View Answer: Correct Answer: (A) Convention of Conservatism

1.
Creating Provision against fluctuation in the price of investment is an example of which accounting convention
A. Convention of conservatism
B. Convention of full disclosure
C. Convention of materiality
D. Convention of consistency
View answer
Correct answer: (A)
Convention of conservatism
2. Return of goods by a customer should be debited to
A. Customers account
B. Sales return account
C. Goods account
D. Purchase account
View answer
Correct answer: (B)
Sales return account
3. Cash discount allowed to a debtor should be credited to
A. Discount account
B. Customer’s account
C. Sales account
D. Cash account
View answer
Correct answer: (B)
Customer’s account
4. The concept of separate entity is applicable to which of following types of businesses?
A. Sole proprietorship
B. Corporation
C. Partnership
D. All of them
View answer
Correct answer: (D)
All of them
5. Accounting principles are generally based upon:
A. Practicability
B. Subjectivity
C. Convenience in recording
D. None of the above
View answer
Correct answer: (A)
Practicability
6. Debit the receiver credit the giver rule for
A. Real a/c
B. Personal a/c
C. Nominal a/c
D. None of these
View answer
Correct answer: (B)
Personal a/c
7. Managerial accounting information is generally prepared for
A. Shareholders
B. Creditors
C. Managers
D. Regulatory agencies
View answer
Correct answer: (C)
Managers
8. True & fair profit and loss a/c of a company know by
A. Preparing trial balance

B. Preparing respective ledger of account
C. Preparing trading a/c
D. Preparing trading & profit & loss a/c
View answer
Correct answer: (D)
Preparing trading & profit & loss a/c
9. Which one of the following items would fall under the definition of a liability
A. Cash
B. Debtor
C. Owner’s equity
D. None of these
View answer
Correct answer: (C)
Owner’s equity
10. The basic sequence in the accounting process can best be described as:
A. Transaction, journal entry, source document, ledger account, trial balance.

B. Source document, transaction, ledger account, journal entry, trial balance.
C. Transaction, source document, journal entry, trial balance, ledger account.
D. Transaction, source document, journal entry, ledger account, trial balance.
View answer
Correct answer: (D)
Transaction, source document, journal entry, ledger account, trial balance.
11. Amount brought in by proprietor should be credited to
A. cash account
B. capital account
C. drawings account
D. creditors account
View answer
Correct answer: (B)
capital account
12. Which of the following is a real (permanent) account?
A. Goodwill
B. Sales
C. Accounts Receivable
D. Both Goodwill and Accounts Receivable
View answer
Correct answer: (D)
Both Goodwill and Accounts Receivable
13. Which of the following errors will be disclosed in the preparation of a trial balance?
A. Recording transactions in the wrong account.

B. Duplication of a transaction in the accounting records.
C. Posting only the debit portion of a particular journal entry.
D. Recording the wrong amount for a transaction to both the account debited and the account credited.
View answer
Correct answer: (C)
Posting only the debit portion of a particular journal entry.
14. Management Accounting provides invaluable services to management in performing
A. All management function

B. Interpret financial data
C. Controlling function
D. None of these
View answer
Correct answer: (A)
All management function
15. If closing stock appears in the trial balance, it should be
A. Credited to the trading account

B. Credited to the profit and loss account
C. Deducted from the purchases in the trading account
D. Shown on the liability side of the Balance sheet
View answer
Correct answer: (A)
Credited to the trading account
16. Financial information should be neutral and bias free" is the dictation of which one of the following?
A. Completeness concept
B. Faithful representation Concept
C. Objectivity Concept
D. Duality Concept
View answer
Correct answer: (C)
Objectivity Concept
17. Which of the following statements is not an objective of financial reporting?
A. Provide information that is useful in investment and credit decisions.

B. Provide information regarding policy of organisation
C. Provide information that is useful in assessing cash flow prospective
D. None of theses
View answer
Correct answer: (B)
Provide information regarding policy of organisation
18. A company's telephone bill consisting of a Rs.200 monthly base amount, plus long distance charges, would be classified
as a:
A. Variable cost
B. Committed fixed cost
C. Direct cost
D. Semi variable cost
View answer
Correct answer: (D)
Semi variable cost
19. A book containing a chronological record of business transaction & original record
A. Journal
B. Ledger
C. Trial balance
D. None of these
View answer
Correct answer: (A)
Journal
20. Which of these items would be accounted for as an expense?
A. Repayment of bank Loan

B. Dividend to stock holders
C. The purchase of land
D. Payment of current period rent
View answer
Correct answer: (D)
Payment of current period rent
21. The amount of salary paid to Suresh should be debited to
A. The account of Suresh

B. Salaries a/c
C. Cash a/c
D. Bank a/c
View answer
Correct answer: (B)
Salaries a/c
22. The cash discount allowed to a debtor should be credited to
A. Discount a/c
B. Customer a/c
C. Sales a/c
D. None of these
View answer
Correct answer: (B)
Customer a/c
23. Accounting does not record non-financial transactions because of:
A. Accrual concept
B. Cost concept
C. Continuity concept
D. Money measurement concept
View answer
Correct answer: (D)
Money measurement concept
24. The concept of separate entity is applicable to which of following types of businesses?
A. Sole proprietorship
B. Corporation
C. Partnership
D. All of them
View answer
Correct answer: (D)
All of them
25. Accounting is the process of matching
A. Benefits & Costs

B. Revenues & Costs
C. Cash Inflow & Cash Outflow
D. Potential & Real Performance
View answer
Correct answer: (B)
Revenues & Costs
26. The primary objective of cost accounting is
A. Ascertain the cost of goods and services

B. Ascertain the profit
C. Presentation of all data
D. None of these
View answer
Correct answer: (A)
Ascertain the cost of goods and services
27. Of the following account types, which would be increased by a debit?
A. Liabilities and expenses.

B. Assets and equity.
C. Assets and expenses.
D. Equity and revenues.
View answer
Correct answer: (C)
Assets and expenses.
28. Which of the following statements about differences between financial and managerial accounting is incorrect?
A. Managerial accounting information is prepared primarily for external parties such as stockholders and creditors;
financial accounting is directed at internal users.
B. Financial accounting is aggregated; managerial accounting is focused on products and departments.
C. Managerial accounting pertains to both past and future items; financial accounting focuses primarily on past
transactions and events.
D. Financial accounting is based on generally accepted accounting practices; managerial accounting faces no similar
constraining factors.
View answer
Correct answer: (A)
Managerial accounting information is prepared primarily for external parties such as stockholders and creditors; financial
accounting is directed at internal users.
29. Custom and traditions which guide the accountant while preparing the accounting statements
A. Accounting convention
B. Accounting concepts
C. Accounting principles
D. None of these
View answer
Correct answer: (C)
Accounting principles
30. Balance Sheet is a statement of
A. Assets
B. Liabilities
C. Capital
D. All of these
View answer
Correct answer: (D)
All of these
31. The convention of disclosure implies that all material information should be
A. Disclosed in the account

B. Disclosed in the accounts which is required to owner
C. Not disclosed
D. None of these
View answer
Correct answer: (A)
Disclosed in the account
32. Outstanding salary 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 a and c above
E. Both b and c above
View answer
Correct answer: (E)
Both b and c above
33. Proprietor (owner) is treated as creditor of business due to:
A. Periodicity concept
B. Materiality Principle
C. Entity Concept
D. Consistency concept
View answer
Correct answer: (C)
Entity Concept
34. Which of the following is correct
A. Profit does not alter capital

B. Capital can only come from profit
C. Profit reduces capital
D. Profit increases capital
View answer
Correct answer: (D)
Profit increases capital
35. Interest , rent, electricity bill are types of account
A. Personal a/c
B. Impersonal a/c
C. Real a/c
D. Nominal a/c
View answer
Correct answer: (D)
Nominal a/c
36. Cost of asset should always be equal to the cost of the liabilities. This concept is
A. Double Entry Bookkeeping

B. Matching Concept
C. Consistency
D. Money measurement Concept
View answer
Correct answer: (B)
Matching Concept
37. P& l a/c is prepared for a period of one year by following:
A. Consistency concept
B. Conservatism concept
C. Accounting period concept
D. Cost Concept
View answer
Correct answer: (C)
Accounting period concept
38. Prepaid expense is treated as
A. Current asset
B. Current liability
C. Short term liability
D. None of these
View answer
Correct answer: (A)
Current asset
39. Which of the following is a liability?
A. Loan from Mr.Y

B. loan to Mr.y
C. Both (a) (b)
D. None of these
View answer
Correct answer: (A)
Loan from Mr.Y
40. Advantages of cost accounting accrue:
A. Only to workers
B. Only to government
C. Only to consumers
D. To management, workers, consumers and government
View answer
Correct answer: (D)
To management, workers, consumers and government
41. Marginal costing is concerned with:
A. Fixed cost
B. Variable cost
C. Semi variable cost
View answer
Correct answer: (B)
Variable cost
42. The books to be compulsorily maintained by a company are:
A. Cash book and ledger

B. Sales and purchase book
C. Journal
D. Both a and b
E. All of a, b, c above
View answer
Correct answer: (E)
All of a, b, c above
43. Which of the following best describes a trial balance?
A. It is a list of balances on the books

B. It is a special account
C. Shows the financial position of a business
D. Shows all the entries in the books
View answer
Correct answer: (A)
It is a list of balances on the books b) It is a special account
44. Which of the following equation is related with Dual Aspect Concept ?

A. Total Assets = Total Liabilities
B. Total Assets = Capital + Outsider’s Liabilities
C. Capital = Total Assets - Outsider’s Liabilities
D. All of the above
View answer
Correct answer: (D)
All of the above
45. The prime function of accounting is to
A. To record economic data

B. Provide the information basis of action
C. Classifying and recording business transaction
D. Attainmentofeconomic goal
View answer
Correct answer: (C)
Classifying and recording business transaction
46. According to schedule VI Companies Act which item is not shown on Asset side of Balance sheet
A. Investment
B. Current Loan & Advances
C. Provision
D. Lease Holds
View answer
Correct answer: (C)
Provision
47. Salary paid to factory manager is an item of:
A. Prime cost
B. Factory overhead
C. Selling overhead
D. Office overhead
View answer
Correct answer: (B)
Factory overhead
48. Carriage outward is charged to
A. Debit side Profit & Loss a/c

B. Debit side Trading a/c
C. Credit side of Profit & Loss a/c
D. Credit side of trading a/c
View answer
Correct answer: (A)
Debit side Profit & Loss a/c
49. Payment received from Debtor
A. Decreases the Total Assets

B. Increases the Total Assets
C. Results in no change in the Total Assets
D. Increases the Total Liabilities
View answer
Correct answer: (C)
Results in no change in the Total Assets
50. Accounting does not record non-financial transactions because of:
A. Accrual concept
B. Cost concept
C. Continuity concept
D. Money measurement concept
View answer
Correct answer: (D)
Money measurement concept
51. Which one of the following is not an example of Intangible Assets?
A. Patents
B. Trade Marks
C. Copyright
D. Land
View answer
Correct answer: (D)
Land
52. Creating provision against fluctuation in the price of investment is application of accounting concept
C. Convention of consistency
D. None of these
View answer
Correct answer: (A)
53. Debit what come in Credit what goes out rule for
A. Real a/c
B. Personal a/c
C. Nominal a/c
D. None of these
View answer
Correct answer: (A)
Real a/c
54. The following comments each relate to the recording of journal entries. Which statement is true?
A. For any given journal entry, debits must exceed credits.

B. It is customary to record credits on the left and debits on the right.
C. The chart of accounts reveals the amount to debit and credit to the affected accounts.
D. Journalization is the process of converting transactions and events into debit/credit format.
View answer
Correct answer: (D)
Journalization is the process of converting transactions and events into debit/credit format.
55. Going concern concept assumes

A. Business as a dissolving concern
B. Business on relishing values
C. Business as a going concern
D. Asset = liability
View answer
Correct answer: (C)
Business as a going concern
56. Management Accounting relates to
A. Recording of accounting data

B. Recording of cost data
C. Presentation of account data
View answer
Correct answer: (C)
Presentation of account data
57. Which items does not come under the balance sheet
A. sales
B. Share capital
C. Reserves and surplus
D. Unsecured loan
View answer
Correct answer: (A)
sales
58. Which of the following is not related with Money Measurement Concept ?
A. All business transaction should be expressed only in money

B. The transactions which cannot be expressed in money, will not be recorded in accounting books
C. Business is treated as separate from the proprietor
D. None of These
View answer
Correct answer: (B)
The transactions which cannot be expressed in money, will not be recorded in accounting books
59. Depreciation is a charge against
A. Profit
B. Assets
C. Company
D. Books of A/c
View answer
Correct answer: (A)
Profit
60. Fixed assets and current assets are categorized as per concept of:
A. Separate entity
B. Going concern
C. Consistency
D. Time period
View answer
Correct answer: (B)
Going concern
61. Management accounting is applicable to
A. Service entities
B. Manufacturing entities
C. Non profit entities
D. All of these
View answer
Correct answer: (D)
All of these
62. Insurance prepaid is shown as
A. Current assets
B. Current liabilities
C. Fixed asset
D. Fixed liability
View answer
Correct answer: (A)
Current assets
63. Financial accounting is concerned with
A. Recording of business expenses and revenue

B. Recording of costs of products and services
C. Recording of day to day business transactions
View answer
Correct answer: (C)
Recording of day to day business transactions
64. Goods given as samples should be credited to:
A. Advertisement account
B. Sales account
C. Purchase account
View answer
Correct answer: (C)
Purchase account
65. Investment of X company profit in shares of other company PQR Pvt. ltd are recorded in
A. Asset side of Balance Sheet

B. Liability side of Balance Sheet
C. Profit & Loss a/c
D. Not recorded in Balance Sheet
View answer
Correct answer: (A)
Asset side of Balance Sheet
66. Sales made to Mahesh for cash should be debited to

A. Cash account
B. Mahesh Account
C. Sales account
D. Purchase account
View answer
Correct answer: (A)
Cash account
67. Income tax paid by a sole proprietor on his business income should be:
A. Debited to trading account

B. Debited to profit and loss account
C. Deducted from capital account in the balance sheet
View answer
Correct answer: (C)
Deducted from capital account in the balance sheet
68. What comes in is to be debited, what goes out is to be credited.
A. Rules of Personal
B. Rules of Real
C. Rules of Nominal
D. All of these
View answer
Correct answer: (B)
Rules of Real
69. Which of the following is not an example of real a/c:
A. Machinery
B. Building
C. Cash
D. Creditor
View answer
Correct answer: (D)
Creditor
70. Payment received from Debtor
A. Decreases the Total Assets

B. Increases the Total Assets
C. Results in no change in the Total Assets
D. Increases the Total Liabilities
View answer
Correct answer: (C)
Results in no change in the Total Assets
A. Loan from Mr.Y

B. loan to Mr.y
C. Both (a) (b)
D. None of these
View answer
Correct answer: (A)
Water
72. Purchases of goods on credit from A is recorded as:
A. Debit purchases a/c; credit cash a/c

B. Debit A a/c; credit purchases a/c
C. Debit purchases a/c; credit A a/c
D. Debit A a/c; credit stock a/c
View answer
Correct answer: (C)
Debit purchases a/c; credit A a/c
73. Payment received from debtor:
A. Decreases the total assets

B. Increases the total assets
C. Results in no change in total assets
D. Increase the total liabilities
View answer
Correct answer: (C)
Results in no change in total assets
74. The transferring of debit and credit items from journal to the respective accounts in the ledger is called as
A. Ledger
B. Posting
C. Forward journal
D. None of these
View answer
Correct answer: (B)
Posting
75. The following comments all relate to the recording process. Which of these statements is correct?
A. The general ledger is a chronological record of transactions.

B. The general ledger is posted from transactions recorded in the general journal.
C. The trial balance provides the primary source document for recording transactions into the general journal.
D. Transposition is the transfer of information from the general journal to the general ledger.
View answer
Correct answer: (B)
The general ledger is posted from transactions recorded in the general journal.
76. Cost accounting information can be used for:
A. Budget control and evaluation.

B. Determining standard costs and variances.
C. Pricing and inventory valuation decisions.
D. All of these
View answer
Correct answer: (D)
All of these
77. Current liability does not include

A. Sundry creditors
B. Acceptances
C. Unclaimed dividend
D. Short term investment
View answer
Correct answer: (D)
Short term investment
78. The term Management Accounting was first used in
A. 1910
B. 1939
C. 1950
D. 1960
View answer
Correct answer: (C)
1950
79. ______________ system records only actual cash receipts and payments
A. Cash basis
B. Accrual basis
C. Mercantile basis
D. Single entry basis
View answer
Correct answer: (A)
Cash basis
80. Aggregate of direct costs is known as:
A. Direct material costs

B. Direct Wages
C. Direct Expenses
D. Prime Cost
View answer
Correct answer: (D)
Prime Cost
81. Sunk costs are:
A. relevant for decision making

B. Not relevant for decision making
C. cost to be incurred in future
D. future costs
View answer
Correct answer: (B)
Not relevant for decision making
82. Information about an item is ______________ if its omission or misstatement might influence the financial decision of
the users taken on the basis of that information
A. Concrete
B. Complete
C. Immaterial
D. Material
View answer
Correct answer: (D)
Material
83. Proposed dividends" is shown in the Balance Sheet of a company under the head:
A. Provisions
B. Reserves and Surplus
C. Current Liabilities
D. Other Liabilities
View answer
Correct answer: (A)
Provisions
84. Authorized capital, also known as
A. ominal capital
B. Paid up capital
C. Issues capital
D. None of these
View answer
Correct answer: (A)
Nominal capital
85. Trade Payables are recorded in ______________
A. Asset side of B/S

B. Liability side of B/S
C. P & L a/c
View answer
Correct answer: (B)
Liability side of B/S
86. Cost accounting emerged mainly on account of:
A. Statutory requirements
B. Competition in the market
C. Labour unrest
D. Limitations of financial accounting
View answer
Correct answer: (D)
Limitations of financial accounting
87. Rent paid to landlord should be credited to
A. Landlords account
B. Rent account
C. Cash account
D. Expense account
View answer
Correct answer: (C)
Cash account
88. The primary objective of management accounting is
A. Prepare final a/c

B. Provide management complete and true information
C. Both (a) & (b)
D. None of these
View answer
Correct answer: (B)
Provide management complete and true information
89. Cost of goods sold= opening stock+ net purchases+ expenses on Purchases – sales Which part of formula is wrong?
A. opening stock
B. net purchases
C. expenses on Purchases
D. sales
View answer
Correct answer: (D)
sales
90. Interest on drawings is:
A. Expenditure for the business

B. Cost for the business
C. Gain for the business
View answer
Correct answer: (C)
Gain for the business
91. The basic concepts related to p& l a/c are:
A. Realization Concept
B. Matching Concept
C. Cost Concept
D. Both a and b above
View answer
Correct answer: (D)
Both a and b above
92. All those to whom business owes money are:
A. Debtors
B. Investors
C. Creditors
D. Shareholders
View answer
Correct answer: (C)
Creditors
93. All direct & indirect expenses related to business are charged:
A. Profit and loss account

B. Trading account
C. Trading account Profit and Loss account
D. Directly to Balance sheet
View answer
Correct answer: (C)
Trading account Profit and Loss account
94. If loan have been guaranteed by managers and directors is called as
A. Loan
B. Unsecured Loan
C. Secured Loan
D. Advance by Manager & director
View answer
Correct answer: (C)
Secured Loan
95. Opening stock + ______________ + Direct Expenses (Carriage on Raw material)-Closing Stock = ______________
A. Sales, Purchases
B. Sales, Sales return
C. Purchases, Cost of goods produced
D. Purchases, Cost of goods sold
View answer
Correct answer: (C)
Purchases, Cost of goods produced
96. Carriage outward is charged to
A. Debit side Profit & Loss a/c

B. Debit side Trading a/c
C. Credit side of Profit & Loss a/c
D. Credit side of trading a/c
View answer
Correct answer: (A)
Debit side Profit & Loss a/c
97. Credit balance of profit & loss a/c shown on
A. Asset side of balance sheet

B. Liability side of balance sheet
C. Not shown in balance sheet
D. Half on asset side and half on liability side
View answer
Correct answer: (B)
Liability side of balance sheet
98. Outstanding expenses are charged to
A. Asset side of balance sheet

B. Liability side of balance sheet
C. Not charged to balance sheet
D. None of these
View answer
Correct answer: (B)
Liability side of balance sheet
A. Loan from Mr.Y

B. loan to Mr.y
C. Both (a) (b)
D. None of these
View answer
Correct answer: (A)
Loan from Mr.Y
100. The revenue recognition principal dictates that all types of incomes should be recorded or recognized when
A. Cash is received
B. At the end of accounting period
C. When they are earned
D. When interest is paid
View answer
Correct answer: (C)
When they are earned
01. Which of the following is time span into which the total life of a business is divided for the purpose of preparing
financial statements?
A. Fiscal year
B. Calendar year
C. Accounting period
D. Accrual period
View answer
Correct answer: (C)
Accounting period
102. If the total assets of the company amount to Rs 1,50,000 and owner’s equity is Rs 70,000,the amount of liabilities will
be
A. Rs 70,000
B. Rs 80,000
C. Rs 90,000
D. Rs 1,00,000
View answer
Correct answer: (B)
Rs 80,000
103. The system of recording transaction based on dual aspect concept is called
A. Double account system

B. Double entry system
C. Single entry system
D. None of these
View answer
Correct answer: (B)
Double entry system
104. The convention of conservatism is applicable

A. In providing for discount on creditors
B. In making provision for bad doubtful debts
C. Providing depreciation
D. None of these
View answer
Correct answer: (B)
In making provision for bad doubtful debts
105. Rules of action or conduct adopted by the accountants universally while recording accounting transaction
D. None of these
View answer
Correct answer: (C)
Accounting principles
106. Which of the following items would not fall under the definition of an asset?
A. Land
B. Machine
C. Cash
D. Milk
View answer
Correct answer: (D)
Owner Equity
107. Basic assumptions or conditions upon which the science of accounting is based.
D. None of these.
View answer
Correct answer: (B)
Accounting concepts
108. Which of the following is time span into which the total life of a business is divided for the purpose of preparing
financial statements?
A. Fiscal year
B. Calendar year
C. Accounting period
D. Accrual period
View answer
Correct answer: (C)
Accounting period
109. The system of recording based on dual aspect concept is called:
A. Double account system

B. Double entry system
C. Single entry system
D. All the above
View answer
Correct answer: (B)
Double entry system
110. Preliminary expenses are recorded in ______________
A. Equity and liabilities-Liability side of B/S

B. Current liabilities- Liability side of B/S
C. Fixed assets- Asset side of B/S
D. Asset side of B/S
View answer
Correct answer: (D)
Asset side of B/S
111. ______________ is a person or item for which cost may be ascertained.
A. Cost unit
B. Cost centre
C. Cost object
D. Cost estimation
View answer
Correct answer: (B)
Cost centre
112. Which of the following is not a fixed asset?
A. Building
B. Bank Balance
C. Plant Patents
D. Goodwill
View answer
Correct answer: (B)
Bank Balance
113. According to which concept business is treated as a unit apart from owner
A. Dual concept
B. Divider concept
C. Entity concept
D. Landlord concept
View answer
Correct answer: (C)
Entity concept
114. The reduction in the value of the fixed assets which can arise due to time factor is
A. Discount
B. Depreciation
C. Reduction
View answer
Correct answer: (b)
Depreciation
115. Which of the following should not be called sales?

A. Good sold on credit
B. Office fixtures sold
C. Sale of item previously included in purchase
D. Good sold for cash
View answer
Correct answer: (B)
Office fixtures sold
116. Which of the following is not regarded as the fundamental accounting concept?
A. The going concern concept

B. The separate entity concept
C. The prudence (conservatism) concept
D. Correction concept
View answer
Correct answer: (D)
Correction concept
117. Outstanding salaries are shown as:
A. Added to Salaries while preparing P & La/c

B. Shown in liability side of Balance sheet under current Liability
C. (a) &(b) above
View answer
Correct answer: (C)
(a) &(b) above
118. Marginal costing is concerned with:
A. Fixed cost
B. Variable cost
C. Semi variable cost
View answer
Correct answer: (B)
Variable cost
119. Which of the following account balance will be shown on debit side of Trial Balance?
A. Outstanding expenses
B. Cash a/c
C. Short term loan
D. creditors
View answer
Correct answer: (D)
creditors
120. Cash Purchases:
A. Increases assets
B. Results in no change in the total assets
C. Decreases assets
D. Increases liability
View answer
Correct answer: (C)
Decreases assets
121. The practice of appending notes regarding contingent liabilities in accounting statements is in pursuance to:
A. Convention of consistency
B. Money measurement concept
C. Convention of conservatism
D. Convention of disclosure
View answer
Correct answer: (D)
Convention of disclosure
122. Sales are equal to:
A. Cost of goods sold + gross profit

B. Cost of goods sold - gross profit
C. Gross profit- Cost of goods sold
View answer
Correct answer: (B)
Cost of goods sold + gross profit
123. Identify which is wrong rule
A. Nominal account- debit all expenses & losses

B. Real account- credit what comes in
C. Nominal account- credit all incomes & gains
D. Personal account- debit the receiver
View answer
Correct answer: (B)
Real account- credit what comes in
124. The work of factory employees that can be physically associated with converting raw material into finished goods is
classified as-
A. Manufacturing overhead
B. Indirect materials
C. Indirect labour
D. Direct labour
View answer
Correct answer: (D)
Direct labour
125. ______________ cost will still be incurred although a plant is shut down temporarily.
A. Cost of raw material

B. Advertising
C. Depreciation
D. Carriage
View answer
Correct answer: (D)
Depreciation
126. According to which concept business is treated as a unit apart from owner
A. Dual concept
B. Divider concept
C. Entity concept
D. Landlord concept
View answer
Correct answer: (C)
Entity concept
127. Variable cost per unit
A. Remains fixed
B. Fluctuates with volume of production
C. Varies in consideration with the volume of sales
View answer
Correct answer: (B)
Fluctuates with volume of production
128. Making the provision for doubtful debts and discount on debtors in anticipation of actual bad debts and discount is an
example for which concept
A. Conservatism concept
B. Continuity concept
C. Realization concept
D. All of these
View answer
Correct answer: (A)
Conservatism concept
129. liabilities in balance sheet include the following items
A. Long term loan

B. Short term loan
C. Owner’s fund
D. All of these
View answer
Correct answer: (D)
All of these
130. Net profit is calculated in
A. Trading a/c
B. Balancesheet
C. Profit & loss a/c
D. Trial balance.
View answer
Correct answer: (C)
Profit & loss a/c
131. The going concern concept assumes that

A. The entity continue running for foreseeable future
B. The entity continue running until the end of accounting period
C. The entity will close its operating in 10 years
D. The entity can't be liquidated
View answer
Correct answer: (A)
The entity continue running for foreseeable future
132. Accounting principles are divided into two types. These are ______________
A. Accounting Concepts
B. Accounting Conventions
C. Accounting Standards
D. Accounting Concepts &Accounting Conventions
View answer
Correct answer: (D)
Accounting Concepts &Accounting Conventions
133. Which expenses is a Capital Nature?
A. Depreciation
B. Wages
C. Salary
D. Stationary
View answer
Correct answer: (A)
Depreciation
134. The basic function of financial accounting is to
A. Record all business transaction

B. Interpret financial data
C. Assist the management in performing function effectively
View answer
Correct answer: (B)
Interpret financial data
135. Accounting principles are generally based on
A. Practicability
B. Subjectivity
C. Convenience in recording
D. None of these
View answer
Correct answer: (A)
Practicability
136. According to the money measurement concept the following will be recorded in the books of accounts of the business
A. Health of the managing director of the company

B. Quality of company goods
C. Value of plant and machinery
D. Health of labour in factory
View answer
Correct answer: (C)
Value of plant and machinery
137. In case of a debt becoming bad, the amount should be credited to
A. Debtors Accounts
B. Bad debts a/c
C. Sales a/c
View answer
Correct answer: (A)
Debtors Accounts
138. Accountant should follow the same principles of accounting continuously is as per which accounting convention
C. Convention of consistency
D. None of these
View answer
Correct answer: (C)
Convention of consistency
139. A system in which accounting entries are made on the basis of amounts having become due for payment or receipt is
called
A. Cash concept
B. Accrual concept
C. Matching concept
D. On-going concept
View answer
Correct answer: (B)
Accrual concept
140. Debit all expenses and losses Credit all gains and income.
A. Real a/c
B. Personal a/c
C. Nominal a/c
D. None of these
View answer
Correct answer: (C)
Nominal a/c
141. Transferring the debit and credit item from the journal to the respective accounts is called
A. Compound Journal
B. Ledger
C. Trial balance
D. None of these
View answer
Correct answer: (B)
Ledger
142. A statement containing the various ledgers balances on particular date

A. Compound Journal
B. Ledger
C. Trial balance
D. None of these
View answer
Correct answer: (C)
Trial balance
143. Retained earnings will change over time because of several factors. Which of the following factors would explain an
increase in retained earnings?
A. Net Loss
B. Net income
C. Dividend
D. Investment by share holder
View answer
Correct answer: (B)
Net income
144. The full disclosure principle, as adopted by the accounting profession, is best described by which of the following?
A. All information related to an entity's business and operating objectives is required to be disclosed in the financial
statements.
B. Information about each account balance appearing in the financial statements is to be included in the notes to the
financial statements.
C. Enough information should be disclosed in the financial statements so a person wishing to invest in the stock of the
company can make a profitable decision.
D. Disclosure of any financial facts significant enough to influence the judgment of an informed reader
View answer
Correct answer: (D)
Disclosure of any financial facts significant enough to influence the judgment of an informed reader
145. The trial balance is ______________
A. Is a formal financial statement.

B. Is used to prove that there are no errors in the journal or ledger.
C. Provides a listing of every account in the chart of accounts.
D. Provides a listing of the balance of each account in active use.
View answer
Correct answer: (D)
Provides a listing of the balance of each account in active use.
146. Investment in Bonds should be disclosed on the balance sheet.
A. On liability side of balance sheet

B. On Assets side of balance sheet
C. On both side of Balance sheet
D. None of these
View answer
Correct answer: (B)
On Assets side of balance sheet
147. Which of the following functions is managerial accounting intended to facilitate?
A. Planning
B. Decision making
C. Control
D. All of these
View answer
Correct answer: (D)
All of these
148. Accounting principles are
A. As definite as principles of physics and chemistry

B. Unlike principles of physical sciences.
C. Verifiable through observations and records
D. Thoughts of accountant
View answer
Correct answer: (B)
Unlike principles of physical sciences.
149. Business entity concept distinguishes between:
A. Individual and business

B. Business and business
C. Owners
D. Debtors and creditors
View answer
Correct answer: (A)
Individual and business
150. Financial account provide summary of:
A. Asset
B. Liability
C. Accounts
View answer
Correct answer: (C)
Accounts
151. User of financial statement is:
A. Management
B. Creditors
C. Bankers
D. All of the above
View answer
Correct answer: (D)
All of the above
152. Inventory accounts should be classified in which section of a balance sheet?
A. Current assets
B. Investments
C. Property, plant, and equipment
D. Intangible assets
View answer
Correct answer: (A)
Current assets
153. The Cash account on the balance sheet should not include which of the following items?
A. Travel advances to employees

B. Currency
C. Money orders
D. Deposits in transit
View answer
Correct answer: (A)
Travel advances to employees
154. In accounting all business transaction are recorded as having
A. Single aspect
B. Dual aspect
C. Triple aspect
D. None of these
View answer
Correct answer: (B)
Dual aspect
155. Which of the following equations properly represents a derivation of the fundamental accounting equation?
Assets + liabilities = Owner Equity
Asset = OwnerEquity
Cash = Assets
Assets – Liabilities = Owner Equity
A. Only (a)
B. Both (a) (b)
C. All (a)(b)(c)(d)
D. None of these
View answer
Correct answer: (D)
None of these
156. Which of the following would not be included on a balance sheet?
A. Accounts payable
B. Accounts receivable
C. Sales
D. Cash
View answer
Correct answer: (C)
Sales
157. Contingent liabilities should be recorded in the accounts when:
A. It is probable that the future event will occur.

B. The amount of the liability can be reasonably estimated.
C. Both (a) and (b).
D. Either (a) or (b).
View answer
Correct answer: (C)
Both (a) and (b).
158. The cost concept records the figures at
A. Market values
B. Actual amount paid
C. Actual amount or market values whichever is less.
D. MRP maximum retail price
View answer
Correct answer: (B)
Actual amount paid
159. Financial statements are:
A. Estimates of facets
B. Anticipated facts
C. Recorded facts
View answer
Correct answer: (C)
Recorded facts
160. The term Management Accounting was first used in
A. 1910
B. 1939
C. 1950
D. 1960
View answer
Correct answer: (C)
1950
161. Which does not comes under the head of asset:
A. Fixed asset
B. Investment
C. Current asset
D. Owners equity
View answer
Correct answer: (D)
Owners equity
162. The word accounting can be classified in to:
A. Financial accounting and management accounting

B. Financial accounting and cost accounting
C. Financial accounting, management accounting and cost accounting
D. Cannot be classified
View answer
Correct answer: (C)
Financial accounting, management accounting and cost accounting
163. The work of a book keeper is ______________ in nature.
A. Analytical
B. Clerical
C. Executive
D. Non – executive
View answer
Correct answer: (B)
Clerical
164. 206. Which of the following is true for: – "In accounts recording is done of_ _ _ _ _"
A. only financial transaction

B. only non- financial transaction
C. Both
D. Personal transaction of Proprietor
View answer
Correct answer: (A)
only financial transaction
165. Salary is one of the ______________ expenses
A. Capital
B. Revenue
C. Direct
D. Non – cash
View answer
Correct answer: (B)
Revenue
166. A company's telephone bill consisting of a Rs.200 monthly base amount, plus long distance charges, would be
classified as a:
A. Variable cost
B. Committed fixed cost
C. Direct cost
D. Semi variable cost
View answer
Correct answer: (D)
Semi variable cost
167. The practice of appending notes regarding contingent liabilities in accounting statement is pursuant of
A. Convention of consistency
B. Money measurement concept
C. Convention of conservatism
D. Convention of disclosure
View answer
Correct answer: (C)
168. In manufacturing a product, prime costs are:
A. Raw materials and manufacturing overhead

B. Indirect materials and manufacturing overhead
C. Indirect labour and manufacturing overhead
D. Direct materials and direct labour
View answer
Correct answer: (D)
Direct materials and direct labour
169. Because of automation, which component of product cost is declining?
A. Direct labour
B. Direct materials
C. Manufacturing overhead
D. Advertising
View answer
Correct answer: (A)
Direct labour
170. Salary paid to factory manager is an item of:
A. Prime Cost
B. Factory Overhead
C. Selling overhead
D. Office overhead
View answer
Correct answer: (B)
Factory Overhead
171. Calculate the prime cost from the following information:

Direct material purchased: Rs. 1,00,000
Direct material consumed: Rs. 90,000
Direct labour: Rs. 60,000
Direct expenses: Rs. 20,000
Manufacturing overheads: Rs. 30,000
A. Rs. 1,80,000
B. Rs. 2,00,000
C. Rs. 1,70,000
D. Rs. 2,10,000
View answer
Correct answer: (C)
Rs. 1,70,000
172. Aggregate of cost of goods sold and selling and distribution overheads is known as:
A. Total Cost
B. Office Cost
C. Cost of sales
D. Selling overhead
View answer
Correct answer: (A)
Total Cost
173. Cost accounting information can be used for:
A. Budget control and evaluation.

B. Determining standard costs and variances.
C. Pricing and inventory valuation decisions.
D. All of these
View answer
Correct answer: (D)
All of these
174. Which one of the following would not be classified as manufacturing overhead?
A. Indirect labour
B. Direct materials
C. Insurance on factory building
D. Indirect materials
View answer
Correct answer: (B)
Direct materials
175. A manufacturing process requires small amounts of glue. The glue used in the process is classified as
A. A prime cost
B. An indirect material
C. A direct material
D. Miscellaneous expense
View answer
Correct answer: (B)
An indirect material
176. Lubricants, used regularly in a production process, are classified as
A. Miscellaneous expense
B. Direct materials
C. Indirect materials
D. Immaterial items
View answer
Correct answer: (C)
Indirect materials
177. Manufacturing costs are also known as product costs. Which of the following best describes those costs which are
considered to be manufacturing costs?
A. Direct materials, direct labor, and factory overhead.

B. Direct materials and direct labor only.
C. Direct materials, direct labor, factory overhead, and administrative overhead.
D. Direct labor and factory overhead.
View answer
Correct answer: (C)
Direct materials, direct labor, factory overhead, and administrative overhead.
178. Accounting principles are ______________ which are adopted by the accountant universally while recording
accounting transaction.
A. Rules of action or conduct

B. Which u can change as per accountant
C. Which keep changing every year
D. None of these
View answer
Correct answer: (C)
Rules of action or conduct
179. Showing purchased office equipments in financial statements is the application of which accounting concept?
A. Historical cost convention
B. Materiality
C. Prudence
D. Matching concept
View answer
Correct answer: (B)
Materiality
180. Which of the following should not be called sales?
A. Good sold on credit

B. Office fixtures sold
C. Sale of item previously included in purchase
D. Good sold for cash
View answer
Correct answer: (A & B)
Good sold on credit & Office fixtures sold
181. Material concept tell about
A. Disclosure of loss
B. Disclosure of profit
C. Disclosure of all information which are important for investor
D. Disclosure of all information which are important for management
View answer
Correct answer: (C)
Disclosure of all information which are important for investor
182. Using "lower of cost and net realisable value(Market Value)" for the purpose of inventory valuation is the
implementation of which of the following concepts?
A. The going concern concept

B. The separate entity concept
C. The prudence concept
D. Matching concept
View answer
Correct answer: (C)
The prudence concept
183. Which financial statement represents the accounting equation ASSETS = LIABILITIES + OWNER'S EQUITY
A. Income Statement
B. Cash Flow Statement
C. Balance Sheet
D. Fund Flow Statement
View answer
Correct answer: (C)
Balance Sheet
184. Cost accounting aims at ascertain ______________ of product
A. Cost
B. Net profit
C. Gross profit
D. Selling price
View answer
Correct answer: (A)
Cost
185. The purpose of financial accounts is reporting to
A. Management only
B. Government only
C. Investor only
D. All of these
View answer
Correct answer: (D)
All of these
186. Financial accounting use data
A. Projected data
B. External data only
C. Historic data
D. Manager data only
View answer
Correct answer: (C)
Historic data
187. What comes in is to be debited, what goes out is to be credited.
A. Rules of Personal
B. Rules of Real
C. Rules of Nominal
D. All of these
View answer
Correct answer: (C)
Rules of Nominal
188. Payment of salary is recorded by:
A. Debiting salary a/c; crediting cash a/c

B. Debiting cash a/c; crediting salary a/c
C. Debiting employee a/c; crediting cash a/c
D. Debiting employee a/c; crediting salary a/c
View answer
Correct answer: (A)
Debiting salary a/c; crediting cash a/c
189. Amortization of intangible Asset Such as Goodwill which has indefinite life is an example of accounting concept
A. Conservatism Concept
B. Continuity Concept
C. Realisation Concept
D. Measurement Concept
View answer
Correct answer: (A)
Conservatism Concept
190. ______________ cost refers to those cost which have already been incurred and cannot be altered by any decision in
the future.
A. Opportunity cost
B. Sunk Cost
C. Incremental cost
D. Decremental cost
View answer
Correct answer: (B)
Sunk Cost
191. The main object of cost accounting is:
A. To record day to day transactions of the business

B. To reveal managerial efficiency
C. To ascertain true cost of products and services
D. To determine tender price
View answer
Correct answer: (C)
To ascertain true cost of products and services
192. The nature of financial accounting is
A. Historical
B. Forward looking
C. Analytical
D. Social
View answer
Correct answer: (A)
Historical
193. An accounting that deals with the accounting and reporting of information to management regarding the detail
information is
A. Financial accounting
B. Management accounting
C. Cost accounting
D. Real Accounting
View answer
Correct answer: (B)
Management accounting
194. Bad debt amount should be credited to
A. Debtors account
B. Bad debts account
C. Sales account
D. Creditors account
View answer
Correct answer: (A)
Debtors account
195. Management accounting concentrates on ______________
A. Opening books of account

B. Preparation of financial statements
C. Control of business activities
D. None of these
View answer
Correct answer: (C)
Control of business activities
196. Which of the following is not an internal user of management information?
A. Creditor
B. Department manager
C. Controller
D. Treasurer
View answer
Correct answer: (A)
Creditor
197. Double entry system is used in which type of accounting
A. Cost
B. Financial
C. Management
D. All
View answer
Correct answer: (B)
Financial
198. Which type of asset class includes those assets which have only definite use and become valueless when the yield is
over?
A. Fixed asset
B. Current asset
C. Fictitious asset
D. Wasting asset
View answer
Correct answer: (D)
Wasting asset
199. Cost accounting is applied to:
A. Public undertakings only

B. Large business enterprise only
C. Small business concerns only
D. Manufacturing and service concern
View answer
Correct answer: (D)
Manufacturing and service concern
200. Reserve for doubtful debts appearing in the trial balance should be:
A. credited to P & L a/c

B. Shown as liability side in balance sheet
C. Reduced from related asset in the balance sheet
D. Both a and b
E. Both a and c
View answer
Correct answer: (E)
Both a and c
201. Under which concept it is assumed that the enterprises has neither the intention nor the necessity of liquidation or of
curtailing materiality the scale of operation
A. Revenue realization concept

B. Matching cost concept
C. Going concern concept
D. None of these
View answer
Correct answer: (C)
Going concern concept
202. Bookkeeping is an ______________ of correctly recording of business transition.
A. Art and Science

B. Art
C. Science
D. Art or Science
View answer
Correct answer: (B)
Art
203. Journal Entries are known as book of ______________ Entry.
A. Original
B. Duplicate
C. Personal
D. Nominal
View answer
Correct answer: (A)
Original
204. Fixed assets and current assets are categorized as per concept of:
A. Separate entity
B. Going concern
C. Consistency
D. Time period
View answer
Correct answer: (B)
Going concern
205. The allocation of owner's private expenses to his/her business violates which of the following?
A. Accrual concept
B. Matching concept
C. Separate business entity concept
D. Consistency concept
View answer
Correct answer: (C)
Separate business entity concept
206. Profit from sale of assets is example for–
A. Revenue Profit
B. Capital Profit
C. Loss
D. None of these
View answer
Correct answer: (B)
Capital Profit
207. Book keeping is mainly concerned with
A. Recording of financial data relating to business operation

B. Designing the systems in recording classifying,summarizing the recorded data
C. Interpreting the data for internal and external users
View answer
Correct answer: (A)
Recording of financial data relating to business operation
208. The convention of conservatism when applied to the balance sheet result in.
A. Understand the asset

B. Understand the liabilities
C. Overstatement of capital
D. None of these
View answer
Correct answer: (A)
Understand the asset
209. The amount brought in by the proprietor in the business should be credited to
A. Cash a/c
B. Capital a/c
C. Drawing a/c
D. Bank a/c
View answer
Correct answer: (B)
Capital a/c
210. The return of goods by the customer should be debited to
A. Customer a/c
B. Sales return a/c
C. Goods a/c
D. Purchase return a/c
View answer
Correct answer: (B)
Sales return a/c
211. sales made by Mahesh for cash should be debited to
A. Cash a/c
B. Mahesh a/c
C. Sales a/c
D. Sales return a/c
View answer
Correct answer: (A)
Cash a/c
212. The rent paid to land lord to be credited to
A. Land lord a/c

B. Rent a/c
C. Cash a/c
D. Tenant a/c
View answer
Correct answer: (C)
Cash a/c
213. Which of the following statements are false?
A. All liability is a debt for your business

B. Debtor are a asset for business
C. The accounting equation shows how much of your assets belong to the owner, and how much belong to people
outside business
View answer
Correct answer: (D)
None of the above
214. A business has the following items in it:

Land Rs.1,000,000
Machinery Rs.20,000
Cash Rs.10,000
Debt Rs.0
Owner’s equity?
What is the valve of owner’s equity?
A. Rs.1020000
B. Rs.1010000
C. Rs.1030000
View answer
Correct answer: (C)
Rs.1030000

Owners’ equity Rs.6,00, 000.
Liabilities Rs.14,00,000.
What is the value of Assets ______________
What is the valve of owner’sequity?
A. 600,000
B. 1,400,000
C. 2,000,000
D. None of these
View answer
Correct answer: (C)
2,000,000
Land Rs.1, 500,000
Machinery Rs.80, 000
Cash Rs.20, 000
Owners equity Rs.900, 000
Loan Rs.500, 000
Creditors?
A. Rs.200, 000
B. Rs.700, 000
C. Rs.800, 000
D. Rs1, 100,000
View answer
Correct answer: (A)
Rs.200, 000
217. A business has following items in it Land?

Vehicles Rs.600,000
Debtors Rs. 1,20,000
Cash Rs.30,000
Owners’Equity Rs.1,000,000
Loan 5,00,000
Creditors Rs.50,000
What is the value of the land ______________
A. 1,000,000
B. 1,550,000
C. 800,000
D. None of these
View answer
Correct answer: (C)
800,000
218. XYZ ltd.has provided the following information about its balance sheet:
Cash Rs.100
Accounts Receivable Rs.500
Stock holder equity Rs.700
Accounts Payable Rs.200
Bank Loan Rs.1,000
Based on the information provided, how much are XYZ ltd.Total liabilities?
A. Rs.200
B. Rs.1900
C. Rs.1200
D. Rs.1700
View answer
Correct answer: (B)
s.1900
219. Contingent liabilities should be recorded in the accounts when:
A. It is probable that the future event will occur.

B. The amount of the liability can be reasonably estimated.
C. Both (a) and (b).
D. Either (a) or (b).
View answer
Correct answer: (C)
Both (a) and (b).
220. Accounting concepts are based on
A. Certain assumptions
B. Certain facts and figures
C. Certain accounting records
D. Practice experience
View answer
Correct answer: (B)
Certain facts and figures
221. Retained earnings statement depicts:
A. Appropriation of profits
B. Estimates of profits
C. Estimates of costs
View answer
Correct answer: (A)
Appropriation of profits
222. Financial accounting deals with:
A. Determination of cost
B. Determination of profit
C. Determination of price
D. Determination of selling price
View answer
Correct answer: (B)
Determination of profit
223. Financial account record only
A. Actual figures
B. Budgeted figures
C. Standard figures
D. Management Figure
View answer
Correct answer: (A)
Actual figures
224. Content of income statement
A. Trading account
B. Profit and loss account
C. Balance sheet
D. All of the above
View answer
Correct answer: (D)
All of the above
225. Depreciation is a ______________
A. Cash operating expenditure

B. Non cash operating expenditure
C. Cash non-operating expenditure
D. Non cash non-operating expenditure
View answer
Correct answer: (B)
Non cash operating expenditure
226. Outstanding salary account is a ______________ account
A. Nominal account
B. Real Account
C. Artificial person’s account
D. Representative personal account
View answer
Correct answer: (D)
Representative personal account
227. The work of factory employees that can be physically associated with converting raw material into finished goods is
classified as ––
A. Manufacturing overhead
B. Indirect materials
C. Indirect labour
D. Direct labour
View answer
Correct answer: (D)
Direct labour
228. Aggregate of prime cost and Factory overhead is known as:
A. Work on cost
B. Work Cost
C. Cost of Production
D. Direct Cost
View answer
Correct answer: (B)
Work Cost
229. Conversion cost includes cost of onverting ______________ into ______________
A. Raw material, WIP

B. Raw material, Finished goods
C. WIP, Finished goods
D. Finished goods, Saleable goods
View answer
Correct answer: (B)
Raw material, Finished goods
230. All costs other than direct materials cost, direct labour cost and direct expenses are known as:
A. Indirect material cost

B. Overhead
C. Indirect labour cost
D. Indirect expenses
View answer
Correct answer: (B)
Overhead
231. ______________ is a summary of all transactions relating to particular account.
A. Balance sheet
B. Trial Balance
C. Ledger
D. Journal
View answer
Correct answer: (C)
Ledger
232. Amount of salary paid to Suresh should be debited to ______________
A. Account of Suresh
B. Salaries account
C. Cash account
D. Outstanding expenses
View answer
Correct answer: (B)
Salaries account
233. Modern Method of Accounting was introduced by
A. M. S. Gosav
B. Wheldon
C. LucoPacioli
D. R. N. Carter
View answer
Correct answer: (C)
LucoPacioli
234. If a company has contingent liabilities, they appear in the ______________
A. Balance Sheet
B. Director’s Report
C. Foot note down the balance sheet
D. Chairman’s report
View answer
Correct answer: (A)
Balance Sheet
235. The use of management accounting is
A. Compulsory
B. Optional
C. Obligation
D. Statutory requirement
View answer
Correct answer: B)
Optional
236. Financial account state the ______________ position of a concern.

A. Financial
B. Economic
C. Non financial
D. None of these
View answer
Correct answer: (A)
Financial
237. Which group of ratios relates profits to sales and investment?
A. Liquidity ratios
B. Debt ratios
C. Coverage ratios
D. Profitability ratios
View answer
Correct answer: (D)
Profitability ratios
238. Process that involves decision making with respect to investment in fixed asset
A. Valuation
B. Breakeven analysis
C. Capital budgeting
D. Material management decision
View answer
Correct answer: (C)
Capital budgeting
239. When a Bond's Yield to Maturity is greater than the Bond's Coupon Rate, the Bond
A. Is selling at a Premium
B. Has reached its Maturity Date
C. Is priced at Par
D. Is selling at a Discount
View answer
Correct answer: (D)
Is selling at a Discount
240. The ______________ is a common term for the market consensus value of the required return on a stock.
A. Dividend payout ratio

B. Intrinsic value
C. Market capitalization rate
D. Plowback rate
View answer
Correct answer: (C)
Market capitalization rate
241. Current ratio is 2:5.Current Liability is Rs.30,000.The Net working Capital is
A. Rs. 18,000
B. Rs. 45,000
C. Rs. (45,000)
D. Rs. (18000)
View answer
Correct answer: (D)
Rs. (18000)
242. ______________ means expanding the number of investments which cover different kinds of stocks.
A. Diversification
B. Standard deviation
C. Variance
D. Covariance
View answer
Correct answer: (A)
Diversification
243. What is the value of a $1,000 Face Value Bond that has twenty years remaining to Maturity, 10 % Coupon (paid
annually), and is priced to yield 6%?
A. $ 980
B. $ 1,000
C. 1,263
D. None
View answer
Correct answer: (D)
None
244. One of the problems with attempting to forecast stock market values is that
A. There are no variables that seem to predict market return

B. The earnings multiplier approach can only be used at the firm level
C. The level of uncertainty surrounding the forecast will always be quite high
D. Dividend payout ratios are highly variable
View answer
Correct answer: (C)
The level of uncertainty surrounding the forecast will always be quite high
245. Which of the following is a characteristic of a coupon bond?
A. Pays interest on a regular basis (typically every six months)

B. Does not pay interest on a regular basis but pays a lump sum at maturity
C. Total payment must be made at the end of period
D. All of above statement are correct
View answer
Correct answer: (A)
Pays interest on a regular basis (typically every six months)
246. When the market's Required Rate of Return for a particular Bond is much less than its Coupon Rate, the Bond is selling
at
A. Premium
B. Discount
C. Par
D. Face
View answer
Correct answer: (A)
Premium
247. ______________ is responsible for financial inventory, management, financial planning etc.
A. Shareholders
B. Treasurer
C. Controller
D. Board of Directors
View answer
Correct answer: (B)
Treasurer
248. Which group of ratios measures a firm's ability to meet short-term obligations?
A. Liquidity ratios
B. Debt ratios
C. Coverage ratios
View answer
Correct answer: (A)
Liquidity ratios
249. Which one of following is not Direct Claim Security?
A. Bonds
B. Option
C. Shares
D. Stock
View answer
Correct answer: (B)
Option
250. ABC’s and XYZ’s debt-to-total assets ratio is 0.4. What is its debt-to-equity ratio?
A. 0 .2
B. 0 .77
C. 0.667
D. 0.333
View answer
Correct answer: (C)
0.667
251. The Future Value (FV) of $1000 in 5 years at 5% interest rate will be:
A. $1,000.00
B. $1,276.28
C. $999.99
D. $1,500.52
View answer
Correct answer: (B)
$1,276.28
252. Which of the following is an advantage of a corporation that is NOT an advantage as in a partnership?
A. Limited liability
B. Capital shortage
C. Single taxation
D. All of the above
View answer
Correct answer: (A)
Limited liability
253. You wish to earn a return of 13% on each of two stocks, X and Y. Stock X is expected to pay a dividend of Rs. 3 in the
upcoming year while Stock Y is expected to pay a dividend of Rs. 4 in the upcoming year. The expected growth rate of
dividends for both stocks is 7%. The intrinsic value of stock X:
A. Will be greater than the intrinsic value of stock Y

B. Will be the same as the intrinsic value of stock Y
C. Will be less than the intrinsic value of stock Y
D. Cannot be calculated without knowing the market rate of return
View answer
Correct answer: (C)
Will be less than the intrinsic value of stock Y
254. Financial leverage means
A. Use of more debt capital to increase profit

B. High degree of solvency
C. Low bank finance
View answer
Correct answer: (A)
Use of more debt capital to increase profit
255. A capital budgeting technique that is NOT considered as discounted cash flow method is:
A. Payback period
B. Internal rate of return
C. Net present value
D. Profitability index
View answer
Correct answer: (A)
Payback period
256. The coupon is the
A. Amount of discount received when a Bond is purchased

B. Amount paid to a Bond dealer when a Bond is purchased
C. Difference between the Bid and Ask Price
D. Stated Interest Payment on a Bond
View answer
Correct answer: (D)
Stated Interest Payment on a Bond
257. You wish to earn a return of 10% on each of two stocks, C and D. Each of the stocks is expected to pay a dividend of
Rs2 in the upcoming year. The expected growth rate of dividends is 9% for stock C and nine percent for stock D. The
intrinsic value of stock C ______________.
A. Will be the same as the intrinsic value of stock D

B. Will be less than the intrinsic value of stock D
C. Cannot be calculated without knowing the rate of return on the market portfolio
D. None of the above is a correct statement
View answer
Correct answer: (A)
Will be the same as the intrinsic value of stock D
258. Which of following is (are) Direct Claim Security?
A. Bonds
B. Option
C. Shares
D. a and c
View answer
Correct answer: (D)
a and c
259. The ______________ is defined as the present value of all cash proceeds to the investor in the stock.
A. Dividend payout ratio

B. Intrinsic value
C. Market capitalization rate
D. Plowback ratio
View answer
Correct answer: (B)
Intrinsic value
260. Break even analysis is also called
A. Contribution Margin
B. Unit sales
C. Cost-Volume-Profit analysis
View answer
Correct answer: (C)
Cost-Volume-Profit analysis
261. ______________ are analysts who use information concerning current and prospective profitability of firms to assess
the firm's fair market value.
A. Credit analysts
B. Fundamental analysts
C. Systems analysts
D. Technical analysts
View answer
Correct answer: (B)
Fundamental analysts
262. Those liabilities which arise only on the happening of some event are called
A. Current liabilities
B. Outstanding liabilities
C. Deferred liabilities
D. Contingent liabilities
View answer
Correct answer: (D)
Contingent liabilities
263. There are ______________ types of financial statements analysis
A. 1
B. 2
C. 3
D. 4
View answer
Correct answer: (C)
3
264. ______________ tells us after how much time period the amount of money will become double.
A. Real interest rate

B. Nominal interest rate
C. Rule of 72
D. Time value of money
View answer
Correct answer: (C)
Rule of 72
265. Horizontal analysis is also called
A. Ratio change analysis

B. Common size analysis
C. Trend analysis
D. Ratio analysis
View answer
Correct answer: (C)
Trend analysis
266. Interest paid (earned) on only the original principal borrowed (lent) is often referred to as ______________.
A. Compound interest
B. Simple interest
C. Present value
D. Future value
View answer
Correct answer: (B)
Simple interest
267. If gross profit is Rs 5,000 and the net profit is 25% of the gross profit the expenses must be
A. Rs 3,750
B. Rs 1,250
C. Rs 4,150
D. Rs 6,250
View answer
Correct answer: (A)
Rs 3,750
268. What are the earnings per share (EPS) for a company that earned Rs.100, 000 last year in after-tax profits, has 200,000
common shares outstanding and Rs.1.2 million in retained earning at the year end?
A. Rs.1.00
B. Rs. 6.00
C. Rs. 0.50
D. Rs. 6.50
View answer
Correct answer: (C)
Rs. 0.50
269. Which of the following affects the price of the bond?
A. Market interest rate

B. Required rate of return
C. Interest rate risk
D. All of the given options
View answer
Correct answer: (D)
All of the given options
270. Which of the following statements is most correct?
A. One of the ways in which firms can mitigate or reduce agency problems between bondholders and stockholders is
by increasing the amount of debt in the capital structure.
B. Managerial compensation can be structured to reduce agency problems between stockholders and managers.
C. All of above statements are incorrect
D. All of the statements above are correct
View answer
Correct answer: (B)
Managerial compensation can be structured to reduce agency problems between stockholders and managers.
271. Pension fund and insurance obligation is an example of
A. Annuities
B. Perpetuity
C. Consol
D. Securities
View answer
Correct answer: (A)
Annuities
272. Carrying cost always calculate on
A. Inventory cost
B. Ordering cost
C. Purchase cost
D. EOQ
View answer
Correct answer: (C)
Purchase cost
273. Assume that the interest rate is greater than zero. Which of the following cash-inflow streams totalling Rs.1, 500 would
you prefer? The cash flows are listed in order for Year 1, Year 2, and Year 3 respectively.
A. Rs.700; Rs.500 and Rs.300

B. Rs.300; Rs.500 and Rs.700
C. Rs.500; Rs.500 and Rs.500
D. Any of the above, since they each sum to Rs.1,500
View answer
Correct answer: (A)
Rs.700; Rs.500 and Rs.300
274. The higher the Future Value (FV) of the payment, the higher will be the:
A. Discount rate
B. Present value
C. Liquidity
D. Cost of borrowing
View answer
Correct answer: (B)
Present value
275. In the Balance Sheet of a firm, the Total Debt-to-Equity Ratio is 2:1.The amount of Long Term and Short Term Sources
are Rs.12 billion. What is the amount of owner’s Net Worth of the firm?
A. Rs.18 billion
B. Rs.6 billion
C. Rs.4 billion
D. Rs.2 billion
View answer
Correct answer: (B)
Rs.6 billion
276. Which group of ratios shows the extent to which the firm is financed with debt?
A. Liquidity ratios
B. Debt ratios
C. Coverage ratios
View answer
Correct answer: (B)
Debt ratios
277. Income statement comes under the category of
A. Point in time statement

B. Period statement
C. Flow statement
D. Both b & c
View answer
Correct answer: (D)
Both b & c
278. If you have to judge a project from its NPV, you will select the one with the ______________
A. Lowest NPV
B. Highest NPV
C. NPV cannot judge the project
D. Information is not enough
View answer
Correct answer: (B)
Highest NPV
279. In the Balance Sheet amount of total Assets is Rs.10 million, Current Liabilities Rs.5 million and Owner Equity are
Rs.2 million. What is the Long term Debt-to-Equity Ratio?
A. 1:1
B. 1.5 : 1
C. 2:1
View answer
Correct answer: (B)
1.5 : 1
280. Financing decision determines
A. Current asset
B. Fix asset
C. Equity
D. Mix of finance
View answer
Correct answer: (D)
Mix of finance
281. Life of security simply refer to
A. Yield
B. Liquidity
C. Maturity
D. Safety
View answer
Correct answer: (C)
Maturity
282. Ratio of present value of project’s future net cash flows to projects initial cash flow is
A. Profitability index
B. Internal rate of return
C. Net present value
D. Average rate of return
View answer
Correct answer: (A)
Profitability index
283. The ______________ is responsible for accounting, maintaining and auditing of the accounts.
A. Shareholders
B. Treasurer
C. Controller
D. Board of Directors
View answer
Correct answer: (C)
Controller
284. The financial ratio measured as EBIT/Interest expense is known as the firm's

A. Profit margin
B. Return on assets
C. Interest coverage
D. Earnings before interest and taxes (EBIT)
View answer
Correct answer: (C)
Interest coverage
285. Fixed-based method is the subcategory of which of the following analysis.
A. Ratio analysis
B. Vertical analysis
C. Horizontal analysis
View answer
Correct answer: (C)
Horizontal analysis
286. Which of the following best represents the total inventory costs, T, where S is total usage of the inventory item for the
period, Q is the q
A. T = C (Q/2) + O (S/Q)
B. T = SQRT [2 (O) (S) / C]
C. T = SQRT [2 (C) (S) / O
D. T = C (S/Q) + O (Q/2)
View answer
Correct answer: (A)
T = C (Q/2) + O (S/Q)
287. Which of the following is NOT the present value of the bond?
A. Intrinsic value
B. Market price
C. Fair price
D. Theoretical price
View answer
Correct answer: (B)
Market price
288. ______________ is concerned with the acquisition, financing, and management of assets with some overall goal in
mind.
A. Financial management
B. Profit maximization
C. Agency theory
D. Social responsibility
View answer
Correct answer: (A)
Financial management
289. Oliver Incorporated has a current ratio equal to 1.6 and a quick ratio equal to 1.2. The company has $2 million in sales
and its current liabilities are $1 million. What is the company’s inventory turnover ratio?
A. 5.0
B. 5.2
C. 5.5
D. 6.0
View answer
Correct answer: (A)
5.0
290. Share and bonds floats in ______________
A. Money market
B. Capital market
C. Commercial bank
D. Equity market
View answer
Correct answer: (B)
Capital market
291. Which of the following is NOT an example of hybrid equity?
A. Convertible bonds
B. Convertible debenture
C. Common shares
D. Preferred shares
View answer
Correct answer: (C)
Common shares
292. What are the three interrelated areas of finance?
A. Financial markets, option and forwards

B. Investment, Financial management and Money & capital markets
C. Banking, financial institutions and swap currency
D. All of above
View answer
Correct answer: (B)
Investment, Financial management and Money & capital markets
293. Convertible debt is debt that
A. The issuing firm can pay off early

B. The bondholder can sell back to the firm at a guaranteed price
C. The bondholder can convert into shares
D. All of above
View answer
Correct answer: (C)
The bondholder can convert into shares
294. ______________ means value at some future time of a present amount of money evaluated at a given interest rate.
A. Compounding
B. Discounting
C. Nominal rate
D. Continuous rate
View answer
Correct answer: (A)
Compounding
295. When the market's Required Rate of Return for a particular Bond is equal to its Coupon Rate, the Bond is selling at
A. Premium
B. Discount
C. Par
D. None
View answer
Correct answer: (C)
Par
296. A Bond has a $1,000 Face Value, a Market Price of $1,115, and pays interest payments of $ 90 every year. What is the
coupon rate?
A. 4.50 %
B. 6.75 %
C. 7.39 %
D. 9.00 %
View answer
Correct answer: (D)
9.00 %
297. A bond with a $1,000 face value and an 8 percent annual coupon pays interest semi-annually. The bond will mature in
15 years. The nominal yield to maturity (i) is 11 percent. What is the price of the bond today?
A. $ 784.27
B. $ 781.99
C. $ 1,259.38
D. $ 739.19
View answer
Correct answer: (B)
$ 781.99
298. The goal of fundamental analysts is to find securities
A. Whose intrinsic value exceeds market price

B. With a positive present value of growth opportunities
C. With high market capitalization rates
D. All of the above
View answer
Correct answer: (A)
Whose intrinsic value exceeds market price
299. ______________ is the set of possible values that a random variable can assume and their association probabilities of
occurrence.
A. Expected Rate of Return

B. Probability Distribution
C. Variance
D. Standard deviation
View answer
Correct answer: (B)
Probability Distribution
300. Which of the following is not component of financial report?
A. Balance sheet
B. Notes of the account
C. Comparative figure of previous period
D. None of the given option
View answer
Correct answer: (D)
None of the given option
301. If you want to deposit money into bank, what will be yours choice?
A. Compounding annually
B. Compounding Semi-annually
C. Compounding monthly
D. Compounding daily
View answer
Correct answer: (D)
Compounding daily
302. Interest paid (earned) on both the original principal borrowed (lent) and previous interest allowed (earned) is often
referred to as ______________.
A. Compound interest
B. Double interest
C. Simple interest
D. Present value
View answer
Correct answer: (A)
Compound interest
303. Which of the following is the activity which finance people are involved
A. Investing decisions
B. Marketing decisions
C. Promotion decisions
D. Non of Above
View answer
Correct answer: (A)
Investing decisions
304. The Bailey Brothers want to issue 20-year, zero coupon bonds that yield 9 percent. What price should it charge for these
bonds if the face value is $1,000?
A. $ 157.25
B. $ 163.70
C. $ 178.43
D. $ 194.49
View answer
Correct answer: (C)
$ 178.43
305. When bonds are issued, under which of the following category the value of the bond appears?
A. Equity
B. Fixed assets
C. Short term loan
D. Long term loan
View answer
Correct answer: (D)
Long term loan
306. What type of long-term financing most likely has the following features: (1) it has an infinite and finite life (2) it pays
dividends, and (3) its cash flows are expected to be a constant annuity stream.
A. Long-term debt
B. Preferred stock
C. Common stock
D. None of the given option
View answer
Correct answer: (B)
Preferred stock
307. PV of lump sum is simply termed as current value ofor
A. Present payment
B. Future payment
C. Annuity payment
D. Discount payment
View answer
Correct answer: (B)
Future payment
308. ______________ Ratios are used to measure a firm’s ability to meet short-term obligations.mpor
A. Asset management ratios

B. Debt management ratios
C. Liquidity ratios
D. Equity ratios
View answer
Correct answer: (C)
Liquidity ratios
309. Creditors turnover ratios comes under the category of
A. Activity ratios
B. Asset management ratios
C. All of the above
View answer
Correct answer: (C)
All of the above
310. Dividend is approved by the shareholder in the ______________ at the recommendation of the directors.
A. Annual general meeting

B. Director meeting
C. Statutory meeting
D. Special meeting
View answer
Correct answer: (A)
Annual general meeting
311. If bank giving 12% interest rate per year, then per month it will be
A. 1%
B. 12%
C. 5%
D. 6%
View answer
Correct answer: (A)
1%
312. Market value determines
A. On running business
B. When company closedown
C. Before establishment of business
D. When asset sold individually
View answer
Correct answer: (A)
On running business
313. The Yield to Maturity on a bond is
A. Equal to the Coupon Rate divided by the Market Price

B. The Current Required Market Rate
C. Equal to the Annual Interest divided by the Face Value
D. Another name for the coupon rate.
View answer
Correct answer: (B)
The Current Required Market Rate
314. Muhammad Ali just received an interest payment that is equal to 7 percent of his Rs. 20,000 in Bond investment. This 7
percent is best described as a
A. Real Return
B. Deflated Return
C. Coupon Return
D. None
View answer
Correct answer: (C)
Coupon Return
315. A decrease in the firm's receivable turnover ratio means that ______________.
A. Inventories have gone up

B. It is collecting credit sales more slowly than before
C. Cash sales have gone down
D. None of above
View answer
Correct answer: (B)
It is collecting credit sales more slowly than before
316. Marketable Securities, Account Receivables and Inventory are listed as
A. Current Asset
B. Current Liabilities
C. Long Term Asset
D. Long term liabilities
View answer
Correct answer: (A)
Current Asset
317. The Coupon Rate for a Bond is best defined as the
A. Annual interest divided by the current market price

B. Annual interest divided by the face value
C. Annual interest divided by the clean market price
D. All of Above
View answer
Correct answer: (B)
Annual interest divided by the face value
318. Which of the following is considered a Profitability measure?
A. Days Sales in Inventory

B. Fixed Asset Turnover
C. Cash Coverage Ratio
D. Return on Assets
View answer
Correct answer: (D)
Return on Assets
319. Quick ratios are also called ______________
A. Super ratios
B. Acid-test ratios
C. Cash ratios
View answer
Correct answer: (B)
Acid-test ratios
320. Bond secured by lien on real property is
A. Debenture
B. Euro bond
C. Mortgage bond
D. Convertible bond
View answer
Correct answer: (C)
Mortgage bond
321. Net present value ______________.
A. Is equal to the initial investment in a project

B. Is equal to the present value of the project benefits
C. Is equal to zero when the discount rate used is equal to the IRR
D. Is simplified by the fact that future cash flows are easy to estimate
View answer
Correct answer: (B)
Is equal to the present value of the project benefits
322. Profit maximization is a
A. Short term concept

B. Long term concept
C. Both a & b
D. None
View answer
Correct answer: (A)
Short term concept
323. Which of the following is the variability of return on stocks or portfolios associated with changes in return on the
market as a whole?
A. Systematic risk
B. Standard deviation
C. Unsystematic risk
D. Coefficient of variation
View answer
Correct answer: (A)
Systematic risk
324. When the bond approaches its maturity, the market value of the bond approaches to which of the following?
A. Intrinsic value
B. Book value
C. Par value
D. Historic cost
View answer
Correct answer: (A)
Intrinsic value
325. Bonds are hybrid of
A. Annuity due + Lumpsum amount

B. Ordinary annuity + Lumpsum amount
C. Annuity due + Ordinary annuity
D. Perpetuity + Lumpsum amount
View answer
Correct answer: (B)
Ordinary annuity + Lumpsum amount
326. Which one of the following can issue the corporate bond?
A. Individuals
B. Government
C. Public limited companies
D. All of before
View answer
Correct answer: (C)
Public limited companies
327. A Bond that pays no interest payments and sells at a deep discount is called
A. Bond
B. Zero Coupon
C. Convertible
D. Tax-free
View answer
Correct answer: (B)
Zero Coupon
328. Which of the following statements is incorrect?
A. Assets - Capital = Liabilities

B. Liabilities + Assets = Capital
C. Liabilities + Capital = Assets
D. Assets - Liabilities = Capital
View answer
Correct answer: (B)
Liabilities + Assets = Capital
329. Given the following, what is the amount of Capital? Assets: Premises £20,000; Stock £8,500; Cash £100. Liabilities:
Creditors £3,000; Loan from A Adams £4,000
A. £21,100
B. £21,400
C. £21,600
D. £32,400
View answer
Correct answer: (C)
£21,600
330. To find the value of closing stock at the end of a period we
A. do this by stocktaking
B. deduct cost of goods sold from sales
C. deduct opening stock from cost of goods sold
D. look in the stock account
View answer
Correct answer: (A)
do this by stocktaking
331. Given figures showing: Sales £8,200; Opening stock £1,300; Closing stock £900; Purchases £6,400; Carriage inwards
£200, the cost of goods sold figure is:
A. Another figure
B. £6,200
C. £6,800
D. £7,000
View answer
Correct answer: (D)
£7,000
332. When Lee makes out a cheque for £50 and sends it to Young, then Lee is known as:
A. The payee
B. The banker
C. The drawer
D. The creditor
View answer
Correct answer: (C)
The drawer
333. 'Posting' the transactions in bookkeeping means:
A. Making the second entry of a double entry transaction

B. Entering items in a cash book
C. Making the first entry of a double entry transaction
D. Something other than the above
View answer
Correct answer: (A)
Making the second entry of a double entry transaction
334. Given a purchases invoice showing 5 items of £80 each, less trade discount of 25 per cent and cash discount of 5 per
cent, if paid within the credit period, your cheque would be made out for:
A. £260
B. £280
C. £285
D. None of these
View answer
Correct answer: (C)
£285
335. We originally sold 25 items at £12 each, less 331/3 per cent trade discount. Our customer now returns 4 of them to us.
What is the amount of credit note to be issued?
A. £36
B. £30
C. £32
D. £48
View answer
Correct answer: (C)
£32
336. At the balance sheet date the balance on the Accumulated Provision for Depreciation Account is:
A. Transferred to Depreciation Account

B. Transferred to the Asset Account
C. Transferred to Profit and Loss Account
D. Simply deducted from the asset in the Balance Sheet
View answer
Correct answer: (D)
Simply deducted from the asset in the Balance Sheet
337. A credit balance brought down on a Rent Account means:
A. We have paid too little in rent

B. We have paid too much rent
C. We owe that rent at that date
D. We have paid that rent in advance at that date
View answer
Correct answer: (C)
We owe that rent at that date
338. Which of the following are not true? A Bank Reconciliation Statement is
i. (i) Part of the double entry system

ii. (ii) Not part of the double entry system
iii. (iii) Sent by the firm to the bank
iv. (iv) Posted to the ledger accounts.
A. (i), (ii) and (iv)

B. (i), (iii) and (iv)
C. (i) and (ii)
D. (ii), (iii) and (iv)
View answer
Correct answer: (B)
(i), (iii) and (iv)
339. Which of the following do not affect trial balance agreement?
i. (i) Sales £105 to A Henry entered in P Henry's account

ii. (ii) Cheque payment of £134 for Motor expenses entered only in Cash Book
iii. (iii) Purchases £440 from C Browne entered in both accounts as £404
iv. (iv) Wages account added up incorrectly, being totaled £10 too much.
A. (i) and (iii)

B. (ii) and (iii)
C. (i) and (iv)
D. (iii) and (iv)
View answer
Correct answer: (A)
(i) and (iii)
340. What should happen if the balance on a Suspense Account is of a material amount?
A. Write it off to Profit and Loss Account

B. Should be written off to the balance sheet
C. Carry forward the balance to the next period
D. Find the error(s) before publishing the final accounts
View answer
Correct answer: (D)
Find the error(s) before publishing the final accounts
341. If opening stock is £3,000, closing stock £5,000, sales £40,000 and margin 20 per cent, then stock turn is:
A. 7 ½ times
B. 8 times
C. 5 times
D. 6 times
View answer
Correct answer: (B)
8 times
342. Which of the following should be charged in the Profit and Loss Account?
A. Carriage on raw materials

B. Work in progress
C. Office rent
D. Direct materials
View answer
Correct answer: (C)
Office rent
343. You are to buy an existing business which has assets valued at buildings £50,000, Motor vehicles £15,000, Fixtures
£5,000 and Stock £40,000. You are to pay £140,000 for the business. This means that:
A. You have made an arithmetical mistake

B. You are paying £40,000 for Goodwill
C. Buildings are costing you £30,000 more than their value
D. You are paying £30,000 for Goodwill
View answer
Correct answer: (D)
You are paying £30,000 for Goodwill
344. A company wishes to pay out all available profits as dividends. Net profit is £26,600. There are 20,000 8% Preference
shares of £1 each, and 50,000 Ordinary shares of £1 each. £5,000 is to be transferred to General Reserve. What Ordinary
dividends are to be paid, in percentage terms?
A. 40 per cent
B. 60 per cent
C. 10 per cent
D. 20 per cent
View answer
Correct answer: (A)
40 per cent
345. Which of the following is not an asset?
A. Buildings
B. Debtors
C. Loan from K Harris
D. Cash balance
View answer
Correct answer: (C)
Loan from K Harris
346. Which of the following best describes the meaning of 'Purchases'?
A. Goods bought on credit

B. Goods paid for
C. Goods bought for resale
D. Items bought
View answer
Correct answer: (C)
Goods bought for resale
347. Which of the following best describes a trial balance?
A. Shows all the entries in the books

B. It is a list of balances on the books
C. Shows the financial position of a business
D. It is a special account
View answer
Correct answer: (B)
It is a list of balances on the books
348. The descending order in which current assets should be shown in the balance sheet is:
A. Debtors, Stock, Bank, Cash

B. Cash, Bank, Debtors, Stock
C. Stock, Debtors, Cash, Bank
D. Stock, Debtors, Bank, Cash
View answer
Correct answer: (D)
Stock, Debtors, Bank, Cash
349. The Sales Day Book is best described as:
A. Containing customers' accounts

B. Containing real accounts
C. Part of the double entry system
D. A list of credit sales
View answer
Correct answer: (D)
A list of credit sales
350. A debit balance of £100 in a cash account shows that:
A. There was £100 cash in hand

B. The total of cash received was less than £100
C. £100 was the total of cash paid out
D. Cash has been overspent by £100
View answer
Correct answer: (A)
There was £100 cash in hand
351. Sales invoices are first entered in:
A. The Cash Book

B. The Purchases Journal
C. The Sales Journal
D. The Sales Account
View answer
Correct answer: (C)
The Sales Journal
352. Credit notes issued by us will be entered in our:
A. Sales Account
B. Returns Outwards Journal
C. Returns Inwards Journal
D. Returns Inwards Account
View answer
Correct answer: (C)
Returns Inwards Journal
353. If an accumulated provision for depreciation account is in use then the entries for the year's depreciation would be:
A. Credit Asset Account, debit Provision for Depreciation Account

B. Debit Asset Account, credit Profit and Loss Account
C. Credit Provision for Depreciation Account, debit Profit and Loss Account
D. Credit Profit and Loss Account, debit Provision for Depreciation Account
View answer
Correct answer: (C)
Credit Provision for Depreciation Account, debit Profit and Loss Account
354. If we take goods for own use we should:
A. Debit Drawings Account: Credit Purchases Account

B. Debit Drawings Account: Credit Stock Account
C. Debit Sales Account: Credit Stock Account
D. Debit Purchases Account: Credit Drawings Account
View answer
Correct answer: (A)
Debit Drawings Account: Credit Purchases Account
355. A cheque paid by you, but not yet passed through the banking system, is:
A. A credit transfer
B. A dishonored cheque
C. An un-presented cheque
D. A standing order
View answer
Correct answer: (C)
An un-presented cheque
356. Given desired cash float of £200, if £146 is spent in the period, how much will be reimbursed at the end of the period?
A. £53
B. £146
C. £254
D. £200
View answer
Correct answer: (B)
£146
357. Which of these errors would be disclosed by the trial balance?
A. A purchase of £250 was omitted entirely from the books

B. Credit sales of £300 entered in both double entry accounts as £30
C. Selling expenses had been debited to Sales Account
D. Cheque £95 from C Smith entered in Smith's account as £59
View answer
Correct answer: (D)
Cheque £95 from C Smith entered in Smith's account as £59
358. MC83 If cost price is £90 and selling price is £120, then:

i. (i) Mark-up is 25 per cent
ii. (ii) Margin is 331/3 per cent
iii. (iii) Margin is 25 per cent
iv. (iv) Mark-up is 331/3 per cent
A. (i) and (ii)

B. (i) and (iii)
C. (iii) and (iv)
D. (ii) and (iv)
View answer
Correct answer: (C)
(iii) and (iv)
359. A Receipts and Payments Account is one:
A. In which the surplus of income over expenditure is calculated

B. In which the opening and closing cash balances are shown
C. Which is accompanied by a balance sheet
D. In which the profit is calculated
View answer
Correct answer: (B)
In which the opening and closing cash balances are shown
360. Where there is no partnership agreement then profits and losses:
A. Must be shared equally

B. Must be shared in same proportion as capitals
C. Must be shared equally after adjusting for interest on capital
D. None of these
View answer
Correct answer: (A)
Must be shared equally
361. In a limited company which of the following are shown in the Appropriation Account?
i. (i) Debenture interest

ii. (ii) Proposed dividend
iii. (iii) Transfers to reserves
iv. (iv) Directors' remuneration
A. (i) and (ii)

B. (i) and (ii)
C. (ii) and (iii)
D. (ii) and (iv)
View answer
Correct answer: (C)
(ii) and (iii)
A. Motor Vehicles
B. Machinery
C. Creditors for goods
D. Cash at Bank
View answer
Correct answer: (C)
Creditors for goods
363. Which of the following should not be called 'Sales'?
A. Goods sold for cash

B. Sale of item previously included in 'Purchases'
C. Office fixtures sold
D. Goods sold on credit
View answer
Correct answer: (C)
Office fixtures sold
364. What would have been the balance on the account of C De Freitas in MC17 on 19 May 20X5?
A. A credit balance of £445

B. A credit balance of £95
C. A credit balance of £265
D. A debit balance of £265
View answer
Correct answer: (D)
A debit balance of £265
365. Which of these best describes fixed assets?
A. Are bought to be used in the business

B. Are expensive items bought for the business
C. Are items which will not wear out quickly
D. Are of long life and are not bought specifically for resale
View answer
Correct answer: (D)
Are of long life and are not bought specifically for resale
366. Which of the following are personal accounts?
1. (i) Buildings
2. (ii) Wages
3. (iii) Debtors
4. (iv) Creditors
A. (ii) and (iii) only

B. (i) and (iv) only
C. (ii) and (iv) only
D. (iii) and (iv) only
View answer
Correct answer: (D)
(iii) and (iv) only
367. Discounts received are:
A. Deducted by us when we pay our accounts

B. Deducted when we receive cash
C. Given by us when we sell goods on credit
D. None of these
View answer
Correct answer: (A)
Deducted by us when we pay our accounts
368. Entered in the Purchases Journal are:
A. Discounts received
B. Purchases invoices
C. Payments to suppliers
D. Trade discounts
View answer
Correct answer: (B)
Purchases invoices
369. A firm bought a machine for £3,200. It is to be depreciated at a rate of 25 per cent using the Reducing Balance Method.
What would be the remaining book value after 2 years?
A. £2,400
B. £1,800
C. £1,600
D. Some other figure
View answer
Correct answer: (B)
£1,800
370. A Provision for Doubtful Debts is created:
A. When debtors cease to be in business

B. To provide for possible bad debts
C. When debtors become bankrupt
D. To write off bad debts
View answer
Correct answer: (B)
To provide for possible bad debts
371. In the business of C Songster, who owns a clothing store, which of the following is Capital Expenditure?
i. Shop fixtures bought

ii. Wages of assistants
iii. New van bought
iv. Petrol for van
A. (ii) and (iv)

B. (i) and (iii)
C. (i) and (ii)
D. (ii) and (iii)
View answer
Correct answer: (B)
(i) and (iii)
372. Which of the following should be entered in the Journal?
i. Payment for cash purchases

ii. Fixtures bought on credit
iii. Credit sale of goods
iv. Sale of surplus machinery.
A. and (iv)
B. and (iv)
C. and (iv)
D. and (iii)
View answer
Correct answer: (B)
(ii) and (iv)
373. Which of the following are not errors of principle?
i. Motor expenses entered in Motor Vehicles account

ii. Purchases of machinery entered in Purchases account
iii. Sale of £250 to C Phillips completely omitted from books
iv. Sale to A Henriques entered in A Henry's account.
A. (iii) and (iv)

B. (ii) and (iii)
C. (i) and (ii)
D. (i) and (iv)
View answer
Correct answer: (A)
(iii) and (iv)
374. Given opening debtors of £11,500, Sales £48,000 and receipts from debtors £45,000, the closing debtors should total:
A. £14,500
B. £83,500
C. £18,500
D. £8,500
View answer
Correct answer: (A)
£14,500
375. If creditors at 1 January 20X3 were £2,500, creditors at 31 December 20X3 £4,200 and payments to creditors £32,000,
then purchases for 20X3 are:
A. £31,600
B. £38,700
C. £33,700
D. £30,300
View answer
Correct answer: (C)
£33,700
376. The best method of departmental accounts is:
A. To allocate expenses in proportion to purchases

B. To allocate expenses in proportion to sales
C. To charge against each department its uncontrollable costs
D. To charge against each department its controllable costs
View answer
Correct answer: (D)
To charge against each department its controllable costs
377. Any loss on revaluation is:

A. Debited to old partners in old profit-sharing ratios
B. Credited to old partners in old profit-sharing ratios
C. Credited to new partners in new profit-sharing ratios
D. Debited to new partners in new profit-sharing ratios
View answer
Correct answer: (A)
Debited to old partners in old profit-sharing ratios
378. The Issued Capital of a company is:
A. Always the same as the Authorized Capital

B. The same as Preference Share Capital
C. Equal to the reserves of the company
View answer
Correct answer: (D)
None of the above
379. Which of the following is correct?
A. Profit reduces capital

B. Profit increases capital
C. Capital can only come from profit
D. Profit does not alter capital
View answer
Correct answer: (B)
Profit increases capital
380. Gross profit is:
A. Cost of goods sold + Opening stock

B. Excess of sales over cost of goods sold
C. Sales less Purchases
D. Net profit less expenses of the period.
View answer
Correct answer: (B)
Excess of sales over cost of goods sold
1. The credit entry for net profit is on the credit side of:
A. The trading account

B. The drawings account
C. The capital account
D. The profit and loss account
View answer
Correct answer: (C)
The capital account
2. When banking money in to your current account you should always use:
A. A general ledger
B. A cheque book
C. A cash book
D. A paying-in slip
View answer
Correct answer: (D)
A paying-in slip
3. The total of the Sales Journal is entered on:
A. The debit side of the Sales Account in the General Ledger

B. The credit side of the General Account in the Sales Ledger
C. The credit side of the Sales Account in the General Ledger
D. The debit side of the Sales Day Book
View answer
Correct answer: (C)
The credit side of the Sales Account in the General Ledger
4. Depreciation is:
A. The salvage value of a fixed asset

B. The amount of money spent in replacing assets
C. The part of the cost of the fixed asset consumed during its period of use by the firm
D. The amount spent to buy a fixed asset
View answer
Correct answer: (C)
The part of the cost of the fixed asset consumed during its period of use by the firm
5. When the final accounts are prepared, the Bad Debts Account is closed by a transfer to the:
A. Trading Account
B. Provision for Doubtful Debts Account
C. Balance Sheet
D. Profit and Loss Account
View answer
Correct answer: (D)
Profit and Loss Account
6. Capital Expenditure is:
A. The costs of running the business on a day-to-day basis

B. Money spent on buying fixed assets or adding value to them
C. Money spent on selling fixed assets
D. The extra capital paid in by the proprietor
View answer
Correct answer: (B)
Money spent on buying fixed assets or adding value to them
7. A Bank Reconciliation Statement is a statement:
A. Sent by the bank when we have made an error

B. Drawn up by the bank to verify the cash book
C. Sent by the bank when the account is overdrawn
D. Drawn up by us to verify our cash book balance with the bank statement balance
View answer
Correct answer: (D)
Drawn up by us to verify our cash book balance with the bank statement balance
8. When a petty cash book is kept there will be:
A. No entries made at all in the general ledger for items paid by petty cash
B. The same number of entries in the general ledger
C. Fewer entries made in the general ledger
D. More entries made in the general ledger
View answer
Correct answer: (C)
Fewer entries made in the general ledger
9. If a trial balance totals do not agree, the difference must be entered in:
A. The Profit and Loss Account

B. A Nominal Account
C. The Capital Account
D. A Suspense Account
View answer
Correct answer: (D)
A Suspense Account
10. Given cost of goods sold £16,000 and margin of 20 per cent, then sales figure is:
A. £21,000
B. £20,000
C. £13,600
D. £20,160
View answer
Correct answer: (B)
£20,000
391. Given opening capital of £16,500, closing capital as £11,350 and drawings were £3,300, then:
A. Profit for the year was £8,450

B. Loss for the year was £8,450
C. Profit for the year was £1,850
D. Loss for the year was £1,850
View answer
Correct answer: (D)
Loss for the year was £1,850
392. In the Manufacturing Account is calculated:
A. The production costs paid in the year

B. The total cost of goods produced
C. The gross profit on goods sold
D. The production cost of goods completed in the period
View answer
Correct answer: (D)
The production cost of goods completed in the period
393. Assets can be revalued in a partnership change because:
A. The depreciation charged on them needs to be reversed

B. It helps prevent injustice to some partners
C. The law insists upon it
D. Inflation affects all values
View answer
Correct answer: (B)
It helps prevent injustice to some partners
394. Is it true that the trial balance totals should agree?
A. No, there are sometimes good reasons why they differ

B. Yes, always
C. Yes, except where the trial balance is extracted at the year end
D. No, because it is not a balance sheet
View answer
Correct answer: (B)
Yes, always
395. Carriage inwards is charged to the trading account because:
A. Carriage outwards goes in the profit and loss account

B. It is an expense connected with buying goods
C. It is not part of motor expenses
D. It should not go in the balance sheet
View answer
Correct answer: (B)
It is an expense connected with buying goods
396. Suppliers' personal accounts are found in the:
A. Sales ledger
B. Nominal ledger
C. Purchases ledger
D. General ledger
View answer
Correct answer: (C)
Purchases ledger
397. £50 cash taken from the cash till and banked is entered:
A. Debit cash column £50: Credit bank column £50

B. Debit bank column £50: Credit bank column £50
C. Debit bank column £50: Credit cash column £50
D. Debit cash column £50: Credit cash column £50
View answer
Correct answer: (C)
Debit bank column £50: Credit cash column £50
398. The total of the 'Discounts Allowed' column in the Cash Book is posted to:
A. The debit of the Discounts Received account

B. The debit of the Discounts Allowed account
C. The credit of the Discounts Allowed account
D. The credit of the Discounts Received account
View answer
Correct answer: (B)
The debit of the Discounts Allowed account
399. The total of the Purchases Journal is transferred to the:
A. Credit side of the Purchases Account

B. Credit side of the Purchases Book
C. Debit side of the Purchases Account
D. Debit side of the Purchases Day Book
View answer
Correct answer: (C)
Debit side of the Purchases Account
400. A firm bought a machine for £16,000. It is expected to be used for 5 years then sold for £1,000. What is the annual
amount of depreciation if the straight line method is used?
A. £3,750
B. £3,100
C. £3,200
D. £3,000
View answer
Correct answer: (D)
£3,000
401. Working Capital is a term meaning:
A. The total of Fixed Assets - Current Assets

B. The capital less drawings
C. The amount of capital invested by the proprietor
D. The excess of the current assets over the current liabilities
View answer
Correct answer: (D)
The excess of the current assets over the current liabilities
402. If £500 was shown added to Purchases instead of being added to a fixed asset:
A. Net profit only would be overstated

B. Both gross and net profits would be understated
C. Net profit only would be understated
D. It would not affect net profit
View answer
Correct answer: (B)
Both gross and net profits would be understated
403. The Journal is:
A. Used when other journals have been mislaid

B. A supplement to the Cash Book
C. Not part of the double entry system
D. Part of the double entry system
View answer
Correct answer: (C)
Not part of the double entry system
404. Errors are corrected via the Journal because:
A. It saves the bookkeeper's time

B. It provides a good record explaining the double entry records
C. It saves entering them in the ledger
D. It is much easier to do
View answer
Correct answer: (B)
It provides a good record explaining the double entry records
405. In a Sales Ledger Control Account the Bad Debts written off should be shown in the account:
A. As a credit
B. As a debit
C. As a balance carried down
D. Both as a debit and as a credit
View answer
Correct answer: (A)
As a credit
406. Prime cost includes:
i. Direct labour
ii. Factory overhead expenses
iii. Raw materials consumed
iv. Direct expenses
A. (i), (iii) and (iv)

B. (i), (ii) and (iii)
C. (ii), (iii) and (iv)
D. (i), (ii) and (iv)
View answer
Correct answer: (A)
(i), (iii) and (iv)
407. If it is required to maintain fixed capitals then the partners' shares of profits must be:
A. Credited to capital accounts

B. Debited to capital accounts
C. Debited to partners' current accounts
D. Credited to partners' current accounts
View answer
Correct answer: (D)
Credited to partners' current accounts
408. Net profit is calculated in the:
A. Profit and loss account

B. Balance sheet
C. Trial balance
D. Trading account
View answer
Correct answer: (A)
Profit and loss account
409. The costs of putting goods into a saleable condition should be charged to:
A. Trading account
B. Profit and loss account
C. Balance sheet
D. None of these
View answer
Correct answer: (A)
Trading account
410. If you want to make sure that your money will be safe if Cheques sent are lost in the post, you should:
A. Always pay by cash

B. Cross your Cheques 'Account Payee only, Not Negotiable'
C. Always take the money in person
D. Not use the postal service in future
View answer
Correct answer: (B)
Cross your Cheques 'Account Payee only, Not Negotiable'
411. A credit balance of £200 on the cash columns of the cash book would mean:
A. We have £200 cash in hand

B. Someone has stolen £200 cash
C. We have spent £200 more than we have received
D. The bookkeeper has made a mistake
View answer
Correct answer: (D)
The bookkeeper has made a mistake
412. A cash discount is best described as a reduction in the sum to be paid:
A. If payment is made by cash, not cheque

B. If purchases are made for cash, not on credit
C. If payment is made either by cash or cheque
D. If payment is made within a previously agreed period
View answer
Correct answer: (D)
If payment is made within a previously agreed period
413. An alternative name for a Sales Journal is:
A. Sales Day Book

B. Sales Ledger
C. Sales Invoice
D. Daily Sales
View answer
Correct answer: (A)
Sales Day Book
414. The total of the Returns Outwards Journal is transferred to:
A. The debit side of the Returns Outwards Account

B. The credit side of the Returns Outwards Book
C. The credit side of the Returns Outwards Account
D. The debit side of the Purchases Returns Book
View answer
Correct answer: (C)
The credit side of the Returns Outwards Account
415. In the trial balance the balance on the Provision for Depreciation Account is:
A. Not shown, as it is part of depreciation

B. Sometimes shown as a credit, sometimes as a debit
C. Shown as a credit item
D. Shown as a debit item
View answer
Correct answer: (C)
Shown as a credit item
416. A debit balance brought down on a Packing Materials Account means:
A. We have a stock of packing materials unused

B. We are owed for packing materials
C. We have lost money on packing materials
D. We owe for packing materials
View answer
Correct answer: (A)
We have a stock of packing materials unused
417. Which of these best describes a balance sheet?
A. A statement of assets
B. A listing of balances
C. An account proving the books balance
D. A record of closing entries
View answer
Correct answer: (B)
A listing of balances
418. ______________ the transactions is known as Book Keeping.
A. Classifyi
B. Recordi
C. Summarisi
D. None of the
View answer
Correct answer: (B)
Recordi
419. Goodwill account is related to ______________
A. Nominal account
B. Personal account
C. Real account
D. Tangible account
View answer
Correct answer: (C)
Real account
420. The credit balance of bank account indicates ______________

A. amount payable by the bank
B. amount payable to the bank
C. cash at bank
D. loan from bank
View answer
Correct answer: (B)
amount payable to the bank
421. The statement sent along with purchase return is ______________
A. credit note
B. bills payable book
C. debit note
D. purchases return book
View answer
Correct answer: (A)
credit note
422. Depreciation is provided on ______________
A. working capita
B. current asset
C. fixed asset
D. intangible assets
View answer
Correct answer: (C)
fixed asset
423. An example of revenue expenditure is ______________
A. Purchase of land
B. Salaries
C. Lease
D. Purchase of buildings
View answer
Correct answer: (B)
Salaries
424. At the time of endorsement of a bill, the drawer credits ______________
A. the .drawee
B. endorsees personal account
C. bills receivable account
D. bills for collection account
View answer
Correct answer: (C)
bills receivable account
425. In accounting the benefit receiving aspect is said to be
A. Debi
B. Credi
C. Debit and Credi
D. none of thes
View answer
Correct answer: (A)
Debi
426. Summary of all balances is known as
A. Ledge
B. Journa
C. Subsidiary book
D. Trial Balance
View answer
Correct answer: (D)
Trial Balance
427. The excess of current assets over current liabilities is called ______________.
A. Net tangible worth

B. Networth
C. Gross working capital
D. Net working capital
View answer
Correct answer: (C)
Gross working capital
428. Bills payable book is a ______________.
A. subsidiar
B. a. principal book
C. a. ledger
D. a. memorandum book
View answer
Correct answer: (A)
subsidiar
429. Bank Reconciliation statement is ______________
A. ledger account
B. part of the cash book
C. separate statement
D. a sub division of the journal
View answer
Correct answer: (C)
separate statement
430. The distinction between capital and revenue is necessary for the preparation of ______________.
A. fund flow statement

B. receipts and payment account
C. final accounts
D. cash flow statement
View answer
Correct answer: (B)
receipts and payment account
431. If payment is made on the average due date it results in ______________
A. loss of interest to the creditor

B. loss of interest to the debtor
C. no loss of interest to either of them
D. loss of interest to both the creditor and debtor
View answer
Correct answer: (C)
no loss of interest to either of them
432. A sale of goods to vidhya for cash should be debited to ______________.
A. Vidhya account
B. Cash account
C. Sale of goods accoun
D. Purchases account
View answer
Correct answer: (B)
Cash account
433. Purchases for office furniture on account is recorded in ______________.
A. general journal
B. cash book
C. purchases book
D. sales book
View answer
Correct answer: (B)
cash book
434. Payment of compensation to a worker who has been discharged from service is a ______________.
A. capital expenditure
B. revenue expenditure
C. deferred revenue expenditure
D. partly capital expenditure
View answer
Correct answer: (B)
revenue expenditure
435. The following items are shown in profit and loss appropriation account ______________
A. Dividend declared
B. Discount on issue of shares
C. Non-operating expenses
D. Current assets
View answer
Correct answer: (A)
Dividend declared
436. Wages paid to workers must be debited to ______________ account
A. Wages
B. Machinery
C. Factory expenses
D. Offices expenses
View answer
Correct answer: (A)
Wages
437. Receipts and payment account record receipt and payments of ______________.
A. revenue nature only

B. capital nature only
C. both revenue and capital nature
D. capital receipts
View answer
Correct answer: (C)
both revenue and capital nature
438. In a receipts and payments account the payments are recorded on the ______________ side.
A. credit
B. debit
C. Upper
D. Lower
View answer
Correct answer: (A)
credit
439. Any revenue expense for when a separate fund is available will be ______________.
A. debited to the separate fund

B. debited to income and expenditure account
C. capital issued and shown in the balance sheet
D. credited to the separate fund
View answer
Correct answer: (A)
debited to the separate fund
440. Donations received by a non-profit organisation are usually a ______________.
A. revenue receipt
B. capital receipt
C. capital expenditure
D. revenue expenditur
View answer
Correct answer: (A)
revenue receipt
441. Errors of carry forward from one year to another year affect ______________
A. personal account
B. real account
C. nominal account
D. both personal and real account
View answer
Correct answer: (A)
personal account
442. Average due date can be called as ______________
A. mean due date

B. median due date
C. mode due date
D. zero date
View answer
Correct answer: (A)
mean due date
443. The person upon whom the bill of exchange is drawn is called ______________
A. Drawer
B. Drawer
C. Payee
D. Maker
View answer
Correct answer: (A)
Drawer
444. When furniture is sold for cash, the entry should be made in ______________.
A. sales book
B. cash book
C. Journal.
D. petty cash book.
View answer
Correct answer: (B)
cash book
445. A Cheque received and paid into the bank on the same day id recorded in the ______________.
A. a. cash column of the cash book

B. a. bank column of the cash book
C. a. both the cash and bank columns of the book
D. a. the credit balance as per pass book
View answer
Correct answer: (B)
a. bank column of the cash book
446. Amount paid for acquiring goodwill is ______________.
A. revenue expenditure
B. deferred revenue expenditure
C. capital expenditure
D. deferred capital expenditure
View answer
Correct answer: (D)
deferred capital expenditure
447. Purchase journal is kept to record ______________.
A. cash sales
B. credit sales of assets
C. credit sales of goods
D. credit purchase
View answer
Correct answer: (C)
credit sales of goods
448. Petty cash may be used to pay ______________.
A. the expenses relating to postage and conveyance

B. salaries and wages to the final staff
C. for the purchase of furniture and fittings
D. other recurring expense
View answer
Correct answer: (A)
the expenses relating to postage and conveyance
449. Expenditure incurred by a publisher for acquiring copyrights is a ______________.
B. reserve expenditure
C. deferred reserve expenditur
D. capital receipts
View answer
Correct answer: (A)
capital expenditure
450. A gross profit is transferred to the ______________side of the profit and loss account.
A. Debit
B. Credit
C. Current
D. Asset
View answer
Correct answer: (B)
Credit
451. Subscription received in advance by a club is shown on the ______________ side of the balance sheet.
A. Liabilities
B. Assets
C. credit
D. debit
View answer
Correct answer: (A)
Liabilities
452. Interest received on special fund investments will be added to ______________ fund in the balance sheet.
A. investment fund
B. bank fund
C. General
D. specia
View answer
Correct answer: (D)
specia
453. The information for the preparation of receipt and payments account is taken from ______________.
A. cash book
B. income and expenditure
C. cash book and balance sheet
D. revenue account
View answer
Correct answer: (A)
cash book
454. Any profit on the sale of furniture of a cricket club will be taken to ______________.
A. income and expenditure account

B. cash account
C. profit and loss account
D. furniture account
View answer
Correct answer: (A)
income and expenditure account
455. The main purpose of this ______________ accounting is to ascertain profit or loss during a specific period, to show
financial position of the business.
A. financial accounting
B. cost accounting
C. management account
D. human resource accounting
View answer
Correct answer: (A)
financial accounting
456. ______________ is allowed to encourage early cash payment.
A. Cash discount
B. Trade discount
C. Quantity discount
D. Price discount
View answer
Correct answer: (A)
Cash discount
457. The prime function of accounting is to ______________
A. record economic data

B. provide the informational basis for action
C. classifying and recording business transactions
D. attain non-economic goals
View answer
Correct answer: (C)
classifying and recording business transactions
458. The system of recording transactions based on dual aspect concept is called ______________
A. double account system

B. double entry system
C. single entry system
D. single account system
View answer
Correct answer: (B)
double entry system
459. The cash book records ______________
A. all cash payments

B. all cash receipts
C. all cash receipts and payments
D. only credit payments
View answer
Correct answer: (C)
all cash receipts and payments
460. Bank reconciliation statement is prepared by the ______________
A. bank
B. creditors of a business
C. customer of a bank
D. Suppliers
View answer
Correct answer: (C)
customer of a bank
461. Errors which affect one side of an account are called ______________
A. single sided errors

B. double sided errors
C. triple sided errors
D. a. compensation error
View answer
Correct answer: (A)
single sided errors
462. Bills payable book is a ______________.
A. subsidiary book
B. principal book
C. ledger
D. memorandum book
View answer
Correct answer: (B)
principal book
463. Trading account is prepared to find out ______________
A. gross profit or loss

B. net profit or loss
C. financial position
D. position of the partners
View answer
Correct answer: (A)
gross profit or loss
464. A bill of exchange payable after a certain period is known as ______________ bill.
A. Time
B. accommodation
C. revenue
D. Dishonored
View answer
Correct answer: (A)
Time
465. A bill which is not an inland bill is a ______________ bill.
A. Outwar
B. inwar
C. Foreig
D. Ne
View answer
Correct answer: (C)
Foreig
466. Donations received for a special purpose will be taken to ______________
A. income and expenditure account.

B. asset side of the balance sheet.
C. liabilities side of the balance sheet.
D. debit side of the ledger.
View answer
Correct answer: (C)
liabilities side of the balance sheet.
467. Which one of the following is Current Asset ______________
A. Buildi
B. Furnitu
C. Sto
D. Investme
View answer
Correct answer: (C)
Furnitu
468. Accounts receivable includes ______________
A. sundry debtors
B. bill receivable
C. promissory note
D. all of the above
View answer
Correct answer: (D)
all of the above
469. While discounting the bill, debit should be given to ______________
A. bank account
B. bill receivable account
C. acceptors account
D. cash account
View answer
Correct answer: (A)
bank account
470. Account current is a journal:
A. True
B. False
C. Partly true
D. Partly false
View answer
Correct answer: (B)
False
471. The holder of a bill who endorses it is called
A. Endorse
B. Endorse
C. Accepto
D. Paye
View answer
Correct answer: (A)
Endorse
472. The balance of cash account indicates ______________.
A. net income for the period

B. net loss for the period
C. net cash on hand
D. net worth of the business
View answer
Correct answer: (C)
net cash on hand
473. Wages paid for erection of machinery are debited to ______________.
A. Wages account
B. Machinery account
C. Profit and loss account
D. Deferred wages account
View answer
Correct answer: (B)
Machinery account
474. A Cheque received and deposited in the bank on the same day is recorded in the ______________.
A. cash column of the cash book

B. bank column of the cash book
C. credited in the cash book
D. debited in the cash boo
View answer
Correct answer: (B)
bank column of the cash book
475. Expenditure incurred on research is an example of ______________.
D. partly capital expenditur
View answer
Correct answer: (C)
deferred revenue expenditure
476. Ledger is also called ______________.
A. principal book of accounts

B. cash book
C. subsidiary books
D. petty cash boo
View answer
Correct answer: (A)
principal book of accounts
477. Rs. 500 spent on servicing office typewriter should be debited to ______________.
A. Miscellaneous expenses account

B. Typewriter account
C. Repairs account
D. Services account
View answer
Correct answer: (C)
Repairs account
478. The receipts and payments account begins with ______________.
A. debit balance
B. credit balance
C. no balance
D. normal balance
View answer
Correct answer: (A)
debit balance
479. A debit balance in the income and expenditure account denotes excess of ______________over______________.
A. income, expenditure
B. assets, liabilities
C. liabilities, assets
D. expenditure, income
View answer
Correct answer: (D)
expenditure, income
480. Which of the following items should not be entered in receipts and payments account of a club?
A. Sale of old newspaper

B. Loss on sale of old furniture
C. Subscriptions received in advance
D. Expenses for previous year
View answer
Correct answer: (B)
Loss on sale of old furniture
481. Income and expenditure account reveals ______________.
A. cash in hand
B. surplus or deficiency
C. capital account
D. a. revenue account
View answer
Correct answer: (B)
surplus or deficiency
482. Any written document in support of a business transaction is called a ______________.
A. Voucher
B. Bill
C. Carbon copy
D. Expense bill
View answer
Correct answer: (A)
Voucher
483. Bills Receivable book is to keep record of ______________.
A. a. bills received from customers

B. a. bills received from supplier
C. a. credit purchases
D. a. credit sales
View answer
Correct answer: (A)
bills received from customers
484. Book-keeping is mainly concerned with ______________
A. recording of financial data relating to business operations

B. designing the system in recording, classifying, summarizing the recorded data
C. interpreting the data for internal and external end users
D. only for internal purposes
View answer
Correct answer: (A)
recording of financial data relating to business operations
485. Purchase of machinery is recorded in ______________
A. sales book
B. journal proper
C. purchases book
D. sales returns book
View answer
Correct answer: (B)
journal proper
486. A bank pass book is a copy of ______________
A. the cash column of a customers cash book

B. the bank column of a customers cash book
C. the customers account in the banks ledger
D. the customer account in the suppliers ledger
View answer
Correct answer: (C)
the customers account in the banks ledger
487. Revenue receipts are ______________ in the business.
A. non-recurring
B. Recurring
C. Accumulating
D. non-accumulating
View answer
Correct answer: (B)
Recurring
488. Which account is generally used for rectification of errors?
A. Memorandum account
B. Suspense account
C. Rectification account
D. Adjustment account
View answer
Correct answer: (B)
Suspense account
489. Balance sheet is a ______________
A. statement
B. Account
C. Ledger
D. Book
View answer
Correct answer: (A)
statement
490. A person who draws a bill of exchange is known as the ______________
A. Drawee.
B. Drawer.
C. Payer.
D. Payee.
View answer
Correct answer: (B)
Drawer.
491. Bank account is ______________
A. Nominal account
B. Real account
C. Personal account
D. none of these above
View answer
Correct answer: (C)
Personal account
492. Cash book prepared on imprest system is ______________
A. two column cash book

B. cash book
C. petty cash book
D. purchase book
View answer
Correct answer: (C)
petty cash book
493. Heavy advertising to launch a new product is a ______________
B. deferred revenue expenditur
C. other expenditure
D. revenue expendtur
View answer
Correct answer: (C)
other expenditure
494. When a bill is discharged, the acceptor debits ______________
A. Creditors account
B. Cash account
C. Bills payable account
D. Bills receivable account
View answer
Correct answer: (C)
Bills payable account
495. Capital=
A. Asset - Liabilitie
B. Asse
C. Liabilitie
D. All the abov
View answer
Correct answer: (A)
Asset - Liabilitie
496. Which one the following is an example of an intangible asset?
A. Preliminary expenses
B. Discount on issue of debentures
C. Investments
D. Copyrights
View answer
Correct answer: (D)
Copyrights
497. Which one of the following is an example of personal account?
A. Capital account
B. Building account
C. Cash account
D. Investment account
View answer
Correct answer: (A)
Capital account
498. Any expenditure incurred in order to reduce the operating expenses is ______________.
D. promotional expenditure
View answer
Correct answer: (A)
capital expenditure
499. The method of account current usually employed by the banker is known as ______________.
A. Daily balance method

B. Red ink interest
C. Current account
D. Product method
View answer
Correct answer: (A)
Daily balance method
500. A credit sale of goods to Shiva should be debited to ______________.
A. Sales account
B. Goods account
C. Shiva account
D. Purchase account
View answer
Correct answer: (C)
Shiva account
501. Any donation received for a specific purpose is a ______________.
A. Liability
B. Assets
C. revenue receipt
D. capital receipts
View answer
Correct answer: (D)
capital receipts
502. Purchase of Typewriter would result in ______________ of fund.
A. Change
B. application
C. Service
D. no flow
View answer
Correct answer: (C)
Service
503. Depreciation deducted from the concerned ______________.
A. Liability
B. Asset
C. Expenses
D. Incomes
View answer
Correct answer: (B)
Asset
504. Excess of income over expenditure in shown on the ______________ side of income and expenditure account.
A. Credit
B. Debit
C. Upper
D. Lower
View answer
Correct answer: (B)
Debit
505. Subscriptions received in advance will figure in the ______________.
A. balance sheet
B. receipts and payment account
C. income and expenditure account
D. revenue account
View answer
Correct answer: (A)
balance sheet
506. Specific donations received by a non-trading concern are usually ______________.
A. revenue receipt
B. capital receipt
C. capital expenditur
D. revenue expenditure
View answer
Correct answer: (B)
capital receipt
507. Subscription received in advance is ______________.
A. an income
B. an asset
C. a liability
D. an expense
View answer
Correct answer: (C)
a liability
508. ______________ is given to promote sales.
A. Cash discount
B. Trade discount
C. Quantity discount
D. Price discount
View answer
Correct answer: (B)
Trade discount
509. The basic function of financial accounting is to ______________
A. record all business transactions

B. interpret the financial data
C. assist the management in performing functions effectively
D. information to management
View answer
Correct answer: (A)
record all business transactions
510. Ledger is a book of ______________empor
A. original entry
B. final entry
C. all cash entry
D. all credit entry
View answer
Correct answer: (B)
final entry
511. In triple column cash book, cash withdrawn from bank for office use will appear in ______________
A. debit side of the cash book only

B. both sides of the cash book
C. credit side of the cash book only
D. credit side of the bank account
View answer
Correct answer: (B)
both sides of the cash book
512. The appropriate book to record credit purchase of machinery is ______________.
A. purchases book
B. journal
C. cash book
D. petty cash book
View answer
Correct answer: (A)
purchases book
513. Interest on drawings is ______________
A. expenditure for the business

B. expense for the business
C. gain for the business
D. loss for the business
View answer
Correct answer: (C)
gain for the business
514. A bill drawn and accepted for providing funds to a friend in need is known as ______________
A. Cheque.
B. promissory note.
C. accommodation bill.
D. demand bill.
View answer
Correct answer: (C)
accommodation bill.
515. Which of the following is related to nominal account?
A. Bank account
B. Commission account
C. Furniture account
D. Interest received account
View answer
Correct answer: (B)
Commission account
516. Goods destroyed by fire should be credited to ______________
A. Purchases account
B. Sales account
C. Loss of goods by fire account
D. Insurance account
View answer
Correct answer: (A)
Purchases account
517. Errors which affect one account can be ______________
A. errors of omission
B. errors of principle
C. errors of posting
D. error of commission
View answer
Correct answer: (C)
errors of posting
518. Bills are drawn by ______________
A. Creditors
B. Debtors
C. Agent
D. Brokers
View answer
Correct answer: (C)
Agent
519. The Letter "c" is shown in the Cash book which means ______________
A. consignment
B. Commitment
C. Contra Entry
D. Cash entry
View answer
Correct answer: (C)
Contra Entry
520. Daily Record of Transaction means
A. Ledger
B. Journal
C. Trial Balance
D. None of these
View answer
Correct answer: (B)
Journal
521. The person to whom the amount has to be paid is known as ______________
A. Drawee
B. Drawer
C. Acceptor
D. Payee
View answer
Correct answer: (D)
Payee
522. The appropriate book to record credit purchase of machinery is ______________.
A. purchases book
B. journal
C. cash book
D. petty cash book
View answer
Correct answer: (B)
journal
523. Which account is generally used for rectification of errors?

A. Memorandum account
B. Suspense account
C. Rectification account
D. Adjustment account
View answer
Correct answer: (B)
Suspense account
524. Premium received on issue of shares is a ______________. tempor
A. capital receipt
B. revenue receipt
C. deferred capital receipt
D. deferred revenue receipt
View answer
Correct answer: (A)
capital receipt
525. The preparation of a Trial balance helps in ______________.
A. locating errors in principle

B. locating errors of omission
C. locating clerical errors
D. locating compensatory errors
View answer
Correct answer: (C)
locating clerical errors
526. Which one of the following is capital expenditure?
A. Cost of advertisement
B. Purchase of a delivery van
C. Purchase of raw material
D. Purchase of machine oil
View answer
Correct answer: (B)
Purchase of a delivery van
527. Interest on capital is credited to ______________ account.
A. Expenses account
B. Income account
C. Capital account
D. Asset account
View answer
Correct answer: (C)
Capital account
528. Receipts and payments account is a ______________.
A. Personal account
B. Nominal account
C. Real account
D. Representative account
View answer
Correct answer: (B)
Nominal account
529. Any amount received towards endowment fund is a ______________receipt.
A. Ordinary
B. Special
C. Revenue
D. Capital
View answer
Correct answer: (D)
Capital
530. Income and expenditure account is a ______________.
A. Real account
B. Nominal account
C. Personal account
D. Representative account
View answer
Correct answer: (B)
Nominal account
531. Sale of old newspaper is to be shown on the credit side of the ______________.
A. cash book
B. income and expenditure
C. balance sheet
D. trading account
View answer
Correct answer: (B)
income and expenditure
532. Non-trading institutions prepare ______________.
A. profit and loss account

B. trading account
C. manufacturing account
D. income and expenditure account
View answer
Correct answer: (D)
533. The process of recording financial transactions in the journal is called ______________
A. Journalizing
B. Utilizing
C. Posting
D. Balancing
View answer
Correct answer: (A)
Journalizing
534. Accounting principles are generally based on ______________
A. practicability
B. Subjectivity
C. convenience in recording
D. Applicability
View answer
Correct answer: (A)
practicability
535. Credit sales are recorded in ______________
A. sales book
B. cash book
C. journal proper
D. purchases book
View answer
Correct answer: (A)
sales book
536. Debit balance in cash book means ______________
A. overdraft as per pass book

B. overdraft as per cash book
C. credit balance as per pass book
D. debit balance as per day book
View answer
Correct answer: (C)
credit balance as per pass book
537. The balance of the petty cash book is ______________.
A. an asset
B. a liability
C. an income
D. an expenditure
View answer
Correct answer: (A)
an asset
538. Preliminary expenses are an example of ______________
A. deferred Revenue Expenditure

B. revenue Expenditure
C. capital Expenditure
D. common expenditure
View answer
Correct answer: (B)
revenue Expenditure
539. Wages is an example of ______________
A. capital expenses
B. indirect expenses
C. direct expenses
D. revenue expenses
View answer
Correct answer: (C)
direct expenses
540. A bill drawn and accepted for a genuine trade transaction is termed as a ______________ bill.
A. Trade
B. Time
C. Inland
D. Personal
View answer
Correct answer: (A)
Trade
541. Drawings account is related to ______________
A. Nominal Account
B. Personal Account
C. Real Account
D. None of the abov
View answer
Correct answer: (B)
Personal Account
542. Returns outward book makes a record of ______________
A. goods returned to the suppliers

B. goods returned to customers
C. goods returned to proprietor
D. goods returned to neighbors
View answer
Correct answer: (A)
goods returned to the suppliers
543. Error of commission do not allow ______________
A. correct totalling of the balance sheet

B. correct totaling of the trial balance
C. the trail balance to agree
D. correct totaling of the day book
View answer
Correct answer: (C)
the trail balance to agree
544. Cancelling the original bill and drawing a fresh acceptance is known as ______________.
A. retiring under rebate

B. Discounting
C. Renewal
D. bill sent to bank for collection
View answer
Correct answer: (C)
Renewal
545. In accounting, the benefit giving aspect is said to be
A. Debit
B. Credit
C. Debit and Credit
D. None of these
View answer
Correct answer: (B)
Credit
546. The person who writes out the bill of exchange is known as
A. Payee
B. Drawee
C. Drawer
D. Acceptor
View answer
Correct answer: (C)
Drawer
547. The balance of the petty cash book is ______________.
A. an asset
B. a liability
C. an income
D. an expenditure
View answer
Correct answer: (A)
an asset
548. Revenue expenditure is intended to benefit ______________.
A. current period
B. future period
C. past period
D. both (1) and (2)
View answer
Correct answer: (A)
current period
549. The person to whom the bill is endorsed is called ______________
A. Endorse
B. Endorse
C. Drawe
D. Drawe
View answer
Correct answer: (B)
Endorse
550. Purchases made on credit not recorded at all would affect ______________.

A. Purchases account
B. Suppliers account
C. Purchases account and suppliers account
D. Wages account
View answer
Correct answer: (C)
Purchases account and suppliers account
551. Which item is shown on the debit side of a trial balance?
A. Rent outstanding
B. Prepaid expenses
C. Purchases returns
D. Excess of income over expenses by the firm
View answer
Correct answer: (B)
Prepaid expenses
552. The ______________ in a ledger helps in locating the accounts contained in it.
A. Folio
B. Pages
C. serial number
D. part number
View answer
Correct answer: (A)
Folio
553. The assets of a business can be classified as ______________.
A. only fixed assets

B. only current assets
C. fixed and current assets
D. fictitious assets
View answer
Correct answer: (C)
fixed and current assets
554. Non-trading institutions prepare ______________.
A. Income and expenditure account

B. Trading and profit and loss account
C. Only trading account
D. Only revenue account
View answer
Correct answer: (A)
Income and expenditure account
555. Sales of old material must be shown on the credit side of ______________.
A. cash book
B. income and expenditure account
C. balance sheet
D. trading account
View answer
Correct answer: (B)
556. The main aim of ______________ accounting is to ascertain cost relating to the various activities of the business and to
have cost control.
A. financial accounting
B. cost accounting
C. management account
D. human resource accounting
View answer
Correct answer: (B)
cost accounting
557. Bills payable book is to keep a record of ______________.
A. bills payable to creditors

B. bills received from supplier
C. credit purchases
D. credit sales
View answer
Correct answer: (A)
bills payable to creditors
558. The amount brought in by the proprietor in the business should be credited to:
A. cash account
B. capital account
C. drawing account
D. bank account
View answer
Correct answer: (B)
capital account
559. If a cheque sent for collection is dishonoured, the debit is given to ______________
A. suppliers account
B. bank account
C. customers account
D. cash account
View answer
Correct answer: (C)
customers account
560. State which of the following errors will not be revealed by the trial balance ______________
A. errors of complete omission

B. errors of carrying forward
C. wrong totaling of the purchases book
D. error of partial omission
View answer
Correct answer: (A)
errors of complete omission
561. The balance of cash account indicates ______________.
A. . net income for the period

B. net loss for the period
C. net cash on hand
D. net worth of the business
View answer
Correct answer: (C)
net cash on hand
562. Outstanding salaries are shown as ______________
A. an expense
B. a liability
C. an asset
D. an income
View answer
Correct answer: (B)
a liability
563. Prepaid insurance is ______________
A. Nominal account
B. Personal account
C. Real account
D. Prepaid account
View answer
Correct answer: (B)
Personal account
564. ______________ is the person who prepares Bank Reconciliation Statement.
A. customer of the bank

B. ban
C. neither of the above two
D. reserve bank of India
View answer
Correct answer: (A)
customer of the bank
565. Provision for bad debts is calculated on ______________
A. creditors
B. Sales
C. Purchases
D. Debtors
View answer
Correct answer: (D)
Debtors
566. The discount column of a triple column cash book records ______________.
A. trade discount
B. cash discount
C. quantity discount
D. seasonal discount
View answer
Correct answer: (B)
cash discount

View Answer: Correct Answer: (A) Convention of Conservatism

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

View Answer: Correct Answer: (A) Convention of Conservatism

Uploaded by

Copyright:

Available Formats

1.

2. Return of goods by a customer should be debited to

3. Cash discount allowed to a debtor should be credited to

4. The concept of separate entity is applicable to which of following types of businesses?

5. Accounting principles are generally based upon:

6. Debit the receiver credit the giver rule for

7. Managerial accounting information is generally prepared for

8. True & fair profit and loss a/c of a company know by

A. Preparing trial balance

A. Transaction, journal entry, source document, ledger account, trial balance.

11. Amount brought in by proprietor should be credited to

A. Recording transactions in the wrong account.

14. Management Accounting provides invaluable services to management in performing

A. All management function

15. If closing stock appears in the trial balance, it should be

A. Credited to the trading account

17. Which of the following statements is not an objective of financial reporting?

A. Provide information that is useful in investment and credit decisions.

20. Which of these items would be accounted for as an expense?

A. Repayment of bank Loan

21. The amount of salary paid to Suresh should be debited to

A. The account of Suresh

22. The cash discount allowed to a debtor should be credited to

24. The concept of separate entity is applicable to which of following types of businesses?

25. Accounting is the process of matching

A. Benefits & Costs

26. The primary objective of cost accounting is

A. Ascertain the cost of goods and services

27. Of the following account types, which would be increased by a debit?

A. Liabilities and expenses.

30. Balance Sheet is a statement of

31. The convention of disclosure implies that all material information should be

A. Disclosed in the account

32. Outstanding salary is shown as:

A. An asset in the balance sheet

33. Proprietor (owner) is treated as creditor of business due to:

34. Which of the following is correct

A. Profit does not alter capital

35. Interest , rent, electricity bill are types of account

A. Double Entry Bookkeeping

37. P& l a/c is prepared for a period of one year by following:

38. Prepaid expense is treated as

A. Loan from Mr.Y

40. Advantages of cost accounting accrue:

41. Marginal costing is concerned with:

42. The books to be compulsorily maintained by a company are:

A. Cash book and ledger

43. Which of the following best describes a trial balance?

A. It is a list of balances on the books

44. Which of the following equation is related with Dual Aspect Concept ?

45. The prime function of accounting is to

A. To record economic data

47. Salary paid to factory manager is an item of:

48. Carriage outward is charged to

A. Debit side Profit & Loss a/c

49. Payment received from Debtor

A. Decreases the Total Assets

50. Accounting does not record non-financial transactions because of:

51. Which one of the following is not an example of Intangible Assets?

53. Debit what come in Credit what goes out rule for

A. For any given journal entry, debits must exceed credits.

55. Going concern concept assumes

56. Management Accounting relates to