AS Level Business chapter 5: Finance and accounting MCQs with answers

By Team Megalecture · Updated 4 Nov 2026

100 exam-style questions on Finance and 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.

100 questions · 5 topics · 10 per test

Test this chapter freeAll AS Level Business chapters

What chapter 5 covers

Ten Finance and accounting questions with answers

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

1. A retailer takes on a second shop, buying inventory and fitting out the premises. What reason for needing finance does this best illustrate?

  1. A
    to survive a fall in sales
  2. B
    to grow the business
  3. C
    to start up the business
  4. D
    to pay a dividend
Show answer

Answer: B. Finance to open new outlets or expand output is finance for growth. Start-up finance is needed to launch the first business, and survival finance keeps a firm going in difficulty.

2. On a break-even chart, what is shown at the point where the total revenue line crosses the total cost line?

  1. A
    the break-even point, with no profit and no loss
  2. B
    the margin of safety of the business at that output
  3. C
    the level of the fixed costs of the business
  4. D
    the maximum profit that the business can earn
Show answer

Answer: A. At the crossing point revenue equals total costs. To the right revenue is higher, so there is profit; to the left there is a loss.

3. A business raises its selling price while its costs stay the same. What is the effect on its break-even output?

  1. A
    it stays the same, because costs are unchanged
  2. B
    it rises, because revenue increases
  3. C
    it falls, because contribution per unit rises
  4. D
    it falls, because fixed costs fall
Show answer

Answer: C. A higher price raises the contribution per unit, so fewer units are needed to cover fixed costs. Fixed costs themselves do not change.

4. Which is an advantage of zero budgeting over incremental budgeting?

  1. A
    it helps to remove unnecessary spending each year
  2. B
    it is always based on the previous year's figures
  3. C
    it guarantees that managers will meet their targets
  4. D
    it takes much less management time to prepare
Show answer

Answer: A. Because each item must be justified, outdated or wasteful items are more likely to be removed. The cost is more time and effort, which is the disadvantage.

5. Which is an example of revenue expenditure?

  1. A
    paying for fuel and repairs for delivery vans
  2. B
    buying a warehouse to store the goods
  3. C
    buying a new delivery van for the business
  4. D
    installing a new machine in the factory workshop
Show answer

Answer: A. Revenue expenditure covers everyday running costs used up within the year. The vehicle, building and machine are purchases of non-current assets, so capital expenditure.

6. A business wants to replace its delivery vans without a large payment up front and does not want to own the vans at the end. Which is the most suitable source?

  1. A
    leasing
  2. B
    issuing new shares
  3. C
    hire purchase
  4. D
    retained earnings
Show answer

Answer: A. Leasing spreads payments and the business does not own the vans, so it can upgrade at the end. Hire purchase ends with ownership, and the other two options are for permanent capital.

7. Which is a drawback of using budgets?

  1. A
    they show managers where money is being spent
  2. B
    they set targets for managers to aim at
  3. C
    they help to allocate resources between departments
  4. D
    they can be inflexible and go out of date
Show answer

Answer: D. If the business environment changes, a fixed budget may no longer be realistic, and setting budgets takes time. The other options are benefits of budgets, not drawbacks.

8. What is a debenture?

  1. A
    a grant given to a company by the government
  2. B
    a short-term overdraft on a company's current account
  3. C
    a share in the ownership of a company with voting rights
  4. D
    a long-term loan to a company at fixed interest
Show answer

Answer: D. Debenture holders are lenders, not owners, so they have no voting rights but must be paid interest whatever the profit. Shareholders own the company.

9. A product sells for $30 and its variable cost per unit is $18. What is the contribution per unit?

  1. A
    $18
  2. B
    $48
  3. C
    $12
  4. D
    $15
Show answer

Answer: C. Contribution per unit = selling price − variable cost per unit = 30 − 18 = $12. It is not the same as profit, because fixed costs have not been deducted.

10. On a break-even chart, which line begins at the origin (zero on both axes)?

  1. A
    the total revenue line
  2. B
    the line showing the margin of safety
  3. C
    the fixed cost line
  4. D
    the total cost line
Show answer

Answer: A. With no sales there is no revenue, so total revenue starts at zero. The total cost line starts at the level of fixed costs on the vertical axis.

Start the chapter testAbout the AS Level Business test

Read the notes for this chapter

Ways to practise this chapter

Finance and accounting: questions students ask

How many Finance and accounting MCQs are there?

100, each with the answer and a short explanation, across 5 topics: Business finance, Sources of finance, Forecasting and managing cash flows, Costs, Budgets. Every chapter test draws ten of them, so you can take it many times.

Is the AS Level Business chapter 5 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.

Keep going

← Chapter 4: Operations managementAll chaptersStuck? Ask a question