1870+ Financial Accounting Solved MCQs

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Business Administration in Computer Applications (BBA [CA]) , Bachelor of Business Administration (BBA) , Bachelor of Accounting and Finance (BAF) , Bachelor of Commerce (B Com) , Cost Accounting .

Chapters

Take a Test

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

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

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

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

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

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

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

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

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

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

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

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 ;

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

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 ;

767.	Ledger contains various ___________ in it
A.	Transactions ;
B.	Entries ;
C.	Accounts ;
D.	None of these
Answer» C. Accounts ;

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

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

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

769.	Which of the following is an example of Personal Account?
A.	Machinery
B.	Rent
C.	Cash
D.	Creditor
Answer» D. Creditor

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

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 ;

772.	12.2012 —
A.	1,25,000 ;
B.	1,35,000 ;
C.	1,05,000 ;
D.	1,50,000
Answer» B. 1,35,000 ;

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) ;

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

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

1870+ Financial Accounting Solved MCQs

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

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

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

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

Recording of Fixed Assets at cost ensures adherence of

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

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?

Accounting does not record non- financial transactions because of

Provision for bad debt is made as per the

Fixed Assets and Current Assets are categorized as per concept of

Which of the following is NOT a revenue expenditure?

Which of the following statements is true?

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

Which of the following is an example of Capital Expenditure?

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

Ledger contains various ___________ in it

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

Which of the following is an example of Personal Account?

Payment received from Debtor

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

12.2012 —

In which of the following statement opening stock is shown?

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

Goods returned from X is entered as

When Fixed Assets are sold

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

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

Withdrawals by proprietor would

Which of the following is true?

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

Trade discount allowed at the time of Sale of goods.

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

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

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

Purchase of goods on credit

Purchase of Raw Material for Cash

Which of the following is not an Asset?

Ledger is also called

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

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

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

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

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

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

Which of the following statements is false?

Purchase of Fixed Assets on credit is originally recorded in

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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