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 .

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901.	Revenue is generally recognised as being earned at that point of time when
A.	sale is effected ;
B.	cash is received ;
C.	production is completed ;
D.	debts are collected
Answer» A. sale is effected ;

902.	Which of the following is a revenue expenses
A.	Raw material consumed ;
B.	Plant purchased ;
C.	Long term loan raised from bank;
D.	Share Capital
Answer» A. Raw material consumed ;

903.	Which of the following is a capital expenditure
A.	Repair of plant and machinery ;
B.	Salary paid to workers ;
C.	Cost of stand by equipment;
D.	Annual whitewash of the office building
Answer» C. Cost of stand by equipment;

904.	Which of these types of expenditure would not be treated as a Capital Expenditure
A.	Acquisition of an Asset ;
B.	Extension of an Asset ;
C.	Improvement of the existing Asset ;
D.	Maintenance of the Asset
Answer» D. Maintenance of the Asset

905.	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.	Depreciation ;
D.	Purchase of raw material
Answer» B. Putting the new asset in working condition ;

906.	Cash received from debtors would be deemed as ………… of funds.
A.	No flow ;
B.	Sources ;
C.	Uses ;
D.	Gain
Answer» A. No flow ;

907.	Purchase day book records
A.	All cash purchases ;
B.	All credit purchases ;
C.	Only credit purchase of raw material or goods purchased for resale ;
D.	All purchases
Answer» C. Only credit purchase of raw material or goods purchased for resale ;

908.	Journal is also known by —
A.	Memorandum A/c ;
B.	Kaccha books ;
C.	Books of original entry ;
D.	Proper books
Answer» C. Books of original entry ;

909.	Generally the term fund is used to mean the difference between
A.	Current assets and current liabilities ;
B.	Profit and loss A/C and Balance sheet ;
C.	Current assets and non-current liabilities ;
D.	Current liabilities and non-current liabilities
Answer» A. Current assets and current liabilities ;

910.	The periodic total of purchase day book is posted to —
A.	Creditors A/c ;
B.	Debtors A/c ;
C.	Purchase A/c ;
D.	None
Answer» C. Purchase A/c ;

911.	Which of these documents is not required for Bank Reconciliation
A.	Bank column of Cash Book ;
B.	Bank Pass Book ;
C.	Bank Statement ;
D.	Trial Balance
Answer» D. Trial Balance

912.	Which of these will not affect Bank and Cash balance
A.	Cash received from X credited to Y;
B.	Cheques issued to A but debited to B;
C.	Cheques deposited and cleared on the same date ;
D.	All the three
Answer» D. All the three

913.	Which of these items are taken into consideration for preparation of adjusted Cash Book
A.	Mistake in Cash Book ;
B.	Mistake in Pass Book ;
C.	Cheque issued but not presented for payment ;
D.	Cheques deposited but not cleared
Answer» A. Mistake in Cash Book ;

914.	Credit balance as per Cash Book mean-
A.	Surplus cash ;
B.	Bank overdraft ;
C.	Terms deposits with bank ;
D.	None of these
Answer» B. Bank overdraft ;

915.	Debit side of Bank Pass book corresponds to –
A.	Credit side of Cash Book ;
B.	Debit side of Cash Book ;
C.	Debit side of Trial Balance
D.	Credit side of Balance Sheet
Answer» A. Credit side of Cash Book ;

916.	Difference in Bank Balance as per Pass Book and Cash Book may arise on account of
A.	Cheque issued but not presented
B.	Cheque issued but dishonoured
C.	Cheque deposited and credited by bank
D.	All of (a) and (b) above
Answer» D. All of (a) and (b) above

917.	Which of the following statements is/are true?
A.	When there are cheques deposited but not collected by the banker, overdraft balance as per Pass Book will be less than that as per Cash Book
B.	When the payment side of the Cash Book is undercast, overdraft balance as per Cash Book will be more than overdraft balance as per Pass Book
C.	When reconciliation is to be done with the extracts of the Cash Book and Pass Book relating to the same period, the transactions which do not figure in one of the extracts are to be noted
D.	Bank interest debited in the Pass Book is to be added to Overdraft Balance as per Pass Book to arrive at the Overdraft balance as per Cash Book
Answer» D. Bank interest debited in the Pass Book is to be added to Overdraft Balance as per Pass Book to arrive at the Overdraft balance as per Cash Book

918.	The Bank Reconciliation Statement is prepared
A.	To rectify the mistakes in the Cash Book
B.	To arrive at the Bank Balance
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
Answer» D. To bring out the reasons for the difference between the Balance as per Cash Book and the

919.	Which of the following statements is false?
A.	When the bank column of a Cash Book shows a credit balance, it means an amount is due to the bank
B.	When Pass Book shows a debit balance, it means overdraft as per Pass Book
C.	While preparing Bank Reconciliation Statement, cheques paid into bank but not yet cleared are deducted from the Debit balance as per Cash Book to arrive at the balance as per Pass Book
D.	A Bank Reconciliation Statement is a part of Pass Book
Answer» D. A Bank Reconciliation Statement is a part of Pass Book

920.	Which of the following statements is true?
A.	Bank charges increase debit balance shown as per Bank Column of the Cash Book.
B.	Bank charges increase debit balance as per Bank pass book.
C.	A cash sale of a non-trading asset is recorded in the journal proper.
D.	Cash discount allowed by the business will appear on the debit side of the debtor‘s account.
Answer» B. Bank charges increase debit balance as per Bank pass book.

921.	Bank reconciliation is a statement prepared to reconcile—
A.	Trial balance ;
B.	Cash book ;
C.	Bank A/c;
D.	Cash as per cash book with bank balance as per bank pass book
Answer» D. Cash as per cash book with bank balance as per bank pass book

922.	Bank reconciliation statement is a part of —
A.	Cash book ;
B.	Trial balance ;
C.	Auditors report ;
D.	None of these
Answer» A. Cash book ;

923.	Benefits of preparing Bank Reconciliation Statement includes —
A.	It bring out any errors committed in preparation of Cash book / Bank Pass Book
B.	Highlights under delay in clearance of cheques deposited but not credited
C.	Help know actual bank balance ;
D.	All the three
Answer» D. All the three

924.	Debit balance as per bank pass book mean —
A.	Surplus cash ;
B.	Bank Overdraft ;
C.	Terms deposits with bank ;
D.	None of these
Answer» B. Bank Overdraft ;

925.	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 cash book ;
B.	Errors in pass book ;
C.	Cheques deposited and cleared;
D.	Cheques issued but not presented for payment
Answer» C. Cheques deposited and cleared;

1870+ Financial Accounting Solved MCQs

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

Which of the following is a revenue expenses

Which of the following is a capital expenditure

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

Expenses of the following nature are treated as a Revenue expenses except —

Cash received from debtors would be deemed as ………… of funds.

Purchase day book records

Journal is also known by —

Generally the term fund is used to mean the difference between

The periodic total of purchase day book is posted to —

Which of these documents is not required for Bank Reconciliation

Which of these will not affect Bank and Cash balance

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

Credit balance as per Cash Book mean-

Debit side of Bank Pass book corresponds to –

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

Which of the following statements is/are true?

The Bank Reconciliation Statement is prepared

Which of the following statements is false?

Which of the following statements is true?

Bank reconciliation is a statement prepared to reconcile—

Bank reconciliation statement is a part of —

Benefits of preparing Bank Reconciliation Statement includes —

Debit balance as per bank pass book mean —

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

Provision is created for —

Which of the following is not a method of charging depreciation

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.

In the above question if the depreciation is charged @10% on written down value method, find the profit or loss on sale of the Second hand car.

The term ― Reserve‖ has been defined in ------ of the Companies Act, 1956

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

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

The main objective of providing depreciation is to

Depreciation is a process of

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

The accounting process of gradually converting the unexpired cost of fixed assets into expenses over a series of accounting periods is

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

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

Which of the following statements is correct?

Depreciation is calculated on the

Which of the following is an external cause of depreciation

Depreciation is a process of —

Which of the following is not depreciated

Schedule XIV of the Companies Act specifies —————— as minimum rate of depreciation (WDV) on ship fishing vessels

—————— is also known as Appraisal system of depreciation

Bad debts recovered account will be transferred to

The entry for creating a Provision for bad debts is

When a person purchasing goods on credit he becomes a………….. in the books of the seller-

Which of these is not a Business expense-

926.	Provision is created for —
A.	Unknown Liabilities ;
B.	Known Liabilities ;
C.	Creation of Secret Reserves ;
D.	All the Three
Answer» B. Known Liabilities ;

927.	Which of the following is not a method of charging depreciation
A.	Straight line Method ;
B.	Written down value Method ;
C.	Discounted present value Method ;
D.	Sum of digits Method
Answer» C. Discounted present value Method ;

928.	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.	20,000 Profit ;
C.	10,000 Loss ;
D.	10,000 Profit
Answer» A. 20,000 Loss ;

929.	In the above question if the depreciation is charged @10% on written down value method, find the profit or loss on sale of the Second hand car.
A.	Loss of ` 20,000 ;
B.	Loss of ` 22,000 ;
C.	Loss of ` 11,000 ;
D.	Profit of ` 11,000
Answer» B. Loss of ` 22,000 ;

930.	The term ― Reserve‖ has been defined in ------ of the Companies Act, 1956
A.	Part III Schedule VI ;
B.	Part III Schedule V ;
C.	Part II Schedule VI ;
D.	Part I Schedule I
Answer» A. Part III Schedule VI ;

931.	Which of the following is true with respect to providing depreciation under diminishing balance method?
A.	The amount of depreciation keeps increasing every year while the rate of depreciation keeps decreasing
B.	The amount of depreciation and the rate of depreciation decrease every year
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
Answer» C. The amount of depreciation decreases while the rate of depreciation remains the same

932.	Which of the following statements best describes the purpose of depreciation?
A.	Regular reduction of asset value to correspond to changes in market value as the asset ages
B.	A process of correlating the market value of an asset with its gradual decline in physical efficiency
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
Answer» D. Allocation of the cost of an asset to the periods in which services are received from the asset

933.	The main objective of providing depreciation is to
A.	Calculate the true profit
B.	Show the true financial position in the Balance Sheet
C.	Provide funds for replacement of fixed assets
D.	Both (a) and (b) above
Answer» B. Show the true financial position in the Balance Sheet

934.	Depreciation is a process of
A.	Valuation
B.	Valuation and allocation
C.	Allocation
D.	Appropriation
Answer» C. Allocation

935.	The portion of the acquisition cost of the asset yet to be allocated is known as
A.	Written down value
B.	Accumulated value
C.	Salvage value
D.	Residual Value
Answer» A. Written down value