Accounting MCQs

Option A: Current assets and current liabilities

Option B: Profit and loss A/C and Balance sheet

Option C: Current assets and non-current liabilities

Option D: Current liabilities and non-current liabilities

Correct Answer: Current assets and current liabilities ✔

Option A: No flow

Option B: Sources

Option C: Uses

Option D: Gain

Correct Answer: No flow ✔

Option A: Expenses for day to day running of the business

Option B: Putting the new asset in working condition

Option C: Depreciation

Option D: Purchase of raw material

Correct Answer: Putting the new asset in working condition ✔

Option A: Acquisition of an Asset

Option B: Extension of an Asset

Option C: Improvement of the existing Asset

Option D: Maintenance of the Asset

Correct Answer: Maintenance of the Asset ✔

Option A: Repair of plant and machinery

Option B: Salary paid to workers

Option C: Cost of stand by equipment

Option D: Annual whitewash of the office building

Correct Answer: Cost of stand by equipment ✔

Option A: Raw material consumed

Option B: Plant purchased

Option C: Long term loan raised from bank

Option D: Share Capital

Correct Answer: Raw material consumed ✔

Option A: sale is effected

Option B: cash is received

Option C: production is completed

Option D: debts are collected

Correct Answer: sale is effected ✔

Option A: Balance Sheet

Option B: Profit and Loss appropriation A/c

Option C: Manufacturing A/c

Option D: Trading and Profit and Loss A/c

Correct Answer: Trading and Profit and Loss A/c ✔

Option A: Balance Sheet

Option B: Profit and Loss A/c

Option C: Trading A/c

Option D: None of these

Correct Answer: Balance Sheet ✔

Option A: Purchase register

Option B: Purchase A/c

Option C: Cash purchase A/c

Option D: Credit purchase A/c

Correct Answer: Purchase A/c ✔

Option A: Sales A/c

Option B: Cash sales A/c

Option C: Sales return A/c

Option D: Credit sales A/c

Correct Answer: Sales A/c ✔

Option A: Cash journal

Option B: Purchase journal

Option C: Debtors journal

Option D: Sales journal

Correct Answer: Debtors journal ✔

Option A: Subsidiary books

Option B: Journal

Option C: Ledger

Option D: Trial Balance

Correct Answer: Ledger ✔

Option A: Posting the letters in drop box

Option B: Posting suitable person to a suitable job

Option C: Entering in the ledger the information contained in the ledger

Option D: All the three

Correct Answer: Entering in the ledger the information contained in the ledger ✔

Option A: Nominal A/c

Option B: Tangible Asset

Option C: Intangible Asset

Option D: Fictitious Asset

Correct Answer: Intangible Asset ✔

Option A: Outstanding Salary A/c

Option B: Rent A/c

Option C: SBI A/c

Option D: Debtors A/c

Correct Answer: Rent A/c ✔

Option A: Outstanding Salary A/c

Option B: Rent A/c

Option C: SBI A/c

Option D: Bad debts A/c

Correct Answer: Outstanding Salary A/c ✔

Option A: Salary A/c

Option B: Bank A/c

Option C: Building A/c

Option D: Goodwill A/c

Correct Answer: Building A/c ✔

Option A: Postage stamps

Option B: B/R

Option C: Cheque Deposited with Bank

Option D: B/R endorsed

Correct Answer: Postage stamps ✔

Option A: Assets

Option B: Expenditure

Option C: Liability

Option D: None

Correct Answer: Assets ✔

Option A: Bank column

Option B: Discount column

Option C: Cash column

Option D: None

Correct Answer: Cash column ✔

Option A: Liability

Option B: Gain

Option C: Assets

Option D: Loss

Correct Answer: Assets ✔

Option A: Cash received from debtors

Option B: Cash paid to creditors

Option C: Salary remained outstanding

Option D: Cash deposited with bank

Correct Answer: Salary remained outstanding ✔

Option A: Cash column

Option B: Bank column

Option C: Petty cash column

Option D: Discount column

Correct Answer: Petty cash column ✔

Option A: Only cash sales

Option B: All types of cash receipts and payments

Option C: Only revenue receipts

Option D: Only capital receipts

Correct Answer: All types of cash receipts and payments ✔

Option A: Added, Reduced

Option B: Added, Added

Option C: Deducted, Added

Option D: Deducted, Deducted

Correct Answer: Deducted, Added ✔

Option A: 500 purchase of old equipment not recorded in the books of A/c at all

Option B: 500 being expense on travelling expense credited to travelling expenses

Option C: Both

Option D: None

Correct Answer: 500 being expense on travelling expense credited to travelling expenses ✔

Option A: 5,000 received from Sham credited to Ram A/c

Option B: 5,000 incurred on installation of new plant debited to travelling expenses A/c

Option C: 500 paid for wages debited to salary A/c

Option D: 500 being purchase of raw material debited to purchase A/c ` 50

Correct Answer: 5,000 incurred on installation of new plant debited to travelling expenses A/c ✔

Option A: Errors of complete omission

Option B: Errors of principle

Option C: Errors of posting to wrong account

Option D: All the three

Correct Answer: All the three ✔

Option A: Errors of casting

Option B: Errors of carry forward

Option C: Errors of posting

Option D: All the three

Correct Answer: All the three ✔

Option A: Interest payable on loans or deferred credits taken for the acquisition or construction of fixed assets before they are ready for use

Option B: Stand by equipment and servicing equipment

Option C: Expenditure incurred on test runs and experimental production

Option D: Administration and general expenses

Correct Answer: Administration and general expenses ✔

Option A: Increase in working capacity of an asset

Option B: Reduction in operating costs

Option C: Replacing damaged parts of an asset

Option D: Both A and C above

Correct Answer: Both A and C above ✔

Option A: Compensation paid to Directors on termination of their services

Option B: Expenditure incurred in connection with the renewal of a Trade Mark.

Option C: Gratuities paid to Directors on termination of their services.

Option D: Royalty paid in installments for the purchase of rights to manufacture and sell patient medicines.

Correct Answer: Compensation paid to Directors on termination of their services ✔

Option A: All the significant events after the Balance Sheet date

Option B: The events after Balance Sheet date but before submitting it to the Registrar of Companies

Option C: The events after Balance Sheet date but before its approval by the board

Option D: All changes after Balance Sheet date before its approval

Correct Answer: The events after Balance Sheet date but before its approval by the board ✔

Option A: 1000 paid for the execution of a new plant

Option B: Loss of 10,000 incurred in increasing the sitting accommodation of a hotel

Option C: Damage paid on account of breach of a contract to supply certain goods

Option D: Repair to machinery purchased, second hand.

Correct Answer: Damage paid on account of breach of a contract to supply certain goods ✔

Option A: Sales

Option B: Purchases

Option C: Inward returns

Option D: Closing stock

Correct Answer: Closing stock ✔

Option A: Research and development costs during the year

Option B: Interest on borrowed fund utilized for acquisition of Office Furniture

Option C: Installation charges paid in conjunction with the purchase of Office Equipment

Option D: Monthly rent of a machinery used in the business

Correct Answer: Installation charges paid in conjunction with the purchase of Office Equipment ✔

Option A: Liability

Option B: Assets

Option C: Revenue receipts

Option D: Capital receipts

Correct Answer: Capital receipts ✔

Option A: Expenses in connection with issue of equity shares

Option B: Preoperative expenses

Option C: Heavy advertising expenses to introduce a new product

Option D: Legal expenses incurred in defending a suit for breach of contract to supply goods

Correct Answer: Legal expenses incurred in defending a suit for breach of contract to supply goods ✔

Option A: Benefits the current accounting period

Option B: Will benefit the next accounting period

Option C: Results in the acquisition of a permanent asset

Option D: Results in the acquisition of a current asset

Correct Answer: Results in the acquisition of a permanent asset ✔

Option A: Interest on loans and debentures

Option B: Annual fire insurance premiums on Plant and Equipment

Option C: Sales tax paid in connection with the purchase of office equipment

Option D: Small expenditures on long- lived assets, such as ` 20 for a paper weight.

Correct Answer: Sales tax paid in connection with the purchase of office equipment ✔

Option A: Mistake in balancing an account

Option B: Omitting to record a transaction entirely in the subsidiary books

Option C: Recording of a wrong entry in the subsidiary books

Option D: Posting an entry on the correct side but in the wrong account

Correct Answer: Mistake in balancing an account ✔

Option A: The Trial Balance will not agree

Option B: The balance of creditors is understated

Option C: The purchases are understated

Option D: The favorable bank balance as per Pass Book is less than the Bank balance as per Cash book

Correct Answer: The favorable bank balance as per Pass Book is less than the Bank balance as per Cash book ✔

Option A: 17,000 (overstated.

Option B: 12,000 (understated.

Option C: 7,000 (overstated.

Option D: 7,000 (understated.

Correct Answer: 7,000 (overstated. ✔

Option A: All purchases of goods

Option B: All credit purchases of goods

Option C: All credit purchases

Option D: None of these

Correct Answer: All credit purchases of goods ✔

Option A: Credit to wage expense for ` 64,000

Option B: Debit to wage expense for ` 64,000

Option C: Debit to wage expense for ` 51,000

Option D: Debit to wage expense for ` 13,000

Correct Answer: Debit to wage expense for ` 13,000 ✔

Option A: Net Profit will decrease by 3,140

Option B: Gross Profit will increase by 3,320

Option C: Gross Profit will decrease by 3,500

Option D: Gross Profit will decrease by 3,320

Correct Answer: Gross Profit will decrease by 3,320 ✔

Option A: Errors which affect one account can be errors of posting

Option B: Errors of omission arise when any transaction is left to be recorded

Option C: Errors of carry forward from one year to another year affect both Personal and Real A/c

Option D: Errors of commission arise when any transaction is recorded in a fundamentally incorrect manner

Correct Answer: Errors of commission arise when any transaction is recorded in a fundamentally incorrect manner ✔

Option A: Previous year‘s profit is overstated and current year‘s profit is also overstated.

Option B: Previous year‘s profit is understated and current year‘s profit is overstated.

Option C: Previous year‘s profit is overstated and current year‘s profit is understated.

Option D: There will be no impact on the profit of either the previous year or the current year.

Correct Answer: Previous year‘s profit is overstated and current year‘s profit is understated. ✔

Option A: The Trial Balance is prepared after preparing the Profit and Loss Account

Option B: The Trial Balance shows only balances of Assets and Liabilities

Option C: The Trial Balance shows only nominal account balances

Option D: The Trial Balance has no statutory importance from the point of view of law

Correct Answer: The Trial Balance has no statutory importance from the point of view of law ✔

Option A: Add income received in advance to respective income and show it as a liability

Option B: Deduct income received in advance from respective income and show it as a liability

Option C: Add income received in advance to respective income and show it as asset

Option D: Deduct income received in advance from respective income and show it as an asset in the Balance Sheet

Correct Answer: Deduct income received in advance from respective income and show it as a liability ✔

Option A: If a Trial Balance tallies, it always means that none of the transactions has been completely omitted

Option B: A Trial Balance will not tally if a transaction is omitted

Option C: A customer to whom goods have been sold on credit cannot avail himself of a cash discount

Option D: A credit balance in the Pass Book indicates excess of deposits over withdrawals

Correct Answer: A credit balance in the Pass Book indicates excess of deposits over withdrawals ✔

Option A: It is already adjusted in the opening stock

Option B: It is adjusted in the Purchase A/c

Option C: It is adjusted in the Cost of Sale A/c

Option D: It is adjusted in the Profit &Loss A/c

Correct Answer: It is adjusted in the Purchase A/c ✔

Option A: Credit purchase of fixed assets

Option B: Return of goods

Option C: All such transactions for which no special journal has been kept by the business

Option D: None of these

Correct Answer: All such transactions for which no special journal has been kept by the business ✔

Option A: Error of casting affects personal accounts

Option B: Omission of a transaction from a subsidiary record affects only one account

Option C: Error of carry forward affects two accounts

Option D: Error of principle involves an incorrect allocation of expenditure or receipt between capital and revenue

Correct Answer: Error of principle involves an incorrect allocation of expenditure or receipt between capital and revenue ✔

Option A: Sale of ` 100 was recorded in the Purchases Journal

Option B: Wages paid to Mohan have been debited to his account

Option C: The total of the sales journal has not been posted to the Sales Account

Option D: Repairs to buildings have been debited to buildings account

Correct Answer: The total of the sales journal has not been posted to the Sales Account ✔

Option A: The cost of goods sold was overstated during 2011-2012 and income will be understated during 2012-2013

Option B: The income was overstated during 2011-12 and closing inventory will be overstated during 2012-2013

Option C: The retained earnings was overstated during 2011-2012 and retained earnings will be understated during 2012-2013

Option D: The cost of goods sold was understated during 2011-2012 but retained earnings will not be affected during 2012-2013

Correct Answer: The retained earnings was overstated during 2011-2012 and retained earnings will be understated during 2012-2013 ✔

Option A: Overstatement of Assets

Option B: Understatement of Assets

Option C: Overstatement of Liabilities

Option D: Understatement of Liabilities

Correct Answer: Understatement of Assets ✔

Option A: Error of commission

Option B: Error of principle

Option C: Error of omission

Option D: Compensating error

Correct Answer: Error of principle ✔

Option A: Dividend

Option B: Royalty

Option C: Purchase consideration

Option D: Installment

Correct Answer: Royalty ✔

Option A: Delivery method

Option B: Percentage-of-completion method

Option C: Production method

Option D: Moving average method

Correct Answer: Moving average method ✔

Option A: a, c and g

Option B: c, d and f

Option C: c, d, e and h

Option D: c, d, f and h

Correct Answer: c, d and f ✔

Option A: Goodwill

Option B: Inventories

Option C: Investments

Option D: Both B. and C. above.

Correct Answer: Inventories ✔

Option A: Cost Price

Option B: Market Price

Option C: Cost price or Market price whichever is higher

Option D: Cost price or Market price whichever is lower

Correct Answer: Cost price or Market price whichever is lower ✔

Option A: They must be followed by reversing entries

Option B: They transfer the balances in all of the Nominal Accounts to the Trading and Profit and Loss Account

Option C: They must be made after the reversing entries but before the adjusting entries

Option D: They must be made after the adjusting entries but before the reversing entries

Correct Answer: They must be made after the adjusting entries but before the reversing entries ✔

Option A: A sale of an asset is recorded in the Sales Book

Option B: Total of Return Outward Book is debited to Return Outward Account

Option C: The balance of Petty Cash Book is a liability

Option D: Cash Book is a subsidiary book as well as a ledger

Correct Answer: Cash Book is a subsidiary book as well as a ledger ✔

Option A: Masood’s account

Option B: Cash account

Option C: Cash account and Gagan’s account

Option D: None of these

Correct Answer: A. Masood’s account ✔

Option A: Scrap value

Option B: Residual value

Option C: Market value

Option D: Depreciable value

Correct Answer: Depreciable value ✔

Option A: Assets accounts

Option B: liability accounts

Option C: Cash accounts

Option D: Revenue accounts

Correct Answer: Assets accounts ✔

Option A: Recording the transaction

Option B: Identifying the transaction

Option C: Posting the transaction

Option D: Preparing the source documents

Correct Answer: Identifying the transaction ✔

Option A: Trade discount

Option B: Prompt payment discount

Option C: Cash discount

Option D: Bulk discount

Correct Answer: Cash discount ✔

Option A: Capital account

Option B: Fixed assets account

Option C: Building account

Option D: Cash account

Correct Answer: Cash account ✔

Option A: Alphabetical order

Option B: Numeric order

Option C: Bullets order

Option D: Chronological order

Correct Answer: Chronological order ✔

Option A: Assets column

Option B: Date column

Option C: Description column

Option D: Amount column

Correct Answer: Assets column ✔

Option A: Book of entries

Option B: Book of original entries

Option C: T account

Option D: Books of economic event

Correct Answer: Book of original entries ✔

Option A: Drawings

Option B: Cash

Option C: Business

Option D: Stock

Correct Answer: Drawings ✔

Option A: Cash

Option B: Debtor

Option C: Creditor

Option D: Purchases

Correct Answer: Purchases ✔

Option A: Source documents

Option B: Ledger

Option C: Bonds

Option D: Journals

Correct Answer: Source documents ✔

Option A: Expense of business

Option B: Income of business

Option C: Loss of business

Option D: Abnormal loss of business

Correct Answer: Expense of business ✔

Option A: Sales income account

Option B: Sales account

Option C: Return inward account

Option D: Expenses account

Correct Answer: Return inward account ✔

Option A: 2,10

Option B: 10,2

Option C: 10,30

Option D: 3,15

Correct Answer: 2,10 ✔

Option A: Journal entry

Option B: Multi entry

Option C: Additional entry

Option D: Compound entry

Correct Answer: Compound entry ✔

Option A: Ledger

Option B: T account

Option C: Day book

Option D: Cash book

Correct Answer: Day book ✔

Option A: Account payable

Option B: Account receivable

Option C: Cash account

Option D: Discount account

Correct Answer: Account receivable ✔

Option A: One

Option B: Two

Option C: Three

Option D: Infinite

Correct Answer: Two ✔

Option A: Posting

Option B: Entry making

Option C: Adjusting

Option D: Journalizing

Correct Answer: Journalizing ✔

Option A: First

Option B: Original

Option C: Secondary

Option D: Generic

Correct Answer: Original ✔

Option A: Two times a year

Option B: once a year

Option C: Frequently during the accounting period

Option D: At the end of a accounting period

Correct Answer: Frequently during the accounting period ✔

Option A: Cash

Option B: Equity

Option C: Net income

Option D: Net expenses

Correct Answer: Equity ✔

Option A: Capital

Option B: Absorbed capital

Option C: Net assets

Option D: Net working capital

Correct Answer: Net working capital ✔

Option A: Decrease net income

Option B: Decrease liabilities

Option C: Increase net income

Option D: Increase liabilities

Correct Answer: Decrease net income ✔

Option A: Liabilities

Option B: Cash

Option C: Bank

Option D: Capital

Correct Answer: Capital ✔

Option A: $5000

Option B: $10,000

Option C: $15,000

Option D: $20,000

Correct Answer: $5000 ✔

Option A: Business operations

Option B: cash outflows

Option C: Inflows of cash

Option D: Appropriation expenses

Correct Answer: Business operations ✔

Option A: Increase cash and liability

Option B: Increase equity and liability

Option C: Increase fixed assets and cash

Option D: Increase cash and equity

Correct Answer: Increase cash and equity ✔

Option A: Assets and liabilities

Option B: Assets and equity

Option C: Liabilities and equity and bank balance

Option D: Capital and liabilities

Correct Answer: Assets and equity ✔

Option A: Cash+Other assets=Capital-Liabilities

Option B: Capital+ Liabilities=Assets+Income

Option C: Assets-Liabilities=Capital

Option D: Assets+Capital=Liabilities

Correct Answer: Assets-Liabilities=Capital ✔

Option A: Cash flow statement

Option B: Income statement

Option C: Statement of changes in equity

Option D: Statement of financial position

Correct Answer: Statement of financial position ✔

Option A: Increase

Option B: Reduce

Option C: apportion

Option D: Overstate

Correct Answer: Reduce ✔

Option A: Increase assets and decrease assets

Option B: Increase assets and decrease liabilities

Option C: Increase assets and increase capital

Option D: Increase assets and increase cash

Correct Answer: Increase assets and decrease assets ✔