AS Level Accounting chapter 1: Financial accounting MCQs with answers

By Team Megalecture · Updated 4 Nov 2026

193 exam-style questions on Financial accounting, each with the answer and a short explanation. Ten of them are below to try. The chapter test draws ten fresh questions each time and is marked the moment you finish, with your score by topic.

193 questions · 6 topics · 10 per test

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What chapter 1 covers

Ten Financial accounting questions with answers

Try each one, then open the answer. These ten stay the same; the test draws new ones every time.

1. An irrecoverable debt of $400 was written off in the customer's account in the sales ledger, but no entry was made in the sales ledger control account or in the irrecoverable debts account. What is the effect on the financial statements of correcting this?

  1. A
    profit decreases by $400 and trade receivables decrease by $400
  2. B
    profit increases by $400 and trade receivables decrease by $400
  3. C
    profit decreases by $400 and trade receivables increase by $400
  4. D
    profit is unchanged and trade receivables decrease by $400
Show answer

Answer: A. The correction debits irrecoverable debts (an expense, so profit falls) and credits the sales ledger control account, whose balance is the trade receivables figure in the statement of financial position.

2. The owner of a business decides to close it next month and sell all its assets. Which accounting concept will no longer apply when its final statement of financial position is prepared?

  1. A
    business entity
  2. B
    duality
  3. C
    going concern
  4. D
    money measurement
Show answer

Answer: C. Going concern assumes the business will continue for the foreseeable future, which is why assets are normally shown at cost less depreciation. When the business is about to close, assets are valued at the amounts they are expected to raise.

3. A partnership has no partnership agreement. Which applies under the Partnership Act 1890?

  1. A
    a partner who works full time in the business is entitled to a salary
  2. B
    each partner receives interest at 5% a year on their capital
  3. C
    profits and losses are shared in the ratio of the capitals invested
  4. D
    a partner’s loan to the firm earns interest at 5% a year
Show answer

Answer: D. Without an agreement the Act provides that profits and losses are shared equally, with no interest on capital, no salaries and no interest on drawings. Partners’ loans to the firm earn interest at 5% a year.

4. A cash sale of $300 was debited to the sales account and credited to the cash account. Which type of error is this?

  1. A
    error of principle
  2. B
    error of original entry
  3. C
    error of commission
  4. D
    complete reversal of entries
Show answer

Answer: D. The correct accounts and amount were used, but the debit and credit were made on the wrong sides. Each side still totals $300, so the trial balance agrees; the correction is double the amount, $600, in each account.

5. Which document from an external source can be used to check the balance of a supplier's account in the purchases ledger?

  1. A
    the supplier's statement of account
  2. B
    the purchases journal
  3. C
    the trial balance
  4. D
    the list of purchases ledger balances
Show answer

Answer: A. The statement is prepared by the supplier from its own records, so agreeing it with the ledger account gives independent evidence. The other three are all internal records of the business.

6. A small trader who keeps only a cash book is considering keeping full double-entry records. Which is an advantage of doing so?

  1. A
    the records will take less time and cost less to keep up to date
  2. B
    no documents such as invoices will need to be kept
  3. C
    statements are easier to prepare, and errors or fraud are more likely to be found
  4. D
    the trader will no longer need to count the inventory held at the end of each year
Show answer

Answer: C. Full records give complete ledger accounts and a trial balance, so statements are quicker to prepare, balances owed to and by the business are known, and errors can be traced. They take more time, not less, and inventory must still be counted.

7. Wages paid of $750 were correctly entered in the cash book but were debited to the wages account as $570. Which journal entry corrects the error?

  1. A
    debit Wages $180, credit Suspense $180
  2. B
    debit Suspense $180, credit Wages $180
  3. C
    debit Wages $750, credit Suspense $750
  4. D
    debit Wages $180, credit Bank $180
Show answer

Answer: A. The wages account is $750 − $570 = $180 too low, so it is debited with $180. The cash book was correct, so the other side of the correction goes to the suspense account.

8. Which item would normally be included in a partnership agreement?

  1. A
    the market value of each partner’s private assets
  2. B
    the amount of income tax each partner must pay
  3. C
    the names of the firm’s main customers and suppliers
  4. D
    the ratio in which profits and losses are to be shared
Show answer

Answer: D. A partnership agreement sets out how the partners will run the firm financially: capital to be invested, the profit-sharing ratio, salaries, interest on capital and on drawings, and what happens when a partner joins or leaves. Tax, customers and private assets are not its concern.

9. On 1 January a partner’s current account had a credit balance of $3,200. During the year she was credited with a share of profit of $21,000 and interest on capital of $4,000. Her drawings were $26,500, and interest on drawings was $700. What was the balance on her current account at 31 December?

  1. A
    $5,400 debit
  2. B
    $2,400 credit
  3. C
    $1,000 credit
  4. D
    $1,000 debit
Show answer

Answer: C. Credits: 3,200 + 21,000 + 4,000 = 28,200. Debits: 26,500 + 700 = 27,200. The balance is $1,000 credit, meaning the firm still owes her $1,000. Interest on drawings is a debit, not a credit.

10. A business uses the straight-line method to depreciate its machinery every year, so that its profits can be compared fairly from one year to the next. Which accounting concept is being applied?

  1. A
    prudence
  2. B
    materiality
  3. C
    realisation
  4. D
    consistency
Show answer

Answer: D. Consistency means using the same accounting methods from one period to the next, so that changes in the results reflect changes in performance rather than changes in method.

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How many Financial accounting MCQs are there?

193, each with the answer and a short explanation, across 6 topics: Types of business entity, The accounting system, Accounting for non-current assets, Reconciliation and verification, Preparation of financial statements, Analysis and communication of accounting information. Every chapter test draws ten of them, so you can take it many times.

Is the AS Level Accounting chapter 1 test free?

Yes. The test, the answers and the explanations are free and need no sign-up. Sign in only if you want your scores kept across devices.

How is the chapter test marked?

The moment you press Finish: your score, the right answer and an explanation for every question, and the ones you got wrong saved in My mistakes to retry.

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