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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951.	Cost of goods sold excludes-
A.	Opening Stock ;
B.	Carriage inward ;
C.	Wages & Salary ;
D.	Postage & Stamps
Answer» D. Postage & Stamps

952.	Tax deducted at source A/c appears in-
A.	Assets side ;
B.	Liability side ;
C.	Profit & Loss A/c ;
D.	Debited to Capital A/c
Answer» A. Assets side ;

953.	Investment in own share A/c appears in –
A.	Asset side ;
B.	Liability side ;
C.	Netted from Capital ;
D.	Profit & Loss A/c
Answer» A. Asset side ;

954.	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.	Shown as a liability
C.	Credited to P&L A/c
D.	Either (a) or (b) above
Answer» D. Either (a) or (b) above

955.	If a company has contingent liabilities, they appear in the
A.	Balance Sheet
B.	Directors‘ report
C.	Notes on account to Balance Sheet
D.	Chairman‘s report
Answer» C. Notes on account to Balance Sheet

956.	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.	Shown in the Balance Sheet at its replacement cost
C.	Shown in the Balance Sheet at cost, but classified as a non-current asset
D.	Carried in the accounting records at cost until it is sold
Answer» A. Written down to zero or its scrap value

957.	Which of the following is not classified as inventory in the financial statements?
A.	Finished goods ;
B.	Work-in-process ;
C.	Stores and spares
D.	Advance payments made to suppliers for raw materials
Answer» D. Advance payments made to suppliers for raw materials

958.	Which of the following statements is true?
A.	Inventory valuation affects only the income statement
B.	Undercasting or overcastting of subsidiary book is an example of error of commission
C.	Capital expenditure wrongly treated as revenue is an example of error of commission
D.	Inventories should be valued at lower of historical cost and current replacement cost
Answer» B. Undercasting or overcastting of subsidiary book is an example of error of commission

959.	Which of the following statements is / are not correct?
A.	Provision for bad debts appears as a liability on the Balance Sheet
B.	The provision for bad debts is owed to the proprietor
C.	Bad debts could be less than the provision for bad debts
D.	Bad debts could exceed the provision for bad debts
Answer» B. The provision for bad debts is owed to the proprietor

960.	If actual bad debts are more than the provision for bad debts, then there will be a
A.	Credit balance of Provision for Bad Debts Account
B.	Debit balance of Provision for Bad Debts Account
C.	Debit balance of Bad Debts Account
D.	Debit balance of Discount on Debtors Account
Answer» B. Debit balance of Provision for Bad Debts Account

961.	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.	Credit Profit and Loss Account and add the provision to debtors
D.	Debit Profit & Loss Account and add the provision to debtors
Answer» A. Debit Profit and Loss Account and deduct the provision from debtors

962.	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.	Revenue is overstated in the year of sales
C.	It violates the matching principle of accounting
D.	All of the above
Answer» D. All of the above

965.	Property, Plant and Equipment are conventionally presented in the Balance Sheet at
A.	Replacement cost – Accumulated Depreciation
B.	Historical cost – Salvage Value
C.	Historical cost – Depreciation portion thereof
D.	Original cost adjusted for general price-level changes
Answer» C. Historical cost – Depreciation portion thereof

967.	Insurance prepaid is shown as
A.	Current Asset
B.	Current Liability
C.	Fixed Asset
D.	Income
Answer» A. Current Asset

969.	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 ` 1,400
B.	P&L A/C is debited with ` 1,200
C.	200 is shown as current asset
D.	Both (b) and (c) above
Answer» D. Both (b) and (c) above

963.	At the time of preparation of financial accounts, bad debt recovered account will be transferred to
A.	Debtors A/c
B.	Profit & Loss A/c
C.	Profit & Loss Adjustment A/c
D.	Profit & Loss Appropriation A/c
Answer» B. Profit & Loss A/c

964.	The balance of Revaluation Reserve pertaining to an asset that has been disposed off or retired can be transferred to
A.	General Reserve A/c
B.	Profit & Loss A/c
C.	Asset A/c
D.	Capital Reserve A/c
Answer» D. Capital Reserve A/c

966.	Outstanding salaries is shown as
A.	An Asset in the Balance Sheet
B.	A Liability
C.	By adjusting it in the P & L A/c
D.	Both (b) and (c) above
Answer» D. Both (b) and (c) above

968.	Depreciation appearing in the Trial Balance should be
A.	Debited to P&L A/c
B.	Shown as liability in Balance Sheet
C.	Reduced from related asset in Balance Sheet
D.	Both (a) and (c) above
Answer» A. Debited to P&L A/c

970.	Bad debts recovered is
A.	Credited to P&L A/c
B.	Debited to P&L A/c
C.	Reduced from debtors in Balance Sheet
D.	Added to debtors in Balance Sheet
Answer» A. Credited to P&L A/c

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

972.	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.	7,000 Overstated
B.	10,000 Overstated
C.	17,000 Understated
D.	17,000 Overstated
Answer» B. 10,000 Overstated

973.	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 Accounts Payable A/c and Credit P&L A/c
C.	Debit Reserve for Discount on Accounts Payable A/c and Credit P&L A/c
D.	Debit Reserve for Discount on Accounts Payable A/c and credit Accounts Payable A/c
Answer» C. Debit Reserve for Discount on Accounts Payable A/c and Credit P&L A/c

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

975.	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.	Deduct the ` 800 from closing stock in the Trading Account
C.	Credit insurance company for ` 600
D.	Debit of ` 600 and ` 200 to insurance company and Profit and Loss Account respectively and
Answer» D. Debit of ` 600 and ` 200 to insurance company and Profit and Loss Account respectively and

1870+ Financial Accounting Solved MCQs

Cost of goods sold excludes-

Tax deducted at source A/c appears in-

Investment in own share A/c appears in –

Payments received in advance from a customer for a contract can be

If a company has contingent liabilities, they appear in the

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

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

Which of the following statements is true?

Which of the following statements is / are not correct?

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

The creation of provision for doubtful debts given as an adjustment requires

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

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

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

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

Outstanding salaries is shown as

Insurance prepaid is shown as

Depreciation appearing in the Trial Balance should be

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

Bad debts recovered is

The adjustment to be made for prepaid expenses is

Which of the following entries is correct in respect of reserve for discounts on accounts payable?

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:

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

Prepaid expenses are valued on the Balance Sheet at

Which of the following relationships is/are false?

Gross Profit is equal to

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

Which of the following equations is correct?

Which of the following is not true with regard to preparation of Profit & Loss Account?

The Profit and Loss Account shows the

Which of the following statements is true?

Cash Profit is

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

Which of the following is not a financial statement?

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

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

Which of the following are/is a current asset?

Tax deducted at source appears in the Balance Sheet

Which of the following statements is false?

Which of the following statements is true?

The Balance Sheet gives information regarding the

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

Which of the following is not an intangible asset?

Which of the following is a current liability?

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

Which of the following is not a contingent liability?

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

Which of the following statements is true?

976.	Prepaid expenses are valued on the Balance Sheet at
A.	Replacement cost
B.	Current cost
C.	Cost to acquire less accumulated amortization
D.	Cost less expired portion
Answer» D. Cost less expired portion

977.	Which of the following relationships is/are false?
A.	Net Profit = Gross Profit – Administration and Other expenses
B.	Net Profit = Gross Profit + Administration expenses and Other expenses
C.	Opening Stock + Purchases – Closing Stock = Cost of Sales
D.	Both (b) and (c) above
Answer» D. Both (b) and (c) above

978.	Gross Profit is equal to
A.	Sales – Cost of goods sold ;
B.	Sales – Closing Stock + Purchases
C.	Opening Stock + Purchases – Closing Stock ;
D.	None of the above
Answer» A. Sales – Cost of goods sold ;

979.	Which of the following shall not be deducted from net profit while calculating managerial remuneration?
A.	Loss on sale of undertaking
B.	Debts considered bad and written off
C.	Liability arising from a breach of contract
D.	Director‘s remuneration
Answer» D. Director‘s remuneration

980.	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
Answer» C. Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock = Sales

981.	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 are ascertained on the basis of current costs
D.	Net Profits as disclosed by P&L Account is not absolute
Answer» A. Profit & Loss Account is prepared for a certain period and hence it is an interim statement

982.	The Profit and Loss Account shows the
A.	Financial results of the concern for a period
B.	Financial position of the concern on a particular date
C.	Financial results of the concern on a particular date
D.	Cost of goods sold during the period
Answer» A. Financial results of the concern for a period

983.	Which of the following statements is true?
A.	Provision for doubtful debts represents the amount that cannot be collected
B.	Cash balance on hand shows whether the business has earned Profit or Loss
C.	Free samples received are business gains
D.	The WDV of an asset depreciated on the reducing balance method can never become zero
Answer» D. The WDV of an asset depreciated on the reducing balance method can never become zero

984.	Cash Profit is
A.	Net profit – Non-trading Profit – Depreciation and provision
B.	Gross Profit – Non-trading Profit + Depreciation and provision
C.	Net Profit + Depreciation and provision
D.	Gross Profit – Operational expenses
Answer» C. Net Profit + Depreciation and provision

985.	Which of the following will not appear in Profit and Loss Account of a business?
A.	Drawings
B.	Bad debts
C.	Accrued expenses
D.	Reserve for discount on Sundry Creditors
Answer» A. Drawings