15. Depreciation under Diminishing Balance Method is calculated on?

A. Scrap Value
B. Book Value
C. Cash Account
D. Repair

Answer: B) Book Value

14. In the books of D. Ltd. the machinery account shows a debit balance of Rs.60, 000 as on April 1 st, 2003. The machinery was
sold on September 30, 2004 for Rs.30, 000. The company charges depreciation @ 20% p.a. (FY April to March) on diminishing
balance method. What will be the Profit or Loss on sale of machinery?
(a) Rs.13, 200 Profit.
(b) Rs.13, 200 Losses.
(c) Rs.6, 800 Profit.
(d) Rs.6, 800 Losses.
ANS(b)

16. Original cost of an assets Rs.2, 50,000, scrap value Rs.10, 000. Depreciation for 2 nd year @ 10% p.a. under W.D.V. method
will be: /4
(a) Rs.21,600
(b) Rs.24,000
(c) Rs.22,500
(d) None of the above.
(c) is correct.

19. A purchased a mine for Rs.5, 00,000. Minerals in the mine were expected to be 10, 00,000 tones. In the first year, 1,
00,000 tones of minerals were used. What is the depreciation for the first year?
(a) Rs.40,000
(b) Rs.50,000
(c) Rs.60,000
(d) None of these
ANS. (b) is correct

20. Original cost = Rs.1, 50,000, Estimated life = 5 years, Expected salvage value
= Rs.3, 000. Rate of depreciation p.a. =?
(a) 19.6%
(b) 20%
(c) 19.8%
(d) 20.8%
Rate of depreciation = (Original cost – Salvage value) / Estimated life.
i.e. Rs. (1, 50,000 – 3,000) / 5 = 29,400
Hence, % of depreciation = (Rs.29,400 /1,50,000) x 100% = 19.6%.
So, option (a) is correct.
21. Lease for 5 year Rs.10, 000. Rate of interest 5% Reference to annuity table 0.230975. The depreciation per year is
(a) Rs.1,000
(b) Rs.115.48
(c) Rs.230.97
(d) Rs.2,309.75
Depreciation of Re.1 in one year under annuity table is 0.230975
So the depreciation of Rs.10, 000 in one year is 0.230975 x Rs.10, 000 = Rs.2,309.75.
Hence, option (d) is correct.
22. Machinery cost Rs.40, 000. Scrap value Rs.10, 000. Life 5 years. Rate of interest 5%. Reference to sinking fund table
0.180975. The depreciation per year will be
(a) Rs.6,000
(b) Rs.2,000
(c) Rs.7,239
(d) None of these
Depreciation of Re.1 in
(c) is correct.

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23. On 1st January, 2008 A Ltd. purchased a machinery of Rs.6, 000 and also purchased a second hand machinery as on 1 st July,
2008 of Rs.5, 000. Both the machinery were sold on 31st April, 2009 for Rs.5, 000 and Rs.4, 200 respectively. The company
charges depreciation @ 20% p.a. on diminishing balance method. What will be the profit or loss on sale of both machinery?
(a) No profit, no loss for both machinery.
(b) For 1st machine ‘profit’ and for 2nd machine ‘loss’.
(c) For 1st machine ‘profit’ and for 2nd machine ‘no profit no loss’.
(d) Loss for both the machinery.
26. Machinery was purchased for Rs.50, 000 two years ago. The current book value of the machinery is Rs.36, 125. If the
depreciation is charged under written down value method, the rate of depreciation is :
(a) 30%
(b) 25%
(c) 20%
(d) 15%
Rate of Depreciation is 1-( 2√(36,125 / 50,000) = 1-√.7225 = 1=.85= .0.15 = (,15 x100)x 100%) =15%. So, option (d) is correct
30. Accumulated depreciation Shows
A) Debit balance
B) Credit balance
C) Nil balance
D) Residual Value
Accumulated depreciation Shows Credit balance. So, option (B) is correct.
32. An increase in the value of asset is referred to as:
A) Depreciation
B) Appreciation
C) Market capitalization
D) Reverse depreciation
An increase in the value of asset is referred to as Appreciation. So, option (B)

2. Trial Balance is prepared

a. On a particular date
b. For a particular month
c. For a particular year
d. None of these.
A Trial Balance is prepared as on or particular date (not for a period). So, option (a) is correct.
3. Trial Balance is prepared to
a. Determine the arithmetical accuracy of the books of accounts
b. Help in preparation of final accounts.
c. Determine the balances of various accounts of persons, assets, income, and expenses at a glance.
d. All of them
Trial Balance is prepared for Determination of arithmetical accuracy. So, statement (a) is correct. To prepare P & L & Balance
Sheet. So, statement (b) is correct. For getting the ledger balances of ledger accounts. So, statement (c) is correct.. So, option
(d) is correct.
4. Trial Balance is the link between the
a. Journal and ledger
b. Journal and Final Accounts
c. Ledger and Final account
d. P & L A/c and Balance sheet
Trial Balance is prepared after balancing of ledger. The next stage is preparation of final accounts. Trial Balance is the link
between Ledger and Final accounts. So, option (d) is correct.
5. Which type of Errors are not disclosed by Trial Balance
Error of principle
Compensating error
Error of omission
All of these.
a. Error of principle occur due to application of the principles of accounting e.g., wages paid for the erection of machinery
debited to wages account instead of debiting to machinery A/c. So, this type of errors cannot be identified by the Trial
Balance. So, Statement (a) is true.
b. Compensating errors mean – one error is compensated by another error of opposite nature, So, they are not identified by
trial balance. So, Statement (b) is true.

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c. Error of omission occurs when a transaction is totally omitted to record in the books of original entry trial balance still
tallies. So, Statement (c) is true.
d. So, trial balance cannot disclose Error of principle, Compensating Error & Error of omission. So, option (d) is correct.
6. A Trial Balance should be prepared
a. After Journal entries
b. After posting into Ledger Book
c. After Balancing Ledger Books
d. None of the above.
A Trial Balance should be prepared after balancing of all ledger accounts. So, option (c) is correct.
7. If the difference in Trial Balance could not be resolved and preparation of Final Accounts can not be delayed then the
difference would be
a. Posted to Suspense A/c
b. Posted to Drawing A/c
c. Posted to Miscellaneous Income or Miscellaneous Expense A/c
d. Final Accounts may be prepared with difference.
If the Trial balance do not agree and finalization of final accounts cannot be further delayed, the difference would be put to
an account called ‘Suspense account’. So, option (a) is correct.
8. Trial balance is a proof that
a. Entry, posting and ledger balancing are arithmetically correct
b. No error occurred in the books of accounts
c. The company or the organization abides by rules and regulations.
d. None of the above
In the double entry system, every transaction with equal amounts of debits and credits are recorded in trial balance. So,
tallied Trial balance only ensures arithmetic accuracy of posting and casting, though all sorts of mistakes cannot be detected
through Trial Balance. So, option (a) is correct.
9. Trial Balance is prepared
a. Annually
b. Yearly
c. Quarterly
d. At certain interval of period as decided by the organization.
Trial Balance is prepared on a particular date (such as monthly, half-yearly or yearly) as decided by the management. So,
option (d) is correct.
10. Which of the following statement will be regarded as a cause of mismatch in the trial balance?
a. Omission to record a transaction in the books of original entry.
b. Compensation of errors by another error of opposite nature.
c. Posting of an amount in wrong side of Ledger Book
d. None of the above
Posting in wrong side of Ledger Book will cause mistake in Ledger Balance and hence in Trial Balance. So, option (c) is correct.
11. Which of the following statements is correct?
a. The trial balance is a profit statement of a concern during a period.
b. The trial balance is a sub-part of the Profit and Loss A/c.
c. The trial balance is a summary of only assets and liabilities.
d. The Trial Balance is not part of statutory published accounts.
Trial Balance is not part of published Accounts. So, option (d) is correct.
12.The difference in the Trial Balance is transferred to Suspense Account, which appears in:
a. Balance Sheet
b. Capital Account in Balance Sheet
c. Profit & Loss Accounts
d. in Misc Expenses Accounts in Balance Sheet
The difference in Trial Balance is transferred to Suspense Account, which appears in Balance Sheet. So, option (a) is correct.
13. The opening inventory of the current year is overstated by Rs.5,000 and closing inventory is overstated by Rs.12,000.
These errors will cause the net income for the current year by
a. Rs.17,000 (understated)
b. Rs.17,000 (overstated)
c. Rs.7,000 (overstated)
d. No effect in net income.
Overstatement of closing stock results in overstatement of profit and overstatement of opening stock results in
understatement of profit. So, the net effect of the mistakes will be overstatement of profit by Rs.12,000 – Rs.5,000. = Rs.7,
000. So, option (c) is correct.
14. Bad Debt Recovery is

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a. Added to debtors
b. Debited to P & L A/c
c. Reduced from debtors
d. Credited to P & L A/c.
When a bad debt is recovered later on, it is treated as income and so credited to Profit & Loss A/c. So, option (d) is correct.

Question 5: Bad debts mentioned in Trial balance will be shown in

(a) Trading Account

(b) Profit & Loss Account

(c) Assets

(d) None of these

Question 6: Prepaid expenses are shown in?

(a) Asset side

(b) Liability side

(c) Assets or Liability side

(d) None of the above

Question 7: Receipt and payment account is a summary of-

(a) Income & Expenditure account

(b) Profit & Loss A/c

(c) Cash book

(d) None of these

Question 8: If the manager is entitled to a 5% commission on sales before deducting his commission, he will receive a
commission of how many rupees on a ₹ 8400 profit?

(a) 400

(b) 420

(c) 442

(d) 440

Question 9: Calculate gross profit if rate of gross profit is 20% on cost of goods sold and cost of goods sold is ₹ 120000.

(a) 15000

(b) 10000

(c) 24000

(d) None of the above

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Question 10: Such persons who earn remuneration against their services are called –

(a) Seller
(b) Purchaser
(c) Professional
(d) None of these

Accounting equation MCQs

1)

The Basic accounting equation is

A) Asset=Expense +Income B) Assets=Cash+Capital C) Assets=Capital+Liabilities D) Assets=Expenses+Capital
2)

Find out the value of assets if: Liabilities=$5000 and Capital=$1000

A)$4000 B)$6000C)$7000 D)$3000
3)

Calculate the amount of cash if: Total assets=$10,000 Total liabilities=$10,000 Total Capital=$5000
A)$6000 B)$10,000 C)$5000 D)$1000
4)

Capital increases if ______ increases

A)Expenses B)Drawings C)Interest on capital D)Revenue
5)

Capital of a business decreases if there is an increase in

A)DrawingsB)Income C)Gains D)Fresh capital
6)

If the total liabilities of a business decrease by $5000 what will be the effect on
2. The balance of cash book shows
(a) Net income.
(b) Cash in hand.
(c) Net expenditure.
(d) Net bank balance.
The cash book balance shows the amount of cash-in-hand. So, option (b) is correct
3. Cash in hand A/c may have
(a) Only debit balance.
(b) Only credit balance.
(c) Debit or credit balance.
(d) None of the above
All receipt (inflow) of cash is debited to cash a/c. All payment of cash (outflow) is credited to cash a/c. The cash in hand is
represented by the difference of receipts & payments. Since payments (credits) cannot be more than receipts (debits), there
is always debit balance in cash a/c. So, option (a) 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.
The main advantages of petty cash book are saving the time of cashier in making small payments and writing numerous
transactions in main cash book. It provides better control on small payments as this task is better dome by petty cash keeper.
The number of entries and posting to ledger gets reduced as only a monthly total of each account is posted into the main
ledger.
So, option (d) is correct answer.
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.

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(d) Bank Column is always debit balance.
When cash discount received then the entry would be
Creditors A/c Dr
To Cash A/c Cr
To Discount Received A/c Cr
So, trade discount received should be recorded in credit side of the cash book. 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.
(d) None of the above.
Discount column in the cash book are not balanced and the totals are entered in a ledger called discount account. Only cash &
bank 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.
(d) None of the above.
Cash withdrawn from bank for personal use is not contra entry it is a personal expenses and debited to drawings a/c. So,
option (c) is correct answer.
8. When a cheque is received on a particular date is not deposited the same day into bank, it is entered in
(a) Cash column on the debit side.
(b) Bank column on the debit side.
(c) Cash column on the credit side.
(d) Cash column on both the debit side and credit side.
When a cheque received on a particular date then the entry is passed in both debit & credit side of cash column (because no
cash is received and the two entries nullify the cash balance effect). When the cheque is deposited into bank, it is entered
into the debit side of the bank column.
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.
(d) None of the above.
As petty cash book is a part of cash book, so its balance is shown in balance sheet like main cash book balance, 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.
Petty cash is used to pay all sorts of small expenses, like-postage and telegram, conveyance. 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
In Imprest system, certain fixed amount is given to the petty cashier for meeting small expenses which are recorded in petty
cash book. So, option (d) is correct answer.

2. IASC established in the year

(a) 1963

(b) 1973

(c) 1983

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(d) 1993

Answer (b) 1973

3. IASB Stands for

(a) International accounting standard Board

(b) International accounting standard Board

(c) Indian accounting standard Board

(d) None of the above

Answer (a) International accounting standard Board

4. IASB established in the year

(a) 2000

(b) 2001

(c) 2003

(d) 2004

Answer (b) 2001

5. ICAI established under

(a) Chartered accountant act 1949

(b) Company act 1956

(c) Partnership act 1930

(d) Company act 2013

Answer (a) Chartered accountant act 1949

6. When accounting standard board has been constitute

(a) 21 Feb 1977

(b) 21 March 1977

(c) 21 April 1977

(d) 21 May 1977

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Answer (c) 21 April 1977

7. National advisory committee on accounting standard (NACAS) established in the year

(a) August 2001

(b) August 2002

(c) August 2003

(d) August 2004

Answer (a) August 2001

8. IAS in accounting stands for

(a) Indian administrative services

(b) International accounting standard

(c) Indian accounting standard

(d) None of the above

Answer (b) International accounting standard

9. How many Ind AS are there in India

(a) 39

(b) 38

(c) 42

(d) 41

Answer (d) 41

10. Income taxes Comes under

(a) Ind AS 11

(b) Ind AS 12

(c) Ind AS 13

(d) Ind AS 14

Answer (b) Ind AS 12

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11. Intangible assets come under

(a) AS 22

(b) AS 23

(c) AS 24

(d) AS 26

Answer (d) AS 26

12. Intangible assets come under

(a) Ind AS 37

(b) Ind AS 23

(c) Ind AS 26

(d) Ind AS 38

Answer (d) Ind AS 38

13. XBRL stands for

(a) Extensible Business Reporting league

(b) Extensible Boards Reporting language

(c) Extensible Business Reporting language

(d) Estimated Business Reporting language

Answer (c) Extensible Business Reporting language

14. The main aim of accounting standard is

(a) Standardize diverse accounting policies

(b) Lower the accounting dissimilarities

(c) Ensuring the comparability of financial statement

(d) All of the above

Answer (d) All of the above

15. GAAP of India has been established by

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(a) MCA

(b) ICAI

(c) Ministry of Finance

(d) ICSI

Answer (b) ICAI

16. How many number of accounting standard have been issued by ICAI

(a) 38

(b) 41

(c) 32

(d) 12

Answer (c) 32

17. The global recognized set of standard for the preparation of financial statement by business entity used in multiple
countries is termed as

(a) IFRS

(b) ICAI

(c) ASB

(d) IAS

Answer (a) IFRS

18. The board which was constitute by ICAI to formulate accounting standard is known as

(a) IFRS

(b) ICAI

(c) ASB

(d) IAS

Answer (c) ASB

19. A language used for the electronic communication of business and financial data which revolutionizing business reporting
around the world is known as

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(a) XBRL

(b) ASB

(c) IAS

(d) IFRS

Answer (a) XBRL

20. Interim financial reporting comes under

(a) Ind AS 31

(b) Ind AS 32

(c) Ind AS 33

(d) Ind AS 34

Answer (d) Ind AS 34

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