accounting Mcqs
101. While finalizing the current years accounts, the company realized that an error was made in the calculation of closing stock of the previous year. In the previous year, closing stock was valued more by 50,000. As a result
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A. Previous years profit is overstated and current years profit is also overstated.

B. Previous years profit is overstated and current years profit is understated.

C. There will be no impact on the profit of either the previous year or the current year.

D. Previous years profit is understated and current years profit is overstated.

102. Which of the following is not a cause of difference in balance as per cash book and balance as per bank pass book___________?
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A. Cheques deposited and cleared

B. Errors in pass book

C. Cheques issued but not presented for payment

D. Errors in cash book

103. The portion of the acquisition cost of the asset yet to be allocated is known as___________?
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A. Accumulated value

B. Written down value

C. Residual Value

D. Salvage value

104. ___________ helps business to classify transactions according to their nature?
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A. Ledger accounts

B. Real accounts

C. Cash accounts

D. General journal

105. Which of the following is the normal balance of a rent expense account?
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A. Credit balance

B. Overdraft

C. Cash balance

D. Debit balance
106. When goods, in which business deals are sold, it is called___________?
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A. Return outwards

B. Sales

C. Return inward

D. Purchases

107. Liabilities are which of the following?
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A. Obligations

B. Future benefits

C. Expenses

D. Resources

108. Goods returned by customer should be debited to which of the following accounts?
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A. Sales account

B. Return inward account

C. Sales income account

D. Expenses account

109. reduction in price is called:
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A. Discount

B. Book price

C. Invoice price

D. Paid price

110. Another name of journal is_____________?
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A. Cash book

B. Record book

C. Specialized journal

D. Day book
111. Which of the following will be debited if a business purchases goods on credit?
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A. Creditor

B. Purchases

C. Debtor

D. Cash

112. Cash received from debtor is recorded in which of the following SPECIALIZED journals?
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A. Cash payments journal

B. Cash receipts

C. Purchase journal

D. Sales journal

113. A chart of accounts generally start with which of the following types of accounts?
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A. liability accounts

B. Cash accounts

C. Assets accounts

D. Revenue accounts

114. The standard format of journal does not include which of the following?
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A. Amount column

B. Date column

C. Description column

D. Assets column
115. Which of the following specialised journals will record goods returned by the BUSINESS ?
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A. Purchase journal

B. Sales return journal

C. Sales journal

D. Purchases return journal
116. In which of the following methods, the cost of the asset is spread over in equal proportion during its useful economic life?
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A. Straight-line method

B. Written down value method

C. Sum-of-the years-digits method

D. Units-of-production method

117. The normal balance of capital account is_____________?
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A. Cash balance

B. Neither debit nor credit balance

C. Credit balance

D. Debit balance

118. The adjustment to be made for income received in advance is:
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A. Add income received in advance to respective income and show it as asset

B. Deduct income received in advance from respective income and show it as an asset in the Balance Sheet

C. Add income received in advance to respective income and show it as a liability

D. Deduct income received in advance from respective income and show it as a liability
119. Depreciation decreases____________?
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A. Capital

B. Cash

C. Bank

D. Liabilities

120. Goods return to supplier are known as:__________?
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A. Sales return

B. Return inwards

C. Purchase return

D. Merchandise return

121. Specialized journals are more adequate for which TYPE OF BUSINESSES?
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A. Small businesses

B. Sole proprietorship

C. Partnership

D. Big businesses
122. Financial statements differ from management account because
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A. They are mainly prepared for external users of financial information

B. The are prepared on basis of actual concept

C. They are more complex and hard to prepare

D. The are the summary of accounting data

123. Expenses of the following nature are treated as a Revenue expenses except__________?
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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

124. Collection of account receivable will
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A. Increase assets and decrease liabilities

B. Increase assets and decrease assets

C. Increase assets and increase capital

D. Increase assets and increase cash

125. Which of the following is true with respect to providing depreciation under diminishing balance method?
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A. The amount of depreciation and the rate of depreciation decrease every year

B. The amount of depreciation keeps increasing every year while the rate of depreciation keeps decreasing

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

126. Which of the following is an one sided error?
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A. Both

B. 500 being expense on travelling expense credited to travelling expenses

C. 500 purchase of old equipment not recorded in the books of A/c at all

D. None

127. _________ is the first phase of accounting cycle?
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A. Preparing journals

B. Making decisions about business

C. Identifying an economic event or transaction

D. Posting entries to ledger accounts

128. The normal balance of liability account is____________?
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A. Credit balance

B. Debit balance

C. Neither debit nor credit balance

D. Cash balance

129. Which of the following statements is /are true?
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A. Entering wrong amount in the subsidiary book affects the agreement of the Trial Balance

B. Undercasting or overcastting of a subsidiary book is an example or error of commission

C. Errors of principle do not affect the agreement of Trial Balance

D. Both B. and C. above
130. Liability are arisen from which of the following events?
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A. Past event

B. Future event

C. Present event

D. None of them

131. SALE of old furniture will be recorded in which of the following specialised journals?
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A. General journal

B. Sales journal

C. Cash receipt journal

D. Purchase journal

132. Which of the following statements best describes the purpose of depreciation?
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A. Allocation of the cost of an asset to the periods in which services are received from the asset

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. Regular reduction of asset value to correspond to changes in market value as the asset ages

133. Which of the following is a liability?
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A. Creditors

B. Cash

C. Equipment

D. Debtors

134. An asset must be _______ by the business to be shown as an asset in its balance sheet
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A. Used

B. Owned

C. Controlled

D. Possessed

135. _________ will be credited if goods are given as charity?
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A. Cash

B. Charity

C. Purchases

D. Sales

136. Which of the following statements is correct about Trial Balance?
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A. The Trial Balance shows only nominal account balances

B. The Trial Balance has no statutory importance from the point of view of law

C. The Trial Balance shows only balances of Assets and Liabilities

D. The Trial Balance is prepared after preparing the Profit and Loss Account

137. Sales return is also known as____________?
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A. Return Payed

B. Return inward

C. Return outward

D. Return received

138. The accounting process of gradually converting the unexpired cost of fixed assets into expenses over a series of accounting periods is_________?
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A. Valuation of an asset at a point of time

B. Physical deterioration of the asset

C. Depreciation

D. Decrease in market value of the asset

139. Which of the following is a revenue expenses?
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A. Share Capital

B. Raw material consumed

C. Long term loan raised from bank

D. Plant purchased

140. The person to whom goods are sold on credit is called___________?
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A. Debtor

B. Buyer

C. Creditor

D. Seller

141. What is the basic accounting equation?
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A. Liabilities+Capital

B. Capital+Liabilities=Assets

C. Assets+ liabilities =Capital

D. Capital+assets=liabilities

142. Discount received is a/an:
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A. Expense

B. Asset

C. Liability

D. Revenue
143. Auditing is what?
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A. maintaining the ledger records

B. Preparation financial statements

C. Examination of financial statements

D. Reporting the financial information

144. Double entry implies that
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A. Recording every transaction in books

B. Recording two aspects of every transaction

C. Recording entries in journal

D. Recording entries in Ledger account

145. Cash brought by the owner to start business is called__________?
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A. Capital

B. Loan

C. None of these

D. Drawing

146. Which of the following specialized journals records goods returned by customers?
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A. Purchases return journal

B. Sales journal

C. Sales return journal

D. Purchase journal

147. _______ the withdrawal of cash and goods by the owner of the busienss for his/her personal use?
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A. Outflow of cash

B. Depreciation

C. Drawings

D. Appreciation

148. Which of the following is the closing balance of a ledger account?
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A. Balance b/d

B. Balance e/d

C. Balance f/c

D. Balance c/d
149. A brief explanation recorded below every entry in general journal is commonly known as__________?
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A. Narration

B. Summary

C. Explanation

D. Other information

150. Which is the most important characteristic that all assets of a business have?
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A. Value of assets

B. Future economic benefits

C. Long life of assets

D. Intangible nature of assets