit. What is the entry?

a) Debit Purchases ₦80,000, Credit Cash ₦50,000, Credit Accounts Payable ₦30,000

b) Debit Cash ₦50,000, Credit Purchases ₦80,000, Debit Accounts Payable ₦30,000

c) Debit Accounts Payable ₦30,000, Credit Cash ₦50,000, Credit Purchases ₦80,000

d) Debit Purchases ₦80,000, Credit Accounts Payable ₦50,000, Credit Cash ₦30,000

8. If capital at the beginning of the year is ₦150,000 and additional capital introduced is
₦50,000, what is the total capital?

a) ₦100,000
b) ₦150,000

c) ₦200,000

d) ₦250,000

(Solution: Total Capital = Initial Capital + Additional Capital = ₦150,000 + ₦50,000 =

₦200,000)

9. Which of the following represents the accounting equation?

a) Assets = Liabilities - Equity

b) Assets = Liabilities + Equity

c) Equity = Assets + Liabilities

d) Liabilities = Assets - Equity

10. If the Cash Account has a debit balance of ₦10,000 and a credit entry of ₦3,000 is made,
what is the new balance?

a) ₦7,000 (Debit)

b) ₦13,000 (Debit)

c) ₦3,000 (Credit)

d) ₦10,000 (Credit)

(Solution: New Balance = ₦10,000 - ₦3,000 = ₦7,000 Debit)

11. The single-entry accounting system records:

a) Only revenues

b) Both debits and credits

c) Only cash transactions

d) Both assets and liabilities

12. The double-entry system ensures that:

a) Every transaction affects only one account

b) Every transaction is recorded in at least two accounts

c) Only cash transactions are recorded

d) Only profits are tracked

13. If a company earns revenue of ₦120,000 and incurs expenses of ₦70,000, what is the net
income?

a) ₦40,000

b) ₦50,000

c) ₦60,000

d) ₦70,000

(Solution: Net Income = Revenue - Expenses = ₦120,000 - ₦70,000 = ₦50,000)

14. Which of the following is a liability account?

a) Cash

b) Equipment

c) Bank Loan

d) Inventory

15. A firm records sales of ₦25,000 on credit. What is the correct journal entry?

a) Debit Cash ₦25,000, Credit Sales ₦25,000

b) Debit Accounts Receivable ₦25,000, Credit Sales ₦25,000

c) Debit Sales ₦25,000, Credit Accounts Payable ₦25,000

d) Debit Sales ₦25,000, Credit Cash ₦25,000

16. If total liabilities are ₦400,000 and owner’s equity is ₦150,000, what are the total assets?

a) ₦250,000

b) ₦400,000

c) ₦550,000

d) ₦600,000

(Solution: Assets = Liabilities + Equity = ₦400,000 + ₦150,000 = ₦550,000)

17. Which of these transactions increases both assets and liabilities?

a) Paying off a loan

b) Buying goods on credit

c) Receiving cash from sales

d) Recording depreciation

18. If an asset depreciates by ₦5,000 per year and its original value was ₦50,000, what is its
value after three years?

a) ₦30,000

b) ₦35,000

c) ₦40,000

d) ₦45,000

(Solution: New Value = ₦50,000 - (₦5,000 × 3) = ₦35,000)

19. The account used to track unpaid customer invoices is:

a) Accounts Payable

b) Cash

c) Accounts Receivable

d) Owner’s Equity

20. A business buys equipment worth ₦20,000 and pays ₦5,000 immediately while the rest is
on credit. The credit amount is:

a) ₦5,000

b) ₦10,000

c) ₦15,000

d) ₦20,000

(Solution: Credit = Total Cost - Cash Paid = ₦20,000 - ₦5,000 = ₦15,000)

Another topic 2:-

1. The origin of accounting can be traced back to which civilization?

a) Roman Empire
b) Ancient Egypt

c) Mesopotamia

d) The British Empire

2. The Italian mathematician who developed the double-entry bookkeeping system was:

a) Albert Einstein

b) Luca Pacioli

c) Adam Smith

d) Isaac Newton

3. The first book on double-entry bookkeeping was published in which year?

a) 1400

b) 1494

c) 1776

d) 1880

4. Accounting was initially developed to:

a) Track business profits

b) Record trade transactions

c) Calculate government taxes

d) Analyze employee performance

5. Before the introduction of bookkeeping, early traders used which method for recording
transactions?

a) Electronic spreadsheets

b) Paper invoices

c) Memory-based recording

d) Blockchain technology

6. The concept of auditing was first introduced by:

a) The Greeks
b) The Romans

c) The Chinese

d) The British

7. Accounting was officially recognized as a profession in:

a) The 17th century

b) The 19th century

c) The 20th century

d) The 21st century

8. The earliest form of accounting was used for:

a) Tracking debts and payments

b) Employee salary payments

c) Marketing goods and services

d) Predicting future sales

9. Which ancient record-keeping method was commonly used before paper-based

accounting?

a) Clay tablets

b) Wooden books

c) Digital records

d) Plastic sheets

10. The first professional accounting body was established in:

a) Italy

b) Scotland

c) England

d) America

11. Which of the following is NOT an accounting system?

a) Manual system
b) Electronic system

c) Cloud-based system

d) Physical asset system

12. The major disadvantage of manual accounting is:

a) High accuracy

b) Time-consuming process

c) Reduced costs

d) Ease of access

13. Accounting procedures involve:

a) Identifying, recording, and summarizing transactions

b) Only preparing financial statements

c) Marketing company products

d) Managing customers

14. The main goal of accounting systems is to:

a) Record, classify, and summarize financial transactions

b) Reduce business expenses

c) Track employee performance

d) Control inflation

15. The Golden Rules of Accounting apply to which system?

a) Single-entry system

b) Double-entry system

c) Hybrid system

d) Blockchain system

16. The single-entry accounting system records:

a) Only revenues
b) Both debits and credits

c) Only cash transactions

d) Both assets and liabilities

17. The double-entry system ensures that:

a) Every transaction affects only one account

b) Every transaction is recorded in at least two accounts

c) Only cash transactions are recorded

d) Only profits are tracked

18. Who is considered the “Father of Accounting”?

a) Warren Buffet

b) Adam Smith

c) Luca Pacioli

d) Aristotle

19. A manual accounting system relies on:

a) Computers

b) Paper records

c) Online software

d) Blockchain

20. Which of the following is a benefit of an electronic accounting system?

a) Speed and efficiency

b) More paperwork

c) Higher chances of errors

Topic 4: Equation Accounting and Basic Records

1. The basic accounting equation is:

a) Assets = Liabilities – Equity

b) Assets = Liabilities + Equity

c) Assets + Liabilities = Equity

d) Liabilities = Assets + Equity

2. If a company’s assets are ₦500,000 and its liabilities are ₦200,000, what is the owner’s
equity?

a) ₦300,000

b) ₦700,000

c) ₦200,000

d) ₦500,000

3. Which of the following increases owner’s equity?

a) Additional capital investment

b) Withdrawal of cash

c) Loss on operations

d) Increase in liabilities

4. The equation Assets = Liabilities + Equity is known as the:

a) Double-entry equation

b) Accounting equation

c) Equity formula

d) Business transaction equation

5. The owner’s equity in a business can increase due to:

a) Expenses exceeding revenue

b) Additional owner investments

c) A decrease in assets

d) An increase in liabilities

6. Which of the following transactions will NOT affect the accounting equation?
a) Purchase of equipment on credit

b) Collection of accounts receivable

c) Owner investing additional capital

d) Owner withdrawing money for personal use

7. If total assets remain the same but liabilities decrease, what happens to owner’s equity?

a) Increases

b) Decreases

c) Remains the same

d) Becomes negative

8. If a company’s liabilities increase by ₦50,000 and its assets remain constant, what happens
to owner’s equity?

a) Increases by ₦50,000

b) Decreases by ₦50,000

c) Remains the same

d) Cannot be determined

9. The double-entry bookkeeping system is based on the principle that:

a) Every debit must have a corresponding credit

b) Transactions are only recorded once

c) Liabilities and expenses are the same

d) Equity is not part of the equation

10. If an asset increases, then there must be:

a) A decrease in another asset or an increase in liabilities/equity

b) No change in the equation

c) A decrease in owner’s equity

d) A decrease in revenue
Section B: Calculation-Based Questions

11. If Assets = ₦700,000 and Liabilities = ₦400,000, what is the Owner’s Equity?

a) ₦300,000

b) ₦400,000

c) ₦700,000

d) ₦1,100,000

Solution: Equity = Assets - Liabilities = ₦700,000 - ₦400,000 = ₦300,000

12. A company purchased equipment worth ₦120,000 on credit. How does this transaction
affect the accounting equation?

a) Increase assets and increase liabilities

b) Increase liabilities and decrease owner’s equity

c) Increase assets and decrease liabilities

d) No effect

13. A business has ₦250,000 in assets and ₦100,000 in liabilities. If the owner invests
₦50,000 more into the business, what is the new owner’s equity?

a) ₦100,000

b) ₦150,000

c) ₦200,000

d) ₦250,000

Solution: New equity = (₦250,000 - ₦100,000) + ₦50,000 = ₦200,000

14. If revenue is ₦80,000, expenses are ₦50,000, and liabilities are ₦30,000, what is the net
income?

a) ₦30,000

b) ₦50,000

c) ₦80,000

d) ₦100,000

Solution: Net income = Revenue - Expenses = ₦80,000 - ₦50,000 = ₦30,000

15. A business had ₦500,000 in assets and ₦200,000 in liabilities. If it takes a loan of
₦100,000, what is the new liability amount?

a) ₦200,000

b) ₦300,000

c) ₦400,000

d) ₦500,000

Solution: New liabilities = ₦200,000 + ₦100,000 = ₦300,000

16. A company started with ₦600,000 in assets and ₦250,000 in liabilities. After a year, the
assets increased to ₦900,000, and liabilities increased to ₦400,000. What is the change in
owner’s equity?

a) Increase of ₦150,000

b) Increase of ₦250,000

c) Increase of ₦300,000

d) Increase of ₦400,000

Solution:

Old Equity = ₦600,000 - ₦250,000 = ₦350,000

New Equity = ₦900,000 - ₦400,000 = ₦500,000

Change in Equity = ₦500,000 - ₦350,000 = ₦150,000

17. If liabilities increase by ₦20,000 and assets increase by ₦50,000, how much does
owner’s equity change?

a) ₦30,000 increase

b) ₦20,000 increase

c) No change

d) ₦50,000 decrease

Solution: Increase in Equity = ₦50,000 - ₦20,000 = ₦30,000

18. A company records the following:

• Cash: ₦300,000
• Equipment: ₦200,000

• Liabilities: ₦250,000

What is the owner’s equity?

a) ₦200,000

b) ₦250,000

c) ₦300,000

d) ₦350,000

Solution: Owner’s Equity = (₦300,000 + ₦200,000) - ₦250,000 = ₦250,000

19. A business earns ₦75,000 in revenue and incurs ₦30,000 in expenses. If the owner
withdraws ₦20,000, what is the impact on equity?

a) Increase of ₦25,000

b) Decrease of ₦20,000

c) Increase of ₦75,000

d) Decrease of ₦30,000

Solution:

Net Profit = ₦75,000 - ₦30,000 = ₦45,000

Equity Change = ₦45,000 - ₦20,000 = ₦25,000 increase

20. A firm’s liabilities decrease by ₦40,000, and its assets remain constant. What happens to
owner’s equity?

a) Increases by ₦40,000

b) Decreases by ₦40,000

c) No effect

d) Becomes negative

Solution: Since Assets = Liabilities + Equity, a decrease in liabilities without a change in

assets results in an increase in equity by ₦40,000.
Bank Reconciliation statement
1. What is a Bank Reconciliation Statement (BRS)?

a) A record of all transactions in a business

b) A statement prepared to reconcile bank balance differences

c) A document showing only cash payments

d) A report of fixed assets

2. A Bank Reconciliation Statement is usually prepared by:

a) The bank

b) The auditor

c) The business owner or accountant

d) The government

3. Which of the following is NOT a reason for preparing a bank reconciliation statement?

a) Identifying errors in cash book or bank statement

b) Preventing fraud and misstatements

c) Avoiding tax payments

d) Tracking unrecorded transactions

4. What does it mean when a cheque is outstanding?

a) It has been recorded by the bank but not by the company

b) It has been recorded by the company but not yet cleared by the bank

c) It has been paid by the bank

d) It has been cancelled

5. What does it mean when a cheque is dishonored?

a) The bank refuses to pay it

b) It has been cleared

c) It has been lost in transit

d) It has been signed incorrectly

6. If the balance as per the cash book is higher than the bank statement, it could be due to:

a) Outstanding cheques

b) Bank charges

c) Direct deposits by customers

d) Errors in the company’s books

7. Which of the following items is added while reconciling the cash book balance?

a) Cheques issued but not presented

b) Cheques deposited but not yet cleared

c) Bank charges

d) Direct debits by the bank

8. What are bank charges in bank reconciliation?

a) A fee charged by the bank for services

b) Money refunded to customers

c) Deposits made by customers

d) Errors in the cash book

9. A business issued a cheque, but it was not yet cleared by the bank. This will cause:

a) The bank balance to be lower than the cash book balance

b) The cash book balance to be lower than the bank balance

c) No difference in the balances

d) The bank to increase the balance

10. Which of the following will not affect the cash book balance?

a) Direct deposits by customers

b) Bank charges

c) Outstanding cheques
d) Dishonored cheques

11. What is the purpose of a Bank Reconciliation Statement?

a) To identify discrepancies between the cash book and bank statement

b) To record daily cash transactions

c) To show the profit or loss of a business

d) To determine tax liability

12. Which of the following is NOT a common cause of differences between the bank
statement and the cash book?

a) Outstanding cheques

b) Deposits in transit

c) Depreciation of assets

d) Bank charges

13. A cheque received from a customer but not yet deposited in the bank is called:

a) An outstanding cheque

b) A dishonored cheque

c) A deposit in transit

d) A cleared cheque

14. When a cheque issued by a company is not yet presented to the bank, how does it affect
reconciliation?

a) It reduces the bank statement balance

b) It increases the bank statement balance

c) It does not affect reconciliation

d) It increases the cash book balance

15. A direct credit in the bank statement but not recorded in the cash book will:

a) Require an addition to the cash book balance

b) Require a subtraction from the cash book balance

c) Be ignored in the reconciliation process

d) Result in a bank overdraft

16. If a company forgets to record a bank charge in its cash book, what correction should be
made?

a) Add the amount to the cash book

b) Subtract the amount from the cash book

c) Ignore it

d) Add it to the bank statement

17. Bank reconciliation should be prepared:

a) Once a year

b) Monthly or at regular intervals

c) Only when errors occur

d) Every five years

18. When preparing a BRS, which of the following should be subtracted from the cash book
balance?

a) Deposits in transit

b) Outstanding cheques

c) Bank charges

d) Bank interest received

19. If a cheque is dishonored, what does it mean?

a) It was successfully deposited in the bank

b) The payment was rejected by the bank

c) The cheque was cashed immediately

d) The bank approved the transaction

20. If the cash book balance is lower than the bank statement, it may be due to:

a) Cheques deposited but not yet cleared

b) Outstanding cheques

c) Bank errors

d) Unrecorded direct deposits

21. If a business issued a cheque of ₦20,000 but it has not yet been presented to the bank,
what is the effect on the reconciliation?

a) The bank balance is higher than the cash book balance

b) The bank balance is lower than the cash book balance

c) No difference in the balances

d) The bank balance and cash book balance remain equal

22. If the bank has deducted ₦5,000 as bank charges but the business has not yet recorded it,
what should be done?

a) Add ₦5,000 to the cash book

b) Subtract ₦5,000 from the cash book

c) Ignore it

d) Add it to the bank balance

23. When a cheque is deposited but not yet cleared by the bank, it is known as:

a) An outstanding cheque

b) A direct deposit

c) A deposit in transit

d) A dishonored cheque

24. If the bank credits the account with ₦10,000 interest, but it is not recorded in the cash
book, what should be done?

a) Add ₦10,000 to the cash book

b) Subtract ₦10,000 from the cash book

c) Ignore the transaction

d) Add it to the bank balance

25. Which of the following is an example of an addition to the cash book balance when
reconciling?

a) Bank charges

b) Outstanding cheques

c) Direct deposits by customers

d) Errors in the company’s books

26. The bank statement shows a balance of ₦150,000, but deposits in transit amount to
₦20,000. What is the correct adjusted balance?

a) ₦170,000

b) ₦150,000

c) ₦130,000

d) ₦120,000

27. A cheque for ₦50,000 issued by a company is still outstanding. How does this affect the
bank reconciliation?

a) Subtract ₦50,000 from the cash book balance

b) Subtract ₦50,000 from the bank balance

c) Ignore it

d) Add ₦50,000 to the bank balance

28. If an accountant makes an error in recording a transaction in the cash book, what should
be done during reconciliation?

a) Ignore the error

b) Correct the error in the bank statement

c) Adjust the cash book balance

d) Report the error to the bank

29. A company’s cash book shows a balance of ₦80,000, but the bank statement shows
₦70,000. What is the possible reason?

a) The company has deposited a cheque that is not yet cleared

b) The bank has made an error

c) There are outstanding cheques

d) The company recorded a duplicate transaction

30. Which of the following transactions will not appear in a Bank Reconciliation Statement?

a) Direct debits by the bank

b) Bank charges

c) Inventory purchases

d) Outstanding cheques

31. A Bank Overdraft appears in the bank reconciliation statement as:

a) A negative balance in the cash book

b) A positive balance in the cash book

c) An outstanding cheque

d) A deposit in transit

32. The bank reconciliation statement is prepared to reconcile differences between:

a) The bank statement and trial balance

b) The cash book and bank statement

c) The income statement and bank account

d) The balance sheet and bank statement

33. A post-dated cheque will be treated as:

a) An outstanding cheque

b) A deposit in transit

c) A dishonored cheque

d) A direct debit

34. An error made by the bank in recording a company’s transaction will be corrected by:

a) The company’s accountant

b) The bank itself

c) The government

d) The auditor

35. Bank charges and direct debits by the bank should be:

a) Added to the cash book balance

b) Ignored in the reconciliation

c) Deducted from the cash book balance

d) Added to the bank balance

36. Which of the following is NOT included in a bank reconciliation statement?

a) Cash payments to suppliers

b) Deposits in transit

c) Outstanding cheques

d) Bank errors

37. A cheque of ₦10,000 issued but not yet presented should be:

a) Deducted from the bank statement balance

b) Added to the cash book balance

c) Ignored in the reconciliation

d) Deducted from the cash book balance

38. If a company’s bank balance is ₦50,000, and there are outstanding cheques worth
₦20,000, what is the adjusted balance?

a) ₦30,000

b) ₦50,000

c) ₦70,000

d) ₦100,000

39. A dishonored cheque will cause:

a) A decrease in the bank balance

b) A decrease in the cash book balance

c) An increase in the cash book balance

d) No change in either balance

40. The main objective of preparing a bank reconciliation statement is to:

a) Prevent tax evasion

b) Identify and correct differences in records

c) Increase the cash balance

d) Maintain accurate financial statements