1870+ Financial Accounting Solved MCQs

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701.

Selling expenses should be divided among the different departments on the basis of ______

A. Sales
B. Purchase
C. Gross profit
D. Net profit
Answer» A. Sales
discuss
702.

Building expenses should be divided among the different departments according to the ______ by each departments

A. Area occupied
B. No of employees
C. Direct wages
D. Direct material
Answer» A. Area occupied
discuss
703.

Balance of trading account is a transfer to

A. Balance sheet
B. Trial balance
C. Profit and loss account
D. Income statement
Answer» C. Profit and loss account
discuss
704.

Depreciation on machinery this transaction initially shown on

A. Trading account
B. Profit and loss account
C. Balance sheet
D. All of these
Answer» B. Profit and loss account
discuss
705.

The expenses which have been incurred to bring the goods or making the goods ready for sales is called

A. Administrative expenses
B. Direct expenses
C. Indirect expenses
D. Revenue expenses
Answer» B. Direct expenses
discuss
706.

Packing of goods for protecting the goods is debited in the

A. Balance sheet
B. Profit and loss account
C. Trading account
D. Trial balance
Answer» C. Trading account
discuss
707.

The balance of profit and loss account is called

A. Net profit /loss
B. Gross profit/ loss
C. Working profit / loss
D. Petty profit / loss
Answer» A. Net profit /loss
discuss
708.

Carriage out expenses are come under

A. Administrative expenses
B. Financial expenses
C. Manufacturing expenses
D. Distribution expenses
Answer» D. Distribution expenses
discuss
709.

Mines, quarries etc are

A. Fixed asset
B. Fictitious asset
C. Current asset
D. Wasting asset
Answer» D. Wasting asset
discuss
710.

The final accounts , when adjustment entry is passed ,it affects the minimum ________

A. One account
B. Two account
C. Three account
D. Entire account
Answer» B. Two account
discuss
711.

The closing stock will appear in trial balance at the

A. Debit side
B. Asset side
C. Credit side
D. None of these
Answer» D. None of these
discuss
712.

Outstanding salary is shown on

A. Balance sheet
B. Trading account
C. Suspense account
D. Outstanding account
Answer» A. Balance sheet
discuss
713.

If closing stock appear on the trial balance it must have been ____

A. Added to the purchase
B. Added to the opening stock
C. Deducted from the purchases
D. Deducted from opening stock
Answer» C. Deducted from the purchases
discuss
714.

Discount on purchase will be

A. Debited to profit and loss account
B. Credited to profit and loss account
C. Deducted from purchases
D. Added to purchases
Answer» B. Credited to profit and loss account
discuss
715.

Resources which are invested in permanent asset are called

A. Investment
B. Working capital
C. Block capital
D. Intangible capital
Answer» C. Block capital
discuss
716.

Sales is equal to

A. Net income + expenses + cost of goods sold
B. Gross profit + net income + expenses
C. Gross profit + cost of goods sold + direct expenses
D. Net income + direct expenses
Answer» C. Gross profit + cost of goods sold + direct expenses
discuss
717.

The premium paid on the life policy of the proprietor is debited to

A. Profit and loss account
B. Trading account
C. Premium account
D. Drawing account
Answer» D. Drawing account
discuss
718.

Expenses which have become due during the accounting period for which the final accounts have been prepared but have not yet been paid is called

A. Accrued
B. Outstanding
C. Arrears
D. Non over dues
Answer» B. Outstanding
discuss
719.

Balance sheet is a _______

A. Ledger
B. Account
C. Statement
D. Subsidiary book
Answer» C. Statement
discuss
720.

Income tax paid for the proprietor from the business is

A. Debited in the income account
B. Debited in the trading account
C. Deducted from capital
D. Deducted from profit
Answer» C. Deducted from capital
discuss
721.

In the balance sheet of sole trader business , assets are managed in the order of

A. Permanency
B. Liquidity
C. Priority
D. Flexibility
Answer» B. Liquidity
discuss
722.

Under ______ system the buyer does not get ownership of goods immediately

A. Installment
B. HP
C. Installment and HP
D. None of these
Answer» B. HP
discuss
723.

________ means the price at which the goods can be purchased by the hirer for ready cash

A. HP price
B. Installment price
C. Cash price
D. Down payment
Answer» C. Cash price
discuss
724.

_______ is the initial payment made at the time of signing the hire purchase agreement

A. HP price
B. Installment price
C. Cash price
D. Down payment
Answer» A. HP price
discuss
725.

The difference between hire purchase price and the cash price is called ______

A. Hire charges
B. Cost of the asset
C. Installment price
D. Cash price
Answer» A. Hire charges
discuss
726.

Under ______ system , the buyer gets ownership of goods immediately

A. Installment
B. HP
C. Installment and HP
D. None of these
Answer» A. Installment
discuss
727.

When an asset is acquired on hire purchase system, the asset account is debited with _______ of the assets in the books of the hire purchaser.

A. Hp price
B. Cash price
C. Installment price
D. None of these
Answer» B. Cash price
discuss
728.

In order to deal with the re possession the hire vendor operates an account called _______

A. Asset account
B. Goods account
C. Goods repossessed account
D. None of these
Answer» C. Goods repossessed account
discuss
729.

Under _____ system , the hire vendor has a right to take back the goods

A. Installment
B. HP
C. Installment and HP
D. None of these
Answer» B. HP
discuss
730.

Single entry system of accounts is maintained by ______

A. Partnership
B. Company
C. Sole trader
D. None of these
Answer» C. Sole trader
discuss
731.

The statement of profit or loss is prepared according to _______ method to calculate profit or loss under single entry system

A. Conversion method
B. Statement of affairs method
C. Conversion and statement of affairs method
D. None of these
Answer» B. Statement of affairs method
discuss
732.

Under single entry system , drawings is _____ to know gross profit

A. Added
B. Deducted
C. Added and deducted
D. None of these
Answer» A. Added
discuss
733.

Receipts and payment account is a summary of ______

A. Income and expenditure
B. Profit and loss
C. Cashbook
D. Balance sheet
Answer» C. Cashbook
discuss
734.

Excess of income over expenditure of non trading concern is called _______

A. Profit
B. deficit
C. Surplus
D. Loss
Answer» C. Surplus
discuss
735.

Income and expenditure account is a type of ______

A. Balance sheet
B. Receipts and payment
C. Profit and loss account
D. None of these
Answer» C. Profit and loss account
discuss
736.

The amount of money owed by a business to outsider is called _____

A. Capital
B. Asset
C. Liabilities
D. None of these
Answer» C. Liabilities
discuss
737.

The properties and possession of a business are termed as ________

A. Asset
B. Capital
C. Liabilities
D. None of these
Answer» A. Asset
discuss
738.

Prepaid expenses appearing in trial balance will appear in _____

A. Profit and loss account debit side
B. Profit and loss account credit side
C. Balance sheet asset side
D. Balance sheet liability side
Answer» C. Balance sheet asset side
discuss
739.

Net profit / loss is transferred to the ______ account

A. Asset account
B. Liabilities account
C. Capital account
D. None of these
Answer» C. Capital account
discuss
740.

All ________ expenses are recorded in the trading account

A. Indirect
B. Direct
C. Direct and indirect
D. None of these
Answer» D. None of these
discuss
741.

________ expenses are shown in the profit and loss account

A. Indirect
B. Direct
C. Direct and indirect
D. None of these
Answer» A. Indirect
discuss
742.

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

A. I ;
B. T ;
C. H ;
D. None
Answer» B. T ;
discuss
743.

Gross Profit is the difference between

A. Net Sales and Cost of goods sold ;
B. PAT and Dividends ;
C. Net Sales and Cost of production ;
D. Net Sales and Direct costs of productions
Answer» A. Net Sales and Cost of goods sold ;
discuss
744.

Process of spreading cost 3. Profit and Loss A/c 4. Check arithmetic accuracy 4. Accounting for Fixed Asset

A. (1, 2), (2, 3), (3, 4), (4,1)
B. (1, 3), (2, 4), (3, 2), (4, 1)
C. (1, 4) (2, 2) (3, 1), (4, 3)
D. (1, 4), (2, 3), (3, 2), (4, 1)
Answer» C. (1, 4) (2, 2) (3, 1), (4, 3)
discuss
745.

The basic concepts related to Balance Sheet are

A. Cost Concept
B. Business Entity Concept
C. Accounting Period Concept
D. Both (a) and (b) above
Answer» D. Both (a) and (b) above
discuss
746.

The basic concepts related to P & L Account are

A. Realization Concept
B. Matching Concept
C. Cost Concept
D. Both (a) and (b) above
Answer» D. Both (a) and (b) above
discuss
747.

Which of the following is (are) characteristic(s) of Bad Debt?

A. It is a definite loss to the business ;
B. It must be shown in Profit & loss account ;
C. No provision is necessary for it ;
D. All of the given options
Answer» D. All of the given options
discuss
748.

Only the significant events which affect the business must be recorded as per the principle of

A. Separate Entity
B. Accrual
C. Materiality
D. Going Concern
Answer» C. Materiality
discuss
749.

P & L Account is prepared for a period of one year by following [Hints: (c) P&L A/C is prepared for a period of one year by following the concept of Accounting Period.]

A. Consistency Concept
B. Conservatism Concept
C. Accounting Period Concept
D. Cost Concept
Answer» C. Accounting Period Concept
discuss
750.

If the Going Concern concept is no longer valid, which of the following is true?

A. All prepaid assets would be completely written-off immediately
B. Total contributed Capital and Retained Earnings would remain unchanged
C. Intangible Assets would continue to be carried at net Amortized historical cost
D. Land held as an Investment would be valued at its realizable value
Answer» D. Land held as an Investment would be valued at its realizable value
discuss
751.

Under which of the following concepts are shareholders treated as creditors for the amount they paid on the shares they subscribed to?

A. Cost Concept
B. Duality Concept
C. Business Entity Concept
D. Since the shareholders own the business, they are not treated as creditors
Answer» B. Duality Concept
discuss
752.

The underlying accounting principle(s) necessitating amortization of intangible asset(s) is/are

A. Cost Concept
B. Realization Concept
C. Matching Concept
D. Both (a) and (c) above
Answer» B. Realization Concept
discuss
753.

Which of the following practices is not in consonance with the convention of conservatism?

A. Creating Provision for Bad debts
B. Creating Provision for Discount on Creditors
C. Creating Provision for Discount on Debtors
D. Creating Provision for tax
Answer» B. Creating Provision for Discount on Creditors
discuss
754.

The accounting measurement that is not consistent with the Going Concern concept is

A. Historical Cost
B. Realization
C. The Transaction Approach
D. Liquidation Value
Answer» C. The Transaction Approach
discuss
755.

Recording of Fixed Assets at cost ensures adherence of

A. Conservatism Concept
B. Going Concern Concept
C. Cost Concept
D. Both (a) and (b) above
Answer» D. Both (a) and (b) above
discuss
756.

Omission of paise and showing the round figures in financial statements is based on

A. Conservatism Concept
B. Consistency Concept
C. Materiality Concept
D. Realization Concept
Answer» C. Materiality Concept
discuss
757.

X Ltd., purchased goods for ` 5 lakh and sold 9/10th of the value of goods for ` 6 lakh. Net expenses during the year were ` 25, 000. The company reported its net profit as ` 75,000. Which of the following concept is violated by the company?

A. Realization
B. Conservation
C. Matching
D. Accrual
Answer» C. Matching
discuss
758.

Accounting does not record non- financial transactions because of

A. Entity Concept
B. Accrual Concept
C. Cost Concept
D. Money Measurement Concept
Answer» D. Money Measurement Concept
discuss
759.

Mr. Rohit, owner of Rohit Furniture Ltd., owns a personal residence that cost ` 6,00,000, but has a market value of ` 9,00,000. During preparation of the financial statement for the business, the entire value of property was ignored and was not shown in the financial statements. The principle that was followed was

A. The concept of the Business Entity
B. The concept of the Cost Principle
C. The concept of Going Concern Principle
D. The concept of Duality Principle
Answer» D. The concept of Duality Principle
discuss
760.

Provision for bad debt is made as per the

A. Entity Concept
B. Conservatism Concept
C. Cost Concept
D. Going Concern Concept
Answer» B. Conservatism Concept
discuss
761.

Fixed Assets and Current Assets are categorized as per concept of

A. Separate Entity
B. Going Concern
C. Consistency
D. Time period
Answer» B. Going Concern
discuss
762.

Which of the following is NOT a revenue expenditure?

A. Petrol consumed in motor vehicles ;
B. Cost of saleable goods ;
C. Bad debts ;
D. Premium given on lease
Answer» A. Petrol consumed in motor vehicles ;
discuss
763.

Which of the following statements is true?

A. Going Concern Concept assumes that business will be carried on for a definite period
B. The Capital Losses need not be deducted to ascertain net income
C. Provision for bad and doubtful debts is created in recognition of conservatism concept
D. Materiality concept states that all business transactions are to be recorded however insignificant they may be
Answer» C. Provision for bad and doubtful debts is created in recognition of conservatism concept
discuss
764.

The expenses and incomes pertaining to full trading period are taken to the Profit and Loss Account of a business, irrespective of their payment or receipt. This is in recognition of

A. Time period Concept
B. Going Concern Concept
C. Accrual Concept
D. Duality Concept
Answer» C. Accrual Concept
discuss
765.

Which of the following is an example of Capital Expenditure?

A. Insurance Premium
B. Taxes and Legal expenses
C. Discount allowed
D. Customs duty on Import of Machinery
Answer» D. Customs duty on Import of Machinery
discuss
766.

In the creditors control account, all of the below exist except:

A. Credit purchases ;
B. Purchase returns ;
C. Cash purchases ;
D. Cash/cheques paid
Answer» C. Cash purchases ;
discuss
767.

Ledger contains various ___________ in it

A. Transactions ;
B. Entries ;
C. Accounts ;
D. None of these
Answer» C. Accounts ;
discuss
768.

Which of the following concepts assumes that a business will last indefinitely?

A. Business Entity
B. Going Concern
C. Periodicity
D. Consistency
Answer» B. Going Concern
discuss
769.

Which of the following is an example of Personal Account?

A. Machinery
B. Rent
C. Cash
D. Creditor
Answer» D. Creditor
discuss
770.

Payment received from Debtor

A. Decreases the Total Assets
B. Increases the Total Assets
C. Results in no change in the Total Assets
D. Increases the Total Liabilities
Answer» C. Results in no change in the Total Assets
discuss
771.

The ____________ in a ledger helps in locating the accounts contained in it

A. Folio ;
B. Pages ;
C. Serial Number ;
D. None of these
Answer» A. Folio ;
discuss
772.

12.2012 —

A. 1,25,000 ;
B. 1,35,000 ;
C. 1,05,000 ;
D. 1,50,000
Answer» B. 1,35,000 ;
discuss
773.

In which of the following statement opening stock is shown?

A. Profit and loss account (Right Answer) ;
B. Balance sheet ;
C. Cash flow statement ;
D. Owner‘s equity
Answer» A. Profit and loss account (Right Answer) ;
discuss
774.

The process of transfer of entries from day book to ledgers is called _______________

A. Simple posting ;
B. Journal posting ;
C. Transaction ;
D. Ledger posting
Answer» D. Ledger posting
discuss
775.

Goods returned from X is entered as

A. Debit X A/c; Credit Purchase Return A/c
B. Debit X A/c; Credit Cash A/c
C. Debit Sales Return A/c; Credit X A/c
D. Debit X A/c; Credit Sales A/c
Answer» C. Debit Sales Return A/c; Credit X A/c
discuss
776.

When Fixed Assets are sold

A. The Total Assets will increase
B. The Total Liabilities will increase
C. The Total Assets will decrease
D. There is no change in the Total Assets
Answer» D. There is no change in the Total Assets
discuss
777.

Withdrawal of goods from stock by the owner of the business for personal use should be recorded by

A. Debiting Stock Account and crediting Capital Account
B. Debiting Capital Account and crediting Drawings Account
C. Debiting Drawings Account and Crediting Stock Account
D. Debiting Stock Account and Crediting Drawings Account
Answer» C. Debiting Drawings Account and Crediting Stock Account
discuss
778.

Which of the following transactions would cause a change in ―owners‘ equity‖?

A. Repayment of a Bank Loan
B. Payment of Dividends and Unprofitable Operations
C. Sale of Land on Credit
D. Purchase of Assets and incurrence of Liabilities
Answer» B. Payment of Dividends and Unprofitable Operations
discuss
779.

Withdrawals by proprietor would

A. Reduce both Assets and Owner‘s Equity
B. Reduce Assets and increase Liabilities
C. Reduce Owner‘s Equity and increase Liabilities
D. Have no affect on the Balance Sheet
Answer» A. Reduce both Assets and Owner‘s Equity
discuss
780.

Which of the following is true?

A. The payment of a Liability causes an increase in Owner‘s Equity
B. The collection of an Account Receivable will cause Total Assets to increase
C. The accounting equation may be stated as: Assets+Liabilities = Owners‘ equity
D. The purchase of an asset such as office equipment, either for cash or on credit, does not change the Owners‘ Equity
Answer» D. The purchase of an asset such as office equipment, either for cash or on credit, does not change the Owners‘ Equity
discuss
781.

Which of the following statements is/are true?
(i) Cash Book records all cash receipts and cash payments
(ii) Cash Book records all sale and purchase transactions of goods both in cash and on credit
(iii) Cash Book records discount on Cash Payments

A. Only (i) above
B. Only (ii) above
C. Only (iii) above
D. Both (i) and (iii) above
Answer» D. Both (i) and (iii) above
discuss
782.

Trade discount allowed at the time of Sale of goods.

A. Is recorded in Sales Book
B. Is recorded in Cash Book
C. Is recorded in Journal
D. Is not recorded in Books of Accounts
Answer» D. Is not recorded in Books of Accounts
discuss
783.

The Periodical total of the Sales Return Book is posted to the

A. Debit of Sales Account
B. Debit of Sales Return Account
C. Credit of Sales Return Account
D. Debit of Debtors Account
Answer» B. Debit of Sales Return Account
discuss
784.

If the Petty Cash fund is not reimbursed just prior to year end and an appropriate adjusting entry is not made, then

A. The petty cash account is to be returned to the company‘s cashier
B. Expenses are overstated and Cash is understated
C. Cash is overstated and expenses are understated
D. Cash is overstated and expenses are overstated
Answer» C. Cash is overstated and expenses are understated
discuss
785.

XYZ Ltd. Paid wages of ` 8,000 for erection of machinery. The journal entry for the transaction is

A. Debit wages and credit cash
B. Debit machinery and credit cash
C. Debit wages and credit erection charges
D. Debit machinery and credit erection charges
Answer» B. Debit machinery and credit cash
discuss
786.

Purchase of goods on credit

A. Increases Liabilities
B. Increases Assets
C. Increases both Assets and Liabilities
D. Decreases Assets
Answer» C. Increases both Assets and Liabilities
discuss
787.

Purchase of Raw Material for Cash

A. Increases total Assets
B. Leaves total Assets unchanged
C. Increases total Fixed Assets
D. Increases total Current Assets
Answer» B. Leaves total Assets unchanged
discuss
788.

Which of the following is not an Asset?

A. Stock of stationery
B. Goodwill
C. Profit and Loss Account (Credit Balance)
D. Accounts Receivable
Answer» C. Profit and Loss Account (Credit Balance)
discuss
789.

The process of balancing of an account involves equalization of both sides of the account. If the debit side of an account exceeds the credit side, the difference is put on the credit side. The said balance is
(i) A Debit balance
(ii) A Credit balance
(iii) An expenditure or an Asset
(iv) An Income or a Liability

A. Only (ii) above
B. Only (iv) above
C. Both (i) and (iii) above
D. Both (ii) and (iii) above
Answer» C. Both (i) and (iii) above
discuss
790.

Ledger is also called

A. Principal book of accounts ;
B. Cash books ;
C. Subsidiary book ;
D. None of these
Answer» A. Principal book of accounts ;
discuss
791.

Which of the following transactions of a business is/ are recorded in Journal Proper?
(i) Purchase of goods on credit
(ii) Sale of Office Furniture for cash
(iii) Discounting of Bill of Exchange with a bank
(iv) Endorsement of a Bill of Exchange in settlement of debt of the business

A. Only (i) above
B. Only (iv) above
C. Both (ii) and (iv) above
D. (i),(iii) and (iv) above
Answer» B. Only (iv) above
discuss
792.

Which of the following statements is/are true?
(i) Drawings Account is a Nominal Account
(ii) Capital Account is a Real Account
(iii) Sales Account is a Nominal Account
(iv) Outstanding salaries account is a Nominal Account
(v) Patents Account is a Personal Account

A. Only (i) above
B. Only (iii) above
C. Both (ii) and (iii) above
D. Both (ii) ,(iv) and (v)above
Answer» B. Only (iii) above
discuss
793.

The entry to record the collection of cash from Sundry Debtors would involve a
(i) Debit to Sundry Debtors
(ii) Debit to Cash Account
(iii) Credit to Sundry Debtors
(iv) Credit to Cash Account

A. Only (i) above
B. Only (iii) above
C. Both (ii) and (iii) above
D. Both (i) and (iv) above
Answer» C. Both (ii) and (iii) above
discuss
794.

ABC Ltd. makes payments to its Sundry Creditors through cheques and the Cash Discount received on these payments is recorded in the Triple-columnar Cash Book. In the event of dishonour of any such cheques, the discount so received should be written back through
(i) A debit to discount column of the Cash Book
(ii) A credit to discount column of the Cash Book
(iii) A credit to bank column of the Cash Book
(iv) A debit to Discount Account through Journal Proper
(v) A credit to Creditor‘s Account through Journal Proper

A. Only (i) above
B. Only (ii) above
C. Both (i) and (iii) above
D. Both (iv) and (v) above
Answer» D. Both (iv) and (v) above
discuss
795.

R Ltd. makes purchases on credit. If the purchases are not as per the specifications, the company returns them to the suppliers. The book, that is used to record such returns is

A. Returns Inward Book
B. Returns Outward Book
C. Cash Book
D. Journal Proper
Answer» B. Returns Outward Book
discuss
796.

If Office Equipment is purchased for cash, what effect will this transaction have on the financial position of the company?

A. There is no change in the Assets, Liabilities and Owners‘ Equity
B. There is a decrease in Assets, increase in Liabilities and no change in Owners‘ Equity
C. There is a decrease in Assets, no change in Liabilities and a decrease in Owners‘ Equity
D. There is an increase in Assets, decrease in Liabilities and no change in Owners‘ Equity
Answer» A. There is no change in the Assets, Liabilities and Owners‘ Equity
discuss
797.

The periodical total of discount column on receipts side of a Triple Column Cash Book is recorded to the

A. Credit side of Discount Account
B. Credit side of provision for Discount Account
C. Debit side of Discount Account
D. Credit side of Debtor‘s Account
Answer» C. Debit side of Discount Account
discuss
798.

Which of the following statements is false?

A. Credit side total of Discount column of Cash Book is an income
B. Credit balance of Bank Pass Book is an overdraft
C. Debit balance of Bank column of Cash Book is an Asset
D. Debit balance of Cash column of Cash Book is an Asset
Answer» B. Credit balance of Bank Pass Book is an overdraft
discuss
799.

Purchase of Fixed Assets on credit is originally recorded in

A. Purchases Book
B. Ledger
C. Cash Book
D. Journal Proper
Answer» D. Journal Proper
discuss
800.

If you start with cash book favorable balance in Bank Reconciliation Statement, which item will be added?

A. Cheque deposited but not credited by the bank
B. Cheques omitted to be deposited into bank
C. Any amount directly collected by bank on behalf of customer but not recorded in cash book
D. Debit side of cash book was overcast
Answer» C. Any amount directly collected by bank on behalf of customer but not recorded in cash book
discuss

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