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accounting MCQs

Practise multiple-choice questions from accounting for competitive examinations and subject revision. Review each marked answer and report any item that may be outdated or unclear.

accounting Mcqs

1. Which of the following accounts are closed at the end of an accounting period?
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A. Nominal accounts

B. None of them

C. Balance sheet accounts

D. Real accounts

2. Discount for quick repayment of debt is normally referred as____________?
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A. Prompt payment discount

B. Bulk discount

C. Cash discount

D. Trade discount

3. Which of the following statements are / is true? Events after Balance Sheet are?
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A. All changes after Balance Sheet date before its approval

B. The events after Balance Sheet date but before its approval by the board

C. All the significant events after the Balance Sheet date

D. The events after Balance Sheet date but before submitting it to the Registrar of Companies

4. The Basic accounting equation is___________?
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A. Assets=Capital+Liabilities

B. Assets=Cash+Capital

C. Assets=Expenses+Capital

D. Asset=Expense +Income

5. Journal proper is meant for recording_____________?
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A. None of these

B. Return of goods

C. All such transactions for which no special journal has been kept by the business

D. Credit purchase of fixed assets

6. Financial accounting provides financial information to all of the following external users except:
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A. Creditors

B. Government agencies

C. Managers

D. investors

7. In which of the following orders data is entered in journal?
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A. Numeric order

B. Bullets order

C. Alphabetical order

D. Chronological order

8. Assets having physical existence are called ___________?
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A. Liquid asset

B. intangible asset

C. Tangible asset

D. Current asset

9. Which of these errors affect only one account?
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A. Errors of carry forward

B. Errors of casting

C. All the three

D. Errors of posting

10. Capital expenditure is an expenditure which
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A. Results in the acquisition of a permanent asset

B. Results in the acquisition of a current asset

C. Benefits the current accounting period

D. Will benefit the next accounting period

11. Current assets Current liabilities=?
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A. Capital

B. Net working capital

C. Absorbed capital

D. Net assets

12. Assets-Liabilities=____________?
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A. Net income

B. Equity

C. Net expenses

D. Cash

13. Bookkeeping mainly concerns with which part of accounting process?
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A. Auditing the books of accounts

B. Analyzing

C. Recording financial information

D. Preparing financial statements

14. Which one of the following is a capital expenditure?
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A. Royalty paid in installments for the purchase of rights to manufacture and sell patient medicines.

B. Compensation paid to Directors on termination of their services

C. Expenditure incurred in connection with the renewal of a Trade Mark.

D. Gratuities paid to Directors on termination of their services.

15. If Cash=$1000 inventories=$4000 Debtors=$5000 fixed assets=? Capital+Liabilities=$15000 What is the Amount of total assets?
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A. $20,000

B. $5000

C. $10,000

D. $15,000

16. Difference in Bank Balance as per Pass Book and Cash Book may arise on account of_____________?
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A. Cheque issued but not presented

B. Cheque issued but dishonoured

C. Cheque deposited and credited by bank

D. Both A. and B.

17. Which of the following factors are primarily considered to determine the economic life of an asset?
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A. Tax regulations and asset usage

B. Tax regulations and SEBI guidelines

C. Passage of time, asset usage, and obsolescence

D. SEBI guidelines and Asset usage

18. Which of the following accounts can be classified as a real account?
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A. Rent income account

B. Cash account

C. Rent expenses account

D. insurance expenses account

19. Double entry means______________?
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A. Entry in two sets of books

B. Entry at two ends

C. Entry for two aspects of the transaction

D. Entry at two dates

20. 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?
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A. 2,10

B. 3,15

C. 10,30

D. 10,2

21. Which of the following methods is not a practical way of realizing revenue?
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A. Production method

B. Percentage-of-completion method

C. Delivery method

D. Moving average method

22. Which of the following is a type of cash receipt journal + cash payment journal?
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A. Cash documents

B. Bank statement

C. Statement of cash flow

D. Cash book

23. The concept of conservatism will have the effect of______________?
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A. Overstatement of Liabilities

B. Overstatement of Assets

C. Understatement of Assets

D. Understatement of Liabilities

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

B. Auditing

C. Accountancy

D. Book Keeping

25. Sales and purchase journal dont record__________?
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A. Cash sales and purchases

B. Credit sales and purchases

C. Credit sales

D. Credit purchases

26. Which of the following accounting equation is correct?
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A. Capital+ Liabilities=Assets+Income

B. Assets-Liabilities=Capital

C. Cash+Other assets=Capital-Liabilities

D. Assets+Capital=Liabilities

27. Any donation received for a specific purpose is a_________?
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A. Liability

B. Revenue receipts

C. Assets

D. Capital receipts

28. An account records the ___________ in the balance of an item?
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A. Increase

B. Increase or decrease

C. Decrease

D. Appreciation

29. Transactions that a BUSINESS doesnt record in any specialised journal are recorded in which of the following journals or day books?
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A. Cash receipts journal

B. Cash payments journal

C. Purchases return journal

D. General journal

30. Which of following best describes the increase in equity expands___________?
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A. Appropriation expenses

B. Business operations

C. Inflows of cash

D. cash outflows

31. A few errors committed in Ahhiwalias books of account are given below. State which errors would affect the Trial Balance.
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A. Sales of `500 to Sadiq entered in sales journal as sales to Mushtaq

B. . Purchases of `720 from Shyam entered in the purchases journal as `700

C. . Purchases Journal is overcast by `1,000

D. . Sales returns journal is undercast by `200

E. Bank overdraft shown under debit column in the Trial Balance

F. Amount paid to Agarwal wrongly posted to the debit to Mittals account

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

33. 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
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A. 12,000 (understated.

B. 17,000 (overstated.

C. 7,000 (overstated.

D. 7,000 (understated.

34. Which of the following is a Real A/c?
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A. Goodwill A/c

B. Bank A/c

C. Salary A/c

D. Building A/c

35. Which of the following statements is incorrect regarding capital account?
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A. Credit increases the capital account balance

B. Debit increases the capital account balance

C. Net income increases the capital account balance

D. Fresh capital increases the capital account balance

36. Which of these types of expenditure would not be treated as a Capital Expenditure?
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A. Acquisition of an Asset

B. Maintenance of the Asset

C. Extension of an Asset

D. Improvement of the existing Asset

37. Which of the following can be considered as the most important phase of accounting cycle and it is the primarily objective of financial accounting?
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A. Preparing trial balances

B. Identifying transactions

C. Preparing financial statements

D. Preparing T Accounts

38. Which of the following is the internal user of financial statements?
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A. Manager of the business

B. Creditor of the business

C. Government agency

D. Shareholder of the business

39. Bank reconciliation is a statement prepared to reconcile__________?
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A. Cash as per cash book with bank balance as per bank pass book

B. Trial balance

C. Cash book

D. Bank A/c

40. If the businesss owner withdraws cash for his/her personal use what will be the effect on capital?
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A. Remain the same

B. Decrease in capital

C. No effect on capital

D. Increase in capital

41. Which of the following should not be treated as revenue expenditure?
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A. Small expenditures on long- lived assets, such as ` 20 for a paper weight.

B. Interest on loans and debentures

C. Annual fire insurance premiums on Plant and Equipment

D. Sales tax paid in connection with the purchase of office equipment

42. 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.
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A. Arithmetic accuracy

B. Omissions of economic events

C. Errors of commission

D. Understatements of balances

43. Which of the following is true about a trial balance?
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A. It is not a part of accounting cycle

B. It is a kind of financial statement

C. It lists down the balances of accounts

D. It lists down the balances of a balance sheet

44. Generally the term fund is used to mean the difference between?
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A. Current liabilities and non-current liabilities

B. Current assets and current liabilities

C. Current assets and non-current liabilities

D. Profit and loss A/C and Balance sheet

45. Which of the following will affect the agreement of a trial balance?
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A. Partial omission of a transaction

B. Complete omission of a transaction

C. Error of principle

D. Compensating errors

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

B. Quick assets

C. Fixed assets

D. Contingent assets

47. The unsold goods are ______________?
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A. Sale return

B. Inventory

C. Purchases

D. Equity

48. Which of the following statements is true?
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A. A customer to whom goods have been sold on credit cannot avail himself of a cash discount

B. If a Trial Balance tallies, it always means that none of the transactions has been completely omitted

C. A credit balance in the Pass Book indicates excess of deposits over withdrawals

D. A Trial Balance will not tally if a transaction is omitted

49. If the total liabilities of a business decrease by $5000 what will be the effect on total asset?
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A. suming the amount of capital remain same)

50. Which of the following is not a method of charging depreciation?
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A. Discounted present value Method

B. Straight line Method

C. Sum of digits Method

D. Written down value Method

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