Accounting MCQ Questions and Solutions
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| Accounting Mcqs: |
| A systematic way to maintain the books of accounts is called_________? |
| A. Accountancy B. Economics C. Book Keeping D. Auditing |
| An Art of reading, classifying & Summarizing of accounts in a systematic way is called__________? |
| A. Accounting B. Accountancy C. Auditing D. Book Keeping |
| The maintenance of accounts in a systematic way is called__________? |
| A. Accounting B. Reading C. Book Keeping D. Auditing |
| Goods Return by the customer are termed as : |
| A. Purchase return B. Customer return C. Sales return D. Inventory return |
| Modern system of book keeping is called______________? |
| A. Double entry system B. American system C. Single entry system D. Italic system |
| The person to whom goods are sold on credit is called___________? |
| A. Buyer B. Seller C. Debtor D. Creditor |
| Double entry means______________? |
| A. Entry in two sets of books B. Entry at two ends C. Entry at two dates D. Entry for two aspects of the transaction |
| Discount received is a/an: |
| A. Asset B. Expense C. Liability D. Revenue |
| Obligation of the Business are known as___________? |
| A. Liabilities B. Revenues C. Expenses D. Assets |
| The amount invested by the proprietor to start the business is called: |
| A. Capital B. Business C. Drawings D. All of them |
| Cash discount is provided on _______________? |
| A. Purchases B. Prompt payment C. Sales D. Sales return |
| Goods return to supplier are known as:__________? |
| A. Merchandise return B. Purchase return C. Return inwards D. Sales return |
| The excess of current assets over current liabilities is called: |
| A. Working Capital B. Circulating capital C. Fixed capital D. Trading capital |
| When goods, in which business deals are sold, it is called___________? |
| A. Purchases B. Return inward C. Sales D. Return outwards |
| Sales return is also known as____________? |
| A. Return received B. Return Payed C. Return inward D. Return outward |
| reduction in price is called: |
| A. Paid price B. Invoice price C. Book price D. Discount |
| Cash brought by the owner to start business is called__________? |
| A. Capital B. Loan C. Drawing D. None of these |
| The concession received on the price of defective goods is called: |
| A. Discount B. Cash discount C. Allowance D. Trading discount |
| In support of business transaction, any written evidence is called ___________? |
| A. Discount B. Voucher C. Allowance D. Price |
| Building and furniture are called ____________? |
| A. Current asset B. Fictitious asset C. Tangible asset D. Fixed assets |
| For the business, capital is ____________? |
| A. Expense B. Liability C. financial assets D. All of them |
| When owner withdraw cash for its private use, it is called ___________? |
| A. Profit B. Income C. Expense D. Drawing |
| Assets having physical existence are called ___________? |
| A. Current asset B. intangible asset C. Tangible asset D. Liquid asset |
| The assets which have some market value are called ____________? |
| A. Fixed asset B. Quick asset C. Fictitious assets D. Real assets |
| The assets which come into existence upon the happening of a certain event are called__________? |
| A. Contingent assets B. Fixed assets C. Fictitious assets D. Quick assets |
| Income earned but not received is called ____________? |
| A. Fictitious assets B. Quick asset C. Real asset D. Outstanding asset |
| Debts which are payable in the course of a month are called _____________? |
| A. External liabilities B. Fixed liabilities C. Current liabilities D. Liquid Liabilities |
| The unsold goods are ______________? |
| A. Equity B. Sale return C. Inventory D. Purchases |
| The systems of accounting are _____________? |
| A. Two B. Three C. Five D. Six |
| A sale of Rs. 50.000 to A was entered as a sale to B. This is an example of____________? |
| A. Error of omission B. Error of commission C. Compensating error D. Error of principle |
| Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an example of____________? |
| A. Error of principle B. Error of commission C. Error of omission D. Error of duplication |
| Institute of Chartered Accountants of Pakistan was established in____________? |
| A. 1949 B. 1956 C. 1961 D. 1972 |
| Trial balance is prepared to check accuracy of_______________? |
| A. Ledger accounts balances B. Balance sheet balances C. Income statement balances D. Cash flow statement balances |
| If a transaction is completely omitted from the books of accounts, will it affect the agreement of a trial balance? |
| A. Yes B. No C. Transactions can’t be omitted D. none of these |
| ________ is the common base for preparing a trial balance? |
| A. Ledger accounts B. General Journal C. Specialized journals D. Balance sheet |
| Which of the following is true about a trial balance? |
| A. It lists down the balances of accounts B. It lists down the balances of a balance sheet C. It is a kind of financial statement D. It is not a part of accounting cycle |
| Debit balance = Credit balance in a trial balance indicates that: |
| A. No error in recording transactions B. No error in posting entries to ledger accounts C. Account balances are correct D. Mathematically Capital+Liabilities=Assets |
| Trial balance is commonly prepared? |
| A. Frequently during the year B. At the end of an accounting period C. At the end of a month D. At the end of a year |
| Which of the following will affect the agreement of a trial balance? |
| A. Complete omission of a transaction B. Partial omission of a transaction C. Error of principle D. Compensating errors |
| If debit balances = credit balances, trial balance only shows or check the ____________ and it does not indicate that no errors were made during recording and posting. |
| A. Arithmetic accuracy B. Errors of commission C. Omissions of economic events D. Understatements of balances |
| Which of the following account with normal balance is shown at the debit side of a trial balance? |
| A. Rent income account B. Creditors account C. Unearned income account D. Cash account |
| Which of the following account with normal balance is shown at the credit side of a trial balance? |
| A. Cash account B. Bank account C. Equipment account D. Accrued expenses account |
| Which of the following specialized journals records “goods returned by customers”? |
| A. Purchase journal B. Sales journal C. Purchases return journal D. Sales return journal |
| Sales on credit is recorded in which of the following journal? |
| A. Purchase journal B. Sales journal C. Purchases return journal D. Sales return journal |
| Transactions that a BUSINESS doesn’t record in any specialised journal are recorded in which of the following journals or day books? |
| A. Cash payments journal B. Cash receipts journal C. Purchases return journal D. General journal |
| Another name of journal is_____________? |
| A. Specialized journal B. Day book C. Cash book D. Record book |
| Which of the following specialised journals will record “goods returned by the BUSINESS “? |
| A. Purchase journal B. Sales journal C. Purchases return journal D. Sales return journal |
| Sales and purchase journal don’t record__________? |
| A. Credit sales B. Credit purchases C. Credit sales and purchases D. Cash sales and purchases |
| Cash received from debtor is recorded in which of the following SPECIALIZED journals? |
| A. Purchase journal B. Sales journal C. Cash receipts D. Cash payments journal |
| Which of the following is a type of cash receipt journal + cash payment journal? |
| A. Bank statement B. Statement of cash flow C. Cash book D. Cash documents |
| Cash purchases is recorded in which of the following specialized journals? |
| A. Purchase journal B. Sales journal C. Purchases return journal D. Cash payments journal |
| A brief explanation recorded below every entry in general journal is commonly known as__________? |
| A. Narration B. Explanation C. Summary D. Other information |
| Credit purchase of plant and machinery is recorded in which of the following journals? |
| A. General journal B. Cash journal C. Purchase journal D. Purchase return journal |
| Debit note is the basis for recording a transaction in which of the following journals? |
| A. General journal B. Cash journal C. Purchase journal D. Purchase return journal |
| SALE of old furniture” will be recorded in which of the following specialised journals? |
| A. Purchase journal B. Sales journal C. General journal D. Cash receipt journal |
| Credit note is the basis for recording a transaction in which of the following SPECIALIZED journals? |
| A. Purchase journal B. Sales return journal C. General journal D. Cash receipt journal |
| Specialized journals are more adequate for which TYPE OF BUSINESSES? |
| A. Small businesses B. Big businesses C. Sole proprietorship D. Partnership |
| Which of the following is known as an evidence that a transaction took place? |
| A. Cash receipts journal B. General journal C. Source document D. Cash book |
| BUSINESS paid rent amounting to $100″ which of the following specialized journals records this transaction? |
| A. Cash receipts journal B. Cash payments journal C. Sales journal D. Purchase journal |
| Credit memo or credit note No. is entered in which of the following journal? |
| A. General journal B. Cash journal C. Purchase journal D. Sales return day book |
| In accounting an Economic event is referred to as: |
| A. Cash B. Bank statement C. Transaction D. Exchange of money |
| Identify the correct sequence of accounting process |
| A. Communicating→Recording→Identifying B. Recording→Communicating→Identifying C. Identifying→communicating→recording D. Identifying→recording→communicating |
| Bookkeeping mainly concerns with which part of accounting process? |
| A. Analyzing B. Preparing financial statements C. Recording financial information D. Auditing the books of accounts |
| Financial accounting provides financial information to all of the following external users except: |
| A. Government agencies B. investors C. Creditors D. Managers |
| For which step of accounting process the accountants of business entity prepare financial statements? |
| A. Identification of economic event B. Communication of financial information C. Recording financial information D. Making decisions about business |
| Keeping the log of financial information in books of original entries is called__________? |
| A. Recording B. summarizing C. Grouping D. Processing |
| Auditing is what? |
| A. Reporting the financial information B. Examination of financial statements C. Preparation financial statements D. maintaining the ledger records |
| Which of the following is the external user of financial statements? |
| A. Manager of the business B. CEO of the business C. Creditor of the business D. Controller of the business |
| Which of the following is the internal user of financial statements? |
| A. Creditor of the business B. Government agency C. Shareholder of the business D. Manager of the business |
| _________ is the first phase of accounting cycle? |
| A. Identifying an economic event or transaction B. Preparing journals C. Posting entries to ledger accounts D. Making decisions about business |
| Financial statements differ from management account because |
| A. They are mainly prepared for external users of financial information B. They are more complex and hard to prepare C. The are the summary of accounting data D. The are prepared on basis of actual concept |
| ________ is a separate legal entity that Total capital can be divided in many shares. |
| A. Partnership B. Sole proprietorship C. Company D. Non-profit organization |
| An asset posses which of the following? |
| A. Future economic benefits for the business B. All kind of benefits for the business C. Expenses for the business D. Merits and Demerits for the business |
| Liabilities are which of the following? |
| A. Resources B. Obligations C. Future benefits D. Expenses |
| ________ is the gross inflow of economic benefits? |
| A. Assets B. Liabilities C. Income D. Expenses |
| The gross decrease in economic benefits for the business are what? |
| A. Expenses B. Obligations C. Creditors D. Income or gain |
| An asset must be _______ by the business to be shown as an asset in its “balance sheet” |
| A. Possessed B. Owned C. Controlled D. Used |
| Liability are arisen from which of the following events? |
| A. Present event B. Future event C. Past event D. None of them |
| Which of the following can be considered as the most important phase of accounting cycle and it is the primarily objective of financial accounting? |
| A. Identifying transactions B. Preparing “T Accounts” C. Preparing financial statements D. Preparing trial balances |
| Which is the most important characteristic that all assets of a business have? |
| A. Long life of assets B. Value of assets C. Intangible nature of assets D. Future economic benefits |
| What is the basic accounting equation? |
| A. Capital+Liabilities=Assets B. Assets+ liabilities =Capital C. Capital+assets=liabilities D. Liabilities+Capital |
| Which of the following is a liability? |
| A. Cash B. Equipment C. Debtors D. Creditors |
| What is equity? |
| A. Cash from the business B. liability of a business C. Owner’s claim on total assets D. Owner’s claim on total liabilities |
| Identify the asset from the following: |
| A. Cash and cash equivalent B. Creditors C. Notes payable D. Bank loan |
| _______ the withdrawal of cash and goods by the owner of the busienss for his/her personal use? |
| A. Depreciation B. Drawings C. Outflow of cash D. Appreciation |
| Net loss occurs when______________? |
| A. Expenses are greater than Income B. Expenses are less than Income C. Expenses=Income D. Liabilities are greater than income |
| Double entry implies that |
| A. Recording entries in journal B. Recording entries in Ledger account C. Recording two aspects of every transaction D. Recording every transaction in books |
| Identify the nominal account |
| A. Machinery account B. Building account C. Creditors account D. Rent expenses account |
| Which of the following accounts can be classified as a real account? |
| A. Rent expenses account B. Rent income account C. insurance expenses account D. Cash account |
| Transferring entries from journal to ledger account is commonly known as____________? |
| A. Recording B. Transferring C. Posting D. Entry making |
| An account records the ___________ in the balance of an item? |
| A. Increase B. Decrease C. Increase or decrease D. Appreciation |
| If credit side of a bank account is greater than the debit side, it indicates which of the following? |
| A. Bank overdraft B. Cash at bank C. Bank balance D. Current Asset |
| If debit side of a bank account is greater than credit side it indicates which of the following? |
| A. Cash at bank B. Bank understatement C. Bank overdraft D. Balance overstatement |
| _________ will be credited if goods are given as charity? |
| A. Cash B. Charity C. Purchases D. Sales |
| Which of the following is known as the base for preparing trial balance? |
| A. Journal B. Cash account C. Ledger account D. Balance sheet |
| If debit balance is greater than creadit balance then the account blance will be__________? |
| A. Credit balance B. Debit and credit balance C. Cash balance D. Debit balance |
| The normal balance of capital account is_____________? |
| A. Credit balance B. Debit balance C. Cash balance D. Neither debit nor credit balance |
| The normal balance of asset account is____________? |
| A. Credit balance B. Debit balance C. Cash balance D. Neither debit nor credit balance |
| The normal balance of liability account is____________? |
| A. Debit balance B. Credit balance C. Cash balance D. Neither debit nor credit balance |
| Which of the following statements is incorrect regarding capital account? |
| A. Debit increases the capital account balance B. Credit increases the capital account balance C. Fresh capital increases the capital account balance D. Net income increases the capital account balance |
| Which of the following is the normal balance of a rent expense account? |
| A. Credit balance B. Cash balance C. Overdraft D. Debit balance |
| Revenue and expense accounts are referred as______________? |
| A. Nominal accounts B. Real account C. Cash accounts D. Banks account |
| The real accounts are accounts of Assets, liabilities and ___________? |
| A. Expenses B. Revenues C. Capital D. Drawing |
| Building account is classified as _________ account? |
| A. Nominal B. Real C. Cash D. Capital |
| Office equipments account is classified as _________ account? |
| A. Nominal B. Real C. Cash D. Capital |
| ___________ helps business to classify transactions according to their nature? |
| A. General journal B. Real accounts C. Ledger accounts D. Cash accounts |
| Which of the following is a real account? |
| A. Office equipment B. Rent expenses C. Rent income D. Insurance expense |
| Which of the following accounts are closed at the end of an accounting period? |
| A. Nominal accounts B. Balance sheet accounts C. Real accounts D. None of them |
| Which of the following is the closing balance of a ledger account? |
| A. Balance c/d B. Balance b/d C. Balance e/d D. Balance f/c |
| The Basic accounting equation is___________? |
| A. Asset=Expense +Income B. Assets=Cash+Capital C. Assets=Capital+Liabilities D. Assets=Expenses+Capital |
| Find out the value of assets if: Liabilities=$5000 and Capital=$1000 |
| A. $4000 B. $6000 C. $7000 D. $3000 |
| Calculate the amount of cash if: Total assets=$10,000 Total liabilities=$10,000 Total Capital=$5000 |
| A. $6000 B. $10,000 C. $5000 D. $1000 |
| Capital increases if _________ increases? |
| A. Expenses B. Drawings C. Interest on capital D. Revenue |
| Capital of a business decreases if there is an increase in___________? |
| A. Drawings B. Income C. Gains D. Fresh capital |
| If the total liabilities of a business decrease by $5000 what will be the effect on total asset? |
| (assuming the amount of capital remain same) |
| A. Remain constant B. Decrease by $5000 C. Increase by $5000 D. Increase by $10,000 |
| If the business’s owner withdraws cash for his/her personal use what will be the effect on capital? |
| A. Increase in capital B. Remain the same C. Decrease in capital D. No effect on capital |
| Net income equal to Revenues minus____________? |
| A. Gains B. Depreciation C. Expenses D. Capital expenditures |
| Collection of account receivable will |
| A. Increase assets and decrease assets B. Increase assets and decrease liabilities C. Increase assets and increase capital D. Increase assets and increase cash |
| Payment of expenses will ______ the assets |
| A. Increase B. Reduce C. apportion D. Overstate |
| Which of the following is the practical implementation of the accounting equation? |
| A. Cash flow statement B. Income statement C. Statement of changes in equity D. Statement of financial position |
| Which of the following accounting equation is correct? |
| A. Cash+Other assets=Capital-Liabilities B. Capital+ Liabilities=Assets+Income C. Assets-Liabilities=Capital D. Assets+Capital=Liabilities |
| Fresh capital introduction will increase____________? |
| A. Assets and liabilities B. Assets and equity C. Liabilities and equity and bank balance D. Capital and liabilities |
| Cash received for services rendered will______________? |
| A. Increase cash and liability B. Increase equity and liability C. Increase fixed assets and cash D. Increase cash and equity |
| Which of following best describes the increase in equity expands___________? |
| A. Business operations B. cash outflows C. Inflows of cash D. Appropriation expenses |
| If Cash=$1000 inventories=$4000 Debtors=$5000 fixed assets=? Capital+Liabilities=$15000 What is the Amount of total assets? |
| A. $5000 B. $10,000 C. $15,000 D. $20,000 |
| Depreciation decreases____________? |
| A. Liabilities B. Cash C. Bank D. Capital |
| An increase in provision for bad debt will____________? |
| A. Decrease net income B. Decrease liabilities C. Increase net income D. Increase liabilities |
| Current assets – Current liabilities=? |
| A. Capital B. Absorbed capital C. Net assets D. Net working capital |
| Assets-Liabilities=____________? |
| A. Cash B. Equity C. Net income D. Net expenses |
| The process of recording is done? |
| A. Two times a year B. once a year C. Frequently during the accounting period D. At the end of a accounting period |
| General journal is a book of _______ entries? |
| A. First B. Original C. Secondary D. Generic |
| The process of recording transactions in different journals is called_________? |
| A. Posting B. Entry making C. Adjusting D. Journalizing |
| Every business transaction affects at least ________ accounts? |
| A. One B. Two C. Three D. Infinite |
| Discount allowed is a kind of deduction from_____________? |
| A. Account payable B. Account receivable C. Cash account D. Discount account |
| The other name of journal is____________? |
| A. Ledger B. T account C. Day book D. Cash book |
| A journal entry in which two or more account is debited or credited is referred as____________? |
| A. Journal entry B. Multi entry C. Additional entry D. Compound entry |
| he term 2/10-n/30 implies that ______ % discount will be given if the payment is made within days or full amount is receivable within 30 days? |
| A. 2,10 B. 10,2 C. 10,30 D. 3,15 |
| Goods returned by customer should be debited to which of the following accounts? |
| A. Sales income account B. Sales account C. Return inward account D. Expenses account |
| Discount allowed is___________? |
| A. Expense of business B. Income of business C. Loss of business D. Abnormal loss of business |
| _________ is the evidence that a transaction took place? |
| A. Source documents B. Ledger C. Bonds D. Journals |
| Which of the following will be debited if a business purchases goods on credit? |
| A. Cash B. Debtor C. Creditor D. Purchases |
| Which of the following accounts will be debited if the business’s owner withdraws cash from business for his personal use? |
| A. Drawings B. Cash C. Business D. Stock |
| Journals are also referred as_____________? |
| A. Book of entries B. Book of original entries C. T account D. Books of economic event |
| The standard format of journal does not include which of the following? |
| A. Assets column B. Date column C. Description column D. Amount column |
| In which of the following orders data is entered in journal? |
| A. Alphabetical order B. Numeric order C. Bullets order D. Chronological order |
| Which of the following accounts will be credited if a company purchases building for cash? |
| A. Capital account B. Fixed assets account C. Building account D. Cash account |
| Discount for quick repayment of debt is normally referred as____________? |
| A. Trade discount B. Prompt payment discount C. Cash discount D. Bulk discount |
| The first step in accounting process is___________? |
| A. Recording the transaction B. Identifying the transaction C. Posting the transaction D. Preparing the source documents |
| A chart of accounts generally start with which of the following types of accounts? |
| A. Assets accounts B. liability accounts C. Cash accounts D. Revenue accounts |
| Total depreciation of an asset cannot exceed its: |
| A. Scrap value B. Residual value C. Market value D. Depreciable value |
| Amount paid to Masood posted to the credit side of his account would affect___________? |
| A. Masood’s account B. Cash account C. Cash account and Gagan’s account D. None of these |
| Which of the following statements is/are true ? |
| A. A sale of an asset is recorded in the Sales Book B. Total of Return Outward Book is debited to Return Outward Account C. The balance of Petty Cash Book is a liability D. Cash Book is a subsidiary book as well as a ledger |
| Which of the following is true regarding closing entries? |
| A. They must be followed by reversing entries B. They transfer the balances in all of the Nominal Accounts to the Trading and Profit and Loss Account C. They must be made after the reversing entries but before the adjusting entries D. They must be made after the adjusting entries but before the reversing entries |
| Closing stock is generally valued at______________? |
| A. Cost Price B. Market Price C. Cost price or Market price whichever is higher D. Cost price or Market price whichever is lower |
| Which of the following assets is/are to be valued at the lower of cost and net realizable value? |
| A. Goodwill B. Inventories C. Investments D. Both B. and C. above. |
| A few errors committed in Ahhiwalia’s books of account are given below. State which errors would affect the Trial Balance. |
| (a). Sales of `950 to Ram completely omitted from books of account (b). Purchases of `720 from Shyam entered in the purchases journal as `700 (c). Purchases Journal is overcast by `1,000 (d). Sales returns journal is undercast by `200 (e) Amount paid to Agarwal wrongly posted to the debit to Mittal’s account (f) Bank overdraft shown under debit column in the Trial Balance (g) Sales of `500 to Sadiq entered in sales journal as sales to Mushtaq (h) Wages paid for installation of machinery debited to wages account |
| A. a, c and g B. c, d and f C. c, d, e and h D. c, d, f and h |
| Which of the following methods is not a practical way of realizing revenue? |
| A. Delivery method B. Percentage-of-completion method C. Production method D. Moving average method |
| The amount payable to a person as consideration for the use of rights vested in him is |
| A. Dividend B. Royalty C. Purchase consideration D. Installment |
| Buildings account is debited with an amount towards repairs. This is an example of? |
| A. Error of commission B. Error of principle C. Error of omission D. Compensating error |
| The concept of conservatism will have the effect of______________? |
| A. Overstatement of Assets B. Understatement of Assets C. Overstatement of Liabilities D. Understatement of Liabilities |
| During the year 2011-2012, the value of closing inventory was overstated by 25,000. Which of the following is true? |
| A. The cost of goods sold was overstated during 2011-2012 and income will be understated during 2012-2013 B. The income was overstated during 2011-12 and closing inventory will be overstated during 2012-2013 C. The retained earnings was overstated during 2011-2012 and retained earnings will be understated during 2012-2013 D. The cost of goods sold was understated during 2011-2012 but retained earnings will not be affected during 2012-2013 |
| Which of the following errors is an error of omission? |
| A. Sale of ` 100 was recorded in the Purchases Journal B. Wages paid to Mohan have been debited to his account C. The total of the sales journal has not been posted to the Sales Account D. Repairs to buildings have been debited to buildings account |
| Which of the following statements is /are true? |
| A. Entering wrong amount in the subsidiary book affects the agreement of the Trial Balance B. Undercasting or overcastting of a subsidiary book is an example or error of commission C. Errors of principle do not affect the agreement of Trial Balance D. Both B. and C. above |
| Which of the following is true? |
| A. Error of casting affects personal accounts B. Omission of a transaction from a subsidiary record affects only one account C. Error of carry forward affects two accounts D. Error of principle involves an incorrect allocation of expenditure or receipt between capital and revenue |
| Journal proper is meant for recording_____________? |
| A. Credit purchase of fixed assets B. Return of goods C. All such transactions for which no special journal has been kept by the business D. None of these |
| Closing stock in the Trial Balance implies that______________? |
| A. It is already adjusted in the opening stock B. It is adjusted in the Purchase A/c C. It is adjusted in the Cost of Sale A/c D. It is adjusted in the Profit &Loss A/c |
| Which of the following statements is true? |
| A. If a Trial Balance tallies, it always means that none of the transactions has been completely omitted B. A Trial Balance will not tally if a transaction is omitted C. A customer to whom goods have been sold on credit cannot avail himself of a cash discount D. A credit balance in the Pass Book indicates excess of deposits over withdrawals |
| The adjustment to be made for income received in advance is: |
| A. Add income received in advance to respective income and show it as a liability B. Deduct income received in advance from respective income and show it as a liability C. Add income received in advance to respective income and show it as asset D. Deduct income received in advance from respective income and show it as an asset in the Balance Sheet |
| Which of the following statements is correct about Trial Balance? |
| A. The Trial Balance is prepared after preparing the Profit and Loss Account B. The Trial Balance shows only balances of Assets and Liabilities C. The Trial Balance shows only nominal account balances D. The Trial Balance has no statutory importance from the point of view of law |
| While finalizing the current year‘s accounts, the company realized that an error was made in the calculation of closing stock of the previous year. In the previous year, closing stock was valued more by 50,000. As a result |
| A. Previous year‘s profit is overstated and current year‘s profit is also overstated. B. Previous year‘s profit is understated and current year‘s profit is overstated. C. Previous year‘s profit is overstated and current year‘s profit is understated. D. There will be no impact on the profit of either the previous year or the current year. |
| Which of the following is not correct about Errors? |
| A. Errors which affect one account can be errors of posting B. Errors of omission arise when any transaction is left to be recorded C. Errors of carry forward from one year to another year affect both Personal and Real A/c D. Errors of commission arise when any transaction is recorded in a fundamentally incorrect manner |
| If goods worth 1,750 returned to a supplier is wrongly entered in sales return book as 1,570, then |
| A. Net Profit will decrease by 3,140 B. Gross Profit will increase by 3,320 C. Gross Profit will decrease by 3,500 D. Gross Profit will decrease by 3,320 |
| For the past 3 years, DK Ltd. has failed to accrue unpaid wages earned by workers during the last week of the year. The amounts omitted, which were considered material, were as follows: |
| March 31,2010 – ` 56,000 March 31, 2011 – ` 51,000 March 31, 2012 – ` 64,000 |
| The entry on March 31, 2012 to rectify these omissions would include a |
| A. Credit to wage expense for ` 64,000 B. Debit to wage expense for ` 64,000 C. Debit to wage expense for ` 51,000 D. Debit to wage expense for ` 13,000 |
| Purchase journal is kept to record_____________? |
| A. All purchases of goods B. All credit purchases of goods C. All credit purchases D. None of these |
| The beginnings inventory of the current year is overstated by 5,000 and closing inventory is overstated by 12,000. These errors will cause the net income for the current year by |
| A. 17,000 (overstated. B. 12,000 (understated. C. 7,000 (overstated. D. 7,000 (understated. |
| The accountant of Leo Ltd. recorded a payment by cheque to a creditor for supply of materials as 1,340.56. The bank recorded the cheque at its correct amount of 3,140.56. The Company has not passed any rectification entries and the error is not detected through the bank reconciliation. The impact of this error is |
| A. The Trial Balance will not agree B. The balance of creditors is understated C. The purchases are understated D. The favorable bank balance as per Pass Book is less than the Bank balance as per Cash book |
| Which of the following errors affects the agreement of a Trial Balance? |
| A. Mistake in balancing an account B. Omitting to record a transaction entirely in the subsidiary books C. Recording of a wrong entry in the subsidiary books D. Posting an entry on the correct side but in the wrong account |
| Which of the following should not be treated as revenue expenditure? |
| A. Interest on loans and debentures B. Annual fire insurance premiums on Plant and Equipment C. Sales tax paid in connection with the purchase of office equipment D. Small expenditures on long- lived assets, such as ` 20 for a paper weight. |
| Capital expenditure is an expenditure which |
| A. Benefits the current accounting period B. Will benefit the next accounting period C. Results in the acquisition of a permanent asset D. Results in the acquisition of a current asset |
| Which of the following is not a deferred revenue expenditure? |
| A. Expenses in connection with issue of equity shares B. Preoperative expenses C. Heavy advertising expenses to introduce a new product D. Legal expenses incurred in defending a suit for breach of contract to supply goods |
| Any donation received for a specific purpose is a_________? |
| A. Liability B. Assets C. Revenue receipts D. Capital receipts |
| Which of the following is an item of capital expenditure? |
| A. Research and development costs during the year B. Interest on borrowed fund utilized for acquisition of Office Furniture C. Installation charges paid in conjunction with the purchase of Office Equipment D. Monthly rent of a machinery used in the business |
| The balance of which of the following accounts do not disappear, once they are debited/credited to Trading Account? |
| A. Sales B. Purchases C. Inward returns D. Closing stock |
| Which one of the following should be considered a revenue expenditure? |
| A. 1000 paid for the execution of a new plant B. Loss of 10,000 incurred in increasing the sitting accommodation of a hotel C. Damage paid on account of breach of a contract to supply certain goods D. Repair to machinery purchased, second hand. |
| Which of the following statements are / is true? – Events after Balance Sheet are? |
| A. All the significant events after the Balance Sheet date B. The events after Balance Sheet date but before submitting it to the Registrar of Companies C. The events after Balance Sheet date but before its approval by the board D. All changes after Balance Sheet date before its approval |
| Which one of the following is a capital expenditure? |
| A. Compensation paid to Directors on termination of their services B. Expenditure incurred in connection with the renewal of a Trade Mark. C. Gratuities paid to Directors on termination of their services. D. Royalty paid in installments for the purchase of rights to manufacture and sell patient medicines. |
| Which of the following enhances the earning capacity of an asset? |
| A. Increase in working capacity of an asset B. Reduction in operating costs C. Replacing damaged parts of an asset D. Both A. and C. above |
| Which of the following items should not be capitalized relating to fixed assets? |
| A. Interest payable on loans or deferred credits taken for the acquisition or construction of fixed assets before they are ready for use B. Stand by equipment and servicing equipment C. Expenditure incurred on test runs and experimental production D. Administration and general expenses |
| Which of these errors affect only one account? |
| A. Errors of casting B. Errors of carry forward C. Errors of posting D. All the three |
| Which of these errors affect two or more accounts |
| A. Errors of complete omission B. Errors of principle C. Errors of posting to wrong account D. All the three |
| Which of the following error is an error of principle |
| A. 5,000 received from Sham credited to Ram A/c B. 5,000 incurred on installation of new plant debited to travelling expenses A/c C. 500 paid for wages debited to salary A/c D. 500 being purchase of raw material debited to purchase A/c ` 50 |
| Which of the following is an one sided error? |
| A. 500 purchase of old equipment not recorded in the books of A/c at all B. 500 being expense on travelling expense credited to travelling expenses C. Both D. None |
| Any gain on the sale of non-current assets should be _________ from the net profit and the loss must be _________to the net profit in determining fund from operation? |
| A. Added, Reduced B. Added, Added C. Deducted, Added D. Deducted, Deducted |
| Cash book records? |
| A. Only cash sales B. All types of cash receipts and payments C. Only revenue receipts D. Only capital receipts |
| In a three column cash book_______________does not exist? |
| A. Cash column B. Bank column C. Petty cash column D. Discount column |
| Which of these transactions will not be recorded in cash book? |
| A. Cash received from debtors B. Cash paid to creditors C. Salary remained outstanding D. Cash deposited with bank |
| The closing balance of a petty cash book is a / an___________? |
| A. Liability B. Gain C. Assets D. Loss |
| Which column of a cash book will not have credit balance___________? |
| A. Bank column B. Discount column C. Cash column D. None |
| Petty cash balance is a/an___________? |
| A. Assets B. Expenditure C. Liability D. None |
| Which of these is a Part of cash in hand? |
| A. Postage stamps B. B/R C. Cheque Deposited with Bank D. B/R endorsed |
| Which of the following is a Real A/c? |
| A. Salary A/c B. Bank A/c C. Building A/c D. Goodwill A/c |
| Which of the following is a representative Personal A/c? |
| A. Outstanding Salary A/c B. Rent A/c C. SBI A/c D. Bad debts A/c |
| Which of the following is a Nominal A/c ? |
| A. Outstanding Salary A/c B. Rent A/c C. SBI A/c D. Debtors A/c |
| Goodwill A/c is a/an__________? |
| A. Nominal A/c B. Tangible Asset C. Intangible Asset D. Fictitious Asset |
| Posting is the process of____________? |
| A. Posting the letters in drop box B. Posting suitable person to a suitable job C. Entering in the ledger the information contained in the ledger D. All the three |
| A book wherein various accounts are opened is called____________? |
| A. Subsidiary books B. Journal C. Ledger D. Trial Balance |
| Which of these is not a special purpose journal? |
| A. Cash journal B. Purchase journal C. Debtors journal D. Sales journal |
| The periodic total of sales day book is posted to___________? |
| A. Sales A/c B. Cash sales A/c C. Sales return A/c D. Credit sales A/c |
| The periodic total of purchase day book is posted to____________? |
| A. Purchase register B. Purchase A/c C. Cash purchase A/c D. Credit purchase A/c |
| Capital expenses are shown in___________? |
| A. Balance Sheet B. Profit and Loss A/c C. Trading A/c D. None of these |
| Revenue receipts are shown in___________? |
| A. Balance Sheet B. Profit and Loss appropriation A/c C. Manufacturing A/c D. Trading and Profit and Loss A/c |
| Revenue is generally recognized as being earned at that point of time when? |
| A. sale is effected B. cash is received C. production is completed D. debts are collected |
| Which of the following is a revenue expenses? |
| A. Raw material consumed B. Plant purchased C. Long term loan raised from bank D. Share Capital |
| Which of the following is a capital expenditure? |
| A. Repair of plant and machinery B. Salary paid to workers C. Cost of stand by equipment D. Annual whitewash of the office building |
| Which of these types of expenditure would not be treated as a Capital Expenditure? |
| A. Acquisition of an Asset B. Extension of an Asset C. Improvement of the existing Asset D. Maintenance of the Asset |
| Expenses of the following nature are treated as a Revenue expenses except__________? |
| A. Expenses for day to day running of the business B. Putting the new asset in working condition C. Depreciation D. Purchase of raw material |
| Cash received from debtors would be deemed as___________of funds. |
| A. No flow B. Sources C. Uses D. Gain |
| Generally the term fund is used to mean the difference between? |
| A. Current assets and current liabilities B. Profit and loss A/C and Balance sheet C. Current assets and non-current liabilities D. Current liabilities and non-current liabilities |
| Which of these documents is not required for Bank Reconciliation? |
| A. Bank column of Cash Book B. Bank Pass Book C. Bank Statement D. Trial Balance |
| Which of these items are taken into consideration for preparation of adjusted Cash Book |
| A. Mistake in Cash Book B. Mistake in Pass Book C. Cheque issued but not presented for payment D. Cheques deposited but not cleared |
| Credit balance as per Cash Book mean____________? |
| A. Surplus cash B. Bank overdraft C. Terms deposits with bank D. None of these |
| Debit side of Bank Pass book corresponds to___________? |
| A. Credit side of Cash Book B. Debit side of Cash Book C. Debit side of Trial Balance D. Credit side of Balance Sheet |
| Difference in Bank Balance as per Pass Book and Cash Book may arise on account of_____________? |
| A. Cheque issued but not presented B. Cheque issued but dishonoured C. Cheque deposited and credited by bank D. Both A. and B. |
| The Bank Reconciliation Statement is prepared? |
| A. To rectify the mistakes in the Cash Book B. To arrive at the Bank Balance C. To arrive at the Cash Balance D. To bring out the reasons for the difference between the Balance as per Cash Book and the Balance as per Bank Statement |
| Bank reconciliation is a statement prepared to reconcile__________? |
| A. Trial balance B. Cash book C. Bank A/c D. Cash as per cash book with bank balance as per bank pass book |
| Bank reconciliation statement is a part of_________? |
| A. Cash book B. Trial balance C. Auditors report D. None of these |
| Benefits of preparing Bank Reconciliation Statement includes___________? |
| A. It bring out any errors committed in preparation of Cash book / Bank Pass Book B. Highlights under delay in clearance of cheques deposited but not credited C. Help know actual bank balance D. All the three |
| Debit balance as per bank pass book mean_____________? |
| A. Surplus cash B. Bank Overdraft C. Terms deposits with bank D. None of these |
| Which of the following is not a cause of difference in balance as per cash book and balance as per bank pass book___________? |
| A. Errors in cash book B. Errors in pass book C. Cheques deposited and cleared D. Cheques issued but not presented for payment |
| Provision is created for____________? |
| A. Unknown Liabilities B. Known Liabilities C. Creation of Secret Reserves D. All the Three |
| Which of the following is not a method of charging depreciation? |
| A. Straight line Method B. Written down value Method C. Discounted present value Method D. Sum of digits Method |
| A second hand car is purchased for 2,00,000 and sold at 1,40,000 after two years. If depreciation is charged @ 10% on SLM method, find the profit or loss on sale of the car? |
| A. 20,000 Loss B. 20,000 Profit C. 10,000 Loss D. 10,000 Profit |
| A second hand car is purchased for 2,00,000 and sold at 1,40,000 after two years. If depreciation is charged @ 10% on written down value method, find the profit or loss on sale of the Second hand car? |
| A. Loss of 20,000 B. Loss of 22,000 C. Loss of 11,000 D. Profit of 11,000 |
| Which of the following is true with respect to providing depreciation under diminishing balance method? |
| A. The amount of depreciation keeps increasing every year while the rate of depreciation keeps decreasing B. The amount of depreciation and the rate of depreciation decrease every year C. The amount of depreciation decreases while the rate of depreciation remains the same D. The amount of depreciation and the rate of depreciation increases every year |
| Which of the following statements best describes the purpose of depreciation? |
| A. Regular reduction of asset value to correspond to changes in market value as the asset ages B. A process of correlating the market value of an asset with its gradual decline in physical efficiency C. Allocation of cost in a manner that will ensure that Plant and Equipment items are not carried on the Balance Sheet in excess of net realizable value D. Allocation of the cost of an asset to the periods in which services are received from the asset |
| The main objective of providing depreciation is to? |
| A. Calculate the true profit B. Show the true financial position in the Balance Sheet C. Provide funds for replacement of fixed assets D. Both A. and B. above |
| Depreciation is a process of____________? |
| A. Valuation B. Valuation and allocation C. Allocation D. AppropriationThe portion of the acquisition cost of the asset yet to be allocated is known as___________? |
| A. Written down value B. Accumulated value C. Salvage value D. Residual Value |
| Which of the following statements is true with regard to written down value method of depreciation? |
| i. The rate at which the asset is written off reduces year after year ii. The amount of depreciation provided reduces from year to year iii. The rate of depreciation as well as the amount of depreciation reduce year after year iv. The value of the asset gets reduced to zero over a period of time |
| A. Only (i) above B. Only (ii) above C. Both (i) and (ii) above D. (i),(ii) and (iii) above |
| The accounting process of gradually converting the unexpired cost of fixed assets into expenses over a series of accounting periods is_________? |
| A. Depreciation B. Physical deterioration of the asset C. Decrease in market value of the asset D. Valuation of an asset at a point of time |
| Which of the following factors are primarily considered to determine the economic life of an asset? |
| A. Passage of time, asset usage, and obsolescence B. Tax regulations and SEBI guidelines C. Tax regulations and asset usage D. SEBI guidelines and Asset usage |
| In which of the following methods, the cost of the asset is spread over in equal proportion during its useful economic life? |
| A. Straight-line method B. Written down value method C. Units-of-production method D. Sum-of-the years‘-digits method |
| Which of the following statements is correct about Depreciation? |
| A. Depreciation cannot be provided in case of loss in a financial year B. Depreciation is a charge against profit C. Depreciation is provided in the books only when there is profit D. Depreciation is an appropriation of profit |
| Depreciation is calculated on the____________? |
| A. Cost price of asset B. Market price C. Cost+ Transport+ Installation expenses D. Cost or market values whichever is less |
| Which of the following is an external cause of depreciation? |
| A. Routine repair and maintenance B. Misuse C. Obsolescence D. Wear and tear |
| Which of the following is not depreciated? |
| A. Building B. Land C. Plant and Machinery D. Office equipment |
| ____________is also known as Appraisal system of depreciation? |
| A. Inventory system B. Survey system C. Annuity system D. Insurance |
| Bad debts recovered account will be transferred to______________? |
| A. Debtor‘s Account B. Profit and Loss Account C. Provision for Doubtful Debt Account D. Either (b )or C. above |
| The entry for creating a Provision for bad debts is_____________? |
| A. Debit Provision for Bad Debts A/c and credit Debtors A/c B. Debit Debtors A/c and credit Provision for Bad Debts A/c C. Debit Provision for Bad Debts A/c and credit Profit & Loss A/c D. Debit Profit and Loss A/c and credit Provision for Bad Debts A/c. |
| When a person purchasing goods on credit he becomes a_________in the books of the seller? |
| A. Debtor B. Creditor C. Defaulter D. Offender |
| Cost of goods sold excludes___________? |
| A. Opening Stock B. Carriage inward C. Wages & Salary D. Postage & Stamps |
| Tax deducted at source A/c appears in___________? |
| A. Assets side B. Liability side C. Profit & Loss A/c D. Debited to Capital A/c |
| Investment in own share A/c appears in____________? |
| A. Asset side B. Liability side C. Netted from Capital D. Profit & Loss A/c |
| Payments received in advance from a customer for a contract can be__________? |
| A. Shown as a deduction from contract work-in-progress on asset side B. Shown as a liability C. Credited to P&L A/c D. Either A. or B. above |
| If a company has contingent liabilities, they appear in the__________? |
| A. Balance Sheet B. Directors‘ report C. Notes on account to Balance Sheet D. Chairman‘s report |
| Contingent liabilities are disclosed in the notes to Balance Sheet |
| Recent developments have made much of a company‘s inventory obsolete. This obsolete inventory should be? |
| A. Written down to zero or its scrap value B. Shown in the Balance Sheet at its replacement cost C. Shown in the Balance Sheet at cost, but classified as a non-current asset D. Carried in the accounting records at cost until it is sold |
| Which of the following is not classified as inventory in the financial statements? |
| A. Finished goods B. Work-in-process C. Stores and spares D. Advance payments made to suppliers for raw materials |
| If actual bad debts are more than the provision for bad debts, then there will be a_____________? |
| A. Credit balance of Provision for Bad Debts Account B. Debit balance of Provision for Bad Debts Account C. Debit balance of Bad Debts Account D. Debit balance of Discount on Debtors Account |
| The creation of provision for doubtful debts given as an adjustment requires____________? |
| A. Debit Profit and Loss Account and deduct the provision from debtors B. Credit Profit & Loss Account and deduct the provision from debtors C. Credit Profit and Loss Account and add the provision to debtors D. Debit Profit & Loss Account and add the provision to debtors |
| Under the direct write-off method of recognizing a bad debt expense. Which of the following statements is/are true? |
| A. The bad debt expense is not matched with the related sales B. Revenue is overstated in the year of sales C. It violates the matching principle of accounting D. All of the above |
| At the time of preparation of financial accounts, bad debt recovered account will be transferred to? |
| A. Debtors A/c B. Profit & Loss A/c C. Profit & Loss Adjustment A/c D. Profit & Loss Appropriation A/c |
| The balance of Revaluation Reserve pertaining to an asset that has been disposed off or retired can be transferred to? |
| A. General Reserve A/c B. Profit & Loss A/c C. Asset A/c D. Capital Reserve A/c |
| Average Accounting Return is a measure of accounting profit relative to: |
| A. Book value B. Intrinsic value C. Cost D. Market value |
| During the accounting period, sales revenue is Rs. 25,000 and accounts receivable increases by Rs. 8,000. What will be the amount of cash received from customers for the period? |
| A. Rs. 33,000 B. Rs. 25,000 C. Rs. 17,000 D. Rs. 8,000 |
| Which of the following form of business organization is least regulated? |
| A. Sole-proprietorship B. General Partnership C. Limited Partnership D. Corporation |
| Which of the following statement is considered as the accountant’s snapshot of firm’s accounting value as of a particular date? |
| A. Income Statement B. Balance Sheet C. Cash Flow Statement D. Retained Earning Statement |
| Period cost include which of the following ? |
| A. selling Expense B. Direct labor C. factory overhead D. selling Expenses & administrative expenses |
| The compensation paid by the borrower of fund to lender, from the borrower point of the cost of borrowing fund is called? |
| A. Interest Rate B. Required rate of return C. Nominal interest rate D. All of the above |
| An income statement in which each item expressed as percentage of Sale? |
| A. Balance sheet B. income statement C. common size income statement D. All of the Above |
| Short term Assets expected to be converted into cash within 1 year or less than? |
| A. Current Assets B. Fixed Assets C. Current Assets& current liabilities D. All of the above |
| _________is the cost of converting raw material into finished products? |
| A. Prime cost B. Explicit cost C. Job order cost D. Conversion cost |
| Net sales equals, sales minus: |
| A. Return outwords B. Return inwards C. cost of goods sold D. carriage on sales |
| LIFO stands for__________? |
| A. Lots in , Few out B. Link input, Format Output C. Last input, First Output D. Last in, First Out |
| Property, Plant and Equipment are conventionally presented in the Balance Sheet at _________? |
| A. Replacement cost – Accumulated Depreciation B. Historical cost – Salvage Value C. Historical cost – Depreciation portion thereof D. Original cost adjusted for general price-level changes |
| Outstanding salaries is shown as___________? |
| A. An Asset in the Balance Sheet B. A Liability C. By adjusting it in the P & L A/c D. Both B. and C. above |
| Insurance prepaid is shown as:___________? |
| A. Current Asset B. Current Liability C. Fixed Asset D. Income |
| Depreciation appearing in the Trial Balance should be? |
| A. Debited to P&L A/c B. Shown as liability in Balance Sheet C. Reduced from related asset in Balance Sheet D. Both A. and C. above |
| A club paid subscription fees of `1,400. Out of which ` 200 is prepaid. In such case |
| A. P&L A/C is debited with 1,400 B. P&L A/C is debited with 1,200 C. 200 is shown as current asset D. Both B. and C. above |
| Bad debts recovered is: |
| A. Credited to P&L A/c B. Debited to P&L A/c C. Reduced from debtors in Balance Sheet D. Added to debtors in Balance Sheet |
| The adjustment to be made for prepaid expenses is____________? |
| A. Add prepaid expenses to respective expenses and show it as an asset B. Deduct prepaid expenses from respective expenses and show it as an asset C. Add prepaid expenses to respective expenses and show it as a liability D. Deduct prepaid expenses from respective expenses and show it as a liability |
| On scrutiny of a firm‘s books of accounts, it was observed that the following errors have occurred in the previous years but have not yet been rectified. |
| i. Depreciation for 2011-2012- 7,000 understated ii. Accrued expenses as at March 31, 2013 – 10,000 understated The impact of this on the reported net income for the year ending March 31, 2013 is |
| A. 7,000 Overstated B. 10,000 Overstated C. 17,000 Understated D. 17,000 Overstated |
| Which of the following entries is correct in respect of reserve for discounts on accounts payable? |
| A. Debit P&L A/c and Credit Reserve for Discount on Accounts Payable A/c B. Debit Accounts Payable A/c and Credit P&L A/c C. Debit Reserve for Discount on Accounts Payable A/c and Credit P&L A/c D. Debit Reserve for Discount on Accounts Payable A/c and credit Accounts Payable A/c |
| Sundry debtors as per Trial Balance is 43,000 which includes 2,200 due from ‗H in respect of goods sent to him on approval basis, the cost price of which is 1,800. Rectification would involve: |
| A. Adding 2,200 to closing stock B. Deducting 1,800 from closing stock and deducting 2,200 each from debtors and sales C. Adding 1,800 to closing stock and deducting 2,200 each from debtors and sales D. Deducting 1,800 from debtors |
| Goods in stock worth 800 are destroyed by fire and the Insurance Co. is accepted the claim for 600. Adjustment would involve |
| A. Debit of 800 to Trading Account and credit of 600 and 200 to insurance company and Profit and Loss Account respectively B. Deduct the 800 from closing stock in the Trading Account C. Credit insurance company for 600 D. Debit of 600 and 200 to insurance company and Profit and Loss Account respectively and credit of 800 to Trading Account |
| Prepaid expenses are valued on the Balance Sheet at |
| A. Replacement cost B. Current cost C. Cost to acquire less accumulated amortization D. Cost less expired portion |
| Which of the following relationships is/are false? |
| A. Net Profit = Gross Profit – Administration and Other expenses B. Net Profit = Gross Profit + Administration expenses and Other expenses C. Opening Stock + Purchases – Closing Stock = Cost of Sales D. Both B. and C. above |
| Gross Profit is equal to_________? |
| A. Sales – Cost of goods sold B. Sales – Closing Stock + Purchases C. Opening Stock + Purchases – Closing Stock D. None of the above |
| Which of the following shall not be deducted from net profit while calculating managerial remuneration? |
| A. Loss on sale of undertaking B. Debts considered bad and written off C. Liability arising from a breach of contract D. Director‘s remuneration |
| Which of the following equations is correct? |
| A. Gross Profit+ Sales+ Direct expenses+ Purchases+ Closing stock = Opening stock B. Gross Profit+ Sales+ Direct expenses+ Purchases- Closing stock = Opening Stock C. Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock = Sales D. Gross Profit – Opening Stock + Direct expenses + Purchases +Closing stock = Sales |
| Which of the following is not true with regard to preparation of Profit & Loss Account? |
| A. Profit & Loss Account is prepared for a certain period and hence it is an interim statement B. Profit & Loss Account does not disclose the effect of non-financial items C. Net Profits are ascertained on the basis of current costs D. Net Profits as disclosed by P&L Account is not absolute |
| The Profit and Loss Account shows the: |
| A. Financial results of the concern for a period B. Financial position of the concern on a particular date C. Financial results of the concern on a particular date D. Cost of goods sold during the period |
| Which of the following will not appear in Profit and Loss Account of a business? |
| A. Drawings B. Bad debts C. Accrued expenses D. Reserve for discount on Sundry Creditors |
| Which of the following is not a financial statement? |
| A. Profit and Loss Account B. Balance Sheet C. Funds Flow Statement D. Trial Balance |
| If unexpired insurance appears in the Trial Balance, it should be: |
| A. Credited to the Profit & Loss Account B. Debited to the Profit & Loss Account C. Shown on the liabilities side of the Balance Sheet D. Shown on the assets side of the Balance Sheet |
| Which of the following are/is not a fixed asset? |
| A. Stock B. Vehicle C. Fixed deposit in bank D. Both A. and C. above |
| Which of the following are/is a current asset? |
| A. Sundry Debtors B. Stock C. Prepaid insurance D. All of A. B. and C. above |
| Tax deducted at source appears in the Balance Sheet |
| A. On the assets side under current assets B. On the assets side under loans and advances C. On the liabilities side under current liabilities D. On the liabilities side under provisions |
| Which of the following statements is false ? select the false from below options |
| A. Balance Sheet discloses financial position of the business B. A person who owes to the business is called Debtor C. Decrease in the value of the asset could decrease the value of a liability D. Assets are to be shown in the Balance Sheet at the realizable value |
| The Balance Sheet gives information regarding the____________? |
| A. Results of operations for a particular period B. Financial position during a particular period C. Profit earning capacity for a particular period D. Financial position as on a particular date |
| Which of the following accounts appear(s) in the Balance Sheet of a business? |
| i. Stock at the end of the financial year ii. Stock at the beginning of the financial year iii. Drawings iv. Prepaid Rent v. Interest received but not yet earned |
| A. Only (i) above B. Only (iii) above C. Both (i)and (iii) above D. (i), (iii), (iv) and (v) above |
| Computers taken on hire by a business for a period of twelve months should be classified as:___________? |
| A. Current assets B. Intangible assets C. Deferred revenue expenditure D. Not an asset |
| Which of the following is not an intangible asset? |
| A. Trade mark B. Franchise C. Accounts Receivable D. Secret Profit |
| Which of the following is a current liability? |
| A. Prepaid expenses B. Trademark C. Discount on issue of shares D. Outstanding Salaries |
| Based on which of the following concepts, is Share Capital Account shown on the liabilities side of a Balance Sheet? |
| A. Business entity concept B. Money measurement concept C. Going concern concept D. Matching concept |
| Which of the following is not a contingent liability? |
| A. Debts included in Sundry Debtors which are doubtful in nature B. Uncalled liability on partly paid shares C. Claims against the company not acknowledged as debts D. Arrears of fixed cumulative dividend |
| Which of the following are current assets of a business? |
| i. Income received in advance ii. Stock iii. Debtors iv. Pre-paid expenses v. Accrued income |
| A. Both (i) and (iv) above B. Both (ii) and (iii) above C. (i),(ii) and (iii) above D. (ii),(iii),(iv) and (v) above |
| Closing entries are generally passed: |
| A. At the time of opening new books of account B. At the time of closing the accounts C. During the course of accounting period any time D. After certification of accounts |
| Closing stock appearing in the Trial Balance is shown in: |
| A. Trading A/c and Balance Sheet B. Profit and Loss A/c C. Balance Sheet only D. Trading A/c only |
| Depreciation Account appearing in the Trial Balance is shown in: |
| A. Profit and Loss A/c B. Trading A/c C. Deducted from the concerned assets A/c D. Shown on the liability side |
| Profit on sale of old plant is:___________? |
| A. In Trading A/c B. In Profit and Loss Appropriation A/c C. Profit and Loss A/c D. Being a non operating item ignored |
| Carriage on goods purchased is shown in:___________? |
| A. Profit and Loss A/c B. Capitalized with work in progress C. Trading A/c D. Shown in Balance Sheet |
| Which of these is not an operating income? |
| A. Income from sale of trading goods B. Bad debts recovered C. Interest on FDs D. None |
| Riaz holds an average inventory of 36,000(CP) with an inventory turnover of 5 times. If the firm makes a gross profit of 25% on sales, find the total sales of the company. |
| A. 2,40,000 B. 2,10,000 C. 2,00,000 D. 1,80,000 |
| From the following details what will be the partners commission? Net profit before charging partners commission 65,000. Partners commission @ 11% after charging such commission. |
| A. 6441 B. 5431 C. 7654 D. 9876 |
| From the following details what will be the partners commission? Net profit before charging partners commission 65,000. Partners commission 11% before charging such commission |
| A. 6441 B. 5431 C. 7150 D. 5876 |
| Arrangement of Balance Sheet in a logical order is known as __________? |
| A. Dressing Balance Sheet B. Marshalling Balance Sheet C. Formatting Balance Sheet D. Make up of Balance Sheet |
| Find the value of opening stock from the following data. Purchases 1,50,000, Closing stock 30,000 Sales 2,20,000, Gross profit 40,000. |
| A. 50,000 B. 55,000 C. 60,000 D. 65,000 |
| A Bill of Exchange is drawn on 1st April, 2018 payable after 3 months. The due date of the bill is? |
| A. 30th June,2018 B. 1st July,2018 C. 4th July,2018 D. 4th August,2018 |
| When bill discounted with the bank is dishonored? |
| A. Acceptor‘s Account is debited in the books of drawer B. Bills Receivable Account is credited in the books of drawer C. Bank Account is debited in the books of drawer D. Bills Payable Account is debited in the books of drawer |
| In the books of the drawer, the accounting treatment involved on receipt of a bill of exchange duly accepted by the drawee is? |
| i. Debit Bills Receivable Account ii. Debit Drawee‘s Account iii. Credit Drawee‘s Account iv. Credit Sales Account |
| A. Only (i) above B. Both (ii) and (iv) above C. Both (i) and (iii) above D. Both (i) and (iv) above |
| The noting charges levied on dishonour of an endorsed bill by the Notary Public are to be borne by |
| A. The drawer of the bill B. The person responsible for dishonour C. The holder of the bill D. The endorser of the bill |
| The drawer of a trade bill passes relevant entries with regard to the transaction involved in it. But, in case of an accommodation bill, he passes an entry in addition to the usual entries. The additional entry so passed is with respect to |
| A. Discounting of the bill with the bank B. Payment of the bill on due date C. Remitting or receiving the amount D. Sending the bill to bank for collection |
| Under which of the following situations, is journal entry not passed in the books of the drawer? |
| A. When a discounted bill is honoured by the drawee on the due date B. When a bill is sent to the bank for collection C. When a bill is renewed at the request of the drawee D. When a debtor accepts a bill drawn by the drawer |
| Which of the following is not a feature of a promissory note? |
| A. It must be in writing B. It contains an unconditional promise to pay C. It is payable to the bearer D. It must be signed by the maker |
| How many parties are generally found in a Bill of Exchange? |
| A. 4 B. 2 C. 3 D. 5 |
| Negotiable Instrument Act was enacted in_________? |
| A. 1981 B. 1881 C. 1871 D. 2001 |
| Which of these is not an essential feature of a bill of exchange? |
| A. Unconditional B. Certainty of amount C. In writing D. Amount to be paid in foreign currency |
| A foreign bill of exchange is generally drawn up in___________? |
| A. Triplicate B. Duplicate C. Single D. Quadruplicate |
| Which of these are not required in a promissory note? |
| A. Acceptance B. Unconditional promise to pay C. Properly stamped D. Payment to be made legal currency |
| X draws a Bill of Exchange on Y for 10,000 on 1-1-2013 for 3 months. The due date of the bill will be_________? |
| A. 4-4-2013 B. 3-4-2013 C. 1-4-2013 D. 31-3-2013 |
| Accommodation bills are generally for? |
| A. Genuine trade reasons B. For mutual financial accommodation C. To help augment money supply D. All the three |
| A cash deposit made by business appears on the bank statement as _______ balance? |
| A. Debit B. Credit C. Expenses D. Liability |
| A check returned by bank marked “NSF” means that: |
| A. Bank can’t verify your identity B. There are not sufficient funds in your account C. Check has been forged D. Check can’t be cashed being illegal |
| Bank reconciliation statement is prepared by____________? |
| A. Accountant of the business B. Manager of the business C. Controller of the bank D. Accountant of the bank |
| Bank charges amounting to $5000 was not entered in the cash book. Identify the correct adjustment in cash book? |
| A. Bank charges will be debited in cash book B. Bank charges will be added to cash book balance C. Bank charges will be credited in cash book D. Bank charges need no adjustment in cash book |
| Favorable balance of cash book implies that |
| A. Credit balance of cash book B. Debit balance of cash book C. Bank overdraft D. Adjusted balance of cash book |
| Bank reconciliation statement is the comparison of a bank statement (sent by bank) with the _________ (prepared by business). |
| A. Cash receipt journal B. Cash payment journal C. Cash book D. Financial statements |
| In the Bank reconciliation statement “Deposit in transit” is usually: |
| A. Subtracted from bank balance B. Added to bank balance C. Added to Cash book balance D. Subtracted from cash book balance |
| Unpresented checks also referred as____________? |
| A. Uncollected checks B. Uncredited checks C. Outstanding checks D. Bounced checks |
| A discount of $2000 was given to a supplier on his prompt repayment of debt but the cashier entered the gross amount in cash book. What should be the adjustment in cash to work out the correct balance of cash book? |
| A. $2000 will be debited in cash book B. $2000 will be credited in cash book C. $4000 will be debited in cash book D. $4000 will be credited in the cash book |
| Standing orders are ________ |
| A. Credited in the cash book B. Debited in the cash book C. Entered in the bank statement D. Entered in the petty cash balance |
| Uncollected checks also referred as______________? |
| A. Unpresented checks B. Uncredited checks C. Outstanding checks D. Bounced checks |
| ___________ are checks that are issued by the business but not yet presented to bank |
| A. Uncollected checks B. Uncredited checks C. Outstanding checks D. Bounced checks |
| Bank sent debit advice of $500 to company being interest on overdraft. It wasn’t entered in cash book. Identify the correct adjustment in cash book. |
| A. $500 will be debited B. $500 will be credited C. Non-adjustable D. $1000 will be subtracted |
| In bank reconciliation statement the amount of outstanding checks is added to ________ balance of cash book. |
| A. Adjusted B. Unadjusted C. Understated D. Overstated |
| Which of the following error results in unadjusted cash book balance? |
| A. Outstanding checks B. Unpresented checks C. Deposit in transit D. Omission of Bank charges |
| _________ Checks that are presented to bank but not yet credited by the bank. |
| A. Unpresented checks B. Uncredited checks C. Outstanding checks D. Bounced checks |
| Favorable balance of bank statement implies that |
| A. Credit balance B. Debit balance C. Bank overdraft D. Adjusted balance |
| Balance as per cash book(adjusted.=$1000, Unpresented checks=$2000, Uncredited checks=$500, Deposit in transit=$500. Compute the balance as per bank statement. |
| A. $2000 B. Zero C. $3000 D. $2500 |
| A company was entered in hire purchase agreement and had to pay $1000 per month. Three payments were made via bank account but no entry was found in cash book. Identify the correct adjustment in cash book |
| A. $1000 will be added to cash book balance B. $2000 will be deducted from cash book balance C. $3000 will be added to cash book balance D. $3000 will be subtracted from cash book balance |
| $5000 deposited in bank account was entered twice in the cash book. Identify the correct adjustment in cash book. |
| A. $5000 will be credited B. $5000 will be debited C. $10,000 will be credited D. $10,000 will be debited |
| An entry which is made on both sides of a cash book is called__________? |
| A. Cash entry B. Contra entry C. Payment entry D. Compound entry |
| Cash book records:______________? |
| A. Cash payments B. Cash receipts C. Cash payments and cash receipts D. Neither cash payments nor cash receipts |
| Cash book is prepared by____________? |
| A. Bank B. Accountant of business C. Manager of a company D. Bank’s cashier |
| Discount received is recorded on which of the following side of a cash book? |
| A. Receipts B. Payments C. Incomes D. Expenditures |
| The closing balance of petty cash book is considered as_________? |
| A. Liability B. Asset C. Expenses D. Income |
| A credit balance in cash book indicates? |
| A. Bank balance B. Cash at bank C. Bank overdraft D. Bank underdraft |
| Petty cash fund is supposed to be replenished? |
| A. Every day B. Every half year C. Every year D. At the end of every accounting period |
| Postdated checks are considered as__________? |
| A. Cash B. Bank balance C. Accounts receivable D. Cash reserve |
| Which of the following is generally not the party to a check? |
| A. Payee B. Payer C. Bank D. Seller |
| Cash book with cash and discount column is mostly referred as________? |
| A. Simple cash book B. Two column cash book C. Three column cash book D. Petty cash book |
| A simple or one column cash book usually has which of the following main columns? |
| A. Bank B. Payments C. Discount D. Cash |
| Purchase of office equipment for cash will be recorded on which of the following sides of a cash book? |
| A. Receipts B. Payments C. Incomes D. Expenditures |
| Postage stamps on hand are considered as_________? |
| A. Bank B. Prepaid expenses C. Accounts receivable D. Creditor |
| A cash book that is used to record the small payments of cash is generally referred as_________? |
| A. Simple cash book B. Two column cash book C. Three column cash book D. Petty cash book |
| Drawings by owner of business are generally recorded on which of the following side of a cash book? |
| A. Receipts B. Payments C. Incomes D. Expenditures |
| Payment of rent expenses is recorded on which side of cash book? |
| A. Receipts B. Payments C. Income D. Expense |
| Cash discount is allowed on _______ repayment of debt. |
| A. Lump sum B. Prompt C. Actual D. None of them |
| Introduction capital by owner of business is recorded on which side of a cash book? |
| A. Receipts B. Payments C. Incomes D. Expenditures |
| A cash book with cash, bank and discount column is commonly referred as________? |
| A. Cash book B. Two columns cash book C. Three columns cash book D. Petty cash book |
| The most common imprest system is the ________ system? |
| A. Petty cash B. Cash book C. Cash receipt D. Discount |
| Which English alphabet is similar to the shape of an account? |
| A. I B. T C. H D. None |
| When production is equal to sales, which of the following is TRUE? |
| A. No change occurs to inventories for either use absorption costing or variable costing methods B. The use of absorption costing produces a higher net income than the use of variable costing C. The use of absorption costing produces a lower net income than the use of variable costing D. The use of absorption costing causes inventory value to increase more than they would though the use of variable costing |
| An average cost is also known as________? |
| A. Variable cost B. Unit cost C. Total cost D. Fixed cost |
| Costs that change in response to alternative courses of action are called___________? |
| A. Relevant costs B. Differential costs C. Target costs D. Sunk costs |
| The total cost incurred in the operation of a business undertaking other than the cost of manufacturing and production is known as________? |
| A. Direct cost B. Variable cost C. Commercial cost D. Conversion cost |
| Consider the following data for a company during the month of June 2012 Budgeted hours 4,000 Standard hours for actual production 4,400 Maximum possible hours in the budget period 4,800 Actual hours 3,800 The activity ratio of the company during the month is |
| A. 111% B. 120% C. 95% D. 117% |
| Which of the following bases is not appropriate for apportionment of Transport department‘s cost ? |
| A. Crane hours B. Crane value C. Truck Mileage D. Truck value |
| The cost of obsolete inventory acquired several years ago, to be considered in a keep vs. disposal decision is an example of : |
| A. Uncontrollable cost B. Sunk cost C. Avoidable cost D. Opportunity cost |
| Budgeted sales for the next year is 5,00,000 units. Desired ending finished goods inventory is 1,50,000 units and equivalent units in ending W-I-P inventory is 60,000 units. The opening finished goods inventory for the next year is 80,000 units, with 50,000 equivalent units in beginning W-I-P inventory How many equivalent units should be produced? |
| A. 5,80,000 B. 5,50,000 C. 5,00,000 D. 5,75,000 |
| If the asset turnover and profit margin of a company are 1.85 and 0.35 respectively, the return on investment is. |
| A. 0.65 B. 0.35 C. 1.50 D. 5.29 |
| A company is currently operating at 80% capacity level. The production under normal capacity level is 1,50,000 units. The variable cost per unit is ` 14 and the total fixed costs are ` 8,00,000. If the company wants to earn a profit of ` 4,00,000, then the price of the product per unit should be |
| A. 37.50 B. 38.25 C. 24.00 D. 35.00 |
| Consider the following data pertaining to the production of a company for a particular month : |
| Opening stock of raw material 11,570 Closing stock of raw material 10,380 Purchase of raw material during the month 1,28,450 Total manufacturing cost charged to product 3,39,165 Factory overheads are applied at the rate of 45% of direct labour cost. The amount of factory overheads applied to production is A. 65,025 B. 94,287 C. 95,020 D. 1,52,624 |
| If the minimum stock level and average stock level of raw material are 4,000 and 9,000 units respectively, find out its reorder quantity. |
| A. 8,000 units B. 11,000 units C. 10,000 units D. 9,000 units |
| A worker has a time rate of 15/hr. He makes 720 units of component (standard time : 5 minutes/ unit) in a week of 48 hours. His total wages including Rowan bonus for the week is |
| A. 792 B. 820 C. 840 D. 864 |
| One of the most important tools in cost planning is__________? |
| A. Direct cost B. Cost Sheet C. Budget D. Marginal Costing. |
| A Ltd. Has sales of 2,200, total fixed cost of 570, variable cost of 1,540, raw material consumed of ` 1,100, number of units sold 22,000. What shall be the BEP 9 in units) if raw material price is reduced by 2%? |
| A. 18,387 B. 18,560 C. 18,750 D. 19,000 |
| Find the cost of goods sold if goods are sold for 2,000 at 25% profit on cost? |
| A. 1,600 B. 1,500 C. 1,000 D. 1,800 |
| The process of paying off debt over time in regular installment of interest & principal sufficient to repay the loan in fully by its maturity date. |
| A. Amortization B. Loan Payment C. Liability D. Securitization |
| IFRS 9 explains about? |
| A. Inventory B. Accounts Payable C. Accounts Receivable D. Expenses |
| Direct cost incurred can be identified with_______________? |
| A. Each Department B. Each unit of output C. Each Month D. Each Executive |
| Overhead cost is the total of ____________. |
| A. all indirect costs. B. all direct costs. C. indirect and direct costs. D. all specific costs |
| Warehouse rent is a part of _________? |
| A. prime cost. B. factory cost. C. distribution cost. D. production cost |
| Tender is an_____________? |
| A. estimation of profit. B. estimation of cost. C. estimation of selling price. D. estimation of units. |
| Audit fess is a part of__________. |
| A. works on cost. B. selling overhead. C. distribution overhead. D. administration overhead |
| Depreciation fund method is also known as__________? |
| A. Sinking Fund Method B. Annuity Method C. Sum of Year Digits Method D. None of these |
| Non Trading institution prepare:______________? |
| A. profit and loss account B. Manufacturing account C. Income and Expenditure Account D. Cost of good sold |
