Accountancy MCQ

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• Introduction to Financial Accounting and

its terms.
• •Accounting equation and Journal.
• •Voucher Approach in Accounting.
• •Bank reconciliation Statement.
• •Financial Management/Statements.
• •Partnership Accounts.
• •Ledger Accounts.
• •Cash Book, Financial Audit.
• •Elements of Double entry Book Keeping.
• •Rules for journalizing.
• •Trial Balance.
• •Trading Account.
• •Profit Loss Account and Balance Sheet.
• •Concept of Social Accounting, Social Audit
and cash based single entry system of
accounting.
• •Public Financial Management System
(PFMS)
Basic Accounting Terms
1. Accounting provides data or information on
A) Income and cost for the managers
B) Financial conditions of the institutions
C) Company’s tax liability for a particular year
D) All the above
Answer: D
2. Long term assets without any physical existence but, possessing a
value are called
A) Intangible assets
B) Fixed assets
C) Current assets
D) Investments
Answer: A
3. Generally the duration of an Accounting period is of-
(a) 6 months
(b) 3 months
(c) 12 months
(d) 1 month
Answer c
4. In India, the accounting standard board was set up in the year-
(a) 1972
(b) 1977
(c) 1956
(d) 1932.
Ans b
5. Meaning of credibility of going concern is:
(a) Closing of business
(b) Opening of business
(c) Continuing of business
(d) None of these.
Ans C
6) Which of these best explains 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 purchased specifically for resale
Answer: D
7. The revenues and expenses of a company are displayed in which
statement?
A. Balance Sheet
B. Cash Flow Statement
C. Income Statement
D. None of the above
Answer: C) Income Statement
8. The kind of debts which are needed to be repaid in a short term is
known as?
A. Fixed Liabilities
B. Current Liabilities
C. Depreciating Assets
D. Intangible Assets
Answer: B) Current Liabilities
9. What is the supporting evidence in a business transaction called?
a. Journal
b. Ledger
c. Voucher
d. Contra Voucher
Answer: C) Voucher
10) Which person owes an amount to a business organisation for
buying goods and services on a credit basis?
A. Creditors
B. Debtors
C. Owner
Answer: B) Debtors
11) What is Current Liability?
A. Assets of a company that are expected to be sold or used as a result
of standard business operations over the next year.
B. A potential liability that may occur in the future.
C. Company's short-term financial obligations that are due within one
year or within a normal operating cycle.
D. Obligations listed on the balance sheet not due for more than a
year.
Answer: C) Company's short-term financial obligations that are due
within one year or within a normal operating cycle
12) What are Outstanding Expenses?
A. Expenses which are not paid off in the current balance sheet.
B. The necessary purchases that keep a business going from day-to-
day.
C. Type of expense that is due but has not been paid.
D. None of the above.
Answer: C) Type of expense that is due but has not been paid
13 What is Bank Overdraft?
A. A document used by a company's accounts payable department
containing the supporting documents for an invoice.
B. A negotiable instrument where payment is guaranteed by the
issuing bank.
C. A negotiable instrument similar to a bill of exchange.
D. A line of credit that covers your transactions if your bank account
balance drops below zero.
Answer: D) A line of credit that covers your transactions if your bank
account balance drops below zero
14) Transaction is referred as which event in accounting?
A. Political Event
B. Economic Event
C. Dividend
D. Cash Transaction
Answer: B) Economic Event
15 Examining of financial information refers to?
a. Analysis
b. Auditing
c. Recording
d. Balance Sheet
Answer: B) Auditing
16) Who is an external user of financial statements?
a. Shareholders
b. CEO
c. Manager
d. Creditor
Answer: D) Creditor
17) Identifying an economic transaction is which phase of accounting
cycle?
A. First
B. Second
C. Third
D. Last
Answer: A) First
18) What are Liabilities?
A. Resources of a Company
B. Expenses of a Company
C. Obligations of a Company
Answer: C) Obligations of a Company
19) What is the common characteristic of all the assets owned by a
company?
A. Intangible
B. Long Life
C. Future Economic Benefits
Answer: C) Future Economic Benefits
20) How many accounts are affected by a business transaction?
A. One
B. Two
C. Three
D. Several
Answer: B) Two
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Accounting Principles and
Concepts
Q.1 GAAP stands for:
(a) Generally Accepted Accounting Provisions
(b) Generally Accepted Accounting Policies
(c) Generally Accepted Accounting Principles
(d) None of these
Answer: c
Q.2 Which accounting principle states that companies and owners
should be treated as separate entities.
(a) Monetary Unit Assumption
(b) Business Entity Concept
(c) Periodicity Assumption
(d) Going Concern Concept
Answer: b
Q.3 Cost or expenses must be recorded at the same time as the
revenue to which they correspond is specified by which principle?
(a) Matching Principle
(b) Going Concern Principle
(c) Consistency Principle
(d) Prudence Principle
Answer: a
Q4. Using 'lower of cost and net realisable 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
Ans C
Q5 The revenue recognition principle 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
Ans C
Q6 Which of the following is time spann 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
Ans C
Q7 Depreciation is charged on fixed assets to comply with which of
the following accounting principle?
A.Matching concept
B.Prudence concept
C.Timeliness concept
D.Reliability concept
Ans A
Q8 Office equipment is a ______ asset for a computer manufacturer
and the same office equipment is a ____ asset for a company that
deals in these equipments
A.Current, fixed
B.Fixed, intangible
C.Tangible, intangible
D.Fixed, current
Ans D
Q.9 As per revenue recognition principle, sales revenues should be
recognized at the time when?
(a) Order is taken for merchandise
(b) Ownership of goods gets transferred from the seller to the buyer
(c) Cash is received
(d) All of the above
Answer: b
Q.10 Due to which concept, accounting does not record non-financial
transactions?
(a) Going concern concept
(b) Money measurement concept
(c) Accrual concept
(d) Cost concept
Answer: b
Q.11 The owner of the business is treated as a creditor of the business
according to which of the following concept?
(a) Entity concept
(b) Materiality concept
(c) Consistency concept
(d) Periodicity concept
Answer: a
Q12 The purchase price of a software that will be used for more than
12 months should be regarded as
A.a revenue expenditure
B.a capital expenditure
C.a long term expense
D.an accounting period expense
Answer B
13. Who is the profounder of Double Entry System?
(a) Henry Fayol
(b) Lucas Pacilio
(c) Henry Ford
(d) Adam Smith
Double entry system is developed by Lucas Pacioli of Italy So, option (b)
is correct.
14 Accounting rules, practices and conventions should remain same
from one year to another as per the —————-
(a) Convention of consistency
(b) Convention of full disclosure
(c) Convention of conservatism
(d) All of the above.
(a) is correct option.

15 Accounting of a pen as an expense and not as an asset is due to
Convention
(a) Materiality
(b) Conservatism
(c) Consistency
(d) Disclosure
Answer (a) Materiality

16 Making provision for doubtful debts is as per …… convention
(a) Consistency
(b) Disclosure
(c) Conservatism
(d) Materiality
Answer (c) Conservatism

17 According to money measurement concept the following will be
recorded in the books accounts of the business:
(a) Value of Plant and Machinery
(b) Quality of Company Goods
(c) Utility of Managers
(d) Health of Director
Answer (a) Value of Plant and Machinery

18. The convention of Prudence when applied to the balance sheet
results
(a) Overstatement of Assets
(b) Understatement of Liability
(c) Understatement of Assets
(d) Overstatement of Liabilities
Answer (c) Understatement of Assets

19. Revenue Should be recognised at the point of sale. Which principle
is applied here ?
(a) Consistency
(b) Cost Realization
(c) Marketing
(d) Realization
Answer (d) Realization

20. Which assumption says a business entity will not be sold or
liquidated in the near future
(a) Conservatism
(b) Going Concern
(c) Periodic
(d) Separate Entity
Answer (b) Going Concern
Accounting Equation
1. Which of the following statements is incorrect?
(a) Liabilities + Assets = Capital
(b) Assets – Liabilities = Capital
(c) Liabilities + Capital = Assets
(d) Assets - Capital = Liabilities
Ans A
2. Which of the following statements is true about the accounting
equation?
A. The accounting equation represents that the sources in a
business are not equal to the resources of that business
B. The accounting equation represents that the sources in a
business are equal to the resources of that business
C. The accounting equation represents that the resources are
allocated to the business at cost price
Answer: b
3. Which of the following accounts will be affected by a transaction
where the company receives from a debtor?
A. Owner’s equity and cash
B. Owner’s equity and debtors
C. Debtors and cash
Answer: c
4. On January 1st, 2009 an entity's balance sheet showed total assets
of Rs. 750 and liabilities of Rs. 250. Owners' equity at January 1st was?
(a) Rs. 750
(b) Rs. 1,000
(c) Rs. 500
(d) Rs. 250
Ans C
5. During a reporting period, a company’s assets increase by Rs.
80,000,000. Liabilities decrease by Rs. 20,000,000. Equity must
therefore?
(a) Decrease by Rs. 100,000,000
(b) Increase by Rs. 100,000,000
(c) Decrease by Rs. 60,00,000
(d) Increase by Rs. 60,000,000
Ans B
6. Which one of the following equations correctly expresses the
relationship between assets (A), liabilities (L), revenues (R), expenses
(E) and capital (C)?
(a) A = L + R + E + C
(b) A = C + L + (R-E)
(c) A = C - (R - E) + L
(d) A = (L - C) + (R - E)
Ans B
7. Which of the following account is affected from the drawings of
cash in sole-proprietorship business?
(a) Shareholder account
(b) Capital account
(c) Liability account
(d) Expense account
Ans B
8. The favorable balance of profit and loss account should be?
(a) Added in liabilities
(b) Subtracted from current assets
(c) Subtracted from liabilities
(d) Added in capital
Ans D
9) Which of the following transactions would have no impact on
stockholders' equity?
(a) Purchase of land on credit
(b) Dividends to stockholders
(c) Net loss
(d) Investment in cash by stockholders
Ans A
10. ‘Cash withdrawn by the proprietor from the business for his
personal use’ causes
(a) Decrease in assets and decrease in owner’s capital
(b) Increase in one asset and decrease in another asset
(c) Increase in one asset and increase in liabilities
(d) Increase in asset and decrease in capital
Ans A
11. A firm has assets of ` 1,00,000 and the external liabilities of `
60,000. Its capital would be
(a) ` 1,60,000 (b) ` 60,000
(c) ` 1,00,000 (d) ` 40,000
Ans D
12. 6. Assets increased by
a) Selling goods for cash b) Selling goods on credit
c) Purchasing machinery for cash d) Purchasing machinery on
credit
Ans D
13. Capital increased by
a) Interest on capital b) Selling goods on profit
c) Additional capital introduced d) All of these
Ans D
14. What is the effect of Interest on Capital
(A) Increases assets and decreases capital
(B) Increases expense and decreases liability
(C) Increases and Decreases Capital
(D) Increases liability and decreases capital.
Ans C
15. . Recovery of bad debts previously written off:
(A) Increases Assets and Revenue
(B) Decreases Assets and Expenses
(C) Increases Assets and Capital
(D) Increases Expenses and Assets.
Ans C
16 Capital of business is 230000, liabilities are 50000, loss 80000, then
asset will be
a) 400000 b) 320000
c) 360000 D ) 200000
Ans D
17. Profit on sale of goods will be
a) Deducted from capital b) Added to capital
c) Added in liabilities d) None of these
Ans B
18) accounting equation is the base of
A Single Entry System b going concern Concept
c Double Entry System d Costing Measurement System
Ans c
19)) car purchased for business purpose for cash will effect
A increase of current asset and decrease of fixed asset
B increase of fixed asset and decrease of current asset
C increase of current asset and increase of capital
D none
Ans B
20 expenses paid shows effects
A increase of current asset and increase of capital
B decrease of current asset and decrease of capital
C decrease of current asset and decrease of external liability
D no effect
Ans B
Journal Entries
1. Journal lists transactions in which order?
(a) Decreasing
(b) Chronological
(c) Alphabetical
(d) Increasing
Answer: b
Q2. Among these statements which one is incorrect regarding journal
entry?
(a) The debited account titles are listed first
(b) Journal entries show the effects of transactions
(c) Each journal entry should begin with a date
(d) Journal entries provide account balances
Answer: d
Q.3 Cash withdrawal from business by the proprietor should be
credited to
(a) Cash account
(b) Purchase account
(c) Capital account
(d) Drawings account
Answer: a
Q4. ________ A/c is credited and ____ A/c is debited in case wages
are paid for construction of business premises
(a) Cash, Wages
(b) Cash, Premises
(c) Premises, Cash
(d) Wages, Cash
Answer: b
5. Goods returned by customer will be debited to which account?
(a) Purchases A/C
(b) Return outward
(c) Customer’s A/C
(d) Return inward
Answer: d
6. Sales to Mohsin on account should be debited to
a) Cash A/c
b) Sales A/c
c) Mohsin A/c
d) Account Receivable
Ans C
7. Interest paid to Ali should be debited to
a) Ali Account
b) Interest Account
c) Cash Account
d) Account payable Account
Ans B
8. Good returned to supplies should be debited to
a) Sales return
b) Return outward
c) Return inward
d) Supplies account
Ans D
9. A journal entry that require more than two account is called
a) Double entry
b) Compound entry
c) Combined entry
d) Single entry
Ans B
10 Loss of goods by fire should be credited to
a) Loss by fire
b) Sale account
c) Capital
d) Purchase account
Ans D
13. David account is related to
a) Personal account
b) Real account
c) Nominal account
d) All of these
Ans A
14 When a liability is reduced or decreased, it is recorded on the
a) Left or credit side of account
b) Right or debit side of account
c) Right or credit side of account
d) None of these
Ans D
15 Which accounts normally have credit balances?
a. Revenues, liabilities, and Machinery
b. Revenues, liabilities, and assets
c. Revenues, liabilities, and retained earnings
d. Revenues, liabilities, and expenses
Ans C
16 When a company performs a service but has not yet received
payment, it
a. debits Service Revenue and credits Accounts Receivable.
b. debits Accounts Receivable and credits Service Revenue.
c. debits Service Revenue and credits Accounts Payable.
d. makes no entry until cash is received.
Ans B
17 While passing an opening entry, all the assets are______while all
the liabilities are_____
a) Debited , credited
b) Credited, Credited
c) None of the options
d) Credited, Debited\
Ans A
18 Name the transaction that is recorded in both sides of Cash book
simultaneously.
a) Contra Entry
b) Dual entry
c) Double entry
d) Single entry
Ans A
19 Journal proper includes entries related to______
a) Sale of asset on credit
b) Sale of asset for cash
c) Sale of goods for cash
d) Sale of goods on credit
Ans A
20) Purchase of machinery on credit is recorded in_______
a) Journal proper
b) Sales Book
c) Cash book
d) Purchase book
Ans A
Journal Enteries
Q.1. Journal is called
(a) a book of primary entry.
(b) a book of secondary entry.
(c) a book of final entry.
(d) both secondary entry and final entry
Ans A
Q.2. Recording of transaction in a Journal is called
(a) Posting.
(b) Journalising.
(c) Transfer.
(d) Ruling
Ans B
Q.3. Which of the following accounts will be credited on giving cash
donation? .
(a) Cash A/c.
(b) Donation A/c
(c) Purchases A/c.
(d) Discount Received A/c.
Ans A
Q.4. Sale of goods to Ram for cash is debited to
(a) Ram.
(b) Cash A/c.
(c) Sales A/c.
(d) Stock A/c.
Ans B
5. Anil purchased 1,000 Add Gel Roller Pens @ Rs 50 each less Trade
Discount of 20%. Purchases Account will be debited by
(a) Rs 50,000.
(b) Rs 40,000.
(c) Rs 45,000.
(d) Rs 60,000.
Ans B
Q.6. Anil purchased, 1,000 Add Gell Roller Pens @ Rs 50 each less 20%.
Trade Discount and 3% Cash Discount if payment is made within 30
days. Anil paid after 30 days period. Purchases Account will be debited
and Discount Received Account will be credited respectively with
(a) Rs 40,000, Nil.
(b) Rs 40,000, Rs 300.
(c) Rs 40,000, Rs 1,200.
(d) Rs 40,000, Rs 900.
Ans A
Q.7. Which of the following is correct entry to record cash purchase of
Rs 3,000 from Amar?
(a) Dr. Purchases A/c and Cr. Amar by Rs 3,000.
(b) Dr. Amar and Cr. Purchases A/c by Rs 3,000.
(c) Dr. Cash A/c and Cr. Purchase A/c by Rs 3,000.
(d) Dr. Purchases A/c and Cr. Cash A/c by Rs 3,000.
Ans D
Q8. Bad Debts earlier written off and now received are credited to
(a) Bad Debts A/c.
(b) Bad Debts Recovered A/c,
(c) Miscellaneous Income A/c.
(d) Debtors A/c.
Ans B
9) Mr. X is a dealer in electronic goods (refrigerator, washing
machine, air conditioners, televisions, etc.) He purchased
two air conditioners and installed in his showroom. In the
books of X the cost two air conditioners will be debited to
A] Drawing account B] Capital Account
C] Fixed assets D] Purchases account
Ans C
10) A machine (cost $5,000) is bought on credit. Subsequently, $1,000
of the debt is paid by cheque. Which of the following correctly records
the transaction?
A)Debit payables $5,000, credit machine $5,000. Debit bank $1,000,
credit payables $1,000
b)Debit payables $5,000, credit machine $5,000. Debit payables $1,000,
credit bank $1,000
c)Debit machine $5,000, credit payables $5,000. Debit bank $1,000,
credit payables $1,000
d)Debit machine $5,000, credit payables $5,000. Debit payables $1,000,
credit bank $1,000
Ans D
11 A business buys a machine for $500 (cash) and pays machinery
insurance $50 (Cash). Which of the following shows the correct double
entry for this transaction?
A) Debit machinery $550, credit cash $550
B )Debit cash $550, credit machinery $550
C )Debit machinery $500 , credit cash $550, debit insurance expense
$50
D )Debit cash $550 , credit machinery $500, credit insurance expense
$50
ANS A
12. The Page number of the ledger account is mentioned in which
coloumn of Journal
a. Ledger formula
b. Ledger point
c. Ledger folio
d. Ledger page
Ans C
13
Ans C
14
15. A shop makes all its sales for cash. Where does the sales account
appear?
A cash book
B nominal (general) ledger
C sales journal
D sales ledger
Ans A
16 Rent is paid to J. Perigo in cash.
How is this recorded?
account to be debited account to be credited
A cash rent
B J. Perigo rent
C rent cash
D rent J. Perigo
Ans C
17 Which of the following should not be recorded in the books of
account?
A canteen costs
B maintenance of office buildings
C wages of staff
D workers' skills
Ans D
18 Out of the following which is a feature of Journal:
(A) Journal is a book in which all the transactions are recorded, as and
when they take place.
(B) In Journal, all the transactions are recorded in a chronological order.
(C) A Journal has record of daily transactions.
(D) All of the above
Ans D
19) WHEN CHEQUE ISSUED TO RAM HAS BEEN DISHONOURED DUE TO
SOME CIRCUMSTANCES THEN THE A/C TO BE DEBITED WILL BE :
A RAM A/C B BANK A/C
C PURCHASE A/C D CASH A/C
Ans B
20) GOODS DESTROYED IN FIRE . THE JOURNAL ENTRY WILL BE
A PURCHASE DR.
TO LOSS ON FIRE A/C
B LOSS IN FIRE A/C DR.
TO PURCHASE A/C
C LOSS IN FIRE A/C
TO SALES A/C
D LOSS IN FIRE A/C
TO GOODS A/C
Ans B
Ledger A/c
Q.1. Posting of transaction means
(a) entering transactions in Journal
(b) entering transactions in Ledger
(c) entering transactions in Trial Balance,
(d) entering transactions in Financial Statements
Ans B
Q.2. Ledger Account is prepared from
(a) Vouchers.
(b) Trial Balance
(c) Journal
(d) Financial Statements
Ans C
Q.3. Bank A/c is generally maintained in the ____

a) General ledger
b) Debtors’ ledger
c) Cash book
d) Creditors ledger
Ans C
Q.4. Ledger is a book in which

(a) Real and Nominal Accounts are maintained.
(b) Real and Personal Accounts are maintained.
(c) Real, Personal and Nominal Accounts are maintained.
(d) Personal and Nominal Accounts are maintained.
Ans C
Q.5. The process of transferring the transactions from the Journal to
the ledger is called
(a) Journalising.
(b) Posting.
(c) Balancing.
(d) Costing.
Ans B
Q6. Which of the following expense is not a revenue expense?
(a) Salary
(b) Electricity
(c) Water
(d) Repair of second-hand machinery purchased
Ans D
Q7. When goods are lost by fire then Loss of Goods by Fire Account is
debited with
(a) Cost of goods sold.
(b) Cost of goods sold plus Gross Profit.
(c) Cost of goods sold less Gross Profit.
(d) Cost of goods purchased.
Ans D
Q8. The ledger column that links the entry with the journal is called
as.
(a) J.F column
(b) L.F column
(c) Credit column
(d) Debit column
Answer: a
Q9) Accounts that have credit balance are closed by using the
statement.
(a) By balance b/d
(b) By balance c/d
(c) To balance b/d
(d) To balance c/d
Answer: d
Q10) An account is having debit balance is established when.

(a) The last entry of the accounting period was posted on the debit side
(b) The amount of debit exceeds the amount of the credits
(c) There are more entries on the debit side than on the credit side
(d) None of above
Answer: b
Q11 Which of the following item will be appearing on the credit side
of the ledger account?
(a) Discount received
(b) Cash received
(c) Rent Expenses
(d) Purchases
Answer: a
Q12 Among these, which item is used as the base for preparing trial
balance?
(a) Cash account
(b) Balance sheet
(c) Journal
(d) Ledger account
Answer: d
13) If debit side of bank account is greater than credit side it
represents?
(a) Cash at Bank
(b) Bank Loan
(c) Bank Overdraft
(d) None of them
Ans A
14) Which of the following item is not included in the Cash account?
(a) Purchases of Rs. 10,000
(b) Sales of Rs.5,000
(c) Received cash for Salman Rs. 2,000
(d) Credit sales of Rs. 22,000
Ans D
15) When a Liability is reduced or decreased, it is recorded on the?
(a) Right or debit side of the account
(b) Left or debit side of the account
(c) Left or credit side of the account
(d) Right or credit side of the account
Ans B
16) The respective normal account balances of Sales, Sales Returns
and Allowances, and Sales Discounts are?
(a) Credit, Credit, Credit
(b) Debit, credit, debit
(c) Credit, Debit, Debit
(d) Credit, Debit, Credit
Ans C
17) X sells goods on credit to Y. He receives 10% trade discount from X
and a further 5% cash discount if paid within 15 days. Y bought goods
with a list price of Rs. 2,00,000 from X.
Which of the following Journal entry would correctly record the sale in
the books of X?
(a) Dr. y and Cr. Sales A/c by Rs. 1,70,000.
(b) Dr. Y and Cr. Sales A/c by Rs. 1,80,000.
(c) Dr. X and Cr. Sales A/c by Rs. 1,90,000.
(d) Dr. X by Rs. 2,00,000; Cr. Sales A/c by Rs. 1,70,000 and Discount
A/c by Rs. 30,000.
Ans B
18) Which of the following correctly represents the sequence of
accounting cycle?
a.Journal entry > transaction analysis > ledger account
b.Transaction analysis > journal entry > ledger account
c.Transaction analysis > journal entry > trial balance
d.Transaction analysis > trial balance > ledger account
Ans B
19) Debit Means
(a) an increase in asset
(b) a decrease in asset
(c) an increase in liability
(d) an increase in capital
Ans A
20) When the total of debit and credit are equal, it represents
a) Debit balance b) Credit balance
c) Nil balance d) Current balance
Ans C
Trial Balance
1. Trial balance is used to check the accuracy of
A) Balance sheet balances
B) Ledger accounts balances
C) Cash flow statement balances
D) Income statement balances
Answer: B
2. In the books of account if a transaction is completely deleted, will it
affect the trial balance?
A) No
B) Yes
C) A transaction cannot be omitted
Answer: A
3. What is used in preparing trial balance?
A) Specialised Journals
B) Balance Sheet
C) Ledger Accounts
D) General Journal
Answer: C
4. What is the trial balance used for?
A) It is a financial statement
B) It records balances of a balance sheet
C) It doesn’t contribute to the accounting cycle
D) It records balances of accounts
Answer: D
5. The error which can be disclosed by Trial balance-
(a) Error of ommission
(b) Error of principal
(c) Compensatory error
(d) None of these.
Ans D
6) If the trial balance does not tally after many efforts then following
Account is opened –
(a) Purchase account
(b) Suspense account
(c) Sales account
(d) None of these.
Ans B
7) Errors committed due to lack of basis principle of Accounting are
called –
(a) Compensating errors
(b) Error of principle
(c) Single sided error
(d) None of these.
Ans B
8) Cash and bank balances normally appeared on which side of the
trial balance:
a)Credit side
b) Debit side
c) Do not appear on either side
Ans B
9) When is trial balance prepared?
A) At the end of an accounting period
B) At the end of a year
C) Frequently during the year
D) At the end of a month
Answer: A
10) Which items influence the trial balance agreement?
A) Deposit in transit
B) Compensating errors
C) Complete omission of a transaction
D) Partial omission of a transaction
Answer: D
11) When credit balances = debit balances, the trial balance check and
shows ____________ . It also indicates that there were no errors
made during posting and recording and posting.
A) Understatements of Balances
B) Errors of Commission
C) Arithmetic Accuracy
D) Omissions of Economic Events
Answer: C
12) In trial balance, which accounts with normal balance is recorded at
the credit side?
A) Bank account
B) Equipment account
C) Cash account
D) Accrued expenses account
Ans D
13) Trial Balance is prepared
(a) before Journal is written.
(b) after Journal is written.
(c) after Journal is posted into ledger accounts.
(d) after financial statements have been prepared.
Ans C
14 If Closing Stock appears in the Trial Balance, it means
(a) purchases are adjusted against opening and closing stocks.
(b) purchases are adjusted against closing stock.
(c) Both (a) and (b).
(d) None of the above.
Ans A
15) Sale of Rs.50,000 to ‘A’ was entered as a sale to ‘B’. This is an
example of –
(A) Error of omission
(B) Error of commission
(C) Compensating error
(D) Error of Principle.
Ans. : (B) Error of commission.

16) A Suspense Account will give the
(i) Debit or Credit balance
(ii) Debit balance
(iii) Credit balance
(iv) None of the options
Ans A
17) Trial balance is:
(i) an account.
(ii) a statement.
(iii) a subsidiary book.
(iv) a principal book.
Ans A
18) Errors of complete omission permit
(i) Correct totalling of Trial Balance
(ii) Correct totalling of B/S
(iii) The Trial balance to agree
(iv) All the above
Ans D
19) Preparation of a Trial Balance is
(i) compulsory.
(ii) optional.
(iii) compulsory or optional.
(iv) None of these.
Ans B
20) Purchase return is shown on -------- side
A Debit
B Credit
C Both
D None
Rectification of Errors
1) If wages paid for the installation of new machinery is debited to the
wages account, it is ___________.
(a) An error of commission
(b) An error of principle
(c) A compensating error
(d) An error of omission
Answer: (b) An error of principle
2) Which of the following is not an error of principle?
(a) Purchase of furniture debited to purchase account
(b) Repairs on the overhauling of second-hand machinery purchased
debited to repairs account
(c) Cash received from XYZ posted to ABC
(d) Sale of old car credited to sales account
Answer: (c) Cash received from XYZ posted to ABC
3) Which of the following errors will be rectified through a suspense
account?
(a) Sales return book undercast by Rs. 10,000
(b) Sales return by XYZ of Rs. 10,000 is not recorded
(c) Sales return by XYZ of Rs. 10,000 is recorded as Rs. 1,000.
(d) Sales return by XYZ of Rs. 10,000 recorded through purchase return
book
Answer: (a) Sales return book undercast by Rs. 10,000
4) Compensating errors are of a _ nature.
a) Neutralizing
b) Consistent
c) Concealing
d) Accommodating
Ans a
5) Under casting of Sales book is corrected by______Sales Account
a) Crediting
b) Debiting
c) Balancing
d) Ignoring
Ans A
6) Purchase of office furniture worth Rs. 5,000 has been debited to
General expenses account. Identify the error.
a) Error of Principle
b) Clerical error
c) Error of omission
d) None of the options
Ans A
7) If suspense account does not balance off even after rectification of
errors it implies that:
(a) there are some one sided errors only in the books yet to be located.
(b) there are no more errors yet to be located.
(c) there are some two sided errors only yet to be located.
(d) there may be both one sided errors and two sided errors yet to be
located.
Ans A
8) Which of the following has debit balance?
A furniture a/c B cash a/c
C salary paid a/c D all of these
Ans D
9) A trial balance is a
A real account B nominal account
C list of balances D none of these
Ans C
10) While preparing the trial balance, the accountant finds that the
total of the credit column is short by 200. This difference will be
(a) Debited to suspense account
(b) Credited to suspense account
(c) Adjusted to any of the debit balance
(d) Adjusted to any of the credit balance
Ans B
11) The account which has a debit balance and is shown in the debit
column of the trial balance is
(a) Sundry creditors account (b) Bills payable account
(c) Drawings account (d) Capital account
Ans C
12) When closing stock is given in trial balance, then it will effect:
A) Trading and Profit & Loss account only B) Balance sheet only
C) Owner's equity only
D) Trading and Profit & Loss account and Balance sheet
Ans B
13) Which one of the following is not considered the permanent part
of the accounting record
(A) Journal (B) Trial Balance
(C) Balance sheet (D) Final accounts
Ans B
14) Which of the following shown on the credit side of the trial
balance?
a) Wages paid b) Sales returns
c) Drawings d) Provision for bad debts
Ans D
15). In a trial balance the debit balance should be _______the credit
balance
A more B less
C equal D none
Ans C
16 . In a trial balance income received in advance has _________
balance
A debit balance B Credit balance
C depend in circumstances D None
Ans B
17. Accrued income has_____________ balance
A debit b credit
C both D none
Ans A
18) Which one of the following represents correct sequence of
accounting cycle?
a Journal > Trial balance > Ledger > Transaction analysis
b Transaction analysis > Journal > Ledger > Trial balance
c Purchases > Journal > Ledger > Trial balance
d None of the above
Ans B
19) Two methods of preparing a trial balance are:
a Financial method and total method
b Total method and normal method
c Balance method and financial method
d Balance method and total method
Ans D
20) Trial Balance might match in spite of presence of:
(i) Errors of complete omission, Errors of principle
(ii) Errors of complete omission
(iii) Errors of commission
(iv) Errors of Principle
Ans A
CASH BOOK
1. Which of the following statements is true about the balance in the
petty cash account?
A. It is a liability
B. It is an asset
C. It is an expense
Answer: b
2. What is the primary purpose of a cashbook?
A. It records receipts and payments of cash
B. It records payments of cash
C. It records receipts of cash
D. It helps to compute the profit and loss of a business
Answer: a
3. Which of the following is not a part of ‘cash and cash equivalents’ in
a cashbook?
A. Special investments
B. Cheques
C. Money orders
D. Coins
Answer: a
4. A cashbook serves the following purpose:
A. It works as a ledger account
B. It works as a book of original entry as well as a ledger account
C. It works as a book of original entry
Answer: b
8) How do we record the overdrawn balance of a cashbook?
A. It is credited if the balance is mentioned as an overdrawn
balance
B. If debit or credit balance is not mentioned, then it will be an
overdrawn balance
C. If an overdraft balance is mentioned, then it will be debited on
the debit side of the cashbook
Answer: a
9) The credit side of a cashbook is ________:
A. The loss side
B. The receipt side
C. The profit side
D. The payment side
Answer: d
10) Once you add a bank column to both sides of a single cashbook, it
becomes a _______:
A. Petty cashbook
B. Double column cashbook
C. Triple column cashbook
Answer: b
11) In a three column cashbook, the ______ column is not balanced:
a. Discount column
b. Cash column
c. Bank column
d. None of the above
Answer: a
12) In a cashbook, a contra entry involves __________:
A. A cash account and a bank account
B. A cash account and a sales account
C. A cash account and a discount account
D. A bank account and a discount account
Answer: a
13) The transaction that does not affect a cashbook is ___________:
A. Cheque received from Mr B and deposited in the bank
B. Depreciation expense recorded for the year
C. Mobile charges paid from the online company’s bank account
D. Cash paid to creditors for goods purchased from them
Answer: b
14) Which one of the following transactions will be recorded in the
cashbook as a contra entry?
A. Cash is withdrawn from the bank for office use
B. Cash is deposited in a company’s bank account
C. A cheque that was received earlier is deposited into the
company’s bank account
D. All of the above
Answer: d
15) A cashbook that records minor expenses of a business on a day-to-
day basis is a ________:
A. Petty cashbook
B. General cashbook
C. Extra cashbook
D. Additional cashbook
Answer: a
16) A cheque is received from a creditor and paid into the bank on the
same day. How will this transaction be recorded in the cashbook?
A. It will be recorded in the cash column of the cashbook
B. It will be recorded both in the cash and bank column of the
cashbook
C. It will be recorded in the bank column of the cashbook
Answer: c
17) Which of the following transactions will not be included in the
cashbook?
A. Cash receipt from Anil for Rs. 40000
B. Purchases worth Rs. 30000
C. Credit sales worth Rs. 20000
D. Cash sales worth Rs. 40000
Answer: c
18) The total of the discount column on the debit side of a cashbook is
posted to the:
A. Debit side of the discount allowed account in the ledger
B. Credit side of the discount allowed account in the ledger
C. Debit side of the discount received account in the ledger
D. Credit side of the discount received account in the ledger
Answer: a
19) A firm that properly maintains its cashbook does not need to
maintain:
A. Cash payment journal
B. Cash account in the ledger
C. Cash receipt journal
D. All of the above
Answer: d
20) Another name for the debit side of a cashbook is ________:
A. Receipts side
B. Income side
C. Expense side
D. Payment side
Answer: a
Cash Book
1. Small payments are sometimes recorded in a separate book called
(a) Cash Book.
(b) Bank Book.
(c) Small Payment Book.
(d) Petty Cash Book.
So, option (d) is correct answer.

2. The balance of cash book shows
(a) Net income.
(b) Cash in hand.
(c) Net expenditure.
(d) Net bank balance.
So, option (b) is correct

3. Imprest amount 􀳦 Rs. 500. What will be the amount of re-
imbursement if following expenses were incurred by the petty cashier
during the month-Telephone =Rs. 150, Tiffin = Rs. 50, small Repairs =
Rs. 30 general expenses = Rs. 100.
A) 300 B) 170
C) 330 D) 270
So, option (c) is correct answer.

4. The main advantage(s) of the petty cash book is / are
(a) Control over small payment.
(b) Saving of time of the chief-cashier.
(c) Saving of labour in writing up the Cash Book and posting into
ledger.
(d) All of them.

5. In a Three Column Cash Book
(a) Trade Discount allowed is recorded on the debit side of Cash Book.
(b) Cash Discount received is recorded on the Credit side of Cash
Book.
(c) Discount Column are balanced.
(d) Bank Column is always debit balance.
So, option (b) is correct answer.

6. In a Three Column Cash Book.
(a) Only Cash Column and Bank Columns are balanced.
(b) Only Cash Column and Discount Column are Balanced.
(c) Cash Column, Bank Columns and discount Columns are balanced.
. So, option (a) is correct answer.

7. Which is not Contra entry is three column Cash Book.
(a) Cash Deposited into Bank.
(b) Cash withdrawn from Bank.
(c) Cash withdrawn from Bank for Personal use.

8. WHICH OF THE FOLLOWING TRANSACTION IS NOT TO BE ENTERED
IN CASH BOOK?
1 GOODS SOLD FOR CASH 2 GOODS PURCHASED FROM RAM
3 STATIONERY EXPENSE PAID 4 DEPRECIATION CHARGED ON
MACHINE
OPTIONS A 1 AND 2 B 2 AND 3

C 3 AND 4 D 2 AND 4
So, option (d) is correct answer

9) At the end of the year, Petty Cash Book’s balance is shown in the
balance sheet.
(a) As a part of cash balance.
(b) Separately as current asset.
(c) As a part of fixed asset.
So, option (a) is correct answer.

10. Petty cash is normally used to pay
(a) Expenses relating to small expenses, like postage conveyance, etc
(b) Salaries and wages to Employees.
(c) For purchase of Furniture and Machinery.
(d) All of the above.
So, option (a) is right answer.

11. The term “Imprest System” is used in relation to
(a) Sales book
(b) Purchase book
(c) Ledger book
(d) Petty cash book

12. Discount column in the Cash book are——-and their totals entered
in the——–in the ledger.
(a) Balanced; Cash A/c
(b) Balanced; discount A/c
(c) Not balanced; discount A/c
(d) Not balanced; Cash A/c

13. In Three column Cash book—–columns are memorandum columns
:
(a) Cash
(b) Bank
(c) Discount
(d) Overdraft

14. The balance of Bank column of Cash Book is ———-balance :
(a) Debit
(b) Credit
(c) Either Debit or Credit
(d) None
So, option (c) may be considered as correct answer.

15. Bank overdraft is shown on the———side of the Trial Balance
(a) Debit
(b) Credit
(c) Either Debit or Credit
(d) None
So, option (b) is correct answer.

16. Interest received of Rs. 100 was recorded as interest paid. What
will be the effect on cash balance?
A) Cash will reduce by 100. B) Cash will increase by 200.
C) Cash will reduce by 200. D) No effect on cash balance.
So, option (C) is correct answer.
17) Which of the following is entered in cash – book-
(a) Only cash transactions
(b) Only credit transactions
(c) Both cash and credit transactions
(d) None of these.
So, option (a) is correct answer.

18. Cash withdrawn from bank for office use will be entered in which
columns of Cash / Bank Book
(a) Cash column in Debit side only
(b) Cash column in Credit side only
(c) Cash column in Debit side and Bank Column in Credit side.
(d) Bank column in Debit side & Cash column in Credit side.

19. A 3 column cash book contains
(a) Cash, bank & petty cash column on both sides
(b) Cash, Bank & Discount columns on both sides.
(c) Cash & bank in Credit side and Discount Column in Debit side
(d) Cash & bank in Debit side and Discount Column in credit side
The three column cash book contains cash, bank and discount columns
on both sides. So, option (b) is right answer.
20) In cash book, the favourable balance indicates

A) Credit Balance
B) Debit Balance
C) Bank Overdraft
D) Adjusted Balance
Ans B
VOUCHER APPROACH
1) Which of the following is documentary evidence that records the
details of a transaction and is prepared in a specific format?
A. Journal
B. Ledger
C. Voucher
D. All of the above
Answer: c
2) Which of the following transactions is a voucher prepared for?
A. Cash or credit purchase
B. Cash or credit sale
C. Cash received and paid
D. All of the above
Answer: d
3) A voucher is prepared on the basis of ________.
A. The journal entries
B. The ledger entries
C. The documentary evidence
D. All of the above
Answer: c
4) Which of the following details are included in a voucher?
A. The transaction amount (in both figures and words)
B. Signature of the manager or an authorised person
C. The particulars column (it records a brief description of the
transaction)
D. All of the above
Answer: d
5) Cash memo is a source voucher for purchaser of goods
(a) for cash purchases.
(b) for credit purchases.
(c) for credit sales.
(d) for cash sales.
Ans A
6) . Invoice is a source voucher for seller of goods
(a) for cash sales.
(b) for credit purchases.
(c) for credit sales.
(d) for cash purchases.
Ans C
7) If purchaser of goods returns them, he will prepare
(a) Credit Note.
(b) Debit Note.
(d) None of these
Ans B
8) Transfer vouchers are prepared to record
(a) cash transactions.
(b) non-cash transactions.
(c) (a) and (b).
(d) None of these.
Ans B
Q.9). Credit purchase of furniture is recorded through
(a) Transfer voucher.
(b) Cash voucher.
(c) Debit voucher.
(d) Credit voucher.
Ans A
10) Which of the following procedures should an accountant follow
while preparing a voucher?
A. Verify the date, amount, signature and transaction details on
the supporting documents
B. Confirm if an authorised signatory has approved the
supporting documents
C. Select the type of voucher that will be used for the transaction
D. All of the above
Answer: d
11) Which of the following are types of accounting vouchers?
A. Payment voucher
B. Receipt voucher
C. Supporting voucher
D. All of the above
Answer: d
12) Which of the following documents are issued at the time of
purchase return?
A. Banknote
B. Credit note
C. Debit note
Answer: c
13) A debit voucher is prepared when _______.
A. The goods are purchased in exchange for cash
B. The goods are sold on credit
C. A machine is sold on credit
D. All of the above
Answer: a
14) Which of the following statements is not true about a source
document?
A. A petty cash voucher is a source document
B. A voucher is a source document
C. An invoice is a source document
D. A credit note is a source document
Answer: b
15) Which of the following statements is correct about an invoice?
A. An invoice is prepared when the goods are sold on credit
B. An invoice is prepared when the goods are sold both in cash
and credit
C. An invoice is prepared when the goods are sold in cash
Answer: a
16) Which of the following statements is correct?
A. A credit note is prepared when the goods are returned by the
customer
B. A voucher is prepared when the goods are returned by the
customer
C. A debit note is prepared when the goods are returned by the
customer
Answer: a
17) Raman purchases goods worth sixty thousand rupees from Suresh
on credit. But some of those goods are damaged. Which of the
following documents would Raman return to Suresh along with the
damaged goods?
A. Debit note
B. Purchase invoice
C. Sales invoice
D. Sales returns invoice
Answer: a
18) Accounting voucher is prepared from
(a) source voucher.
(b) Journal entry.
(d) None of these.
Ans A
19) in which of the following debit voucher is prepared ?
A goods sold b machine sold
C income received d goods purchased
Ans D
20) Identify the transaction for which transfer voucher is prepared?
a) A payment of 10 towards rent
b) A receipt of 15 towards professional fee
c) A credit sale of 50 to Gopal
d) None of the above
Ans C
Final Accounts
Question 1
Which report gives a review on the profitability of a business?
(a) Statement of changes in equity
(b) Cash flow statement
(c) Balance sheet
(d) Income statement
Answer: d
Question 2
When assets are subtracted from liabilities it will be equal to?
(a) Capital
(b) Net income
(c) Working capital
(d) Goodwill
Answer: a
Question 3
P&L statement is also known as?
(a) Statement of earnings
(b) Statement of balance sheet
(c) Statement of operations
(d) Statement of income
Answer: d
Question 4
Which of the following options is not recorded in the Balance sheet?
(a) Cash
(b) Rent expenses
(c) Building
(d) Goodwill
Answer: b
5) Arrange cash, building goodwill, debtors, and machine in the
Balance Sheet in order of liquidity.
(a) Debtors, Cash, Building Goodwill, Machine
(b) Cash, Debtors, Machine. Building, Goodwill
(c) Cash, Building Goodwill, Debtors, Cash Machine
(d) Cash, Goodwill, Debtors, Machine. Building
Ans B
6). Profit earn through normal activities of business
(a) operating profit (b) net profit
(c) gross profit (d) manufacturing profit
Ans A
7). We get Profit & Loss account for_________.
(a) net profit (b) capital
(c) gross profit (d) gross loss.
Ans A
8). Which is an example of fictitious assets?
(a) Building
(b) Bill receivable (c) Adverting suspense
(d) Cash
Ans C
9. The financial statements consist of:
(a) Trial balance
(b) Profit and Loss account
(c) Balance sheet
(d) (a) & (c)
(e) (b) & c
Ans E
10) Choose the correct chronological order of ascertainment of the
following profits from the profit and loss account:
(a) Operating Profit, Net Profit, Gross Profit
(b) Operating Profit, Gross Profit, Net Profit
(c) Gross Profit, Operating Profit, Net Profit
(d) Gross Profit, Net Profit, Operating Profit
Ans c
11. Direct Expenses are entered in:
(a) Trading Account
(b) profit & Loss Account
(c) Balance sheet (d) None of these
Ans A
12. Which of the following is correct:
(a) Operating profit = Operating profit – Non-operating expenses –
Non-operating incomes
(b) Operating profit = Net profit + Non-operating expenses + Non-
operating incomes
(c) Operating profit = Net profit + Non-operating expenses – Non-
operating incomes
(d) Operating profit = Net profit – Non-operating expenses + Non-
operating incomes
Ans C
13. Trading Account discloses-
(a) Gross profit
(b) Net profit (c) Net loss
(d) Gross profit or Gross loss
Ans D
14) Prepaid expenses are shown in-
(a) Liability side
(b) Asset side
(c) Assets or Liability side
(d) None of these.
Ans B
15) 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
Ans D
16) The charges of placing commodities into a saleable condition
should be charged to:
A) Trading account B) P & L a/c
C) Balance Sheet D) None of the above
Ans A
17) Profit on sale of old plant is shown –
(a).In trading A/c (b).In profit and loss appropriation A/c
(c).Profit and loss A/c (d).Being a non operating item ignored
Ans C
18) Which of these is not an operating income
(a).Income from sale of trading goods (b).Bad debts recovered
(c). Interest on FDs (d).None.
Ans C
19) Drawings appearing in the trial balance is
(a) Added to the purchases (b) Subtracted from the purchases
(c) Added to the capital (d) Subtracted from the capital
Ans D
20. Salaries appearing in the trial balance is shown on the
(a) Debit side of trading account (b) Debit side of profit and loss
account
(c) Liabilities side of the balance sheet (d) Assets side of the balance
sheet
Final A/c
1. Land and Building owned by a firm should be classified as:
(a) Fixed Assets
(b) Current Assets
(c) Fictitious Assets
(d) None of the above
Ans. (a) Fixed Assets
2. The profit on sale of old furniture should be credited to:

(a) Trading Account
(b) Profit and Loss Account
(c) Manufacturing Account
(d) All of the above
Ans. (b) Profit and Loss Account
3. Carriage inwards is shown on:

(a) Debit side of Trading Account
(b) Debit side of Profit and Loss Account
(c) Assets side of the Balance Sheet
(d) Liabilities side of the Balance Sheet
Ans. (a) Debit side of Trading Account
4) Which of the following is correct?

(A) Cost of Goods Sold – Opening Stock + Purchases = Closing Stock
(B) Purchase + Cost of Goods Sold – Opening Stock = Closing Stock
(C) Cost of Goods Sold + Closing Stock – Opening Stock = Purchase
(D) Opening Stock + Closing Stock – Purchase = Cost of Goods sold
Ans C
5)Returns Outward is deducted from:
(a) Sales
(b)Net Profit
(c) Capital
(d) Purchases
Ans. (d) Purchases
6. Trading Account reveals:
(a) Financial Position
(b) Gross Profit or Gross Loss
(c) Net Profit
(d) Appropriation of Profit
Ans. (b) Gross Profit or Gross Loss
7. An example of intangible asset is:
(a) Machinery
(b) Prepaid Insurance
(c) Mine
(d) Copyrights
Ans. (d) Copyrights
8. An example of fictitious asset is:
(a) Patent right
(b) Preliminary Expenses
(c) Furniture
(d) Investment
Ans. (b) Preliminary Expenses
9) Selling and Administrative Expenses are shown in:
(a) Profit and Loss Account
(b) Trading Account
(c) Manufacturing Account
(d) Balance Sheet
Ans. (a) Profit and Loss Account
10) It is necessary to make a distinction between capital and
revenue items because:
(a) It is helpful to assess financial position
(b) It is helpful in calculating true profit or loss
(c) It is required by accounting principles
(d)All of the above
Ans. (d) All of the above
11). Expenditure of installation of a new machinery, is:
(a) Capital expenditure
(b) Revenue expenditure:
(c) Deferred Revenue expenditure
(d) Recurring expenditure
Ans. (a) Capital expenditure
12) Which liability is not shown in Balance Sheet?
(a) Contingent Liability
(b) Current Liability
(c) Long-term Liability
(d) None of the above
Ans. (a) Contingent Liability
13) Which of the following is not deducted from capital?
(a) Loss
(b) Drawings
(c) Loan
(d) Income Tax
Ans. (c) Loan
14) Capital expenditures are shown in the
(A) Balance Sheet
(B) Profit & Loss a/c
(C) Trading a/c
(D) Manufacturing a/c
Ans A
15) If sales revenues are Rs. 1,29,000, cost of goods sold is Rs. 1,15,000
and the operating expenses are Rs. 10,000, the gross profit is
a) Rs. 4,000 b) Rs. 14,000
c) Rs. 24,000 d) Rs. 1,19,000
Ans B
16) A prepayment of insurance premium will appear in
(a) The trading account on the debit side
(b) The profit and loss account on the credit side
(c) The balance sheet on the assets side
(d) The balance sheet on the liabilities side
Ans C
17) Arrangement of Balance Sheet in a logical order is known as --------
- (a).Dressing balance sheet. (b).Marshalling balance sheet.
(c). Formatting balance sheet. (d).Make up of balance sheet.
Ans B
18) Expenses relating to sale of goods are shown in:
A) Profit and Loss Account B)Trading Account
C) Trading and Profit & Loss A/c D)Balance Sheet
Ans A
19) Profit and Loss Account is prepared:
A) At a particular point of time B)On fixed date
C) For a certain period D)All of these
Ans C
20 What will be the total of Balance Sheet ?
Cash 10000 debtors 12000 machine 1000 patents 3000
Creditors 4000 capital 20000 loan 4000 prepaid insurance
2000
A 26000 b 28000
C 30000 d 31000
Ans B
Single Entry System
1) A system of accounting that is not based on a double-entry system
is called ______.
(a) Cash system
(b) Mahajani system of accounting
(c) Incomplete accounting system
(d) None of these
Answer: (c) Incomplete accounting system
2) Accounts that are maintained under a single entry system is
______.
(a) Personal accounts
(b) Impersonal accounts
(c) both (a) and (b)
(d) None of these
Answer: (a) Personal accounts
3) The single entry system can be adopted by ______.
(a) Small firms
(b) Joint Stock Companies
(c) Co-operative Societies
(d) None of these
Answer: (a) Small firms
4) Incomplete record mechanism of bookkeeping is ______.
(a) Scientific
(b) Unscientific
(c) Unsystematic
(d) Both (b) and (c)
Answer: D
5) If opening capital is Rs.0 and closing capital is Rs.5,000, then profit
or loss is _______.
(a) Loss of Rs.5,000
(b) Profit of Rs.2,500
(c) Profit of Rs.5,000
(d) None of these
Answer: (c) Profit of Rs.5,000
6) If the opening capital is Rs. 60,000, drawings Rs. 5,000, capital
introduced during the period Rs. 10,000, closing capital Rs. 90,000.
The value of profit earned during the period will be ______.
(a) Rs. 20,000
(b) Rs. 25,000
(c) Rs. 30,000
(d) Rs. 40,000
Answer: (b) Rs. 25,000
7) Profit = Capital at the end + ? - Capital introduced - Capital in the
beginning.
(a) Sales.
(b) Drawings.
(c) Net Purchases.
(d) None of these.
Ans B
8) When closing capital is greater than opening capital it means
(a) Profit.
(b) Loss
(c) Profit if fresh capital is not introduced.
(d) No profit, no Loss.
Ans C
9) In case of net worth method of Single Entry System, profit is
ascertained by
(a) comparing the capital in the beginning of the accounting period and
the capital at the end of the accounting period.
(b) Preparing a Profit and Loss Account.
(c) Preparing a Balance Sheet.
(d) None of these
Ans A
10) Calculate Sale:
Opening balance of Debtors 14,828
Closing balance of Debtors 23,460
Cash received from Debtors 86,530
Sales ?
a. 71,702 b. 8,632
c. 95,162 d. 1,09,990
Ans C
11) Statement of affairs is prepared to-
(a) Know about assets
(b) Know about liabilities
(c) Calculate capital
(d) Know financial position
Ans C
12 Credit purchase during the year is ascertained by preparing
_______.
(a) Total creditor’s account
(b) Total debtor’s account
(c) Cash account
(d) Opening statement of affairs
Ans A
13) Liabilities and assets amount to Rs. 50,000 and Rs. 78,000
respectively. The difference amount will represent-
(i) Creditors (ii) Debentures
(iii) Profit (iv) Capital.
Ans D
14) Single entry system is must suited where:
(a) Cash transactions are many (b) Credit transactions are
many.
(c) Cash & credit transactions are more. (d) None of the
above
Ans A
15) If the capital at the end of the accounting period is Rs. 50,000, the
net profit for the year is Rs. 15,000 and drawing is Rs. 3,000, what is
the capital at the beginning of the period?
a) Rs. 38,000 b) Rs. 62,000
c) Rs. 32,000 d) Rs. 47,000
Ans A
16) If the capital at the end of the accounting period is Rs.1 50,000,
the net profit for the year is Rs. 4000 and drawing is Rs. 20000, what is
the capital at the beginning of the period?
a) Rs. 160000 b) Rs.1 62,000
c) Rs. 166000 d) Rs. 134000
Ans C
17) Balance sheet cannot be prepared ________.
A. in single entry system. B. in double entry system.
C. with the help of cash book. D. with the help of bank
account
Ans A
18) In single entry system, net worth method is also called ________.
A. double entry system . B. mercantile system.
C. statement of affairs method. D. accrual system.
Ans C
19) Bad-debts written off always affect the:
(a) Debtors A/c (b) Creditor A/c
(c) Cash A/c (d) None of these
Ans A
20) Under single entry system in net worth method, additional capital
is deducted with
A. Opening capital B. Closing Capital
C. Additional Capital D. Drawings
Ans B
Bank Reconciliation
Statement
1. In cash book, the favourable balance indicates

A) Credit Balance
B) Debit Balance
C) Bank Overdraft
D) Adjusted Balance
Answer: B
2. On the bank statement, cash deposited by the company is known as
A) Credit
B) Debit
C) Liability
D) Expenses
Answer: A
3. Bank reconciliation statement compares a bank statement with
_________
A) Cash payment journal
B) Cash receipt journal
C) Financial statements
D) Cashbook
Answer: D
4, ‘NSF’ marked in cheque sent back by the bank indicates
A) Cheque has been forged
B) A bank couldn’t verify the identity
C) Not sufficient funds
D) A cheque cannot be cashed because it’s illegal
Answer: C
5. A bank reconciliation statement is prepared by?
(a) Banker
(b) Accountant of the business
(c) Auditors
(d) Registrar
Ans B
6. The main purpose of preparing a bank reconciliation statement is?
(a) To know the bank balance
(b) To know the balance of bank statement
(c) To correct the cash book
(d) To identify causes of difference between cash book and bank statement
Ans D
7. In cash book, bank charges of Rs.5,000 was not recorded. Name the correct
cash book adjustment
A) It will be credited in cash book
B) It will be debited in cash book
C) No adjustment needed in the cash book
D) Charges will be added to the cash book balance
Answer: A
8. What type of cheques is that which is issued by a firm but not yet presented
to the bank
A) Uncredited cheques
B) Outstanding cheques
C) Uncollected cheques
D) Bounced cheques
Answer: B
9) Farkhanda Jabeen Ltd. receives a check for Rs. 100 records it in cash book
and deposits it on the same day. A statement sent by the bank that day does
not show this Rs. 100. How is this shown on the bank reconciliation statement?
(a) As an uncredited deposits added to the bank statement balance
(b) As an uncredited deposits deducted from the bank statement balance
(c) As an Unpresented check added to the bank statement balance
(d) As an Unpresented check deducted from the bank statement balance
Ans A
10) Which of the following items is not a reason for difference
between bank balance as per cash book and pass book?
(a) Dishonored check
(b) Cheques deposited but not yet cleared
(c) Credit sales
(d) Cheques issued but not yet presented for payment
Ans C
12) A check that bears a date latter than date of issue is called?
(a) Anti dated check
(b) Post-dated check
(c) Dishonored check
(d) Outdated check
Ans B
13) Directly collections of bank are to be ___________ in cash book?
(a) Dr
(b) Cr
(c) both
(d) None
Ans A
14) Unfavourable bank balances means:
(a) Credit balance in the cash book
(b) debit balance in the pass book
(c) Debit balance in the cash book
(d) Both A and B
Ans D
15) Balance as per cash book is 2, 000. Bank charge of 50 debited by
the bank is not yet shown in the cash book. What is the bank
statement balance now?
(a) 1,950 credit balance
(b) 1,950 debit balance
(c) 2,050 debit balance
(d) 2,050 credit balance
Ans A
16) Overdraft means the______balance in the Pass Book.
(a) Debit (b) Credit
(c) Excess (d) Nil
Ans A
17) Entry in debit side of Bank pass book implies
(a) Cash withdrawn (b) Cash/ Cheque deposited in Bank
(c) Business receipts (d) Personal receipts
Ans A
18) Bank Reconciliation is a _______ & not on______.
(a) account, statement (b) statement, account
(c) ledger, journal (d) letter, account
Ans B
19) A wrong entry on debit side of cash book would lead to
(a) Cash book showing more balance (b) Cash book showing less
balance
(c) Cash withdrawal (d) Purchases
Ans a
20) when balance as per cash book is starting point, then uncollected
cheques are
A added B multiplied
C subtracted D None
Ans C
BRS
1. The Cash Book debit balance is equivalent to?
A. Credit Balance as per passbook
B. Overdraft as per Cash Book
C. Overdraft as per Pass Book
Answer: Credit Balance as per passbook

2. How is the Bank Reconciliation Statement prepared?
A. By matching entries in the passbook with entries in the bank
and cash column of the cash book
B. By matching the entries in the passbook with entries in the
bank column of the cash book
C. By matching the entries in the passbook with entries in the
cash column of the cash book
Answer: C. By matching the entries in the passbook with entries in the

bank column of the cash book
3. An order to bank that allows somebody else to take a particular
amt. of money on certain dates from your account is known as
a) Uncredited cheques b) Direct debit
c) Standing order d) Credit transfer
Ans C
4. The Bank Reconciliation Statement is the Part of?
A. Double-entry system
B. Not a Part of the Double-entry system
C. Bank Statement
D. None of all of these
Answer: Not a Part of the double-entry system

5. Who is preparing the Bank Reconciliation Statement?
A. Debtor
B. Creditor
C. Account Holder
D. Bank
Answer: Account Holder

6. Which amount of the following does not need to be adjusted into
the cash book balance?
A. Cheques mistakenly credited by the bank
B. Cheques deposited but not cleared
C. cheques issued but not showing
D. All of these
Answer: Cheques mistakenly credited by the bank

7. If the Account holder deposits the cash in the bank, then it is known
as?
A. Expense
B. Liability
C. Credit
D. Debit
Answer: Credit
8. A Bank Reconciliation Statement is made up using the ……… from
following which?
A. The bank column of the Cashbook and the Bank Statement
B. The Cash column of the Cashbook and Bank statement
C. Bank column of the cash book and cash column of the
Cashbook
D. None of all of the above
Answer: The bank column of the Cashbook and the Bank Statement
9. The customer account is ………….when he withdraws the amount
from the bank?
A. Debited
B. No effect
C. Credited
D. None of these
Answer: Debited
10. What is the “deposit in transit” treatment in a bank
reconciliation?
A. Recorded in books
B. Recorded in banks
C. Added from the cash book balance
D. Added to the Passbook balance
Answer: Added to the passbook balance

11. “NSF” mark in the cheque sent back by the bank indicate?
A. No sufficient funds or money
B. The check has been rejected
C. The Cheque has been forged
D. A bank could not verify the identity
Answer: No sufficient funds or money

12. Unpresented cheques are also known as?
A. Uncollected cheques
B. Uncredited cheques
C. Outstanding cheques
D. None of all of the above
Answer: Outstanding cheques
13. If any cash balance is instantly deposited into the bank, then it is
shown what?
A. Cashbook will show a double balance
B. Cashbook will display less amount of the cash, and the
Passbook will demonstrate the more balance
C. Passbook will show a double balance
D. Cashbook will show increased balance, and the bank will show
fewer
Answer: Cashbook will show less balance, and the bank will show
more
14. If the Cash amount as per the passbook is the beginning point,
then the rate of the bank interest allowed will be permitted?
A. Deducted
B. Added
C. No effect
D. None of all of these
Answer: Subtracted
15. A current account holder had only Rs. 1,200 in his account and a
cheque for Rs. 2,000 issued by him was paid out by the bank. Pick the
most appropriate term to describe the above situation.
a) Bank deficit
b) bank deposit
c) Bank overdraft
d) bank loan
Ans C
16. What are the various steps to completing a bank reconciliation?
A. Obtain bank records and Collect your company records
B. Find a place to start, check the income and expenses in your
books, and Go over your bank withdrawals and deposits
C. Adjust the cash balance, Compare the end balances, and
Adjust the bank statements
D. All of the above points
Answer: All of the above points
17) Unfavorable balance means?
(a) Credit balance in the cash book
(b) Credit balance in Bank statement
(c) Debit balance in cash book
(d) Debit balance in petty cash book
Ams A
18) Bank statement also called?
(a) Pass book
(b) Cash book
(c) Credit book
(d) Debit book
Ans A
19) The check which is deposited into bank but not cleared at the end
of a particular year is called?
(a) Uncredited check
(b) Unpresented check
(c) Omitted check
(d) Dishonored check
Ans A
20) Which of the following would not affect bank reconciliation?
(a) Dishonored cheque
(b) Discount received
(c) Bank interest
(d) Check not presented
Ans B
PFMS
1. Public Financial Management System was previously known as
a) Central Plan Scheme For Monitoring Scheme(CPSMS)
b) Public Plan Scheme For Monitoring Scheme(PPSMS)
c) Fund Plan Scheme for Monitoring Scheme(FPSMS)
d) Properties Plan Scheme for Monitoring Scheme(PPSMS)
Ans A
2. This was done by including PFMS in the _______ initiative of the
erstwhile Planning Commission.
a) 11th Plan b) 12th Plan
c) 10th Plan d) 9th Plan
Ans B
3 CHOOSE CORRECT
• Public Finance Management System (PFMS) portal is a statutory
body
• It is administered by dept of expenditure
(A) Only 1 (B) Only 2
(C) Both (D) None
Ans B
4 IN WHICH YEAR PFMS WAS STARTED
A 2007-08 B 2008-09
C 2009-10 D 2010-11
Ans B
5 BY WHOM PFMS HAS BEEN DEVELOPED
A MINISTRY OF RAILWAY B MINISTRY OF ROADS
C MINISTRY OF HEALTH D MINISTRY OF
FINANCE
Ans D
6 Using which modules the government aims to create
seamless and efficient fund transfer, monitoring ,utilization
network for the multi-crore rupee value schemes?
a) RBA b) CBI
c) NABARD d) RDCA
Ans C
7 The primary objective of PFMS is to
A facilitate a sound Public Financial Management System
B TO INCREASE INCOME OF GOVERNMENT
C to work for welfare of poor section
D to facilitate import and export
Ans A
8 In _________ , the Government scrapped the
distinction between plan and non-plan expenditure.
A 2015 b 2016
C 2017 d 2018
Ans C
9 PFMS is integrated with the core ___________ system
A insurance b service
C banking d all of the above
Ans C
10) PFMS is managed by
A) Central govt
B) Office of CGA
C) RBI
D) State govt
Ans B
11) CPSMS Full Form is
a) Central Plan Schemes Monitoring System
b) Central point Scheme Machinery System
c) Cost Planning Management System
d) Capital Planning Scheme Monitoring System
Ans A
12) Which of the following states were not part of initial PFMS
implementation states
A) Madhya Pradesh
B) Punjab
C) Tamil Nadu
D) Mizoram
Ans C
13) Main purpose of PFMS:
a) Monitoring Fund
b) Tracking Fund
c) Efficient Fund Flow System
d) All of the above
Ans D
14) In December 2013 the Union Cabinet approved the national roll-
out of PFMS for all States and schemes for a period of _________
a) 6 years till 2019
b) 4 years till 2017
c) 5 years till 2018
d) 2 years till 2015
Ans B
15) CPSMS of the Planning Commission in 2008-09 as a pilot in four
States of Madhya Pradesh, Bihar, Punjab and ___________
a) Meghalaya
b) Rajasthan
c) Mizoram
d) Himachal Pradesh
Ans C
Partnership
1. Partners’ Current Account has ______.
a) Credit Balance.
b) Debit Balance or Credit Balance.
c) Neither Debit Balance nor Credit Balance.
d) Debit Balance.
Answer b) Debit Balance or Credit Balance.

2. In the absence of a partnership deed, partners are entitled to
receive ______.
a) Interest on loan.
b) Salary.
c) Commission.
d) Interest on capital.
Answer d) Interest on capital.

3. Current Accounts are opened if capital is _____.
a) Fluctuating.
b) Not contributed.
c) Fixed or fluctuating.
d) Fixed.
Answer d) Fixed.
4. In the absence of any provision in interest on capital will be
calculated for _____.
a) One year.
b) One month.
c) No interest.
d) Six Months.
Answer c) No interest.
5. Ostensible partners are those who _____.
a) Contribute very little capital but get equal profit.
b) Do not contribute any capital and without having any interest in the
business, lend their name to the business.
c) Contribute maximum capital of the business.
d) Do not contribute any capital but get some share of profit for lending
their name to the business.
Answer b) Do not contribute any capital and without having any

interest in the business, lend their name to the business.
6. Which one of the following is NOT an essential feature of a
partnership?
a) There must be a business.
b) The business must be carried on for profits.
c) The business must be carried on by all the partners.
d) There must be an agreement.
Answer c) The business must be carried on by all the partners.

7. When is the Partnership Act enforced?
a) Where there is a partnership deed, but there are differences of
opinion between the partners.
b) When capital contribution by the partners varies.
c) When the partner’s salary and interest on capital are not
incorporated in the partnership deed.
d) When there is no partnership deed.
Answer d) When there is no partnership deed.
8) Features of a partnership firm are :
(A) Two or more persons are carrying common business under an
agreement.
(B) They are sharing profits and losses in the fixed ratio.
(C) Business is carried by all or any of them acting tor all as an agent.
(D) All of the above.
Ans D
9) The persons who have entered into partnership are individually
known as :
(a) Partners
(b) Firm
(c) Associations
(d) None of these
Ans A
10) In the absence of agreement, partners are not entitled to :
(A) Salary
(B) Commission
(C) Equal share in profit
(D) Both (a) and (b)
Ans D
11) A and B are partners in a partnership firm without any agreement.
A devotes more time for the firm as compare to B. A will get the
following commission in addition to profit in the firm’s profit:
(A) 6% of profit
(B) 4% of profit
(C) 5% of profit
(D) None of the above
Ans D
12) Is rent paid to a partner appropriation of profits
(A) It is appropriation of profit
(B) It is not appropriation of profit
(C) If partner’s contribution as capital is maximum
(D) If partner is a working partner.
Ans B
13) What should be the minimum number of persons to form a
Partnership :
(A) 2 (B) 7
(C) 10 (D) 20
Ans A
14) Liability of partner is :
(A) Limited
(B) Unlimited
(C) Determined by Court
(D) all of the above
Ans B
15) X, Y, and Z are partners in a firm. At the time of division of profit
for the year, there was dispute between the partners. Profit before
interest on partner’s capital was Rs.6,00,000 and Z demanded
minimum profit of Rs.5,00,000 as his financial position was not good.
However, there was no written agreement on this point.
(A) Other partners will pay Z the minimum profit and will share the loss
equally.
(B) Other partners will pay Z the minimum profit and will share the loss
in capital ratio.
(C) Xand T will take Rs.50,000 each and Z will take Rs.5,00,000.
(D) Rs.2,00,000 to each of the partners.
Ans D
15) A partner introduced additional capital of Rs.30,000 and advanced
a loan of Rs.40,000 to the firm at the beginning of the year. Partner
will receive year’s interest:
(A) Rs.4,200
(B) Rs.2,400
(C) Nil
(D) Rs.1,800
Ans B
16) In the absence of express agreement, interest @ 6% p.a. is
provided :
(A) On opening balance of partner’s capital accounts
(B) On closing balance of partner’s capital accounts
(C) On loan given by partners to the firm
(D) On opening balance of partner’s current accounts
Ans C
17) If a fixed amount is withdrawn by a partner in the middle of every
month, interest on the total amount is charged for …………… months
(A) 6
(B) 6 1/2
(C) 5 1/2
(D) 12
Ans A
18) The maximum number of Partners allowed in a partnership firm
are __
a) 10
b) 50
c) 25
d) 30
Ans B
19) On 1st January 2019, a partner advanced a loan of Rs.1,00,000 to
the firm. In the absence of agreement, interest on loan on 31st March
2019 will be :
(A) Nil
(B) Rs.1,500
(C) Rs.3,000
(D) Rs.6,000
Ans B
20) If a fixed amount is withdrawn by a partner in the beginning of

each quarter, interest on the total amount is charged for ………………..
months
(A) 3
(B) 6
(C) 4.5
(D) 7.5
Ans D

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Live Test @10 pm

• Introduction to Financial Accounting and

(a) is correct option.

Answer (a) Materiality

Answer (c) Conservatism

Answer (a) Value of Plant and Machinery

Answer (c) Understatement of Assets

Answer (d) Realization

Q.3. Bank A/c is generally maintained in the ____

Q.4. Ledger is a book in which

Q10) An account is having debit balance is established when.

Ans. : (B) Error of commission.

So, option (d) is correct answer.

So, option (b) is correct

So, option (c) is correct answer.

So, option (d) is correct answer.

So, option (b) is correct answer.

. So, option (a) is correct answer.

So, option (c) is correct answer.

OPTIONS A 1 AND 2 B 2 AND 3

So, option (d) is correct answer

So, option (a) is correct answer.

So, option (a) is right answer.

So, option (d) is correct answer.

So, option (c) is correct answer.

So, option (c) is correct answer.

So, option (c) may be considered as correct answer.

So, option (b) is correct answer.

So, option (C) is correct answer.

So, option (a) is correct answer.

So, option (c) is correct answer.

20) In cash book, the favourable balance indicates

2. The profit on sale of old furniture should be credited to:

3. Carriage inwards is shown on:

4) Which of the following is correct?

1. In cash book, the favourable balance indicates

Answer: Credit Balance as per passbook

Answer: C. By matching the entries in the passbook with entries in the

Answer: Not a Part of the double-entry system

Answer: Account Holder

Answer: Cheques mistakenly credited by the bank

Answer: Added to the passbook balance

Answer: No sufficient funds or money

Answer: Outstanding cheques

Answer b) Debit Balance or Credit Balance.

Answer d) Interest on capital.

Answer b) Do not contribute any capital and without having any

Answer c) The business must be carried on by all the partners.

Answer d) When there is no partnership deed.

20) If a fixed amount is withdrawn by a partner in the beginning of

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