Accounting | 1

Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business.
Accounting also refers to the process of summarizing, analyzing and reporting these transactions to oversight
agencies, regulators and tax collection entities. The financial statements that summarize a large company’s
operations, financial position and cash flows over a particular period are a concise summary of hundreds of
thousands of financial transactions it may have entered into over this period.

1. Land on lease should be shown in Balance sheet contrary to the fact that the company does not own that piece
of land is the implementation of which accounting concept?
1. Matchig concept
2. Accrual concept
3. Prudence concept
4. Substance over form concept

2. Bank Reconciliation statement is pre- pared by

1. Accountant of business
2. Manager of business
3. Controller of business
4. Accountant of the bank

3. Debit note is the basis for recording a transaction in which of the following journals?
1. General journal
2. Cash journal
3. Purchase journal
4. Purchase return journal

4. Which of the following financial statements shows the financial position of a business at a specific date?
1. Balance sheet
2. Income statement
3. Cash flow statement
4. Statement of changes in equity

5. Dismantling and demolition charges is a

1. Deferred Revenue expenditure
2. Capital expenditure
3. Revenue expenditure
4. None of the above

6. Profit is a part of
1. Income
2. Owner’s capital
3. Assets
4. All of the above

7. Introduction of capital by owner of business is recorded on which side of a cash book?

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 1. Receipts
2. Payments
3. Incomes
4. Expenditures

8. A recovery of bad debt

1. increases net income
2. decreases net income
3. increases gross profit
4. increases gross profit and net in- come

9. The Journal entry in which two or more account is debited or credited is referred to as
1. Journal entry
2. Multi entry
3. Additional entry
4. Compound entry

10. Which of the following is the normal balance of a rent expense account?
1. Credit balance
2. Cash balance
3. Overdraft
4. Debit balance

11. Which of the following inventory val- uation methods show higher profits during the period of rising prices?
1. FIFO
2. LIFO
3. Weighted average cost method
4. Simple average method

12. What is equity?

1. Cash from the business
2. Liability of a business
3. Owner’s claim on total assets
4. Owner’s claim on total liabilities

13. Which one of the following account- ing equations is correct?

1. Assets = Owner’s equity
2. Assets = Liabilities + Owner’s eq-
3. uity Assets = Liabilities-Owner’s eq-
4. uity Assets + Liabilities = Owner’s
15. eq- uity
1. Suspense account given in the trial balance will be entered in
2. the Manufacturing account
3. Balance sheet
4. Trading account

Profit and loss account

16. Which of the following is the closing balance of a ledger account?
1. Balance c/d
2. Balance b/d
3. Balance e/d
4. Balance f/c

17. NRV or net realizable value of inventory is the expected selling price or market value less
1. Carry value of the inventory
2. Expenses necessary to complete sale
3. Cost of the stock
4. Replacement cost

18. If debit balances = credit balances, trial balance only shows or checks the and it does not indicate
that no errors were made during recording and
1. Arithmetic accuracy
2. Errors of commission
3. Omissions of economic events
4. Understatements of balances

19. A company purchased a vehicle for Rs.6000. It will be used for 5 years and its residual value is expected to

be Rs.1000. What is the annual amount of depreciation using straight line method of depreciation?
1. Rs. 1000
2. Rs. 2000
3. Rs. 3000
4. Rs. 5000
19. The account that records expenses, gains and losses is
1. Personal account
2. Real account
3. Nominal account
4. None of the above
20. Real account records
1. Dealings with creditors or debtors
2. Dealings in commodities
3. Gains and losses
4. All of the above

21. Which of the following can be dis- tributed among the shareholders?
1. Capital reserve
2. General reserve
3. Revaluation reserve
4. All of the above

22. When capital is increased by an amount, it is recorded on the:

1. Left or credit side of the account
 2. Right or debit side of the account
3. Right or credit side of the account
4. Left or debit side of the account

23. When one or both aspects of a trans- action are recorded in the wrong class or category of account, it is called
1. Error of principle
2. Error of omission
3. Error of commission
4. Error of original entry

24. A decrease in value of a fixed asset due to age, wear and tear is known as
1. Depreciation
2. Accumulated depreciation
3. Appreciation
4. Written Down Value (WDV)

25. Bills receivable is a

1. Intangible fixed asset
2. Tangible fixed asset
3. Current asset
4. Investment

26. Cash Account is

1. Personal account
2. Real account
3. Nominal account
4. None of the above
27. Which of the following items of bal- ance sheet are useful in evaluating a company’s liquidity?
1. Current assets and other assets
2. Current liabilities and current as- sets
3. Current liabilities and plant and equipment
4. In current liabilities and other as- sets
28. The expenses that have fallen due for payment but not paid are
1. Outstanding expenses
2. Deffered expenses
3. Accrues expenses
4. Prepaid expenses

29. Which of the following is a type of cash receipt journal + cash payment journal?
1. Bank statement
2. Statement of cash flow
3. Cash book
4. Cash documents

30. Prepaid expenses are considered as

 1. Asset
2. Liability
3. Loss
4. Capital

31. Which of the following is not an item of Balance Sheet?

1. Accounts receivable
2. Accounts payable
3. Sales revenue
4. Marketable securities

32. A proforma invoice is sent by

1. Consignee to consignor
2. Consignee to debtors
3. Debtors to consignee
4. Consignor to consignee

33. Provision for cash discount on debtors is a percentage

1. of Debtors
2. Net debtors
3. Net debtors less provision for doubtful
4. debts Net sale
33. The assets which have a limited useful life are termed
1. as Limited assets
2. Depreciable assets
3. Unlimited assets
4. None of the above

34. days of grace are allowed in case of time bills, for calculating date of maturity
1. 2
2. 4
3. 3
4. 5

35. Return on Investment Ratio (ROI) =

1. (Gross profit / Net sales) x 100
2. (Gross profit x Sales / Fixed as- sets) x 100
3. (Net profit / Sales) x 100
4. (Net profit / Total assets) x 100

36. In balance sheet, fixed assets are shown at

1. Cost price
2. Market value
3. Fair value
4. Written Down Value (WDV)
37. is a separate legal entity whose total capital can be divided into many shares
1. Partnership
2. Sole Proprietorship
3. Company
4. Non-profit organization

38. Which of the following is quoted c start=”40″om-

1. pany? Private limited company
2. Public limited company
3. Listed company
4. Non listed company
40. Petty cash fund is supposed to be re-
1. plenished Every year
2. Every half year
3. Every year
4. At the end of every accounting pe- riod

41. Accounting provides information on

1. Cost and income for managers
2. Company’s tax liability for a par- ticular year
3. Financial conditions of an institu- tions
4. All of the above

42. Which of the following is an example of business liability?

1. Land
2. Building
3. Cash
4. Creditors

43. When it is certain that a debt won’t be recovered. Which of the following is correct?
1. Provision for bad debt is created
2. Account receivable is credited
3. Bad debts is credited
4. Sales is debited

44. The matching concept matches which of the following?

1. Asset with liabilities
2. Capital with income
3. Revenues with expenses
4. Expenses with capital

45. A bill of exchange is called a by one who is liable to pay it on the due date
1. Bill receivable
2. Noted bill of exchange
3. Bill payable
4. 46.
 1. None of the above
2. Which of the following is not re- garded as the fundamental concept that is identified by IAS-1?
3. The going concern concept
4. The separate entity concept

The prudence concept

Correction concept

47. The following is a statement of rev- enues and expenses for a specific pe- riod of time
1. Trading account
2. Trial Balance
3. Profit& Loss statements
4. Balance Sheet

48. The value of inventories or stock is figured out at the lower of cost and
1. Purchase price
2. Opportunity cost
3. Realizable value
4. Net realizable value

49. Provision for doubtful debts account is a/an

1. Asset account
2. Contra asset account
3. Nominal account
4. Liability account

50. Stock of a Trading concern consists of

1. Raw material
2. Work in progress
3. Merchandise inventory
4. All of the above

51. XYZ firm has imported a machine from abroad. Which of the following is NOT the element of the machine’s

cost?
1. Purchase price of machine
2. Import duty
3. Demmurage charges
4. Refundable tax
52. Which of the following ratios indicate the short-term liquidity of a business?
1. Inventory turnover ratio
2. Debt equity ratio
3. Acid test ratio
4. Proprietary ratio

53. An expenditure whose benefit is finished or enjoyed immediately is called

1. Expense
 2. Liability
3. Cost
4. Income

54. Discount received is recorded on which of the following side of a cash book?
1. Receipts
2. Payments
3. Income
4. Expenditure

55. Which one of the following can offer its share to public at large?
1. Private limited company
2. Listed company
3. Partnership firm
4. Trust

56. The following error will affect the Trial Balance

1. Error of partial omission
2. Error of principle
3. Error of complete omission
4. All of the above

57. Which of the following is the normal balance of an accumulated deprecia- tion account?
1. Debit balance
2. Credit balance
3. Nil balance
58. Errors are mistakes
1. Intentional
2. Undetected
3. Unintentional
4. None of the above

59. Assets minus liabilities equal to

1. Goodwill
2. Working capital
3. Net income
4. Capital

60. The closing balance of petty cash book is considered as

1. Liability
2. Asset
3. Expenses
4. Income
Answers
1. D 2. A 3. D 4. A 5. C 6. B 7. A 8. A 9. D 10. D

11. A 12. C 13. B 14. B 15. A 16. B 17. A 18. A 19. C 20. B

21. B 22. C 23. A 24. A 25. C 26. B 27. B 28. A 29. C 30. A

31. C 32. D 33. C 34. B 35. C 36. D 37. D 38. C 39. C 40. D

41. D 42. D 43. B 44. C 45. C 46. D 47. C 48. D 49. B 50. C

51. D 52. C 53. A 54. B 55. B 56. A 57. B 58. 59. 60. B
C D

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