A systematic way to maintain the books of accounts is called_________?

A. Economics
B. Accountancy
C. Book Keeping
D. Auditing

An Art of reading, classifying & Summarizing of accounts in a systematic way is called__________?

A. Accounting
B. Auditing
C. Accountancy
D. Book Keeping

The maintenance of accounts in a systematic way is called__________?

A. Reading
B. Accounting
C. Book Keeping
D. Auditing

Goods Return by the customer are termed as :

A. Customer return
B. Purchase return
C. Sales return
D. Inventory return

Modern system of book keeping is called______________?

A. Double entry system

B. Single entry system
C. American system
D. Italic system

The person to whom goods are sold on credit is called___________?

A. Seller
B. Buyer
C. Debtor
D. Creditor

Double entry means______________?

A. Entry at two ends

B. Entry in two sets of books
C. Entry at two dates
D. Entry for two aspects of the transaction

Discount received is a/an:

A. Expense
B. Asset
C. Liability
D. Revenue

Obligation of the Business are known as___________?

A. Liabilities
B. Expenses
C. Revenues
D. Assets
The amount invested by the proprietor to start the business is called:

A. Capital
B. Drawings
C. Business
D. All of them

Cash discount is provided on _______________?

A. Sales
B. Prompt payment
C. Purchases
D. Sales return

Goods return to supplier are known as:__________?

A. Return inwards
B. Purchase return
C. Merchandise return
D. Sales return

The excess of current assets over current liabilities is called:

A. Working Capital
B. Fixed capital
C. Circulating capital
D. Trading capital

When goods, in which business deals are sold, it is called___________?

A. Return inward
B. Purchases
C. Sales
D. Return outwards

Sales return is also known as____________?

A. Return Payed
B. Return received
C. Return inward
D. Return outward

reduction in price is called:

A. Invoice price
B. Paid price
C. Book price
D. Discount

Cash brought by the owner to start business is called__________?

A. Capital
B. Drawing
C. Loan
D. None of these

The concession received on the price of defective goods is called:

A. Cash discount
B. Discount
C. Allowance
D. Trading discount
In support of business transaction, any written evidence is called ___________?

A. Allowance
B. Voucher
C. Discount
D. Price

Building and furniture are called ____________?

A. Fictitious asset
B. Current asset
C. Tangible asset
D. Fixed assets

For the business, capital is ____________?

A. Assets
B. Liability
C. Expense
D. All of them

When owner withdraw cash for its private use, it is called ___________?

A. Income
B. Profit
C. Expense
D. Drawing

Assets having physical existence are called ___________?

A. intangible asset
B. Current asset
C. Tangible asset
D. Liquid asset

The assets which have some market value are called ____________?

A. Quick asset
B. Fixed asset
C. Fictitious assets
D. Real assets

The assets which come into existence upon the happening of a certain event are called__________?

A. Contingent assets
B. Fictitious assets
C. Fixed assets
D. Quick assets

Income earned but not received is called ____________?

A. Quick asset
B. Fictitious assets
C. Real asset
D. Outstanding asset

Debts which are payable in the course of a month are called _____________?

A. Fixed liabilities
B. External liabilities
C. Current liabilities
D. Liquid Liabilities
The unsold goods are ______________?

A. Sale return
B. Equity
C. Inventory
D. Purchases

The systems of accounting are _____________?

A. Two
B. Five
C. Three
D. Six

A sale of Rs. 50.000 to A was entered as a sale to B. This is an example of____________?

A. Compensating error
B. Error of commission
C. Error of omission
D. Error of principle

Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an example
of____________?

A. Error of principle
B. Error of omission
C. Error of commission
D. Error of duplication

Institute of Chartered Accountants of Pakistan was established in____________?

A. 1956
B. 1949
C. 1961
D. 1972

Trial balance is prepared to check accuracy of_______________?

A. Ledger accounts balances

B. Income statement balances
C. Balance sheet balances
D. Cash flow statement balances

If a transaction is completely omitted from the books of accounts, will it affect the agreement of a trial
balance?

A. Transactions can’t be omitted

B. No
C. Yes
D. none of these

________ is the common base for preparing a trial balance?

A. Ledger accounts
B. Specialized journals
C. General Journal
D. Balance sheet

Which of the following is true about a trial balance?

A. It lists down the balances of accounts

B. It is a kind of financial statement
C. It lists down the balances of a balance sheet
D. It is not a part of accounting cycle

Debit balance = Credit balance in a trial balance indicates that:

A. Account balances are correct

B. No error in posting entries to ledger accounts
C. No error in recording transactions
D. Mathematically Capital+Liabilities=Assets

Trial balance is commonly prepared?

A. At the end of a month

B. At the end of an accounting period
C. Frequently during the year
D. At the end of a year

Which of the following will affect the agreement of a trial balance?

A. Error of principle
B. Partial omission of a transaction
C. Complete omission of a transaction
D. Compensating errors

If debit balances = credit balances, trial balance only shows or check the ____________ and it does not
indicate that no errors were made during recording and posting.

A. Arithmetic accuracy
B. Omissions of economic events
C. Errors of commission
D. Understatements of balances

Which of the following account with normal balance is shown at the debit side of a trial balance?

A. Creditors account
B. Rent income account
C. Unearned income account
D. Cash account

Which of the following account with normal balance is shown at the credit side of a trial balance?

A. Bank account
B. Cash account
C. Equipment account
D. Accrued expenses account

Which of the following specialized journals records “goods returned by customers”?

A. Sales journal
B. Purchase journal
C. Purchases return journal
D. Sales return journal

Sales on credit is recorded in which of the following journal?

A. Sales return journal

B. Sales journal
C. Purchases return journal
D. Purchase journal

Transactions that a BUSINESS doesn’t record in any specialised journal are recorded in which of the
following journals or day books?
A. Cash receipts journal
B. Cash payments journal
C. Purchases return journal
D. General journal

Another name of journal is_____________?

A. Cash book
B. Day book
C. Specialized journal
D. Record book

Which of the following specialised journals will record “goods returned by the BUSINESS “?

A. Sales journal
B. Purchase journal
C. Purchases return journal
D. Sales return journal

Sales and purchase journal don’t record__________?

A. Credit purchases
B. Credit sales
C. Credit sales and purchases
D. Cash sales and purchases

Cash received from debtor is recorded in which of the following SPECIALIZED journals?

A. Sales journal
B. Purchase journal
C. Cash receipts
D. Cash payments journal

Which of the following is a type of cash receipt journal + cash payment journal?

A. Statement of cash flow

B. Bank statement
C. Cash book
D. Cash documents

Cash purchases is recorded in which of the following specialized journals?

A. Sales journal
B. Purchase journal
C. Purchases return journal
D. Cash payments journal

A brief explanation recorded below every entry in general journal is commonly known as__________?

A. Narration
B. Summary
C. Explanation
D. Other information

Credit purchase of plant and machinery is recorded in which of the following journals?

A. General journal
B. Purchase journal
C. Cash journal
D. Purchase return journal

Debit note is the basis for recording a transaction in which of the following journals?
A. Cash journal
B. General journal
C. Purchase journal
D. Purchase return journal

SALE of old furniture” will be recorded in which of the following specialised journals?

A. Sales journal
B. Purchase journal
C. General journal
D. Cash receipt journal

Credit note is the basis for recording a transaction in which of the following SPECIALIZED journals?

A. General journal
B. Sales return journal
C. Purchase journal
D. Cash receipt journal

Specialized journals are more adequate for which TYPE OF BUSINESSES?

A. Sole proprietorship
B. Big businesses
C. Small businesses
D. Partnership

Which of the following is known as an evidence that a transaction took place?

A. General journal
B. Cash receipts journal
C. Source document
D. Cash book

BUSINESS paid rent amounting to $100″ which of the following specialized journals records this
transaction?

A. Sales journal
B. Cash payments journal
C. Cash receipts journal
D. Purchase journal

Credit memo or credit note No. is entered in which of the following journal?

A. Cash journal
B. General journal
C. Purchase journal
D. Sales return day book

In accounting an Economic event is referred to as:

A. Bank statement
B. Cash
C. Transaction
D. Exchange of money

Identify the correct sequence of accounting process

A. Recording→Communicating→Identifying
B. Communicating→Recording→Identifying
C. Identifying→communicating→recording
D. Identifying→recording→communicating
Bookkeeping mainly concerns with which part of accounting process?

A. Preparing financial statements

B. Analyzing
C. Recording financial information
D. Auditing the books of accounts

Financial accounting provides financial information to all of the following external users except:

A. investors
B. Government agencies
C. Creditors
D. Managers

For which step of accounting process the accountants of business entity prepare financial statements?

A. Recording financial information

B. Communication of financial information
C. Identification of economic event
D. Making decisions about business

Keeping the log of financial information in books of original entries is called__________?

A. Recording
B. Grouping
C. summarizing
D. Processing

Auditing is what?

A. Preparation financial statements

B. Examination of financial statements
C. Reporting the financial information
D. maintaining the ledger records

Which of the following is the external user of financial statements?

A. CEO of the business

B. Manager of the business
C. Creditor of the business
D. Controller of the business

Which of the following is the internal user of financial statements?

A. Government agency
B. Creditor of the business
C. Shareholder of the business
D. Manager of the business

_________ is the first phase of accounting cycle?

A. Identifying an economic event or transaction

B. Posting entries to ledger accounts
C. Preparing journals
D. Making decisions about business

Financial statements differ from management account because

A. They are mainly prepared for external users of financial information

B. The are the summary of accounting data
C. They are more complex and hard to prepare
D. The are prepared on basis of actual concept
________ is a separate legal entity that Total capital can be divided in many shares.

A. Sole proprietorship
B. Partnership
C. Company
D. Non-profit organization

An asset posses which of the following?

A. Future economic benefits for the business

B. Expenses for the business
C. All kind of benefits for the business
D. Merits and Demerits for the business

Liabilities are which of the following?

A. Future benefits
B. Obligations
C. Resources
D. Expenses

________ is the gross inflow of economic benefits?

A. Liabilities
B. Assets
C. Income
D. Expenses

The gross decrease in economic benefits for the business are what?

A. Expenses
B. Creditors
C. Obligations
D. Income or gain

An asset must be _______ by the business to be shown as an asset in its “balance sheet”

A. Owned
B. Possessed
C. Controlled
D. Used

Liability are arisen from which of the following events?

A. Future event
B. Present event
C. Past event
D. None of them

Which of the following can be considered as the most important phase of accounting cycle and it is
the primarily objective of financial accounting?

A. Preparing “T Accounts”
B. Identifying transactions
C. Preparing financial statements
D. Preparing trial balances

Which is the most important characteristic that all assets of a business have?

A. Value of assets
B. Long life of assets
C. Intangible nature of assets
D. Future economic benefits

What is the basic accounting equation?

A. Capital+Liabilities=Assets
B. Capital+assets=liabilities
C. Assets+ liabilities =Capital
D. Liabilities+Capital

Which of the following is a liability?

A. Equipment
B. Cash
C. Debtors
D. Creditors

What is equity?

A. liability of a business
B. Cash from the business
C. Owner’s claim on total assets
D. Owner’s claim on total liabilities

Identify the asset from the following:

A. Cash and cash equivalent

B. Notes payable
C. Creditors
D. Bank loan

_______ the withdrawal of cash and goods by the owner of the busienss for his/her personal use?

A. Outflow of cash
B. Drawings
C. Depreciation
D. Appreciation

Net loss occurs when______________?

A. Expenses are greater than Income

B. Expenses=Income
C. Expenses are less than Income
D. Liabilities are greater than income

Double entry implies that

A. Recording entries in Ledger account

B. Recording entries in journal
C. Recording two aspects of every transaction
D. Recording every transaction in books

Identify the nominal account

A. Building account
B. Machinery account
C. Creditors account
D. Rent expenses account

Which of the following accounts can be classified as a real account?

A. Rent income account
B. Rent expenses account
C. insurance expenses account
D. Cash account

Transferring entries from journal to ledger account is commonly known as____________?

A. Transferring
B. Recording
C. Posting
D. Entry making

An account records the ___________ in the balance of an item?

A. Increase
B. Decrease Increase
C. Increase or decrease
D. Appreciation

If credit side of a bank account is greater than the debit side, it indicates which of the following?

A. Bank overdraft
B. Bank balance
C. Cash at bank
D. Current Asset

If debit side of a bank account is greater than credit side it indicates which of the following?

A. Cash at bank
B. Bank overdraft
C. Bank understatement
D. Balance overstatement

_________ will be credited if goods are given as charity?

A. Charity
B. Cash
C. Purchases
D. Sales

Which of the following is known as the base for preparing trial balance?

A. Cash account
B. Journal
C. Ledger account
D. Balance sheet

If debit balance is greater than creadit balance then the account blance will be__________?

A. Cash balance
B. Debit and credit balance
C. Credit balance
D. Debit balance

The normal balance of capital account is_____________?

A. Credit balance
B. Cash balance
C. Debit balance
D. Neither debit nor credit balance

The normal balance of asset account is____________?

A. Cash balance
B. Debit balance
C. Credit balance
D. Neither debit nor credit balance

The normal balance of liability account is____________?

A. Cash balance
B. Credit balance
C. Debit balance
D. Neither debit nor credit balance

Which of the following statements is incorrect regarding capital account?

A. Debit increases the capital account balance

B. Fresh capital increases the capital account balance
C. Credit increases the capital account balance
D. Net income increases the capital account balance

Which of the following is a Real A/c?

A. Bank A/c
B. Salary A/c
C. Building A/c
D. Goodwill A/c

Which of the following is a representative Personal A/c?

A. Outstanding Salary A/c

B. SBI A/c
C. Rent A/c
D. Bad debts A/c

Which of the following is a Nominal A/c ?

A. SBI A/c
B. Rent A/c
C. Outstanding Salary A/c
D. Debtors A/c

Goodwill A/c is a/an__________?

A. Tangible Asset
B. Nominal A/c
C. Intangible Asset
D. Fictitious Asset

Posting is the process of____________?

A. Posting suitable person to a suitable job

B. Posting the letters in drop box
C. Entering in the ledger the information contained in the ledger
D. All the three

A book wherein various accounts are opened is called____________?

A. Journal
B. Subsidiary books
C. Ledger
D. Trial Balance

Which of these is not a special purpose journal?

A. Purchase journal
B. Cash journal
C. Debtors journal
D. Sales journal

The periodic total of sales day book is posted to___________?

A. Sales A/c
B. Sales return A/c
C. Cash sales A/c
D. Credit sales A/c

The periodic total of purchase day book is posted to____________?

A. Cash purchase A/c

B. Purchase A/c
C. Purchase register
D. Credit purchase A/c

Capital expenses are shown in___________?

A. Balance Sheet
B. Trading A/c
C. Profit and Loss A/c
D. None of these

Revenue receipts are shown in___________?

A. Manufacturing A/c
B. Profit and Loss appropriation A/c
C. Balance Sheet
D. Trading and Profit and Loss A/c

Revenue is generally recognized as being earned at that point of time when?

A. sale is effected
B. production is completed
C. cash is received
D. debts are collected

Which of the following is a revenue expenses?

A. Raw material consumed

B. Share Capital
C. Long term loan raised from bank
D. Plant purchased

Which of the following is a capital expenditure?

A. Salary paid to workers

B. Repair of plant and machinery
C. Cost of stand by equipment
D. Annual whitewash of the office building

Which of these types of expenditure would not be treated as a Capital Expenditure?

A. Extension of an Asset
B. Acquisition of an Asset
C. Improvement of the existing Asset
D. Maintenance of the Asset

Expenses of the following nature are treated as a Revenue expenses except__________?

A. Expenses for day to day running of the business
B. Putting the new asset in working condition
C. Purchase of raw material
D. Depreciation

Cash received from debtors would be deemed as___________of funds.

A. No flow
B. Uses
C. Sources
D. Gain

Generally the term fund is used to mean the difference between?

A. Current assets and current liabilities

B. Current liabilities and non-current liabilities
C. Current assets and non-current liabilities
D. Profit and loss A/C and Balance sheet

Which of these documents is not required for Bank Reconciliation?

A. Bank column of Cash Book

B. Bank Statement
C. Bank Pass Book
D. Trial Balance

Which of these items are taken into consideration for preparation of adjusted Cash Book

A. Mistake in Cash Book

B. Cheques deposited but not cleared
C. Cheque issued but not presented for payment
D. Mistake in Pass Book

Credit balance as per Cash Book mean____________?

A. Terms deposits with bank

B. Bank overdraft
C. Surplus cash
D. None of these

Debit side of Bank Pass book corresponds to___________?

A. Credit side of Cash Book

B. Debit side of Trial Balance
C. Debit side of Cash Book
D. Credit side of Balance Sheet

Accounting Mcqs

Difference in Bank Balance as per Pass Book and Cash Book may arise on account of_____________?

A. Cheque issued but dishonoured

B. Cheque issued but not presented
C. Cheque deposited and credited by bank
D. Both A. and B.

The Bank Reconciliation Statement is prepared?

A. To arrive at the Bank Balance

B. To rectify the mistakes in the Cash Book
C. To arrive at the Cash Balance
D. To bring out the reasons for the difference between the Balance as per Cash Book and the Balance
as per Bank Statement

Bank reconciliation is a statement prepared to reconcile__________?

A. Cash book
B. Trial balance
C. Bank A/c
D. Cash as per cash book with bank balance as per bank pass book

Bank reconciliation statement is a part of_________?

A. Cash book
B. Auditors report
C. Trial balance
D. None of these

Benefits of preparing Bank Reconciliation Statement includes___________?

A. Help know actual bank balance

B. Highlights under delay in clearance of cheques deposited but not credited
C. It bring out any errors committed in preparation of Cash book / Bank Pass Book
D. All the three

Debit balance as per bank pass book mean_____________?

A. Terms deposits with bank

B. Bank Overdraft
C. Surplus cash
D. None of these

Which of the following is not a cause of difference in balance as per cash book and balance as per
bank pass book___________?

A. Errors in pass book

B. Errors in cash book
C. Cheques deposited and cleared
D. Cheques issued but not presented for payment

Provision is created for____________?

A. Creation of Secret Reserves

B. Known Liabilities
C. Unknown Liabilities
D. All the Three

Which of the following is not a method of charging depreciation?

A. Written down value Method

B. Straight line Method
C. Discounted present value Method
D. Sum of digits Method

A second hand car is purchased for 2,00,000 and sold at 1,40,000 after two years. If depreciation is
charged @ 10% on SLM method, find the profit or loss on sale of the car?

A. 20,000 Loss
B. 10,000 Loss
C. 20,000 Profit
D. 10,000 Profit
A second hand car is purchased for 2,00,000 and sold at 1,40,000 after two years. If depreciation is
charged @ 10% on written down value method, find the profit or loss on sale of the Second hand car?

A. Loss of 11,000
B. Loss of 22,000
C. Loss of 20,000
D. Profit of 11,000

Which of the following is true with respect to providing depreciation under diminishing balance
method?

A. The amount of depreciation and the rate of depreciation decrease every year
B. The amount of depreciation keeps increasing every year while the rate of depreciation keeps
decreasing
C. The amount of depreciation decreases while the rate of depreciation remains the same
D. The amount of depreciation and the rate of depreciation increases every year

Which of the following statements best describes the purpose of depreciation?

A. A process of correlating the market value of an asset with its gradual decline in physical efficiency
B. Regular reduction of asset value to correspond to changes in market value as the asset ages
C. Allocation of cost in a manner that will ensure that Plant and Equipment items are not carried on the
Balance Sheet in excess of net realizable value
D. Allocation of the cost of an asset to the periods in which services are received from the asset

The main objective of providing depreciation is to?

A. Provide funds for replacement of fixed assets

B. Show the true financial position in the Balance Sheet
C. Calculate the true profit
D. Both A. and B. above

Depreciation is a process of____________?

A. Valuation and allocation

B. Valuation
C. Allocation
D. Appropriation

The portion of the acquisition cost of the asset yet to be allocated is known as___________?

A. Written down value

B. Salvage value
C. Accumulated value
D. Residual Value

Which of the following statements is true with regard to written down value method of depreciation?

i. The rate at which the asset is written off reduces year after year
ii. The amount of depreciation provided reduces from year to year
iii. The rate of depreciation as well as the amount of depreciation reduce year after year
iv. The value of the asset gets reduced to zero over a period of time

A. Both (i) and (ii) above

B. Only (ii) above
C. Only (i) above
D. (i),(ii) and (iii) above

The accounting process of gradually converting the unexpired cost of fixed assets into expenses over a
series of accounting periods is_________?
A. Depreciation
B. Decrease in market value of the asset
C. Physical deterioration of the asset
D. Valuation of an asset at a point of time

Which of the following factors are primarily considered to determine the economic life of an asset?

A. Passage of time, asset usage, and obsolescence

B. Tax regulations and asset usage
C. Tax regulations and SEBI guidelines
D. SEBI guidelines and Asset usage

In which of the following methods, the cost of the asset is spread over in equal proportion during its
useful economic life?

A. Straight-line method
B. Units-of-production method
C. Written down value method
D. Sum-of-the years‘-digits method

Which of the following statements is correct about Depreciation?

A. Depreciation cannot be provided in case of loss in a financial year

B. Depreciation is a charge against profit
C. Depreciation is an appropriation of profit
D. Depreciation is provided in the books only when there is profit

Depreciation is calculated on the____________?

A. Market price
B. Cost price of asset
C. Cost+ Transport+ Installation expenses
D. Cost or market values whichever is less

Which of the following is an external cause of depreciation?

A. Misuse
B. Routine repair and maintenance
C. Obsolescence
D. Wear and tear

Which of the following is not depreciated?

A. Plant and Machinery

B. Land
C. Building
D. Office equipment

____________is also known as Appraisal system of depreciation?

A. Inventory system
B. Annuity system
C. Survey system
D. Insurance

Bad debts recovered account will be transferred to______________?

A. Profit and Loss Account

B. Debtor‘s Account
C. Provision for Doubtful Debt Account
D. Either (b )or C. above
The entry for creating a Provision for bad debts is_____________?

A. Debit Debtors A/c and credit Provision for Bad Debts A/c
B. Debit Provision for Bad Debts A/c and credit Debtors A/c
C. Debit Provision for Bad Debts A/c and credit Profit & Loss A/c
D. Debit Profit and Loss A/c and credit Provision for Bad Debts A/c.

When a person purchasing goods on credit he becomes a_________in the books of the seller?

A. Debtor
B. Defaulter
C. Creditor
D. Offender

Cost of goods sold excludes___________?

A. Carriage inward
B. Opening Stock
C. Wages & Salary
D. Postage & Stamps

Tax deducted at source A/c appears in___________?

A. Assets side
B. Profit & Loss A/c
C. Liability side
D. Debited to Capital A/c

Investment in own share A/c appears in____________?

A. Asset side
B. Netted from Capital
C. Liability side
D. Profit & Loss A/c

Payments received in advance from a customer for a contract can be__________?

A. Shown as a deduction from contract work-in-progress on asset side

B. Credited to P&L A/c
C. Shown as a liability
D. Either A. or B. above

If a company has contingent liabilities, they appear in the__________?

A. Directors‘ report
B. Balance Sheet
C. Notes on account to Balance Sheet
D. Chairman‘s report

Recent developments have made much of a company‘s inventory obsolete. This obsolete inventory
should be?

A. Written down to zero or its scrap value

B. Carried in the accounting records at cost until it is sold
C. Shown in the Balance Sheet at cost, but classified as a non-current asset
D. Shown in the Balance Sheet at its replacement cost

Which of the following is not classified as inventory in the financial statements?

A. Work-in-process
B. Finished goods
C. Stores and spares
D. Advance payments made to suppliers for raw materials

If actual bad debts are more than the provision for bad debts, then there will be a_____________?

A. Debit balance of Bad Debts Account

B. Debit balance of Provision for Bad Debts Account
C. Credit balance of Provision for Bad Debts Account
D. Debit balance of Discount on Debtors Account

The creation of provision for doubtful debts given as an adjustment requires____________?

A. Debit Profit and Loss Account and deduct the provision from debtors
B. Credit Profit & Loss Account and deduct the provision from debtors
C. Debit Profit & Loss Account and add the provision to debtors
D. Credit Profit and Loss Account and add the provision to debtors

Under the direct write-off method of recognizing a bad debt expense. Which of the following
statements is/are true?

A. The bad debt expense is not matched with the related sales
B. It violates the matching principle of accounting
C. Revenue is overstated in the year of sales
D. All of the above

At the time of preparation of financial accounts, bad debt recovered account will be transferred to?

A. Profit & Loss Adjustment A/c

B. Profit & Loss A/c
C. Debtors A/c
D. Profit & Loss Appropriation A/c

The balance of Revaluation Reserve pertaining to an asset that has been disposed off or retired can be
transferred to?

A. Profit & Loss A/c

B. General Reserve A/c
C. Asset A/c
D. Capital Reserve A/c

Average Accounting Return is a measure of accounting profit relative to:

A. Book value
B. Cost
C. Intrinsic value
D. Market value

During the accounting period, sales revenue is Rs. 25,000 and accounts receivable increases by Rs.
8,000. What will be the amount of cash received from customers for the period?

A. Rs. 25,000
B. Rs. 33,000
C. Rs. 17,000
D. Rs. 8,000

Which of the following form of business organization is least regulated?

A. Sole-proprietorship
B. Limited Partnership
C. General Partnership
D. Corporation
Which of the following statement is considered as the accountant’s snapshot of firm’s accounting
value as of a particular date?

A. Cash Flow Statement

B. Balance Sheet
C. Income Statement
D. Retained Earning Statement

Period cost include which of the following ?

A. Direct labor
B. selling Expense
C. factory overhead
D. selling Expenses & administrative expenses

The compensation paid by the borrower of fund to lender, from the borrower point of the cost of
borrowing fund is called?

A. Interest Rate
B. Nominal interest rate
C. Required rate of return
D. All of the above

An income statement in which each item expressed as percentage of Sale?

A. income statement
B. Balance sheet
C. common size income statement
D. All of the Above

Short term Assets expected to be converted into cash within 1 year or less than?

A. Current Assets
B. Current Assets & current liabilities
C. Fixed Assets
D. All of the above

_________is the cost of converting raw material into finished products?

A. Explicit cost
B. Prime cost
C. Job order cost
D. Conversion cost

Net sales equals, sales minus:

A. cost of goods sold

B. Return inwards
C. Return outwords
D. carriage on sales

LIFO stands for__________?

A.  Link input, Format Output

B.  Lots in , Few out
C.  Last input, First Output
D.  Last in, First Out

Property, Plant and Equipment are conventionally presented in the Balance Sheet at _________?

A. Historical cost – Salvage Value

B. Replacement cost – Accumulated Depreciation
C. Historical cost – Depreciation portion thereof
D. Original cost adjusted for general price-level changes

Accounting Mcqs

Outstanding salaries is shown as___________?

A. An Asset in the Balance Sheet

B. By adjusting it in the P & L A/c
C. A Liability
D. Both B. and C. above

Insurance prepaid is shown as:___________?

A. Current Asset
B. Fixed Asset
C. Current Liability
D. Income

Depreciation appearing in the Trial Balance should be?

A. Debited to P&L A/c

B. Reduced from related asset in Balance Sheet
C. Shown as liability in Balance Sheet
D. Both A. and C. above

A club paid subscription fees of `1,400. Out of which ` 200 is prepaid. In such case

A. P&L A/C is debited with 1,200

B. P&L A/C is debited with 1,400
C. 200 is shown as current asset
D. Both B. and C. above

Bad debts recovered is:

A. Credited to P&L A/c

B. Reduced from debtors in Balance Sheet
C. Debited to P&L A/c
D. Added to debtors in Balance Sheet

The adjustment to be made for prepaid expenses is____________?

A. Add prepaid expenses to respective expenses and show it as an asset

B. Deduct prepaid expenses from respective expenses and show it as an asset
C. Deduct prepaid expenses from respective expenses and show it as a liability
D. Add prepaid expenses to respective expenses and show it as a liability

On scrutiny of a firm‘s books of accounts, it was observed that the following errors have occurred in
the previous years but have not yet been rectified.

i. Depreciation for 2011-2012- 7,000 understated

ii. Accrued expenses as at March 31, 2013 – 10,000 understated
The impact of this on the reported net income for the year ending March 31, 2013 is

A. 17,000 Understated
B. 10,000 Overstated
C. 7,000 Overstated
D. 17,000 Overstated

Which of the following entries is correct in respect of reserve for discounts on accounts payable?
A. Debit P&L A/c and Credit Reserve for Discount on Accounts Payable A/c
B. Debit Reserve for Discount on Accounts Payable A/c and credit Accounts Payable A/c
C. Debit Reserve for Discount on Accounts Payable A/c and Credit P&L A/c
D. Debit Accounts Payable A/c and Credit P&L A/c

Sundry debtors as per Trial Balance is 43,000 which includes 2,200 due from ‗H in respect of goods
sent to him on approval basis, the cost price of which is 1,800. Rectification would involve:

A. Deducting 1,800 from closing stock and deducting 2,200 each from debtors and sales
B. Adding 2,200 to closing stock
C. Adding 1,800 to closing stock and deducting 2,200 each from debtors and sales
D. Deducting 1,800 from debtors

Goods in stock worth 800 are destroyed by fire and the Insurance Co. is accepted the claim for 600.
Adjustment would involve

A. Debit of 800 to Trading Account and credit of 600 and 200 to insurance company and Profit and Loss
Account respectively
B. Credit insurance company for 600
C. Deduct the 800 from closing stock in the Trading Account
D. Debit of 600 and 200 to insurance company and Profit and Loss Account respectively and credit of
800 to Trading Account

Prepaid expenses are valued on the Balance Sheet at

A. Current cost
B. Replacement cost
C. Cost to acquire less accumulated amortization
D. Cost less expired portion

Which of the following relationships is/are false?

A. Net Profit = Gross Profit – Administration and Other expenses

B. Opening Stock + Purchases – Closing Stock = Cost of Sales
C. Net Profit = Gross Profit + Administration expenses and Other expenses
D. Both B. and C. above

Gross Profit is equal to_________?

A. Sales – Cost of goods sold

B. Opening Stock + Purchases – Closing Stock
C. Sales – Closing Stock + Purchases
D. None of the above

Which of the following shall not be deducted from net profit while calculating managerial
remuneration?

A. Debts considered bad and written off

B. Loss on sale of undertaking
C. Liability arising from a breach of contract
D. Director‘s remuneration

Which of the following equations is correct?

A. Gross Profit+ Sales+ Direct expenses+ Purchases- Closing stock = Opening Stock
B. Gross Profit+ Sales+ Direct expenses+ Purchases+ Closing stock = Opening stock
C. Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock = Sales
D. Gross Profit – Opening Stock + Direct expenses + Purchases +Closing stock = Sales

Which of the following is not true with regard to preparation of Profit & Loss Account?
A. Profit & Loss Account is prepared for a certain period and hence it is an interim statement
B. Profit & Loss Account does not disclose the effect of non-financial items
C. Net Profits as disclosed by P&L Account is not absolute
D. Net Profits are ascertained on the basis of current costs

The Profit and Loss Account shows the:

A. Financial results of the concern for a period

B. Cost of goods sold during the period
C. Financial results of the concern on a particular date
D. Financial position of the concern on a particular date

Which of the following will not appear in Profit and Loss Account of a business?

A. Drawings
B. Accrued expenses
C. Bad debts
D. Reserve for discount on Sundry Creditors

Which of the following is not a financial statement?

A. Balance Sheet
B. Profit and Loss Account
C. Funds Flow Statement
D. Trial Balance

If unexpired insurance appears in the Trial Balance, it should be:

A. Debited to the Profit & Loss Account

B. Credited to the Profit & Loss Account
C. Shown on the liabilities side of the Balance Sheet
D. Shown on the assets side of the Balance Sheet

Which of the following are/is not a fixed asset?

A. Fixed deposit in bank

B. Vehicle
C. Stock
D. Both A. and C. above

Which of the following are/is a current asset?

A. Stock
B. Sundry Debtors
C. Prepaid insurance
D. All of A. B. and C. above

Tax deducted at source appears in the Balance Sheet

A. On the assets side under loans and advances

B. On the assets side under current assets
C. On the liabilities side under current liabilities
D. On the liabilities side under provisions

Which of the following statements is false ? select the false from below options

A. A person who owes to the business is called Debtor

B. Balance Sheet discloses financial position of the business
C. Decrease in the value of the asset could decrease the value of a liability
D. Assets are to be shown in the Balance Sheet at the realizable value

The Balance Sheet gives information regarding the____________?

A. Financial position during a particular period
B. Results of operations for a particular period
C. Profit earning capacity for a particular period
D. Financial position as on a particular date

Which of the following accounts appear(s) in the Balance Sheet of a business?

i. Stock at the end of the financial year

ii. Stock at the beginning of the financial year
iii. Drawings
iv. Prepaid Rent
v. Interest received but not yet earned

A. Only (iii) above

B. Only (i) above
C. Both (i)and (iii) above
D. (i), (iii), (iv) and (v) above

Which of the following is the normal balance of a rent expense account?

A. Cash balance
B. Credit balance
C. Overdraft
D. Debit balance

Revenue and expense accounts are referred as______________?

A. Nominal accounts
B. Cash accounts
C. Real account
D. Banks account

The real accounts are accounts of Assets, liabilities and ___________?

A. Revenues
B. Expenses
C. Capital
D. Drawing

Building account is classified as _________ account?

A. Cash
B. Real
C. Nominal
D. Capital

Office equipments account is classified as _________ account?

A. Cash
B. Real
C. Nominal
D. Capital

___________ helps business to classify transactions according to their nature?

A. Real accounts
B. General journal
C. Ledger accounts
D. Cash accounts

Which of the following is a real account?

A. Office equipment
B. Rent income
C. Rent expenses
D. Insurance expense

Which of the following accounts are closed at the end of an accounting period?

A. Nominal accounts
B. Real accounts
C. Balance sheet accounts
D. None of them

Which of the following is the closing balance of a ledger account?

A. Balance c/d
B. Balance e/d
C. Balance b/d
D. Balance f/c

The Basic accounting equation is___________?

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

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

A. $7000
B. $6000
C. $4000
D. $3000

Calculate the amount of cash if: Total assets=$10,000 Total liabilities=$10,000 Total Capital=$5000

A. $10,000
B. $6000
C. $5000
D. $1000

Capital increases if _________ increases?

A. Drawings
B. Expenses
C. Interest on capital
D. Revenue

Capital of a business decreases if there is an increase in___________?

A. Drawings
B. Gains
C. Income
D. Fresh capital

If the total liabilities of a business decrease by $5000 what will be the effect on total asset?

(assuming the amount of capital remain same)

A. Increase by $5000
B. Decrease by $5000
C. Remain constant
D. Increase by $10,000
If the business’s owner withdraws cash for his/her personal use what will be the effect on capital?

A. Remain the same

B. Increase in capital
C. Decrease in capital
D. No effect on capital

Net income equal to Revenues minus____________?

A. Depreciation
B. Gains
C. Expenses
D. Capital expenditures

Collection of account receivable will

A. Increase assets and decrease assets

B. Increase assets and increase capital
C. Increase assets and decrease liabilities
D. Increase assets and increase cash

Payment of expenses will ______ the assets

A. apportion
B. Reduce
C. Increase
D. Overstate

Which of the following is the practical implementation of the accounting equation?

A. Income statement
B. Cash flow statement
C. Statement of changes in equity
D. Statement of financial position

Which of the following accounting equation is correct?

A. Capital+ Liabilities=Assets+Income
B. Cash+Other assets=Capital-Liabilities
C. Assets-Liabilities=Capital
D. Assets+Capital=Liabilities

Fresh capital introduction will increase____________?

A. Capital and liabilities

B. Assets and equity
C. Liabilities and equity and bank balance
D. Assets and liabilities

Cash received for services rendered will______________?

A. Increase equity and liability

B. Increase cash and liability
C. Increase fixed assets and cash
D. Increase cash and equity

Which of following best describes the increase in equity expands___________?

A. Business operations
B. Inflows of cash
C. cash outflows
D. Appropriation expenses
If Cash=$1000 inventories=$4000 Debtors=$5000 fixed assets=? Capital+Liabilities=$15000 What is the
Amount of total assets?

A. $5000
B. $15,000
C. $10,000
D. $20,000

Depreciation decreases____________?

A. Cash
B. Liabilities
C. Bank
D. Capital

An increase in provision for bad debt will____________?

A. Decrease net income

B. Increase net income
C. Decrease liabilities
D. Increase liabilities

Current assets – Current liabilities=?

A. Absorbed capital
B. Capital
C. Net assets
D. Net working capital

Assets-Liabilities=____________?

A. Net income
B. Equity
C. Cash
D. Net expenses

The process of recording is done?

A. once a year
B. Two times a year
C. Frequently during the accounting period
D. At the end of a accounting period

General journal is a book of _______ entries?

A. Secondary
B. Original
C. First
D. Generic

The process of recording transactions in different journals is called_________?

A. Entry making
B. Posting
C. Adjusting
D. Journalizing

Every business transaction affects at least ________ accounts?

A. Three
B. Two
C. One
D. Infinite

Discount allowed is a kind of deduction from_____________?

A. Cash account
B. Account receivable
C. Account payable
D. Discount account

The other name of journal is____________?

A. T account
B. Ledger
C. Day book
D. Cash book

A journal entry in which two or more account is debited or credited is referred as____________?

A. Multi entry
B. Journal entry
C. Additional entry
D. Compound entry

he term 2/10-n/30 implies that ______ % discount will be given if the payment is made within days or
full amount is receivable within 30 days?

A. 2,10
B. 10,30
C. 10,2
D. 3,15

Goods returned by customer should be debited to which of the following accounts?

A. Sales account
B. Sales income account
C. Return inward account
D. Expenses account

Discount allowed is___________?

A. Expense of business
B. Loss of business
C. Income of business
D. Abnormal loss of business

_________ is the evidence that a transaction took place?

A. Source documents
B. Bonds
C. Ledger
D. Journals

Accounting Mcqs

Which of the following will be debited if a business purchases goods on credit?

A. Debtor
B. Cash
C. Creditor
D. Purchases
Which of the following accounts will be debited if the business’s owner withdraws cash from business
for his personal use?

A. Drawings
B. Business
C. Cash
D. Stock

Journals are also referred as_____________?

A. T account
B. Book of original entries
C. Book of entries
D. Books of economic event

The standard format of journal does not include which of the following?

A. Assets column
B. Description column
C. Date column
D. Amount column

In which of the following orders data is entered in journal?

A. Numeric order
B. Alphabetical order
C. Bullets order
D. Chronological order

Which of the following accounts will be credited if a company purchases building for cash?

A. Fixed assets account

B. Capital account
C. Building account
D. Cash account

Discount for quick repayment of debt is normally referred as____________?

A. Prompt payment discount

B. Trade discount
C. Cash discount
D. Bulk discount

The first step in accounting process is___________?

A. Posting the transaction

B. Identifying the transaction
C. Recording the transaction
D. Preparing the source documents

A chart of accounts generally start with which of the following types of accounts?

A. Assets accounts
B. Cash accounts
C. liability accounts
D. Revenue accounts

Total depreciation of an asset cannot exceed its:

A. Residual value
B. Scrap value
C. Market value
D. Depreciable value

Amount paid to Masood posted to the credit side of his account would affect___________?

A. Masood’s account
B. Cash account and Gagan’s account
C. Cash account
D. None of these

Which of the following statements is/are true ?

A. The balance of Petty Cash Book is a liability

B. Total of Return Outward Book is debited to Return Outward Account
C. A sale of an asset is recorded in the Sales Book
D. Cash Book is a subsidiary book as well as a ledger

Which of the following is true regarding closing entries?

A. They must be followed by reversing entries

B. They must be made after the reversing entries but before the adjusting entries
C. They transfer the balances in all of the Nominal Accounts to the Trading and Profit and Loss Account
D. They must be made after the adjusting entries but before the reversing entries

Closing stock is generally valued at______________?

A. Market Price
B. Cost Price
C. Cost price or Market price whichever is higher
D. Cost price or Market price whichever is lower

Which of the following assets is/are to be valued at the lower of cost and net realizable value?

A. Investments
B. Inventories
C. Goodwill
D. Both B. and C. above.

Which of the following methods is not a practical way of realizing revenue?

A. Percentage-of-completion method
B. Delivery method
C. Production method
D. Moving average method

The amount payable to a person as consideration for the use of rights vested in him is

A. Installment
B. Royalty
C. Purchase consideration
D. Dividend

Buildings account is debited with an amount towards repairs. This is an example of?

A. Error of omission
B. Error of principle
C. Error of commission
D. Compensating error

The concept of conservatism will have the effect of______________?

A. Overstatement of Liabilities
B. Understatement of Assets
C. Overstatement of Assets
D. Understatement of Liabilities

During the year 2011-2012, the value of closing inventory was overstated by 25,000. Which of the
following is true?

A. The income was overstated during 2011-12 and closing inventory will be overstated during 2012-2013
B. The cost of goods sold was overstated during 2011-2012 and income will be understated during 2012-
2013
C. The retained earnings was overstated during 2011-2012 and retained earnings will be understated
during 2012-2013
D. The cost of goods sold was understated during 2011-2012 but retained earnings will not be affected
during 2012-2013

Which of the following errors is an error of omission?

A. Repairs to buildings have been debited to buildings account

B. Wages paid to Mohan have been debited to his account
C. The total of the sales journal has not been posted to the Sales Account
D. Sale of ` 100 was recorded in the Purchases Journal

Which of the following statements is /are true?

A. Entering wrong amount in the subsidiary book affects the agreement of the Trial Balance
B. Errors of principle do not affect the agreement of Trial Balance
C. Undercasting or overcastting of a subsidiary book is an example or error of commission
D. Both B. and C. above

Which of the following is true?

A. Error of carry forward affects two accounts

B. Omission of a transaction from a subsidiary record affects only one account
C. Error of casting affects personal accounts
D. Error of principle involves an incorrect allocation of expenditure or receipt between capital and
revenue

Journal proper is meant for recording_____________?

A. Return of goods
B. Credit purchase of fixed assets
C. All such transactions for which no special journal has been kept by the business
D. None of these

Closing stock in the Trial Balance implies that______________?

A. It is adjusted in the Cost of Sale A/c

B. It is adjusted in the Purchase A/c
C. It is already adjusted in the opening stock
D. It is adjusted in the Profit &Loss A/c

Which of the following statements is true?

A. A customer to whom goods have been sold on credit cannot avail himself of a cash discount
B. A Trial Balance will not tally if a transaction is omitted
C. If a Trial Balance tallies, it always means that none of the transactions has been completely omitted
D. A credit balance in the Pass Book indicates excess of deposits over withdrawals

The adjustment to be made for income received in advance is:

A. Add income received in advance to respective income and show it as asset
B. Deduct income received in advance from respective income and show it as a liability
C. Add income received in advance to respective income and show it as a liability
D. Deduct income received in advance from respective income and show it as an asset in the Balance
Sheet

Which of the following statements is correct about Trial Balance?

A. The Trial Balance is prepared after preparing the Profit and Loss Account
B. The Trial Balance shows only nominal account balances
C. The Trial Balance shows only balances of Assets and Liabilities
D. The Trial Balance has no statutory importance from the point of view of law

While finalizing the current year‘s accounts, the company realized that an error was made in the
calculation of closing stock of the previous year. In the previous year, closing stock was valued more
by 50,000. As a result

A. Previous year‘s profit is understated and current year‘s profit is overstated.

B. Previous year‘s profit is overstated and current year‘s profit is also overstated.
C. Previous year‘s profit is overstated and current year‘s profit is understated.
D. There will be no impact on the profit of either the previous year or the current year.

Which of the following is not correct about Errors?

A. Errors which affect one account can be errors of posting

B. Errors of omission arise when any transaction is left to be recorded
C. Errors of commission arise when any transaction is recorded in a fundamentally incorrect manner
D. Errors of carry forward from one year to another year affect both Personal and Real A/c

If goods worth 1,750 returned to a supplier is wrongly entered in sales return book as 1,570, then

A. Gross Profit will increase by 3,320

B. Net Profit will decrease by 3,140
C. Gross Profit will decrease by 3,500
D. Gross Profit will decrease by 3,320

For the past 3 years, DK Ltd. has failed to accrue unpaid wages earned by workers during the last week
of the year. The amounts omitted, which were considered material, were as follows:

March 31,2010 – ` 56,000

March 31, 2011 – ` 51,000
March 31, 2012 – ` 64,000

The entry on March 31, 2012 to rectify these omissions would include a

A. Debit to wage expense for ` 51,000

B. Debit to wage expense for ` 64,000
C. Credit to wage expense for ` 64,000
D. Debit to wage expense for ` 13,000

Purchase journal is kept to record_____________?

A. All credit purchases

B. All credit purchases of goods
C. All purchases of goods
D. None of these

The beginnings inventory of the current year is overstated by 5,000 and closing inventory is
overstated by 12,000. These errors will cause the net income for the current year by
A. 12,000 (understated.
B. 17,000 (overstated.
C. 7,000 (overstated.
D. 7,000 (understated.

The accountant of Leo Ltd. recorded a payment by cheque to a creditor for supply of materials as
1,340.56. The bank recorded the cheque at its correct amount of 3,140.56. The Company has not
passed any rectification entries and the error is not detected through the bank reconciliation. The
impact of this error is

A. The purchases are understated

B. The balance of creditors is understated
C. The Trial Balance will not agree
D. The favorable bank balance as per Pass Book is less than the Bank balance as per Cash book

Which of the following errors affects the agreement of a Trial Balance?

A. Mistake in balancing an account

B. Omitting to record a transaction entirely in the subsidiary books
C. Posting an entry on the correct side but in the wrong account
D. Recording of a wrong entry in the subsidiary books

Which of the following should not be treated as revenue expenditure?

A. Annual fire insurance premiums on Plant and Equipment

B. Interest on loans and debentures
C. Sales tax paid in connection with the purchase of office equipment
D. Small expenditures on long- lived assets, such as ` 20 for a paper weight.

Capital expenditure is an expenditure which

A. Will benefit the next accounting period

B. Benefits the current accounting period
C. Results in the acquisition of a permanent asset
D. Results in the acquisition of a current asset

Which of the following is not a deferred revenue expenditure?

A. Preoperative expenses
B. Expenses in connection with issue of equity shares
C. Heavy advertising expenses to introduce a new product
D. Legal expenses incurred in defending a suit for breach of contract to supply goods

Any donation received for a specific purpose is a_________?

A. Assets
B. Liability
C. Revenue receipts
D. Capital receipts

Which of the following is an item of capital expenditure?

A. Monthly rent of a machinery used in the business

B. Interest on borrowed fund utilized for acquisition of Office Furniture
C. Installation charges paid in conjunction with the purchase of Office Equipment
D. Research and development costs during the year

The balance of which of the following accounts do not disappear, once they are debited/credited to
Trading Account?
A. Purchases
B. Sales
C. Inward returns
D. Closing stock

Which one of the following should be considered a revenue expenditure?

A. Loss of 10,000 incurred in increasing the sitting accommodation of a hotel

B. 1000 paid for the execution of a new plant
C. Damage paid on account of breach of a contract to supply certain goods
D. Repair to machinery purchased, second hand.

Which of the following statements are / is true? – Events after Balance Sheet are?

A. All the significant events after the Balance Sheet date

B. All changes after Balance Sheet date before its approval
C. The events after Balance Sheet date but before its approval by the board
D. The events after Balance Sheet date but before submitting it to the Registrar of Companies

Which one of the following is a capital expenditure?

A. Compensation paid to Directors on termination of their services

B. Expenditure incurred in connection with the renewal of a Trade Mark.
C. Royalty paid in installments for the purchase of rights to manufacture and sell patient
D. Gratuities paid to Directors on termination of their services.

Which of the following enhances the earning capacity of an asset?

A. Replacing damaged parts of an asset

B. Reduction in operating costs
C. Reduction in operating costs
D. Both A. and C. above

Which of the following items should not be capitalized relating to fixed assets?

A. Interest payable on loans or deferred credits taken for the acquisition or construction of fixed assets
before they are ready for use
B. Expenditure incurred on test runs and experimental production
C. Stand by equipment and servicing equipment
D. Administration and general expenses

Which of these errors affect only one account?

A. Errors of posting
B. Errors of carry forward
C. Errors of casting
D. All the three

Which of these errors affect two or more accounts

A. Errors of principle
B. Errors of complete omission
C. Errors of posting to wrong account
D. All the three

Which of the following error is an error of principle

A. 500 paid for wages debited to salary A/c

B. 5,000 incurred on installation of new plant debited to travelling expenses A/c
C. 5,000 received from Sham credited to Ram A/c
D. 500 being purchase of raw material debited to purchase A/c ` 50
Which of the following is an one sided error?

A. 500 purchase of old equipment not recorded in the books of A/c at all
B. 500 being expense on travelling expense credited to travelling expenses
C. None
D. Both

Any gain on the sale of non-current assets should be _________ from the net profit and the loss must
be _________to the net profit in determining fund from operation?

A. Added, Added
B. Added, Reduced
C. Deducted, Added
D. Deducted, Deducted

Cash book records?

A. Only revenue receipts

B. All types of cash receipts and payments
C. Only cash sales
D. Only capital receipts

In a three column cash book_______________does not exist?

A. Bank column
B. Cash column
C. Petty cash column
D. Discount column

Which of these transactions will not be recorded in cash book?

A. Cash paid to creditors

B. Cash received from debtors
C. Salary remained outstanding
D. Cash deposited with bank

The closing balance of a petty cash book is a / an___________?

A. Gain
B. Liability
C. Assets
D. Loss

Which column of a cash book will not have credit balance___________?

A. Discount column
B. Bank column
C. Cash column
D. None

Petty cash balance is a/an___________?

A. Assets
B. Liability
C. Expenditure
D. None

Which of these is a Part of cash in hand?

A. Postage stamps
B. B/R endorsed
C. Cheque Deposited with Bank
D. B/R

Computers taken on hire by a business for a period of twelve months should be classified
as:___________?

A. Intangible assets
B. Current assets
C. Deferred revenue expenditure
D. Not an asset

Which of the following is not an intangible asset?

A. Franchise
B. Trade mark
C. Accounts Receivable
D. Secret Profit

Which of the following is a current liability?

A. Trademark
B. Prepaid expenses
C. Discount on issue of shares
D. Outstanding Salaries

Based on which of the following concepts, is Share Capital Account shown on the liabilities side of a
Balance Sheet?

A. Business entity concept

B. Going concern concept
C. Money measurement concept
D. Matching concept

Which of the following is not a contingent liability?

A. Debts included in Sundry Debtors which are doubtful in nature

B. Arrears of fixed cumulative dividend
C. Claims against the company not acknowledged as debts
D. Uncalled liability on partly paid shares

Which of the following are current assets of a business?

i. Income received in advance

ii. Stock
iii. Debtors
iv. Pre-paid expenses
v. Accrued income

A. Both (ii) and (iii) above

B. Both (i) and (iv) above
C. (i),(ii) and (iii) above
D. (ii),(iii),(iv) and (v) above

Closing entries are generally passed:

A. After certification of accounts

B. At the time of closing the accounts
C. During the course of accounting period any time
D. At the time of opening new books of account

Closing stock appearing in the Trial Balance is shown in:

A. Profit and Loss A/c
B. Trading A/c and Balance Sheet
C. Balance Sheet only
D. Trading A/c only

Depreciation Account appearing in the Trial Balance is shown in:

A. Profit and Loss A/c

B. Deducted from the concerned assets A/c
C. Trading A/c
D. Shown on the liability side

Profit on sale of old plant is:___________?

A. In Profit and Loss Appropriation A/c

B. In Trading A/c
C. Profit and Loss A/c
D. Being a non operating item ignored

Carriage on goods purchased is shown in:___________?

A. Capitalized with work in progress

B. Profit and Loss A/c
C. Trading A/c
D. Shown in Balance Sheet

Which of these is not an operating income?

A. Bad debts recovered

B. Income from sale of trading goods
C. Interest on FDs
D. None

Riaz holds an average inventory of 36,000(CP) with an inventory turnover of 5 times. If the firm makes
a gross profit of 25% on sales, find the total sales of the company.

A. 2,40,000
B. 2,00,000
C. 2,10,000
D. 1,80,000

From the following details what will be the partners commission? Net profit before charging partners
commission 65,000. Partners commission @ 11% after charging such commission.

A. 6441
B. 7654
C. 5431
D. 9876

From the following details what will be the partners commission? Net profit before charging partners
commission 65,000. Partners commission 11% before charging such commission

A. 5431
B. 6441
C. 7150
D. 5876

Arrangement of Balance Sheet in a logical order is known as __________?

A. Formatting Balance Sheet

B. Marshalling Balance Sheet
C. Dressing Balance Sheet
D. Make up of Balance Sheet

Find the value of opening stock from the following data. Purchases 1,50,000, Closing stock 30,000
Sales 2,20,000, Gross profit 40,000.

A. 55,000
B. 50,000
C. 60,000
D. 65,000

A Bill of Exchange is drawn on 1st April, 2018 payable after 3 months. The due date of the bill is?

A. 1st July,2018
B. 30th June,2018
C. 4th July,2018
D. 4th August,2018

When bill discounted with the bank is dishonored?

A. Acceptor‘s Account is debited in the books of drawer

B. Bank Account is debited in the books of drawer
C. Bills Receivable Account is credited in the books of drawer
D. Bills Payable Account is debited in the books of drawer

In the books of the drawer, the accounting treatment involved on receipt of a bill of exchange duly
accepted by the drawee is?

i. Debit Bills Receivable Account

ii. Debit Drawee‘s Account
iii. Credit Drawee‘s Account
iv. Credit Sales Account

A. Both (ii) and (iv) above

B. Only (i) above
C. Both (i) and (iii) above
D. Both (i) and (iv) above

The noting charges levied on dishonour of an endorsed bill by the Notary Public are to be borne by

A. The holder of the bill

B. The person responsible for dishonour
C. The drawer of the bill
D. The endorser of the bill

The drawer of a trade bill passes relevant entries with regard to the transaction involved in it. But, in
case of an accommodation bill, he passes an entry in addition to the usual entries. The additional
entry so passed is with respect to

A. Payment of the bill on due date

B. Discounting of the bill with the bank
C. Remitting or receiving the amount
D. Sending the bill to bank for collection

Accounting Mcqs

Under which of the following situations, is journal entry not passed in the books of the drawer?

A. When a discounted bill is honoured by the drawer on the due date

B. When a bill is renewed at the request of the drawer
C. When a bill is sent to the bank for collection
D. When a debtor accepts a bill drawn by the drawer

Which of the following is not a feature of a promissory note?

A. It contains an unconditional promise to pay

B. It must be in writing
C. It is payable to the bearer
D. It must be signed by the maker

How many parties are generally found in a Bill of Exchange?

A. 2
B. 4
C. 3
D. 5

Negotiable Instrument Act was enacted in_________?

A. 1871
B. 1881
C. 1981
D. 2001

Which of these is not an essential feature of a bill of exchange?

A. Certainty of amount
B. Unconditional
C. In writing
D. Amount to be paid in foreign currency

A foreign bill of exchange is generally drawn up in___________?

A. Triplicate
B. Single
C. Duplicate
D. Quadruplicate

Which of these are not required in a promissory note?

A. Acceptance
B. Properly stamped
C. Unconditional promise to pay
D. Payment to be made legal currency

X draws a Bill of Exchange on Y for 10,000 on 1-1-2013 for 3 months. The due date of the bill will
be_________?

A. 4-4-2013
B. 1-4-2013
C. 3-4-2013
D. 31-3-2013

Accommodation bills are generally for?

A. To help augment money supply

B. For mutual financial accommodation
C. Genuine trade reasons
D. All the three

A cash deposit made by business appears on the bank statement as _______ balance?
A. Expenses
B. Credit
C. Debit
D. Liability

A check returned by bank marked “NSF” means that:

A. Check has been forged

B. There are not sufficient funds in your account
C. Bank can’t verify your identity
D. Check can’t be cashed being illegal

Bank reconciliation statement is prepared by____________?

A. Accountant of the business

B. Controller of the bank
C. Manager of the business
D. Accountant of the bank

Bank charges amounting to $5000 was not entered in the cash book. Identify the correct adjustment
in cash book?

A. Bank charges will be added to cash book balance

B. Bank charges will be debited in cash book
C. Bank charges will be credited in cash book
D. Bank charges need no adjustment in cash book

Favorable balance of cash book implies that

A. Bank overdraft
B. Debit balance of cash book
C. Credit balance of cash book
D. Adjusted balance of cash book

Bank reconciliation statement is the comparison of a bank statement (sent by bank) with the
_________ (prepared by business).

A. Cash payment journal

B. Cash receipt journal
C. Cash book
D. Financial statements

In the Bank reconciliation statement “Deposit in transit” is usually:

A. Added to Cash book balance

B. Added to bank balance
C. Subtracted from bank balance
D. Subtracted from cash book balance

Unpresented checks also referred as____________?

A. Uncredited checks
B. Uncollected checks
C. Outstanding checks
D. Bounced checks

A discount of $2000 was given to a supplier on his prompt repayment of debt but the cashier entered
the gross amount in cash book. What should be the adjustment in cash to work out the correct
balance of cash book?
A. $4000 will be debited in cash book
B. $2000 will be credited in cash book
C. $2000 will be debited in cash book
D. $4000 will be credited in the cash book

Standing orders are ________

A. Credited in the cash book

B. Entered in the bank statement
C. Debited in the cash book
D. Entered in the petty cash balance

Uncollected checks also referred as______________?

A. Outstanding checks
B. Uncredited checks
C. Unpresented checks
D. Bounced checks

___________ are checks that are issued by the business but not yet presented to bank

A. Uncredited checks
B. Uncollected checks
C. Outstanding checks
D. Bounced checks

Bank sent debit advice of $500 to company being interest on overdraft. It wasn’t entered in cash
book. Identify the correct adjustment in cash book.

A. Non-adjustable
B. $500 will be credited
C. $500 will be debited
D. $1000 will be subtracted

In bank reconciliation statement the amount of outstanding checks is added to ________ balance of
cash book.

A. Adjusted
B. Understated
C. Unadjusted
D. Overstated

Which of the following error results in unadjusted cash book balance?

A. Outstanding checks
B. Deposit in transit
C. Unpresented checks
D. Omission of Bank charges

_________ Checks that are presented to bank but not yet credited by the bank.

A. Outstanding checks
B. Uncredited checks
C. Unpresented checks
D. Bounced checks

Favorable balance of bank statement implies that

A. Credit balance
B. Bank overdraft
C. Debit balance
D. Adjusted balance

Balance as per cash book(adjusted.=$1000, Unpresented checks=$2000, Uncredited checks=$500,

Deposit in transit=$500. Compute the balance as per bank statement.

A. $2000
B. $3000
C. Zero
D. $2500

A company was entered in hire purchase agreement and had to pay $1000 per month. Three
payments were made via bank account but no entry was found in cash book. Identify the correct
adjustment in cash book

A. $2000 will be deducted from cash book balance

B. $1000 will be added to cash book balance
C. $3000 will be added to cash book balance
D. $3000 will be subtracted from cash book balance

Accounting Mcqs

$5000 deposited in bank account was entered twice in the cash book. Identify the correct adjustment
in cash book.

A. $5000 will be credited

B. $10,000 will be credited
C. $5000 will be debited
D. $10,000 will be debited

An entry which is made on both sides of a cash book is called__________?

A. Payment entry
B. Contra entry
C. Cash entry
D. Compound entry

Cash book records:______________?

A. Cash receipts
B. Cash payments
C. Cash payments and cash receipts
D. Neither cash payments nor cash receipts

Cash book is prepared by____________?

A. Manager of a company
B. Accountant of business
C. Bank
D. Bank’s cashier

Discount received is recorded on which of the following side of a cash book?

A. Incomes
B. Payments
C. Receipts
D. Expenditures

The closing balance of petty cash book is considered as_________?

A. Expenses
B. Asset
C. Liability
D. Income

A credit balance in cash book indicates?

A. Cash at bank
B. Bank balance
C. Bank overdraft
D. Bank underdraft

Petty cash fund is supposed to be replenished?

A. Every year
B. Every half year
C. Every day
D. At the end of every accounting period

Postdated checks are considered as__________?

A. Bank balance
B. Cash
C. Accounts receivable
D. Cash reserve

Which of the following is generally not the party to a check?

A. Payer
B. Payee
C. Bank
D. Seller

Cash book with cash and discount column is mostly referred as________?

A. Three column cash book

B. Two column cash book
C. Simple cash book
D. Petty cash book

A simple or one column cash book usually has which of the following main columns?

A. Payments
B. Bank
C. Discount
D. Cash

Purchase of office equipment for cash will be recorded on which of the following sides of a cash book?

A. Incomes
B. Payments
C. Receipts
D. Expenditures

Postage stamps on hand are considered as_________?

A. Accounts receivable
B. Prepaid expenses
C. Bank
D. Creditor

A cash book that is used to record the small payments of cash is generally referred as_________?
A. Two column cash book
B. Simple cash book
C. Three column cash book
D. Petty cash book

Drawings by owner of business are generally recorded on which of the following side of a cash book?

A. Incomes
B. Payments
C. Receipts
D. Expenditures

Payment of rent expenses is recorded on which side of cash book?

A. Income
B. Payments
C. Receipts
D. Expense

Cash discount is allowed on _______ repayment of debt.

A. Actual
B. Prompt
C. Lump sum
D. None of them

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

A. Receipts
B. Incomes
C. Payments
D. Expenditures

A cash book with cash, bank and discount column is commonly referred as________?

A. Two columns cash book

B. Cash book
C. Three columns cash book
D. Petty cash book

The most common imprest system is the ________ system?

A. Petty cash
B. Cash receipt
C. Cash book
D. Discount

Which English alphabet is similar to the shape of an account?

A. H
B. T
C. I
D. None

When production is equal to sales, which of the following is TRUE?

A. No change occurs to inventories for either use absorption costing or variable costing methods
B. The use of absorption costing produces a lower net income than the use of variable costing
C. The use of absorption costing produces a higher net income than the use of variable costing
D. The use of absorption costing causes inventory value to increase more than they would though the
use of variable costing
An average cost is also known as________?

A. Total cost
B. Unit cost
C. Variable cost
D. Fixed cost

Costs that change in response to alternative courses of action are called___________?

A. Target costs
B. Differential costs
C. Relevant costs
D. Sunk costs

The total cost incurred in the operation of a business undertaking other than the cost of
manufacturing and production is known as________?

A. Variable cost
B. Direct cost
C. Commercial cost
D. Conversion cost

Consider the following data for a company during the month of June 2012 Budgeted hours 4,000
Standard hours for actual production 4,400 Maximum possible hours in the budget period 4,800
Actual hours 3,800 The activity ratio of the company during the month is

A. 111%
B. 95%
C. 120%
D. 117%

Which of the following bases is not appropriate for apportionment of Transport department‘s cost ?

A. Truck Mileage
B. Crane value
C. Crane hours
D. Truck value

Accounting Mcqs

The cost of obsolete inventory acquired several years ago, to be considered in a keep vs. disposal
decision is an example of :

A. Avoidable cost
B. Sunk cost
C. Uncontrollable cost
D. Opportunity cost

Budgeted sales for the next year is 5,00,000 units. Desired ending finished goods inventory is 1,50,000
units and equivalent units in ending W-I-P inventory is 60,000 units. The opening finished goods
inventory for the next year is 80,000 units, with 50,000 equivalent units in beginning W-I-P inventory
How many equivalent units should be produced?

A. 5,80,000
B. 5,00,000
C. 5,50,000
D. 5,75,000

If the asset turnover and profit margin of a company are 1.85 and 0.35 respectively, the return on
investment is.
A. 0.65
B. 1.50
C. 0.35
D. 5.29

A company is currently operating at 80% capacity level. The production under normal capacity level is
1,50,000 units. The variable cost per unit is ` 14 and the total fixed costs are ` 8,00,000. If the company
wants to earn a profit of ` 4,00,000, then the price of the product per unit should be

A. 38.25
B. 37.50
C. 24.00
D. 35.00

Consider the following data pertaining to the production of a company for a particular month :

Opening stock of raw material 11,570

Closing stock of raw material 10,380
Purchase of raw material during the month 1,28,450
Total manufacturing cost charged to product 3,39,165
Factory overheads are applied at the rate of 45% of direct labour cost.
The amount of factory overheads applied to production is
A. 65,025
B. 95,020
C. 94,287
D. 1,52,624

If the minimum stock level and average stock level of raw material are 4,000 and 9,000 units
respectively, find out its reorder quantity.

A. 11,000 units
B. 8,000 units
C. 10,000 units
D. 9,000 units

A worker has a time rate of 15/hr. He makes 720 units of component (standard time : 5 minutes/ unit)
in a week of 48 hours. His total wages including Rowan bonus for the week is

A. 820
B. 792
C. 840
D. 864

One of the most important tools in cost planning is__________?

A. Cost Sheet
B. Direct cost
C. Budget
D. Marginal Costing.

A Ltd. Has sales of 2,200, total fixed cost of 570, variable cost of 1,540, raw material consumed of `
1,100, number of units sold 22,000. What shall be the BEP 9 in units) if raw material price is reduced
by 2%?

A. 18,387
B. 18,750
C. 18,560
D. 19,000

Find the cost of goods sold if goods are sold for 2,000 at 25% profit on cost?
A. 1,000
B. 1,500
C. 1,600
D. 1,800