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MCQ Accounting for Business Decisions (101)

Introduction to Accounting and Financial Statements


1. Which of the following is not a fixed asset?
a. Building.
b. Bank Balance.
c. Plant.
d. Patents.
e. Goodwill.
2. Which of the following is/are not a revenue reserve?
a. General reserve.
b. Investment allowance reserve.
c. Revaluation reserve.
d. Capital reserve.
e. Both (c) and (d) above.
3. Gross profit is the difference between
a. Net sales and cost of goods sold.
b. PAT and dividends
c. Net sales and cost of production
d. Net sales and direct costs of production.
4. Recording of capital contributed by the owner as liability ensures the
adherence of principle of
a. Double entry
b. Going concern
c. Separate entity
d. Materiality
e. Consistency
5. The basic concept related to balance sheet are
a. Cost concept
b. Business entity concept
c. Accounting period concept
d. Both (a) and (b) above
e. All the above
6. The basic concept related to P&L Account are
a. Realization concept
b. Matching concept
c. Cost concept
d. Both (a) and (b) above
e. All of (a), (b) and (c) above.
7. As per the double entry concept
a. Assets + Liabilities = Capital
b. Capital = Assets Liabilities
c. Capital Liabilities = Assets
d. Capital + Assets = Liabilities
e. None of the above.
8. Only the significant events which affect the business must be recorded
as per the principle of
a. Separate entity
b. Accrual

c. Materiality
d. Going concern
e. None of the above
9. P&L account is prepared for a period of one year by following
a. Consistency concept
b. Conservatism concept
c. Time period concept
d. Cost concept
e. None of the above
10.
If the going concern concept is no longer valid, which of the
following is true?
a. All prepaid assets would be completely written-off immediately
b. Total contributed capital and retained earnings would remain
unchanged.
c. The allowance for uncollectible accounts would be eliminated
d. Intangible assets would continue to be carried at net amortized
historical cost.
e. Land held as an investment would be valued at its realizable value
11.
Under which of the following concepts are shareholders treated
as creditors for the amount they paid on the shares they subscribed
to?
a. Cost concept.
b. Duality concept
c. Business entity concept
d. Going concern concept
e. Since the shareholders own the business, they are not treated as
creditors.
12.
The underlying accounting principle(s) necessitating amortization
of intangible asset(s) is/are
a. Cost concept
b. Realization concept
c. Matching concept
d. Both (a) and (c) above
e. Both (b) and (c) above
13.
Which of the following practices is not in consonance with the
convention of conservatism?
a. Creating provision for bad debts.
b. Creating provision for discount on creditors.
c. Creating provision for discount on debtors.
d. Creating provision for tax.
e. None of the above.
14.
The accounting measurement that is not consistent with the
going concern concept is
a. Historical cost
b. Realization
c. The transaction approach
d. Liquidation value
e. Continuity
15.
Recording of fixed assets at cost ensures adherence of
a. Conservatism concept
b. Going concern concept

c. Cost concept
d. Both (a) and (b) above
e. Both (b) and (c) above
16.
Certain fundamental accounting assumptions underlie the
preparation and presentation of financial statements. They are usually
not specifically stated because their acceptance and use are assumed.
Disclosure is necessary if they are not followed. Which of the following
are not fundamental assumptions specified under Accounting
Standard-1?
a. Going concern concept.
b. Consistency concept
c. Accrual concept
d. Materiality concept
e. Both (a) and (b) above.
17.
Which of the following statements is /are true?
i.
The entity concept of accounting is not applicable to sole trading
concerns and partnership concerns
ii.
Assets are to be shown in the balance sheet at their replacement
cost on liquidation.
iii.
Money measurement concept takes into account changes in the
value of monetary unit.
iv.
When a creditor is paid, this results in decrease of one asset and
a corresponding increase in another asset.
a. Both (i) and (iii) above
b. Both (i) and (ii) above
c. Both (iii) and (iv) above
d. Both (ii) and (iv) above
e. All (i), (ii),(iii) and (iv) are false
18.
Omission of paise and showing the round figures in financial
statement is based on
a. Conservation concept
b. Consistency concept
c. Materiality concept
d. Realization concept
e. Cost concept
19.
X Ltd., purchased goods for Rs.5lakhs and sold 9/10th of the value
of goods for Rs. 6 lakh. Net expenses during the year were Rs. 25,000.
The company reported its net profit as Rs. 75,000. Which of the
following concept is violated by the company?
a. Realization
b. Conservation
c. Matching
d. Accrual
e. Materiality
20.
Accounting does not record non-financial transaction because of
a. Entity concept
b. Accrual concept
c. Cost concept
d. Money measurement concept
e. Continuity concept.

21.
Mr. Rohit, owner of Rohit Furniture Ltd. Owns a personal
residence that cost Rs.6,00,000, but has a market value of
Rs.9,00,000. During preparation of the financial statement for the
business, the entire value of property was ignored and was not shown
in the financial statements. The principle that was followed was
a. The concept of business entity
b. The concept of the cost principle
c. The concept of going concern principle
d. The concept of duality principle
e. The concept of realization principle
22.
Provision for bad debt is made as per the
a. Entity concept
b. Conservatism concept
c. Cost concept
d. Going concern concept
e. Time period concept
23.
Fixed assets and current assets are categorized as per concept of
a. Separate entity
b. Going concern
c. Contingency
d. Consistency
e. Time period
24.
Capital is shown under liabilities because of the
a. Conservatism concept
b. Accrual concept
c. Entity concept
d. Revenue recognition concept
e. Matching concept
25.
Which of the following statements is true?
a. Going concern concept assumes that business will be carried on for
a definite period.
b. Time period concept facilitates the comparison of the results of one
accounting period of a business with that in the past.
c. The capital losses need not be deducted to ascertain net income.
d. Provision for bad and doubtful debts is created in recognition of
conservatism concept.
e. Materiality concept states that all business transactions are to be
recorded however insignificant they may be.
26.
The expenses and income pertaining to full trading period are
taken to the Profit and Loss account of a business irrespective of their
payment of receipt. This is in recognition of
a. Time period concept
b. Business entity concept
c. Going concern concept
d. Accrual concept
e. Duality concept.
27.
Which of the following is an example of capital expenditure?
a. Insurance premium
b. Taxes and legal expenses
c. Depreciation on machinery

d. Discount allowed
e. Customs duty on import of machinery.
28.
Which of the following events is/are not recorded in the books of
a business?
a. Significant monetary events after the balance sheet date.
b. Death of a chief executive of the business.
c. Government investigations into the pricing policies of the business
d. Both (b) and (c) above
e. All of (a), (b) and (c) above.
29.
Which of the following concept is not considered a basic principle
of accounting?
a. Materiality concept
b. Cost concept
c. Consistency concept
d. Matching concept
e. Logical concept
30.
In contract accounting, the percentage of completion method is
an exception to the
a. Matching principle
b. Going concern principle
c. Historical cost principle
d. Business entity principle
e. Revenue recognition principle
31.
Which of the following concepts assumes that a business will last
indefinitely?
a. Business entity.
b. Going concern.
c. Periodicity
d. Conservatism
e. Consistency.
32.
If unexpired insurance appear in trial balance it should be
a- Debited to trading account
b- Credited to Profit and Loss account
c- Debited to P&L account
d- Shown In liabilities in balance sheet
e- Shown on asset side of business
33.
Which of the following is not a fixed asset?
a- Stock
b- Vehicle
c- FD in bank
d-a &c
e- b & c
34.
Which of the following is a current asset?
a- sundry debtors
b- Stock
c- Prepaid insurance
d- Both a & b
e-All of the above
35.
Which statement is false?
a- Owner equity + outsiders liability = Assets
b- Assets - capital= Liability

c- Assets + capital= Liability


d- Capital- Liability = Assets
e- Both c & d
36.
Tax deducted at source appears in balance sheet
a- on asset side under current asset
b- on asset side under loans and advances
c- under current liabilities
d- on liability side under provisions
e- On asset side under miscellaneous expenses
37.
Which of the following statement is not true?
a- Balance sheet discloses financial position of business
b- Increase in the value of one asset could reduce the value of other
asset
c- A person who owes to business is called debtor
d- Decrease in value of an asset could decrease the value of liability.
e- Assets are to be shown in balance sheet at a realizable price
38.
Which of following statement is true?
a-The balance of goods account shows the values of stock in hand
b- Balance of all accounts must be done at end of each day.
c- Balance of nominal account are carried forward to next financial year
d- Assets which are to remain in the business for continuous use and are
not meant for
conversion into cash are fixed assets
e- Balance sheet discloses the income position of business
39.
Which accounts appear in balance sheet of business?
a- Closing stock
b- Opening stock
c- Drawings
d- Prepaid Rent
e- Interest received but not yet earned.
f- Both a & c
g- a & c & d & e
h- All a to e
40.
Which of the following is not an intangible asset
a- Goodwill
b- Trademark
c- Franchise
d- Accounts receivable
e- Patents.
41.
Which of the following is a current liability?
a- Prepaid expenses
b- Trademark
c- Discount if issue of shares
e- Outstanding Salaries
f- Fixed Deposits

42.
Based on following which concept, is share capital account
shown on liabilities side of balance sheet?
a- Business entity concept
b- Money Measurement Concept
c- Duality concept
d- Going concern concept
e- Matching concept
43.
Which of the following is not a contingent liability?
a- Doubtful Debts
b- Uncalled liability on partly paid shares
c- Claims against company not acknowledged as debts.
d- Arrears of fixed cumulative dividend.
e- Liability on bills receivable previously discounted.
61. Which of the following are current assets of business?
- Income received in advance
- Stock
- Debtors
- Prepaid expenses
- Accrued income
a- a & d
b- b & c
c- a, b and c
d- b, c, d and e
e- a, b, c and d
62.
Mr. Rohit owner of Rohit furniter ltd. owns a personal residence
that costs Rs. 6, 00,000, but has a market value of Rs. 9, 00,000.
During preparation of the financial statement for the business, the
entire value of the property was ignored and was not shown in the
financial statements. The principle that was followed was
a. The concept of business entity
b. The concept of the cost principle
c. The concept of going concern principle
d. The concept of duality principle
e. The concept of realization principle
63. Provision for bad debt is made as per the
a. Entity concept
b. Conservation concept
c. Cost concept
d. Going concern concept
e. Time period concept
64. Fixed assets and current assets are categorised as per concept of
a. Separate entity
b. Going concern
c. Contingency
d. Consistency
e. Time period
65. Capital is shown under liabilities because of the

a. Conservation concept
b. Accrual concept
c. Entity concept
d. Revenue recognition concept
e. Matching concept
66. Which of the following is the expenses and incotrue?
a. Going concern concept assumes that the business will be
carried on for a definite period.
b. Time period concept facilitates the comparison of the results
of one accounting period of a business with that in the past.
c. The capital losses need not be deducted to ascertain net
income.
d. Provision for bad and doubtful debts is created in recognition
of conservation concept.
e. Materiality concept states that all business transactions are to
be recorded however insignificant they may be.
67. The expenses and incomes pertaining to full trading period are
taken to the Profit and Loss account of a business, irrespective of
their payment or receipt. This is in recognition of
a. Time period concept
b. Business entity concept
c. Going concern concept
d. Accrual concept
e. Duality concept
68.

Which of the following is an example of capital expenditure?


a. Insurance premium
b. Taxes and legal expenses
c. Depreciation on machinery
d. Discount allowed
e. Customs duty on import of machinery
69. Which of the following events is/are not recorded in the books of
the business?
a. Significant monetary events after the balance sheet date
b. Death of a chief executive of the business
c. Government investigations in the pricing of the business
d. Both (b) and (c) above
e. All of (a),(b) and (c) above
70. Which of the following is not considered as the basic principle of
accounting
a. Materiality concept
b. Cost concept
c. Consistency concept
d. Matching concept
e. Logical concept
71.
Which of the following concepts assumes that a business will
last indefinitely?
a. Business entity
b. Going concern
c. Periodicity
d. Conservation

e. consistency
72. Which of the following statements is/are true? Events after
balance sheet date are
a. All significant events.
b. The events after balance sheet date but before its approval by
the board.
c. The events after balance sheet date but its approval
d. all the errors rectified after the balance sheet date.
73. Which of the following are examples of contingencies?
a. Compulsory acquisition of part of land of the company by
Government.
b. A suit filed by the employee against the company.
c. A debtor of the company is declared insolvent, resulting in
bad debts to the company.
d. b and c
e. a, b and c
74. If the petty cash fund is not reimbursed just prior to year end and
an appropriate adjusting entry is not made, then
a. A complete audit is necessary
b. The petty cash a/c is to be returned to the companys cashier
c. Expenses are overstated and the cash is understated.
d. Cash is overstated and expenses are understated.
75.

76.

77.

78.

The periodical total of the sales returns book is posted on the


a. Cr. Sales a/c
b. Dr. sales a/c
c. Dr. sales returns a/c
d. Cr. Sales returns a/c
e. Dr. debtors a/c
Trade discount allowed at the time of sale of goods
a. Is recorded in sales book
b. Is recorded in cash book
c. Is recorded in journal
d. Is not recorded in books of accounts
e. Is recorded in petty cash book.
Which of the following is/are true?
a. Cash book records all cash receipts and cash payments.
b. Cash book records all sale and purchase transactions of goods
both in cash and on credit.
c. Cash book records discount on cash payments.
d. a and b
e. a, b and c
Purchase of goods for cash from Rasheed is to be recorded by:
a. dr. purchases a/c and cr.Rasheed a/c
b. dr. cash a/c and cr. Rasheed a/c
c. dr. purchases a/c and cr. Cash a/c
d. dr. Rasheed a/c and cr. Cash a/c
e. dr. cash a/c and cr. Purchases a/c

79. Which of the following is true?


1) Bank account is a personal account.

2) Stock of stationery account is a nominal account.


3) Return inward is a personal account.
4) Capital account is a real account.
1)
2)
3)
4)
5)

80. Which of the following is a liability of a firm?


Debit balance of analytical petty cash book.
Credit balance of a bank pass book.
Debit balance of bank column of cash book.
Debit balance of cash column of cash book.
Credit balance of bank column of cash book.

Preparation of Financial Statements= Profit and Loss Account.


81. Which of the following relationships are not true?
net profit= gross profit- administration and other expenses.
Net profit= gross profit+ administration expenses and other expenses.
Opening stock+ purchases closing stock = cost of sales.
Opening stock + purchases+ gross profit + direct expenses closing
stock.
5) Both b and c above.
1)
2)
3)
4)

1)
2)
3)
4)
5)

82. Gross profit is equal to?


Sales- cost of goods sold.
Sales closing stock + purchases
Opening stock + purchases closing stock.
Net profit- expenses.
None of the above.

1)
2)
3)
4)
5)

83. Depreciation is calculated is calculated on the


Cost price of the asset.
Market price.
Cost + transport + installation expenses.
Cost of market value whichever is less.
None of the above.

1)
2)
3)
4)
5)

84. Which of the following shall not be deducted from net profit while
calculating managerial remuneration?
Interest on debentures issued buy a company.
Loss on sale of undertaking
Debts considered bad and written off.
Liability arising from a breach of contract.
Managing directors remuneration.

1)
2)
3)
4)
5)

85. Insurance prepaid is shown as


Current asset
Current liability
Fixed asset
Income
Other liability.
86.

Depreciation appearing in the trail balance should be

1)
2)
3)
4)
5)

Debited to P&L a/c


Shown as liability in balance sheet
Reduced from related asset in balance sheet
Both (a) and (b) above
Both (a) and (c) above.

1)
2)
3)
4)
5)

87. Buildings account is debited with an amount towards repairs.


This is an example of
Error of commission
Error of principle
Error of omission
Compensating error
None of the above

88. A club paid subscription fees of Rs.1400, out of which Rs.200 is prepaid,
in such case
1) P&L a/c is debited with Rs.1400
2)P&L a/c is debited with Rs.1200.
3) Rs.200 is shown as current asset
4) Both (b) and (c) above
5) Both (a) and (c) above
89.
Bad debts recovered is
1) Credited to P&L a/c
2) Debited to P&L a/c
3) Reduced from debtors in balance sheet
4) Both (b) and (c) above
90.
The concept of conservatism will have the effect of
1) Overstatement of assets
2) Understatement of assets
3) Overstatement of liabilities
4) Understatement of liabilities
91.
Bank overdraft is shown as
1) Current liability
2) Contingent liability
3) Current asset
4) Unsecured loan
5) Provision
92. 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 expenditure.
d. Repairs and maintenance on fixed assets like machines.
e. Small expenditures on long-lived assets, such as Rs.20 for a paper weight.
93. Which of the following is not true with regard to preparation of profit and
loss account?
a. Profit and loss account is prepared for a certain period and hence it is an
interim statement.
b. Profit and loss account does not disclose the effect of non-financial items.

c. Net profits are ascertained on the basis of current costs.


d. The profit as disclosed by P&L account is not absolute.
e. The T P&L account does not reveal true profit.
94. 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 permanent asset.
d. Results in the acquisition of a current asset.
e. Results in the acquisition of a current asset or permanent asset.
95. 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 position of the concern for a period.
d. Financial results of the concern on a particular date.
e. Cost of the goods sold during the period.
96. Which of the following is not deferred revenue expenditure?
a. Expenses in connection with issue of equity shares.
b. Preliminary expenses.
c. Preoperative expenses.
d. Heavy advertising expenses to introduce a new product.
e. Legal expenses incurred in defending a suit for breach of contract to
supply goods.
97. From the accounting point of view, loss means
a. Increase in liability.
b. Decrease in asset.
c. Increase in owners equity.
d. Decrease in owners equity.
e. Increase in asset.
98. Which of the following is an item of capital expenditure?
a. Annual fire insurance premiums on plant and equipment.
b. Research and Development costs during the year.
c. Interest on borrowed fund utilized for acquisition of office furniture.
d. Sales tax paid in conjunction with the purchase of office equipment.
e. Monthly rent of machinery used in the business.
99. Which of the following statement is true?
a. Provision for doubtful debts represents the amount that cannot be
collected.
b. Interest paid on borrowings is a capital expenditure.
c. Cash balance on hand shows whether the business has earned profit or
loss.
d. Free samples received are business gains.
e. The WDV of an asset depreciated on the reducing balance method can
never become zero.
100. Cash profit is
a. Gross profit Net profit
b. Net profit Net trading profit Depreciation and provision.
c. Gross profit Non-trading profit + Depreciation and provision.
d. Net profit + Depreciation and provision.
e. Gross profit Operational expenses.

101. Which of the following statements is false?


a. Provision for discount on debtors can be estimated only after computing
the provision for doubtful debts.
b. All pre-received incomes under the cash system of accounting are current
gains.
c. Cash balance on hand shows whether the business has earned profit or
loss.
d. Capital expenditure should be shown in the books by debiting asset
account and crediting supplier or cash account.
e. The distinction between capital and revenue is important for the
determination of profit.
102. Which of the following statements is true?
a. Provision for doubtful debts represents the amount that cannot be
collected.
b. The distinction between capital and revenue items is important because it
is of fundamental importance to the determination of profits.
c. Interest paid on borrowings is a capital expenditure.
d. Goods lost by fire need not be accounted for since they are not sales.
e. Free samples received are business gains.
103. The balances 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.
e. Outward returns.
104. Which of the following will not appear in Profit and Loss account of a
business?
a. Drawings
b. Bad debts.
c. Provision for doubtful debts.
d. Accrued expenses.
e. Reserve for discount on sundry creditors.
105. XYZ Ltd. paid wages of Rs.8,000 for erection of machinery. The journal
entry for the transaction is
a. Debit wages and credit cash
b. Debit machinery and credit cash
c. Debit wages and credit erection charges
d. Debit machinery and credit erection charges
e. Debit wages and credit machinery account
106. Which of the following statement is not true?
a. When the bank column of a cash book shows a credit balance, it
means an amount is due to the bank.
b. When passbook shows a debit balance, it means overdraft as per
passbook.
c. While preparing bank reconciliation statement, cheques paid into
bank but not yet cleared are deducted from the Debit balance as
per cash book to arrive at the balance as per passbook.
d. A bank reconciliation statement is a part of passbook.

107.

108.

109.

110.

e. A bank reconciliation statement is a statement, but not the


account by the customer of the bank.
Which of the following statement is true?
a. The 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 liability.
d. Cash book is a subsidiary book as well as a ledger.
e. Purchase book makes a record of all purchases.
Which of the following is true regarding closing entries?
a. They must be followed by revering entries.
b. They transfer the balance 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
reversing entries.
e. They transfer the balance in all Real accounts to profit and loss
account.
Purchase of goods on credit
a. Increases liabilities
b. Increases assets
c. Increases both assets and liabilities
d. Decrease assets
e. Decrease liabilities.
Purchase of raw material for cash
a. Increases total assets
b. Increases total liabilities
c. Total assets remains unchanged
d. Increases total fixed assets
e. Increases total current assets.

111. Which of the following is not an asset?


a. Stock of stationery
b. Goodwill
c. Profit and loss account (Credit balance)
d. Accounts Receivable
e. Cash at bank.
112. The process of balancing of an account involves equalization of both
sides of the account. If the debit side of an account exceeds the credit
side, the difference is put on the credit side. The said balance is
i. A debit balance
ii.
A credit balance
iii.
An expenditure or an asset
iv.
An income or a liability.
a. Only (ii) above
b. Only (iv) above
c. Both (i) and (iii) above
d. Both (ii) and (iii) above
e. Both (ii) and (iv) above
113. Which of the following statement is not true?

114.

115.

116.

117.

a. Wages paid on installation of machinery should be credited to


cash account.
b. A sale of computer that has been used in the business should be
debited to cash account
c. Error of posting of a correctly recorded transaction affects one or
more accounts
d. Repairs of a machinery purchased second hand should be
debited to machinery account
e. Withdrawal of goods by the proprietor of the business should be
credited to capital account.
Which of the following transactions of a business is/are recorded in
journal proper?
i. Purchase of goods on credit
ii.
Sale of office furniture for cash
iii.
Discounting of bill of exchange with a bank
iv.
Endorsement of a bill of exchange in settlement of debt of
the business.
a. Only (i) above
b. Only (iv) above
c. Both (ii) and (iv) above
d. (i), (iii) and (iv) above
e. All of the above.
Which of the following statement is/are true?
i. Drawings account is a nominal account.
ii.
Capital account is a real account.
iii.
Sales account is a nominal account.
iv.
Outstanding salaries account is a nominal account.
v. Patents account is a personal account.
a. Only (i) above
b. Only (iii) above
c. Both (ii) and (iv) above
d. (ii), (iv) and (v) above
e. All of the above.
They entry to record the collection of cash from sundry debtors would
involve a
i. Debit to sundry debtors
ii.
Debit to cash account
iii.
Credit to sundry debtors
iv.
Credit to cash account
a. Only (i) above
b. Only (ii) above
c. Both (iii) above
d. Both (ii) and (iii) above
e. Both (i) and (iv) above.
ABC Ltd. makes payments to its sundry creditors through cheques and
the cash discount received on these payments is recorded in the triple
columnar cash book. In the event of dishonor of any such cheques, the
discount so received should be written back through
i. A debit to discount column of the cash book.
ii.
A credit discount column of the cash book.
iii.
A credit to bank cplomn of the cash book.

iv.
A debit to discount account through journal proper.
v. A credit to creditors account through journal proper.
a. Only (i) above
b. Only (ii) above
c. Only (iv) above
d. Both (i) and (iii) above
e. Both (iv) and (v) above.
118. RS Ltd. makes purchases on credit. If the purchases are not as per the
specifications, the company returns them to the suppliers. The book, that is
used to record such returns is
a. Returns inward book
b. Returns outward book
c. Cash book
d. Journal proper
e. Purchases day book.
119. If office equipment is purchased for cash, what effect will this
transaction have on the financial position of the company?
a. There is no change in the assets, liabilities and owners equity.
b. There is a decrease in assets, increase in liabilities and no
change in owners equity.
c. There is a decrease in assets, no change in liabilities and a
decrease in owners equity.
d. There is an increase in assets, decrease in liabilities and no
change in owners equity.
e. There is an increase in assets, no change in liabilities and
increase in owners equity.
1)
a)
b)
c)
d)

The basic function of financial accounting is to


Record all business transactions
Interpret the financial data
Assist the management in performing functions effectively
None of these

2)
Management Accounting provides invaluable services to management in
performing
a)
All management functions
b)
Controlling functions
c)
Interpret the financial data
d)
None of these
3)
a)
b)
c)
d)
4)
a)
b)
c)
d)

The accounting principle which refers to tendency of accountants to resolve


uncertainty and doubt in favor of understating assets and revenues and
overstating the liabilities and expenses is known as
Conservatism
Materiality
Consistency
None of these
During the life-time of an entity, accountants produce financial statements at
arbitrary points in time in accordance with which basic accounting principle?
Matching
Periodicity
Conservatism
None of these

5)
a)
b)
c)
d)

Management Accounting is
Extension of financial accounting
Extension of financial management
Accounting for management
Concerned with the provision of information to people within the organization
to help them to make better decisions

6)
Management accounting renders useful information to management in
performing
a)
All management functions
b)
Control functions
c)
Co-ordination functions
d)
Business functions
7)
a)
b)
c)
d)

Management accounting involves


Recording of costs
Recording of transactions
Preparation of financial statement
Analysis and interpretation of data

8)
a)
b)
c)
d)
9)
a)
b)
c)
d)

Management accounting and Cost Accounting are


Supplementary to each other
Complementary to each other
Independent to each other
Opposite to each other
Cost accounting is different from financial accounting in respect of
Inventory valuation
Ascertainment of cost
Recording of cost
Reporting of cost

10)
a)
b)
c)
d)

Cost refers to
The value of the sacrifice made to get some goods or services
The present value of future benefits
An asset which has given benefit and is now expired
All of these

11)
a)
b)
c)
d)

Accounting records
Qualitative aspect of business
Quantitative aspect of business
Economic aspect of business
Financial aspect of business

12)
a)
b)
c)
d)

Accounting records
Qualitative aspect of business
Quantitative aspect of business
Economic aspect of business
Financial aspect of business

13)
a)
b)
c)
d)

Management accounting
Is the process of accounting and controlling the cost of a product
Is mainly confined to the preparation of financial statements
Is a branch of financial accounting
Is to find out the profitability

14)
Objective of cost accounting
a)
Is to keep the management fully informed about the latest position of the
concern
b)
Is to summarise the financial performance of the business for external
stakeholders
c)
Is to create a common internal global 'language' in decision making
d)
Is to ascertain. the profitability of the activities carried out or planned _
15)
The art of recording the business transactions in a systematic and regular
manner refers to
a)
Accounting
b)
Cost accounting
c)
Book- keeping
d)
Financial accounting
16)
In financial accounting only transactions
a)
In monetary terms are considered
b)
In non-monetary terms are considered
c)
In an orderly manner are considered
d)
In the balance sheet are considered
17)
The full disclosure principle states
a)
That accounting practices should remain unchanged from one period to
another
b)
The tendency to maintain a state of affairs without a sudden change
c)
That all information significant to the users of financial statements should be
disclosed
d)
To the relative importance of an item or event
18)
a)
b)
c)
d)

Planning and forecasting is the function of


Financial accounting
Book-keeping
Cost accounting
Management accounting

19)
a)
b)
c)
d)

Managers implement strategies by translating them into


Actions
Services
Results
Policies

20)
Essential characteristic of accounting is
a)
Identification, measurement, recording, classification, analyzing and
communication
b)
Tracking methods that allow control of operations
c)
To satisfy the wishes of the management
d)
To act as a co-coordinator among different financial departments
21)
a)
b)
c)
d)

One of the external users of accounting information are


Managers
Proprietors
Creditors
Employees

22)
a)
b)

Limitations of financial accounting include:


Recording of Monetary Transactions Only
Recording of non-monetary Transactions Only

c)
d)

May be Manipulated
Both (a) & (c)

23)
a)
b)
c)
d)

Who are the external users of accounting?


Proprietors
Creditors
None
Managers

24)
a)
b)
c)
d)

Which among the following is not a concept of financial accounting?


Accrual Concept
Going Concern Concept
Similar Entity Concept
Dual Aspect Concept

25)
Decision Making as a role of management accounting in a Business
Organization means :
a)
Track the costs of each activity
b)
Helping management by providing relevant information
c)
Ensuring value for money for the customers.
d)
Creating value by enhancing their supply chain
26)
Scope of management accounting includes:
a)
Covering financial accounting, cost accounting and all aspects of financial
management.
b)
Preparing Trading Ne, Profit and Loss Ne and Balance Sheet.
c)
Measuring the economic performance of the cost centres.
d)
Focus attention on past and current operations.
27)
Cost Accounting:
a)
Uses information generated by economics, mathematics, statistics, etc.
b)
Uses output data.
c)
Uses the basic records (voucher's etc.) of financial accounting for generation
of information.
d)
Both (a) and (b)
28)
a)
b)
c)
d)

In financial accounting classification of recorded facts, with entities of one


nature at one place is done in the book called:
Trial Balance
Journal
Income Statement
Ledger

29)
n)
b)
c)
d)

Historical nature of financial accounting takes into account


The transaction which have already taken place
Futuristic transactions
Transactions taking place
Both (a) and (b)

30)
a)
b)
c)
d)
31)
a)

At any time the accounting equation is


Net Income = Net Expenses - Net Revenues
Assets = Capital - Liabilities
Assets = Liabilities + Capital
Net Income = Net Revenues - Net Expenses
Which of the following is not a convention of financial accounting?
Consistency

b)
Non - Materiality
c)
Full Disclosure
d)
Conservatism
MCQ- 2nd Unit
I)
Outstanding expenses appearing in the Trial Balance are shown in the
a)
Profit and loss Ne
b) Balance sheet
c)
In both (a) and (b)
d) None of these
2)
a)
b)
c)
d)

Sales are equal to


Net income + Expenses + Cost of goods sold
Gross profit + Cost of sales + Expenses
Net income + Cost of goods sold
None of these

3)
a)
b)
c)
d)

Bank overdraft is shown as a


Current liability
Contingent liability
Current asset
Unsecured loan

4)
a)
b)
c)
d)

Returns inward are deducted from


Current liability
Purchases
Returns outward
None of these

5)
a)
b)
c)
d)

Gross profit Net profit


Gross profit -Net profit
Net profit - Non-trading profit - Depreciation and provision
Gross profit - Non-trading profit + Depreciation and provision
Net profit + Depreciation and provision

6)
a)
b)
c)
d)

Which of the following is not a financial statement


Profit and loss account
Profit and loss appropriation account
Balance sheet
Trial balance

7)
a)
b)
c)
d)

The Companies Act prescribes the format for


Both Profit and Loss Account and Balance Sheet
Only Profit and Loss Account
Only Balance Sheet
Neither of the two

8)
a)
b)
c)
d)

As per Schedule VI of the Companies Act, 1956, unclaimed dividends are to be shown
As a deduction from claimed dividends
As an addition to unpaid interest
As a deposit in a nationalized bank
As a current liability

9)
a)
c)

Which of the following is not an example of fixed asset?


Plant and machinery
b) Land and building
Royalty
d) Patent

10)
a)

Features of a partnership firn are


Two or more persons carrying common business under an agreement.

b)
c)
d)

Sharing profits and losses in the agreed ratio.


Business carried by all or any of them acting for all.
All of the above.

1l)
a)
b)
c)
d)

In the absence of any agreement, partners are entitled to


12% simple interest
12% Compounded annually
6% Simple interest
6% p.a. Simple interest

12)
a)
c)

A partner acts as for a firm.


An agent
b)
Third Party
Employee
d)
None of these

13)
a)
c)

Profit and Loss Appropriation Account is prepared


For proprietorship firm
b)
For partnership firm
Both (a) and (b)
d) None of these

14)

Under fluctuating capital account method interest on withdrawal will be debited to which
account?
Capital account
Trading account
Current account
Profit and loss appropriation account

a)
b)
c)
d)
15)
a)
c)

A gets profit 3.5 times of B while C gets profit twice of B.


If the profit of the firm is Rs.39,000. Find share
Rs.12,000
b)
Rs.6,000
Rs.2l,000
d)
None of these

16)
a)
b)
c)
d)

All intangible assets


Arc current assets
Arc fixed assets
Arc fictitious assets
Arc closing stock

17)
a)
b)
c)
d)

Authorized capital is also called


Nominal capital
Issue capital
Paid up capital
unpaid calls

18)
a)
b)
c)
d)

The trading account is an account


Which relates to the entity's ability to use the economic resources available in a profitable manner
Which shows the result of buying and selling of goods/services
Which assess whether entity has made satisfactory contribution to their investments or not
Which help to a large extent in preparing financial statements

19)
a)
b)
c)
d)

Gross profit is transferred to


Balance sheet
Capital account
Trading account
Profit and loss account

20)
a)

In case the manufacturing account is not prepared wages are debited to


Trading account

b)
c)
d)

Purchase account
Sales account
Profit and loss 8ccount

21)
a)
b)
c)
d)

In profit and loss appropriation account


Interim dividend is shown in credit side
Proposed dividend is shown in credit side
Dividend is shown in debit side
Distribution tax is shown in credit side

22)
a)
c)

Sundry debtors should be classified between debts outstanding for a period exceeding
Two months
b)
Three months
Six months
d)
Five months

23)
a)
c)

The standard gross profit ratio is between


I 0% to 20%
b)
15% to 25%
30% to 40%
d)
20% to 300%.

24)
a)
b)
c)
d)

Changes in financial position means how


A business activity has affected the investors' stake in the entity
Well entity managed to general considerable cash flows by consuming such resources
Entity uses the resources at its disposal to adapt the changing business requirements and solvency
To get the full impression of the business

25)
a)
c)

That portion of the expenses, the benefit of which will be received during the next accounting
year, is known as
Prepaid Expenses
b)
Outstanding expenses
Depreciation
d)
Bad debts

26)
a)
b)
c)
d)

A balance sheet
Helps in assessment of financial position of the firm
Tells about current assets and current liabilities
Is affected by the accounting policies relating to inventory valuation
All of the above

27)
a)
b)
c)
d)

Preparation of financial statements is governed by


Company Act
Partnership Act
Generally Accepted Accounting Principles (GAAP)
All of the above

28)
a)
b)
c)
d)

Trial balance
Reflects the true financial position of the firm
Is accepted by the court as documentary evidence
is prepared annually or half yearly
None of these

29)
a)
b)
c)
d)

As per Partnership Deed


Each partner may have to bring Capital from his private sources at the time of formation
Capital account will show the same result year after year
The adjusted profit will be distributed amongst the partners
Interest on capital is always calculated on the capital in the beginning of the year

Answers
11) d
21) c

26) d

2)
7)

d
c
l2) a

3)

8)

17) a
22) c
27) d

18) b

13)

23) d
28) d

4)
9)
14)
19)
24)

a
d

a
29) a

d
10) d
15) a

5)

20) a
25) a