📚 Accountancy MCQs — 600 Questions (chapter-wise)

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PART 1 — Q1–300

PART 2 — Q301–600

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📘 PART 1 · Ch 1 — Introduction to Accounting

meaning, objectives, branches, users, book-keeping vs accounting · Q1–

1. Which of the following is not a business transaction? A) Bought furniture of 10,000 for business B) Paid for salaries of employees 5,000 C) Paid sons’ fees from his personal bank account 20,000 D) Paid sons’ fees from the business 2,000
2. Which is the last step of accounting as a process of information? A) Recording of data in the books of accounts B) Preparation of summaries in the form of financial statements C) Communication of information D) Analysis and interpretation of information
3. Which qualitative characteristics of accounting information is reflected when accounting information is clearly presented? A) Understandability B) Relevance C) Comparability D) Reliability
4. Use of common unit of measurement and common format of reporting promotes; A) Comparability B) Understandability C) Relevance D) Reliability
5. We can say that the business is in profit, when: A) Assets exceed Expenditure B) Income exceeds Liabilities C) Income exceeds Expenditure

D) Income exceeds Liabilities 6. Which of the following shows summary of a company's financial position at a specific date? A) Profit & Loss Account B) Cash Flow Statement C) Balance Sheet D) Income & Expenditure Account 7. Which of the following is NOT an example of intangible assets? A) Franchise rights B) Goodwill C) Patents D) Land 8. Which of the following is an example of business liability? A) Land B) Building C) Cash D) Creditors 9. In accounts recording is made of: A) Only financial transactions B) Only non-financial transactions C) Financial and non-financial transactions D) Personal transactions of the proprietor 10. 5,000 paid as rent of office premises is an/a … : A) Event B) Transaction C) Both ‘A’ and ‘B’

D) None of these 11. Which of the following transactions is not of financial character: A) Purchase of goods on credit B) Purchase of a building C) Payment of salaries D) Strike by employees 12. Which of the following is not a sub-field of accounting? A) Management Accounting B) Cost Accounting C) Financial Accounting D) Book-keeping 13. Who invented the double entry system? A) Marshall B) Karl Pearson C) J.R. Batliboi D) Lucas Pacioli 14. Accounting is: A) A Science B) An Art C) An Art and Science both D) None of these 15. Book-keeping was firstly introduced in: A) England B) America C) India D) Italy

16. Who is the user of Accounting information? A) Owners B) Management C) Investor D) All of these

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📘 Ch 2 — Basic Accounting Terms

goods, assets, liabilities, capital, drawings, debtors & creditors · Q17–

17. Goods means: A) Commodity to be bought and sold B) Commodity to be used as an asset C) Commodity to be bought but not to be sold D) None of these
18. Which of the following is not a current asset? A) Prepaid Expenses B) Debtors C) Furniture D) Bills Receivable
19. Which of the following is not a tangible asset? A) Motor Car B) Goodwill C) Stock D) Building
20. Trade discount is: A) Allowed at the time of receiving payment B) Allowed at the time of sale of goods C) Both ‘A’ and ‘B’ D) None of the above.
21. Cash discount is:

A) Allowed at the time of sale of goods B) Received at the time of making payment C) Received at the time of purchase of goods D) All the above 22. Current Assets is: A) Land B) Building C) Machinery D) Stock 23. Current Liabilities is A) Creditors B) Debentures C) Long-term Loan D) None of these 24. Non-current Assets is: A) Building B) Stock C) Debtors D) Prepaid Expense 25. Arun is a Book-seller, which item will be goods for his business? A) Purchase of Computer B) Purchase of Fan C) Purchase of Furniture D) Purchase of Stationery 26. Is given to Customers when clear his payment before certain period? A) Cash Discount

B) Special Discount C) Trade Discount D) None of these 27. During the life-time of an entity accounting produce financial statements in accordance with which basic accounting concept: A) Conservation B) Matching C) Accounting period D) None of the above

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📘 Ch 3 — Basic Accounting Concepts

going concern, entity, money measurement, accrual, matching, materiality · Q28–

28. A concept that a business enterprise will not be sold or liquidated in the near future is known as: A) Going concern B) Economic entity C) Monetary unit D) None of the above
29. According to the money measurement concept, the following would be recorded in the books of accounts of the business A) Health of director of the company B) Quality of company’s goods C) Value of plant machinery D) All of the above
30. According to this concept, it is assumed that business will exist for indefinite time period A) Realization concepts B) Going Concern Concept C) Business entity concept D) None of the above
31. According to this concept, business and owner both have separate identity

A) Realization concepts B) Going Concern Concept C) Business entity concept D) Cost Concept 32. According to this concept, expenses are matched with revenue to study the business result A) Matching concepts B) Dual Aspect Concept C) Business entity concept D) Cost Concept 33. According to this convention, accounting practice should remain unchanged from one period to another A) Conservatism B) Materiality C) Full Disclosure D) Consistency 34. According to this concept, “Accounting records only those transactions which can be expressed in terms of money” A) Matching concept B) Dual Aspect Concept C) Business entity concept D) Money Measurement Concept 35. All the following items are classified as fundamental accounting assumptions except A) Consistency B) Business Entity C) Going Concern D) Accrual

36. If nothing is given in the financial statements about the three fundamental accounting assumptions then it is to be treated as it A) Is assumed that it is not followed B) Is assumed to be followed C) Is assumed to be followed to some extent D) None of the above
37. The proprietor of the business is treated as creditor for the capital introduced by him due to_____ concept. A) Money measurement B) Cost C) Entity D) Dual aspect
38. Fixed assets are held by business for _____ A) Converting into cash B) Generating revenue C) Resale D) None of the above
39. Human resources will not appear in the balance sheet according to ______ concept. A) Accrual B) Going concern C) Money measurement concept D) None
40. Small items like, pencils, pens, files, etc. are written off within a year according to _ concept. A) Materiality B) consistency C) Conservatism

D) Realisation 41. The policy of anticipate no profit and provide for all possible losses arise due to the concept of _____ A) Consistency B) Disclosure C) Conservatism D) Matching 42. Matching concept means A) Assets = capital + liabilities B) Transactions recorded at accrual concept C) Anticipate no profit but recognize all losses D) Expenses should be matched with the revenue of the period. 43. If the assets of a business are RS 1,00,000 and Capital is RS 40,000. Value of Liabilities will be A) 100000 B) 20,000 C) 60,000 D) 0 44. The system of recording transactions based on dual aspect concept is called A) Double account system B) Double entry system C) Single entry system D) Modern entry system

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📘 Ch 4 — Accounting Equation

Assets = Liabilities + Capital; effect of transactions · Q45–

45. Assets minus liabilities is A) Profit B) Working Capital

C) Capital D) Long-term liabilities 46. The accounting equation is A) Liabilities = Assets + Capital B) Assets = Liabilities + Capital C) Liabilities = Assets – Capital D) None of these 47. If assets are Rs. 8000 and capital is Rs. 6000, liabilities will be A) 8000 B) 2000 C) 14,000 D) None of these 48. Assets must equal to A) Capital B) Liabilities C) Liabilities + Capital D) Liabilities + Bank Loan 49. The accounting equation represents A) Resources are allocated at cost price B) Owner’s give money for business C) Resources in the business are equal to the source of business D) Resources in the business are not equal to the source of business 50. The expression of the equality of an entity’s assets with the claims against them is referred to as the A) Accounting equation B) Accounting transaction

C) Bookkeeping D) None of these 51.Accounting equation is base of A) Single Entry System B) Dual Aspect Concept C) Money Measurement Concept D) Matching Concept

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📘 Ch 5 — Double Entry System, Journal & Rules of Journalizing

types of accounts, golden rules, journal entries · Q52–

52. The amount brought in by owner of the business should be credited to? A) Capital Account B) Cash Account C) Drawing Account D) Bank Account
53. Transactions are initially recorded in A) Ledger B) Trial Balance C) Journal D) Accounting Equation
54. Of the following, which should be debited at the time of increase? A) Assets and Capital B) Liabilities and expenses C) Assets & expenses D) Capital & Reserves
55. Sales made to Ahmed on credit should be debited to? A) Ahmed’s Account B) Sales Account C) Cash Account

D) Purchases Account 56. Every business transaction affects at least ____ accounts A) One B) Two C) Three D) Infinite 57. When a Liability is reduced or decreased, it is recorded on the: A) Left or credit side of the account B) Right or debit side of the account C) Right or credit side of the account D) Left or debit side of the account 58. When Capital is increased by an amount, it is recorded on the: A) Right or debit side of the account B) Left or credit side of the account C) Left or debit side of the account D) Right or credit side of the account 59. Which of the following shows summary of business’s financial position at a specific date? A) Profit & Loss Account B) Cash Flow Statement C) Balance Sheet D) Income & Expenditure Account 60. Which of the following account will be credited, if business bought goods on credit from Mr. Z A) Purchases account B) Mr. Z account

C) Cash account D) Sales account 61. Which of the following account will be credited when a Computer is sold that has been used in the office? A) Computer Account B) Cash Account C) Sales Account D) Purchase Account 62. Which of the following entry will be recorded when the Bad Debts are recovered? A) Cash (Dr.) & Bad Debts recovered(Cr) B) A/C Receivable(Dr.) & Bad Debts recovered(Cr.) C) Bad debts recovered(Dr.) and Profit & Loss(Cr.) D) Provision for doubtful debts(Dr.) & Cash(Cr.) 63. Commercial Accounting is based on: A) Single entry book keeping B) Double entry book keeping C) Both single and double entry book keeping D) Cash basis of book keeping 64. An Asset that is NOT physical in nature is called A) Intangible Asset B) Liquid Asset C) Current Asset 65. Building A/c is related to A) Personal A/c B) Real A/c C) Nominal A/c

D) None of these 66. Interest A/c is: A) Nominal A/c B) Real A/c C) Personal A/c D) None of these 67. Salary A/c is related to: A) Personal A/c B) Real A/c C) Nominal A/c D) Capital A/c 68. Investment A/c is related to: A) Personal A/c B) Real A/c C) Nominal A/c D) None of these 69. Is given to businessman when clear his payment before certain period? A) Cash Discount B) Special Discount C) Trade Discount D) None of these 70. The rent paid to landlord is credited to A) Landlord’s Account B) Rent Account C) Cash Account. 71. Any written evidence in support of a business transaction is called

A) Journal B) Ledger C) Ledger posting D) Voucher 72. The accounts that records expenses, gains and losses are A) Personal accounts B) Real accounts C) Nominal accounts D) None of the abo0ve

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📘 Ch 6 — Voucher Approach in Accounting

debit & credit notes, payment/receipt/non-cash vouchers · Q73–

73. Credit note is issued by an entity at the time of: - A) Purchase return B) Sales Return C) Both of (A) & (B D) None of the above
74. Debit note is issued by an entity at the time of: - A) Purchase return B) Sales Return C) Both of (A) & (B D) None of the above
75. These vouchers are issued at the time of payment: - A) Debit vouchers B) Credit vouchers C) Supporting vouchers D) Transfer vouchers
76. These vouchers are issued at the time of receipt: - A) Debit vouchers B) Credit vouchers C) Supporting vouchers D) Transfer vouchers
77. These vouchers are issued to record the non-cash transactions - A) Debit vouchers

B) Credit vouchers C) Supporting vouchers D) Transfer vouchers 78.Transferring information from journal to ledger is known as: A) Transferring B) Posting C) Balancing D) Journalizing

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📘 Ch 7 — Ledger Accounts

posting, balancing, debit & credit sides · Q79–

79. Collection or group of all accounts of a business enterprise is known as: A) Ledger B) Balance sheet C) Trial balance D) Journal 80.Which of the following accounts is expected to have a debit balance? A) Asset B) Expense C) Loss D) All of the above 81.The process of finding out the balance of a ledger account is known as: A) Posting B) Investigation C) Calculation D) Balancing
80. The left-hand side of a ledger account is known as: A) Income side B) Credit side C) Debit side

D) Profit side 83. The difference between the total of debit side and the total of credit side of a ledger account is known as: A) Deficit B) Debit balance C) Credit balance D) Balance 84. If the total of debit side exceeds the total of credit side, the ledger account is said to have: A) Debit balance B) Credit balance C) Surplus balance D) Normal balance 85. In accounting, the abbreviation Dr. is used for: A) Debtor B) Debate C) Defaulter D) Debit side of ledger account 86. If an account has a credit balance, it means: A) Both debit and credit sides are equal B) Total of debit side exceeds the total of credit side C) Total of credit side exceeds the total of debit side D) None of the above 87. In accounting, the term credit is usually abbreviated as: A) Dr. B) Ct.

C) Cd D) Cr. 88. Which of following types of accounts normally have a credit balance? A) Assets, liabilities, capital B) Revenues, liabilities, capital C) Revenues, liabilities, Expenses D) Revenues, liabilities, losses 89. If total of debit side is equal to the total of credit side of a ledger account, the account is said to have a: A) Expected balance B) Credit balance C) Nil balance D) Debit balance 90. A non-zero balance of a ledger account represents: A) Increase in account B) Increase or decrease in account C) Decrease in account D) No change in account 91. When a Liability is reduced or decreased, it is recorded on the: A) Right or debit side of the account B) Left or credit side of the account C) Right or credit side of the account D) Left or debit side of the account 92. When Capital is increased by an amount, it is recorded on the: A) Right or debit side of the account B) Left or debit side of the account

C) Right or credit side of the account D) Left or credit side of the account 93. Which of the following account will be credited, if business bought goods on credit from Mr. Z A) Purchases account B) Mr.Z account C) Cash account D) Sales account 94. Which of the following entry will be recorded when the Bad Debts are recovered? A) Cash A/c (Dr.) & Bad Debts recovered A/c (Cr) B) A/C Receivable A/c (Dr.) & Bad Debts recovered A/c (Cr.) C) Bad debts recovered A/c (Dr.) and Profit & Loss A/c (Cr.) D) Provision for doubtful debts A/c (Dr.) & Cash A/c (Cr.) 95. Which of the following account will be credited when a typewriter is sold that has been used in the office? A) Sales Account B) Purchase Account C) Cash Account D) Office Equipment Account 96. A ledger account is prepared from A) Events B) Transactions C) Journal D) None of the above 97. Real Accounts always show A) Debit balances

B) Credit balances C) Nil balances D) Trial balances

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📘 Ch 9 — Cash Book

contra entries, petty cash, imprest system · Q98–

98. When any entry is made on the both sides of cash book is called as? A) General entry B) Double entry C) Compound entry D) Contra entry
99. Which one of the following affects cash book during a period? A) Recording depreciation expense B) Declaration of a cash dividend C) Write-off of an uncollectible account receivable D) Payment of an accounts payable
100. How much kind of Cash book? A) 2 B) 3 C) 4 D) None of them
101. A company issues cheque to pay account payable. The effect of the transaction is to? A) Increase assets and liabilities B) Increase assets and decrease liabilities C) Decrease assets and liabilities D) Increase assets and stockholder’s equity
102. A cheque received and paid into the bank on the same date is recorded in the? A) Bank column of the cash book B) Cash column of the cash book

C) Both the cash and bank column of the cash book D) None of above 103. The transaction will be treated as a contra entry when? A) Cash withdrew from bank for personal use B) Cheque received from customer and deposited C) Cash drew from bank for office use D) None of Above 104. Which one of the following is not correct for cash book? A) It is a dual book B) It is journalized ledger C) It records liabilities D) Both b and c 105. A cheque received on 12th of December dated 25th December is considered as? A) Bank B) Cash C) Liability D) Revenue 106. Which of the following item is not included in the Cash Book? A) Purchases of Rs. 10,000 B) Sales of Rs.5,000 C) Received cash for Salman Rs. 2,000 D) Credit sales of Rs. 22,000 107. Which of the following items is not considered as cash or cash equivalent? A) Cash on hand B) Bank borrowings C) Demand deposits

D) Investments with a maturity of two months from the date of acquisition 108. The Cash of a business would change as a result of? A) A supplier being paid by cheque and deposited B) Raw materials being purchased on credit C) Non-current assets being purchased on credit D) Wages being paid in cash 109. Contra entry is recorded in? A) Double column cash book B) Single column cash book C) Three column cash book D) a and c 110. A book in which cash balance and bank balance are simultaneously maintained is known as? A) Simple cash book B) Single column cash book C) Double column cash book D) None-of these 111. If a business shows a debit balance in its own record of its bank balance, this indicates? A) The business has a bank overdraft B) The business is a debtor in the books of bank C) The business has money in the bank D) The ledger entry must be wrong 112. The unfavourable balance of cash in cash book is? A) An expense B) Liability

C) A gain D) An Asset 113. When a company received cheque from customer. The effect of the transaction is to? A) Increase assets and decrease assets B) Increase assets and liabilities C) Increase assets and stockholder’s equity 114. Cash book involves? A) payment transactions B) Both payment and receipt transactions C) For receipt transactions D) None 115. The transaction will be treated as a contra entry when? A) Cash withdrew from bank for domestic use B) Cheque received from customer and deposited C) Cash withdrew from bank for office use D) 1 and 3 only 116. When a cheque is received from a customer and it is deposited into the bank for collection but ultimately returned dishonoured, the customer account will be? A) Debited B) Credited C) Becomes a liability D) None of these 117. Favourable balance means? A) Credit balance in the cash book B) Credit balance in Bank statement C) Debit balance in cash book

D) both b and c

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📘 Ch 10 — Trial Balance

purpose, suspense account, agreed trial balance · Q118–

118. The basic purpose of preparing a trial balance is: A) to find out profit of the business B) to show financial position of the business C) to test arithmetical accuracy of the ledger D) to calculate net purchases of the business
119. Which of the following is correct about an agreed trial balance. A) both debit and credit aspects of each transaction have been recorded B) the books are arithmetically correct C) the debit and credit columns of trial balance have been correctly totaled D) all of the above
120. Which one of the following represents correct sequence of accounting cycle? A) Journal > Trial balance > Ledger > Transaction analysis B) Transaction analysis > Journal > Ledger > Trial balance C) Purchases > Journal > Ledger > Trial balance D) None of the above
121. A trial balance prepared after taking into account the effect of adjusting entries is known as: A) Financial trial balance B) Adjusted trial balance C) Unadjusted trial balance D) Normal trial balance
122. Two methods of preparing a trial balance are: A) Financial method and total method B) Total method and normal method C) Balance method and financial method

D) Balance method and total method 123. In addition to arithmetical accuracy of ledger, a trial balance provides: A) A summary of total capital invested in the business during the period B) A summary of sales made during the period C) A summary of total cash collected from customers during the period D) A summary of all transactions made since the end of the previous accounting period 124. Which one of the following is the most popular method of preparing a trial balance: A) Balance method B) Total method C) Trial and error method D) Line method 125. Under balance method, which one of the following is used for preparing trial balance at the end of an accounting period? A) Beginning balances of ledger accounts B) Ending balances of ledger accounts C) Total of beginning and ending balances of ledger accounts D) Difference of beginning and ending balances of ledger accounts 126.Under total method, which of the following is used for preparing a trial balance: A) Totals of amount columns of ledger accounts B) Differences of amount columns of ledger accounts C) Opening balances of ledger accounts D) Closing balances of ledger accounts 126. Which of the following errors in the journal entry will not be detected by trial balance. A) Debit part is overstated but credit part is correctly recorded B) Debit part is correctly recorded but credit part is overstated C) Both debit and credit parts are overstated by the same amount

D) Debit part is correctly recorded but credit part is understated 128. Which of the following will be placed in the credit column of the trial balance? A) Purchases B) Rent expense C) Furniture D) Sales 129. Which of the following will be placed in the debit column of the trial balance? A) Capital B) salaries payable C) Accounts payable D) None of the above 130. When closing stock is given in trial balance, then it will affect: A) Trading and Profit & Loss account only B) Balance sheet only C) Owner's equity only D) Trading and Profit & Loss account and Balance sheet 131. A debit to an account may A) increase expense B) decrease an asset. C) increase income. D) increase a liability

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📘 Ch 11 — Financial Statements

adjustments: prepaid, outstanding, accrued · Q132–

132. Prepayment of insurance premium will appear in the Balance Sheet and in the Insurance Account respectively as: A) liability and a debit balance. B) an asset and a debit balance. C) an asset and a credit balance

D) a liability and a credit balance 133. In which of the following systems of recording the financial statements reflect true and fair view of an entity and accounting records are considered to be more accurate? A) Single entry system B) Double entry system C) Cash based system 134. Which report gives a review on the profitability of a business A) Statement of changes in equity B) Cash flow statement C) Balance sheet D) Income statement 135. When assets are subtracted from liabilities it will be equal to A) Capital B) Net income C) Working capital D) Goodwill 136. A financial Statement that summarises revenue and expenses is A) Balance Sheet B) Statement of owner’s equity C) Income Statement D) Cash flow statement 137. Which financial statement presents a summary of the Assets, Liabilities and capital of a business: - A) General Ledger B) Worksheet C) Balance sheet

D) Cash flow statement 138. Interest on loan paid by business is an example of: A) Revenue expense B) Income C) Asset D) Return outward 139. The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the asset, is termed as: A) Appreciation B) Depreciation C) Fluctuation D) None of the given options 140. Which of the following will be debited, if cash is drawn by Proprietor? A) Proprietor’s drawings B) Proprietor’s cash C) Proprietor’s capital D) Out flows 141. Which of the following is TRUE about the treatment of insurance paid in advance RS 12000? A) Current asset B) Current liability C) Short term liability D) Fixed asset

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📘 Ch 12 — Trading Account

gross profit, closing stock, cost of goods sold · Q142–

142. Which accounting concept specifies the practice of crediting closing stock to the trading account? A) Cost B) Going concern

C) Realisation D) Matching 143. Which of the following would NOT be considered as a component of 'cost' of stock? A) Transportation inward costs B) Import duties C) Salaries of selling staff D) Purchase price 144. If sales revenues are 4,00,000; cost of goods sold is 3,10,000 and direct expenses are 60,000, the gross profit is A) 30,000. B) 90,000. C) 3,40,000. D) ` 4,00,000 145. Account which shows Gross Profit or Gross Loss of the business is called: A) Profit and Loss Account B) Balance Sheet C) Trial Balance D) Trading Account 146. On debit side of Trading Account we record: A) Direct Expense B) Indirect Expense C) Both of these D) None of these 147. Carriage Outwards is an example of: A) Direct Expense B) Indirect Expense

C) Indirect Income D) Direct Income 148. The unfavourable balance of Profit and Loss account should be: A) Added in liabilities B) Subtracted from current assets C) Subtracted from capital D) Subtracted from liabilities 149. We can say that the business is in profit, when: A) Assets exceed Expenditure B) Income exceeds Liabilities C) Income exceeds Expenditure D) Income exceeds Liabilities

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📘 Ch 13 — Profit & Loss Account

indirect expenses, net profit, discount received · Q150–

150. What type of expenses are paid out of Gross Profit? A) General Expenses B) Financial Expenses C) Selling Expenses D) All of the given options
151. Which of the following is an example of operating expense? A) Purchasing operating equipment B) Purchasing a vehicle C) Purchasing cleaning services D) buying a computer
152. Repair charge of office old furniture is: A) Revenue Expense B) Capital Expense C) Both Revenue & Capital Expense

D) None of these 153. Capital profit is profit on A) Profit & Loss A/c of Business B) Sale of fixed asset C) Sale of goods D) None of these 154. P&L statement is also known as A) Statement of Operations B) Statement of Income C) Statement of Earnings D) All of these 155. Which are indirect Expense of the followings: A) Salaries B) Insurance C) Rent D) All of these 156. Discount received is an example of: A) Direct Expense B) Indirect Expense C) Indirect Income D) Direct Income 157. Which of the following shows summary of a company's financial position at a specific date? A) Profit & Loss Account B) Cash Flow Statement C) Balance Sheet

D) Trial Balance 158. Which of the following items of balance sheet are useful in evaluating a company’s liquidity? A) Current assets and other assets B) Current liabilities and current assets C) Current liabilities and plant and equipment D) Non-current liabilities and other assets 159. In which of the following auditor’s remuneration payable is shown? A) In balance sheet under the head of current liabilities B) In income statement under the administrative expense C) In the statement of changes in equity D) In Cash flow statement under investing activities

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📘 Ch 14 — Balance Sheet

elements, asset & liability classification, normal balances · Q160–

160. Another name for the balance sheet is A) Statement of Operations B) Statement of Financial Position
161. The balance sheet heading will specify a A) Period of Time B) Point in Time
162. Which of the following is a category or element of the balance sheet? A) Expenses B) Gains C) Liabilities D) Losses
163. Which of the following is an asset account? A) Accounts Payable B) Prepaid Insurance

C) Unearned Revenue 164. What is the normal balance for an asset account? A) Debit B) Credit 165. What is the normal balance for liability accounts? A) Debit B) Credit 166. Which of the following would not be a current asset? A) Accounts Receivable B) Land C) Prepaid Insurance D) Stock 167. Which of the following is NOT an example of intangible assets? A) Franchise rights B) Goodwill C) Patents D) Land 168. Which of the following is an example of business liability? A) Land B) Building C) Cash D) Creditors 169. Which of the following is not a current asset? A) Prepaid Expenses B) Debtors C) Furniture

D) Bills Receivable 170. Which of the following is not a tangible asset? A) Motor Car B) Goodwill C) Stock D) Building 171. Current Assets is: A) Land B) Building C) Machinery D) Stock 172. Current Liabilities is: A) Creditors B) Debentures C) Long-term Loan D) None of these 173. The term current asset doesn’t cover: A) Car B) Debtors C) Stock D) Prepaid Expense

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📘 Ch 15 — Bank Reconciliation Statement ⭐

passbook, overdraft, timing differences · Q174–

174. The main purpose of preparing a bank reconciliation statement is? A) To know the bank balance B) To know the balance of bank statement C) To correct the cash book D) To identify causes of difference between cash book and bank statement

175. Bank reconciliation statement is? A) Part of bank statement B) Part of the cash book C) A separate statement D) a sub-division of journal

176. Uncollected cheques are also known as? A) Outstanding checks B) Uncleared checks C) Outstation checks D) Both b & c

177. Favourable balance means? A) Credit balance in the cash book B) Credit balance in Bank statement C) Debit balance in cash book D) both b and c

178. Unfavourable balance means? A) Credit balance in the cash book B) Credit balance in Bank statement C) Debit balance in cash book D) Debit balance in petty cash book

179. When cheque is not paid by the bank, it is called? A) Honoured B) Dishonoured C) Endorsed D) a & b

180. A bank reconciliation statement is prepared by?

A) Banker B) Accountant of the business C) Auditors D) Registrar 180. Bank reconciliation is not a? A) Reconcile records B) Memorandum statement C) Ledger account D) Procedure to provide cash book adjustments 181. The balance on the debit side of the bank column of cash book indicates? A) The total amount has drawn from the bank B) Cash at bank C) The total amount overdraft in the bank D) None of above 182. Bank statement also called? A) Passbook B) Cash book C) Credit book D) Debit book 183. When the balance as per Cash Book is the starting point, direct deposits by customers are: A) Added B) Subtracted C) Not required to be adjusted. 184. The cheque which is deposited into bank but not cleared at the end of a particular year is called?

A) Uncredited cheque B) Unpresented cheque C) Omitted cheque D) Dishonoured cheque 185. Credit balance as per passbook is? A) Unfavourable balance B) Favourable balance C) Both a & b D) None 186. When cash is deposited into bank then the following account would be debited in the business’s accounts? A) Cash account B) Overdraft account C) Bank account D) None 187. Which of the following item must be recorded in the adjusted Cash Book in order to bring it in line with the entries in the Bank Statement? A) Bank charges B) An error on the Bank Statement C) An uncredited deposit D) An unpresented cheque 188. Which of the following would not affect bank reconciliation? A) Dishonoured cheque B) Discount received C) Bank interest D) Check not presented

189. If any amount is directly deposited into the bank then? A) Cash book will show less balance & bank book will show more B) Cash book will show more balance & bank book will show less C) Cash book will show double balance D) Bank book will show double balance
190. Passbook is a copy of: A) Copy of customer Account B) Bank column of cash book C) Cash column of cash book D) Copy of receipts and payments
191. Unfavourable bank balance means: A) Credit balance in passbook B) Credit balance in cash book C) Debit balance in cash book D) None of these
192. A bank reconciliation statement is mainly prepared for: A) Reconcile the cash balance of the cash book. B) Reconcile the difference between the bank balance shown by the cash book and bank passbook C) Both (a) and (b) D) None of these
193. A debit balance in the depositor’s Cash Book will be shown as: A) A debit balance in the Bank Statement. B) A credit balance in the Bank Statement. C) An overdrawn balance in the Bank
194. When balance as per Passbook is the starting point, interest allowed by bank is

A) Added B) Subtracted C) Not required to be adjusted. 195. A Bank Reconciliation Statement is prepared with the help of: A) Bank statement and bank column of the Cash Book. B) Bank statement and cash column of the Cash Book C) Bank column of the Cash Book and cash column of the Cash Book. 196. The cash book showed an overdraft of Rs 1,50,000, but the passbook made up to the same date showed that cheques of Rs 10,000, Rs 5,000 and Rs 12,500 respectively had not been presented for payments; and the cheque of Rs 4,000 paid into account had not been cleared. The balance as per the passbook will be: A) Rs 1,10,000 B) Rs 2,17,500 C) Rs 1,26,500 197. When drawing up a Bank Reconciliation Statement, if you start with a debit balance as per the Bank Statement, the unpresented cheques should be: A) Added B) Deducted C) Not required to be adjusted

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📘 Ch 16 — Partnership Accounts ⭐

Partnership Act, interest on drawings, Garner v. Murray, admission · Q198–

198. To start a partnership business, what should be the minimum number of partners? A) 2 B) 10 C) 4 D) 20
199. What type of agreement is used to form a partnership business? A) Written agreement B) Oral agreement

C) Written or oral agreement D) None of them 200. In partnership, partners liabilities are A) Unlimited B) Limited to the capital of the business C) Limited D) Both A and C 201. What is the partnership written agreement known as: A) Partnership contract B) Agreement C) Partnership deed D) Partnership Act 202. No partnership agreement, what will be the percentage of profit-sharing ratio between them? A) Unequal B) Equal C) It will depend on the experience of a partner D) It will depend on a partner’s capital 203. The correct double entry to record interest on drawings is: A) Debit capital account Credit profit and loss appropriation account B) Debit profit and loss appropriation account Credit current account 204. Which of the following would not be found in a profit & loss appropriation account? A) Interest on capital B) Salaries C) Interest on loan by partner to partnership D) Interest on drawings

205. A debit balance on a partner’s current account must indicate that: A) Drawings are higher than the profit share for that year B) They have withdrawn more than they have earned in the partnership C) They have a credit balance on their capital account D) They are insolvent
206. Current accounts of the partners should be opened when the capitals are: A) Fixed B) Fluctuating C) Floating D) Normal
207. What is interest on drawings? A) Credited to partner’s current a/c B) Not shown in current account C) Debited to partner’s current a/c D) None of the above
208. The main account for dealing with partnership dissolution would be: A) Revaluation B) Realisation C) Appropriation D) Dissolution
209. The rule in Garner v. Murray deals with: A) Writing goodwill off against reserves B) How the debts of insolvent partners are to be cleared C) How profits are to be divided if no prior partner hip agreement exists D) Rules for align the admittance of new partners
210. Which is not a feature of a partnership business?

A) Ease of formation B) Limited liability C) Limited life D) Mutual agency 211. In case of partnership the act of any partner is: A) Binding on all partners B) Binding on that partner only C) Binding on all partners except that particular partner D) None of the above 212. Which of the following statement is true? A) a minor cannot be admitted as a partner B) a minor can be admitted as a partner, only into the benefits of the partnership C) a minor can be admitted as a partner, but his rights and liabilities are same of adult partner D) none of the above 213. The relation of partner with the firm is that of: A) An Owner B) An Agent C) An Owner and an Agent D) Manager 214. In the absence of Partnership Deed, the interest is allowed on partner’s capital: A) @ 5% p.a. B) @ 6% p.a. C) @ 12% p.a. D) No interest is allowed 215. When is the Partnership Act enforced? A) when there is no partnership deed

B) where there is a partnership deed but there are differences of opinion between the partners C) when capital contribution by the partners varies D) when the partner’s salary and interest on capital are not incorporated in the partnership deed 216. A and B are partners in partnership firm without any agreement. A has given a loan of Rs.50,000 to the firm. At the end of year loss was incurred in the business. Following interest may be paid to A by the firm : A) @5% Per Annum B) @ 6% Per Annum C) @ 6% Per Month D) As there is a loss in the business, interest can’t be paid 217. A and B are partners in a partnership firm without any agreement. A has withdrawn Rs.50,000 out of his Capital as drawings. Interest on drawings may be charged from A by the firm: A) @ 5% Per Annum B) @ 6% Per Annum C) @ 6% Per Month D) No interest can be charged 218. A and B are partners in a partnership firm without any agreement. A devotes more time for the firm as compared to B. A will get the following commission in addition to profit in the firm’s profit: A) 6% of profit B) 4% of profit C) 5% of profit D) None of the above 219. In the absence of partnership deed, the following rule will apply: A) No interest on capital B) Profit sharing in capital ratio

C) Profit based salary to working partner D) 9% p.a. interest on drawings 220. In the absence of agreement, partners are not entitled to: A) Salary B) Commission C) Equal share in profit D) Both (a) and (b) 221. Interest on capital will be paid to the partners if provided for in the partnership deed but only out of: A) Profits B) Reserves C) Accumulated Profits D) Goodwill 222. Which one of the following items cannot be recorded in the profit and loss appropriation account? A) Interest on capital B) Interest on drawings C) Rent paid to partner D) Partner’s salary 223. In single entry system of accounting A) Dual aspects of a transaction are recorded B) Single aspect of a transaction is recorded C) Important transactions are recorded D) All of them 224. Statement of financial position produced from incomplete accounting record is commonly known as A) Balance sheet

B) Cash flow statement C) Statement of affairs D) Statement of financial operations 225. Which of the following businesses usually maintain incomplete accounting record of the business activities? A) Large businesses B) Companies C) Big partnership firms D) Small businesses 226. In which of the following systems of recording the financial statements reflect true and fair view of an entity and accounting records are considered to be more accurate? A) Single entry system B) Double entry system C) Cash based system D) None of the above

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📘 Ch 17 — Cash-Based Single Entry System

closing capital formula, statement of affairs, profit calculation · Q227–

227. Identify the correct formula used to ascertain the closing balance of capital A) Opening capital + Net income – Drawing – Assets = Closing capital B) Closing capital = Opening Capital + Net loss-Drawings C) Closing Capital = Opening capital + Assets + Incomes – Expenses D) Closing capital = Opening capital + Net income – Drawings

228. Which of the following formulas is used to calculate the net income for an accounting period? A) Net income = opening capital + Drawings + Ending capital B) Net income = -Opening capital + Drawings – Ending capital C) Net income = Ending capital + Drawings-Opening capital D) Net income = Opening capital – Total assets

229. Which one of the following accounts is supposed to be used to get the figure of credit purchases made during the current accounting period? A) Debtor account B) Revenue account C) Creditors account D) Expenses account

230. To obtain the amount of credit sales made during an accounting period, which account is generally used in single entry and incomplete records? A) A/c payable account B) Total revenue account C) Debtors account D) Stock account

231. Closing balance of cash can be obtained by drawing up a A) Balance sheet B) Statement of affairs C) Income statement D) Cash account

232. Net profit + operating expenses = ? A) Cost of goods sold B) Amount of sales C) Net sales D) Gross profit

233. Opening capital is ascertained by preparing: A) Total debtors account B) Total creditors account C) Cash account

D) Opening statement of affairs 234. If opening capital is 60,000, drawings 5,000, capital introduced during the period 10,000, closing capital 90,000. The value of profit earned during the period will be: A) 20,000 B) 25,000 C) 30,000 D) 40,000 235. In Single entry mostly: A) Personal aspects of transaction are recorded B) Nominal aspects of transaction are recorded C) Real aspects of transaction are recorded D) All of the above 236. In double entry system: A) Only one aspect of a transaction is recorded B) Both aspect of a transaction is recorded C) No aspect of a transaction is recorded D) None of these 237. Statements of assets & liabilities prepared under single entry system is called: A) Balance sheet B) Profit & loss statement C) Statement of affairs D) Income Statement 238. Statements of assets & liabilities prepared under double entry system is called: A) Balance sheet B) Profit & loss statement C) Statement of affairs

D) Income Statement 239. In single entry system profit is calculated by: A) Opening capital + Drawing – Fresh Capital – Closing Capital B) Closing capital + Drawing + Fresh Capital – Opening Capital C) Closing capital – Drawing + Fresh Capital – Opening Capital D) Closing capital + Drawing – Fresh Capital – Opening Capital 240. If opening capital is Rs.10,000 & closing capital is Rs.15,000 then profit or loss: A) Loss of Rs.5,000 B) Profit of Rs.2,500 C) Profit of Rs.5,000 D) None of these 241. In single entry system, it is not possible to prepare:

242. Investment can be defined as A) Person’s dedication to purchasing a house or flat B) Use of capital on assets to receive returns C) Usage of money on a production process of products and services D) Net additions made to the nation’s capital stocks

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📘 Ch 18 — Financial Management

objectives, wealth maximisation, capital budget · Q243–

243. The concept of Financial management is. A) Profit maximization B) All features of obtaining and using financial resources for company operations in a optimum manner C) Organization of funds

D) Effective Management of every company 244. What is the primary goal of financial management? A) To minimize the risk B) To maximize the return C) To maximize the owner’s wealth D) To raise profit 245. The capital budget is associated with. A) Long terms and short terms assets B) Fixed assets C) Long terms assets D) Short term assets 246. Which one is not an important objective of financial Management? A) Profit Maximisation B) Wealth Maximisation C) Value Maximisation D) Maximisation of Social benefits

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📘 Ch 19 — Financial Audit

audit opinion, internal auditor, independence · Q247–

247. Financial audit is primarily concerned with expression of audit opinion on a set of financial statements. A) FALSE B) TRUE
248. The Primary objective of a financial audit is to A) Examine the accounts and records B) Scrutinize financial statements C) Point out overstatements and understatements of account balances D) Express an opinion on the financial statements
249. A financial audit is intended to give

A) Qualified Assurance B) Absolute Assurance C) Positive Assurance D) Reasonable assurance 250. Auditing begins where ends. A) Selling. B) Inventory valuation. C) Accounting. D) Purchases. 251. When the auditor is an employee of the organization being audited, the audit is classified as _____ A) Internal B) External C) Compliance D) Both A & B 252. Internal auditor is appointed by_ A) Management B) Shareholders C) Government D) Statutory body 253. Audit means _______. A) Recording business transactions B) Preparing final accounts C) Examination of books, accounts or vouchers D) Decision making 254. Incomplete record mechanism of book keeping is :

A) Scientific B) Unscientific C) Unsystematic D) both (b) and (c) 255. Financial Statements are part of A) Accounting B) Bookkeeping C) All of the above D) None of the above

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📘 Mixed Revision — Ch 3, 5, 16, 20 & 22

concepts, standards, dissolution, social accounting/CSR, PFMS (Q288–291) · Q256–

256. Historical cost concept requires the valuation of an asset at A) Original Cost B) Replacement Value C) Market Value D) Realisable Value
257. Accounting standards in India are issued by A) Central Govt B) RBI C) State Govt D) ICAI
258. Loss leads to reduction in A) Liability B) Goods C) Cash D) Capital
259. Furniture purchased for Rs 10000. In this transaction, accounts affected are A) Furniture

B) Cash C) Both D) None 260. The proprietor is treated as creditor/internal liability for the Capital introduced by him due to………… Concept A) Money Measurement B) Cost C) Entity D) Dual Aspect 261. According to Conservatism concept, the stock in trade is valued at A) Market Price B) Cost Price C) Cost or Net Realisable Value, whichever is Higher D) Cost or Net Realisable Value, whichever is Lower 262. Discount received from Creditor is A) Expense B) Income C) Loss D) Asset 263. The ………… Principle requires that the same accounting policies should be used from year to year A) Accrual B) Prudence C) Conservatism D) Consistency 264. Which book is called Principal Book

A) Journal B) Ledger C) Balance Sheet D) Day Book 265. Personal accounts are related to A) Assets & Liabilities B) Expenses & Losses C) Customers & Creditors D) Incomes & Revenues 266. Put the odd one out A) Goodwill B) Cash C) Creditor D) Debtor 267. Preliminary expenses are A) Fictitious Assets B) Expenses C) Losses D) Current Liability 268. Sales are also known as A) Profit B) Income C) Revenue D) Gain 269. Which one of the following is not an external user of accounting information A) Creditor

B) Manager C) Supplier D) Debtor 270. Which of the following is not a Nominal Account A) Purchases A/C B) Sales A/C C) Cash D) Salaries A/C 271. When an Asset increases, its account is A) Debited B) Credited C) Reduced D) Increased 272. The rule of “Debit all Expenses & Losses” relates to A) Personal Accounts B) Real Accounts C) Nominal Accounts D) All of the above 273. Which of the following is not a Nominal Account A) Outstanding salaries A/C B) Interest paid C) Interest Received D) Salaries A/C 274. For every debit, there will be an equal credit according to A) Matching Concept B) Cost Concept

C) Accrual Concept D) Dual Aspect Concept 275. When Liability increases, its account is A) Debited B) Credited C) not changed D) Closed 276. To whom goods are sold on credit A) Creditor B) Debtor C) Supplier D) None of these 277. In a Partnership, a Minor A) Cannot be a partner B) Can be a partner, C) can be partner only for the benefits D) None of the above 278. Accounting records transactions in terms of A) Commodity units B) Monetary units C) Production units D) None of the above 279. Goodwill is recorded in the books when A) Super profit is earned by the enterprise B) Money or Money’s worth is paid for acquiring goodwill C) Mgt. of the enterprise decides to record goodwill

D) Any of the above 280. A purchase book records A) All types of purchases B) Only Credit purchase of goods C) All types of credit purchase D) Both credit and cash purchase of goods 281. The imprest system in used in relation to A) Purchase Book B) Sales Book C) Cash Book D) Petty Cash Book 282. Credit Balance of a passbook is a A) Plus balance B) Minus balance C) Either Plus or Minus D) Neither Plus nor Minus 283. Which of the following shows the chronological record of transactions. A) Journal B) Ledger C) Trial Balance D) None of the above 284. Assets very easily convertible into cash are A) Current Assets B) Fixed Assets C) Liquid Assets D) Floating Assets

285. Periodic writing off of Intangible assets is called A) Depreciation B) Allocation C) Amortisation D) None of the above
286. On the dissolution of a firm if partner has a debit balance in his capital then A) He shall not share in the profit/loss on dissolution B) He need not bring cash C) He is required to bring in enough cash to clear off his debit balance D) None of the above
287. On dissolution all assets are transferred to realization account at A) Book value B) Market value C) Cost or Market value, whichever is less D) Replacement value
288. PFMS is managed by A) Central govt B) Office of CGA C) RBI D) State govt
289. PFMS/CPSMS was started in A) 2007-08 B) 2008-09 C) 2009-10 D) 2014-15
290. Which of the following states were not part of initial PFMS implementation states

A) Madhya Pradesh B) Punjab C) West Bengal D) Mizoram 291. In which year govt scrapped the distinction between Plan and non-plan expenditure A) 2013 B) 2019 C) 2014 D) 2017 292. CSR is in which section of companies Act,2013 A) 133 B) 135 C) 137 D) 134 293. India is at which number in implementation of CSR A) 1st B) 2nd C) 3rd D) 4 th 294. All of these are types of Assets A) Fixed Assets B) Floating Assets C) Fictitious Assets D) Tangible & Intangible Assets 295. Partner’s Capitals are: A) Fixed

B) Floating C) Both of the above D) None of the above 296. Accounting cycle includes: A) Recording B) Classifying C) Summarizing D) All of the above 297. Qualitative characteristics of accounting information are A) Reliability B) Relevance C) Understandability D) All of the above 298. Livestock includes A) Plant B) Machinery C) Animals D) Life insurance Policy 299. External users of accounting information are: A) Researchers B) Government C) Tax authorities D) All of the above 300. Capital profit is profit on A) Profit & Loss A/c of Business B) Sale of fixed asset

C) Sale of goods D) None of these

MULTIPLE CHOICE QUESTIONS

MCQ’S OF ACCOUNTANCY

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📘 PART 2 · Ch 1 — Introduction to Accounting

objectives, users, branches — Q303 = stewardship ⭐ · Q301–

301. Which one of the following is not a main objective of accounting? a. Systematic recording of transactions b. Ascertainment of the profitability of the business c. Ascertainment of the financial position of the business d. Solving tax disputes with tax authorities
302. Who is considered to be the internal user of the financial information? a. Creditor b. Employee c. Customer d. Government
303. The root cause of financial accounting system is a. Social accounting b. Stewardship accounting c. Management accounting d. Responsibility accounting
304. Which one of the following is not a branch of accounting? a. Financial accounting b. Management accounting c. Human resources accounting d. None of the above.
305. Financial position of a business is ascertained on the basis of a. Journal b. Trial balance c. Balance Sheet d. Ledger
306. GAAPs are: a. Generally Accepted Accounting Policies b. Generally Accepted Accounting Principles c. Generally Accepted Accounting Provisions d. None of these
307. The rule of stock valuation ‘cost price or realisable value’ whichever is lower is based on the accounting principle of:

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a. Materiality b. Money measurement c. Conservatism d. Accrual 308. Which of the following does not follow dual aspect concept? a. Increase in one asset and decrease in other asset b. Increase in both asset and liability c. Decrease in one asset and decrease in other asset d. Increase in one asset and increase in capital

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📘 Ch 4 — Accounting Equation

equation signifies, assets − external liabilities · Q309–

309. Accounting equation signifies a. Capital of a business is equal to assets b. Liabilities of a business are equal to assets c. Capital of a business is equal to liabilities d. Assets of a business are equal to the total of capital and liabilities
310. Cash withdrawn by the proprietor from the business for his personal use’ causes a. Decrease in assets and decrease in owner’s capital b. Increase in one asset and decrease in another asset c. Increase in one asset and increase in liabilities d. Increase in asset and decrease in capital
311. A firm has assets of 1,00,000 and the external liabilities of 60,000. Its capital would be a. 1,60,000 b. 60,000 c. 1,00,000 d. 40,000
312. The incorrect accounting equation is a. Assets = Liabilities + Capital b. Assets = Capital + Liabilities c. Liabilities = Assets + Capital d. Capital = Assets – Liabilities
313. Accounting equation is formed based on the accounting principle of a. Dual aspect b. Consistency c. Going concern d. Accrual
314. Real account deals with

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a. Individual persons b. Expenses and losses c. Assets d. Incomes and gains 315. Which one of the following is representative personal account? a. Building A/c b. Outstanding salary A/c c. Mahesh A/c d. Balan & Co 316. Prepaid rent is a a. Nominal A/c b. Personal A/c c. Real A/c d. Representative personal A/c

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📘 Ch 5 & Ch 10 — Entries and Trial Balance

drawings entry, account types, trial balance · Q317–

317. Withdrawal of cash from business by the proprietor should be credited to a. Drawings A/c b. Cash A/c c. Capital A/c d. Purchases A/c
318. In double entry system of book keeping, every business transaction affects a. Minimum of two accounts b. Same account on two different dates c. Two sides of the same account d. Minimum three accounts
319. Main objective of preparing ledger account is to a. Ascertain the financial position b. Ascertain the profit or loss c. Ascertain the profit or loss and the financial position d. Know the balance of each ledger account
320. The amount brought into the business by the proprietor should be credited to a. Cash account b. Drawings account c. Capital account d. Suspense account 321. Trial balance is a a) Statement b) Account c) Ledger d) Journal — Ans: A

322. After the preparation of ledger, the next step is the preparation of a) Trading account b) Trial balance c) Journal d) Profit and loss account — Ans: B

323. The trial balance contains the balances of a) Only personal accounts b) Only real accounts c) Only nominal accounts d) All accounts — Ans: D

324. Which of the following is/are the objective(s) of preparing a trial balance? a) Serving as the summary of all the ledger accounts b) Helping in the preparation of final accounts c) Examining arithmetical accuracy of accounts d) All of the above — Ans: D

325. While preparing the trial balance, the accountant finds the total of the credit column is short by ₹200. This difference will be a) Debited to suspense account b) Credited to suspense account c) Adjusted to any debit balance d) Adjusted to any credit balance — Ans: B

326. A list which contains balances of accounts to know whether the debit and credit balances are matched is a) Journal b) Day book c) Trial balance d) Balance sheet — Ans: C

327. The account which has a debit balance and is shown in the debit column of the trial balance is a) Sundry creditors account b) Bills payable account c) Drawings account d) Capital account — Ans: C

328. The difference of the totals of both debit and credit sides of the trial balance is transferred to: a) Trading account b) Difference account c) Suspense account d) Miscellaneous account — Ans: C

329. Trial balance is prepared: a. At the end of the year b. On a particular date c. For a year d. None of the above

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📘 Ch 8 — Subsidiary Books

purchases/sales books, returns, journal proper · Q330–

330. Purchases book is used to record a. all purchases of goods b. all credit purchases of assets c. all credit purchases of goods d. all purchases of assets
331. A periodic total of the purchases book is posted to the a. debit side of the purchases account b. debit side of the sales account c. credit side of the purchases account d. credit side of the sales account
332. Sales book is used to record a. all sales of goods b. all credit sales of assets c. all credit sales of goods d. all sales of assets and goods
333. The total of the sales book is posted periodically to the credit of a. Sales account b. Cash account c. Purchases account d. Journal proper
334. Purchase returns book is used to record a. returns of goods to the supplier for which cash is not received immediately b. returns of assets to the supplier for which cash is not received immediately c. returns of assets to the supplier for which cash is received immediately d. None of the above
335. Sales return book is used to record a. Returns of goods by the customer for which cash is paid immediately b. Returns of goods by the customer for which cash is not paid immediately

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c. Returns of assets by the customer for which cash is not paid immediately d. Returns of assets by the customer for which cash is paid immediately 336. Purchases of fixed assets on credit basis is recorded in a. Purchases book b. Sales book c. Purchases returns book d. Journal proper 337. The source document or voucher used for recording entries in sales book is a. Debit note b. Credit note c. Invoice d. Cash receipt 338. Which of the following statements is not true? a. Cash discount is recorded in the books of accounts b. Assets purchased on credit are recorded in journal proper c. Trade discount is recorded in the books of accounts d. 3 grace days are added while determining the due date of the bill 339. Closing entries are recorded in a. Cash book b. Ledger c. Journal proper d. Purchases book 340. Cash book is a a. Subsidiary book b. Principal book c. Journal proper d. Both subsidiary book and principal book 341. The cash book records a. All cash receipts b. All cash payments c. Both (a) and(b) d. All credit transactions 342. When a firm maintains a simple cash book, it need not maintain a. Sales account in the ledger b. Purchases account in the ledger c. Capital account in the ledger d. Cash account in the ledger

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343. A cash book with discount, cash and bank column is called a. Simple cash book b. Double column cash book c. Three column cash book d. Petty cash book
344. In Triple column cash book, the balance of bank overdraft brought forward will appear in a. Cash column debit side b. Cash column credit side c. Bank column debit side d. Bank column credit side

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📘 Ch 9 — Cash Book

contra entries, petty cash · Q345–

345. Which of the following is recorded as contra entry? a. Withdrew cash from bank for personal use b. Withdrew cash from bank for office use c. Direct payment by the customer in the bank account of the business d. When bank charges interest
346. If the debit and credit aspects of a transaction are recorded in the cash book, it is a. Contra entry b. Compound entry c. Single entry d. Simple entry
347. The balance in the petty cash book is a. An expense b. A profit c. An asset d. A liability
348. Petty cash may be used to pay a. The expenses relating to postage and conveyance b. Salary to the Manager c. Purchase of furniture and fixtures d. Purchase of raw materials
349. Small payments are recorded in a book called a. Cash book b. Purchase book c. Bills payable book d. Petty cash book

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📘 Ch 15 — Bank Reconciliation Statement ⭐

who prepares it, timing differences · Q350–

350. A bank reconciliation statement is prepared by a) Bank b) Business c) Debtor to the business d) Creditor to the business — Ans: B

351. A bank reconciliation statement is prepared with the help of a) Bank statement b) Cash book c) Bank statement and bank column of the cash book d) Petty cash book — Ans: C

352. A debit balance in the bank column of the cash book means a) Credit balance as per bank statement b) Debit balance as per bank statement c) Overdraft as per cash book d) None of the above — Ans: A

353. A bank reconciliation statement is prepared to know the causes for the difference between: a) Cash column of cash book and bank column of cash book b) Cash column of cash book and bank statement c) Bank column of the cash book and the bank statement d) Petty cash book and the cash book — Ans: C

354. When money is withdrawn from the bank, the bank a) Credits customer's account b) Debits customer's account c) Debits and credits customer's account d) None of these — Ans: B

355. Balance as per cash book is ₹2,000. A bank charge of ₹50 debited by the bank is not yet shown in the cash book. What is the bank statement balance now? a) ₹1,950 credit balance b) ₹1,950 debit balance c) ₹2,050 debit balance d) ₹2,050 credit balance — Ans: A

356. Balance as per bank statement is ₹1,000. Cheque deposited but not yet credited by the bank is ₹2,000. What is the balance as per the bank column of the cash book? a) ₹3,000 overdraft b) ₹3,000 favourable c) ₹1,000 overdraft d) ₹1,000 favourable — Ans: B

357. Which one of the following is not a timing difference? a. Cheque deposited but not yet credited b. Cheque issued but not yet presented for payment c. Amount directly paid into the bank d. Wrong debit in the cash book
358. Which of the following errors will not affect the trial balance? a. Wrong balancing of an account b. Posting an amount in the wrong account but on the correct side c. Wrong totalling of an account d. Carried forward wrong amount in a ledger account
359. Under straight line method, the amount of depreciation is a. Increasing every year b. Decreasing every year c. Constant for all the years d. Fluctuating every year
360. Under the written down value method of depreciation, the amount of depreciation is a. Uniform in all the years b. Decreasing every year c. Increasing every year d. None of the above
361. Depreciation provided on machinery is debited to a. Depreciation account b. Machinery account c. Trading account d. Provision for depreciation account
362. Cash received from sale of fixed asset is credited to a. Profit and loss account b. Fixed asset account c. Depreciation account d. Bank account

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📘 Ch 2 — Depreciation & Basic Terms

depletion, obsolescence, capital vs revenue expenditure · Q363–

363. Depreciation is provided on a) Fixed assets b) Current assets c) Outstanding charges d) All assets — Ans: A

364. Depreciation is caused by a) Lapse of time b) Usage c) Obsolescence d) a, b and c — Ans: D

365. Depreciation is the process of a) Allocation of cost of the asset over its useful life b) Valuation of assets c) Maintenance of an asset in a state of efficiency d) Adding value to the asset — Ans: A

366. For which asset is the depletion method adopted for writing off cost? a) Plant and machinery b) Mines and quarries c) Buildings d) Trademark — Ans: B

367. 🚩 A depreciable asset may suffer obsolescence due to ___ a) Passage of time b) Wear and tear c) Technological changes d) None of the above — Key says: D

🚩 The key looks wrong. Obsolescence is precisely caused by technological change → the defensible answer is C. Go with C in the exam.

368. Which method is efficient if repairs and maintenance cost increases as the asset grows older? a) Straight line method b) Reducing balance method c) Sinking fund method d) Annuity method — Ans: B

369. Depreciation is to be calculated from the date when a) Asset is put to use b) Purchase order is made c) Asset is received at premises d) Invoice is received — Ans: A

370. Residual value of an asset means the amount it can fetch on sale at the ___ of its useful life. a) Beginning b) End c) Middle d) None — Ans: B

371. Amount spent on increasing the seating capacity in a cinema hall is a. Capital expenditure b. Revenue expenditure c. Deferred revenue expenditure d. None of the above.
372. Expenditure incurred ` 20,000 for trial run of a newly installed machinery will be a. Preliminary expense b. Revenue expenditure c. Capital expenditure d. Deferred revenue expenditure
373. Interest on bank deposits is a. Capital receipt b. Revenue receipt c. Capital expenditures d. Revenue expenditures
374. Revenue expenditure is intended to benefit a. Past period b. Future period c. Current period d. Any period
375. Closing stock is an item of. a. Fixed asset b. Current asset c. Fictitious asset d. Intangible asset
376. Balance sheet is a. An account b. A statement c. Neither a statement nor an account d. None of the above
377. Net profit of the business increases the a. Drawings b. Receivables c. Debts

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d. Capital 378. Carriage inwards will be shown a. In the trading account b. In the profit and loss account c. On the liabilities side d. On the assets side 379. Bank overdraft should be shown a. In the trading account b. Profit and loss account c. On the liabilities side d. On the assets side

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📘 Ch 12 & Ch 14 — Trading Account and Balance Sheet

financial position, gross profit, bank overdraft · Q380–

380. Balance sheet shows the _________ of the business. a. Profitability b. Financial position c. Sales d. Purchases
381. Drawings appearing in the trial balance is a. Added to the purchases b. Subtracted from the purchases c. Added to the capital d. Subtracted from the capital
382. Salaries appearing in the trial balance is shown on the a. Debit side of trading account b. Debit side of profit and loss account c. Liabilities side of the balance sheet d. Assets side of the balance sheet
383. Current assets does not include a. Cash b. Stock c. Furniture d. Prepaid expenses
384. Goodwill is classified as a. A current asset b. A liquid asset c. A tangible asset d. An intangible asset
385. A prepayment of insurance premium will appear in

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a. The trading account on the debit side b. The profit and loss account on the credit side c. The balance sheet on the assets side d. The balance sheet on the liabilities side 386. Net profit is a. Debited to capital account b. Credited to capital account c. Debited to drawings account d. Credited to drawings account 387. Closing stock is valued at a. Cost price b. Market price c. Cost price or market price whichever is higher d. Cost price or net realisable value whichever is lower 388. Accrued interest on investment will be shown a. On the credit side of profit and loss account b. On the assets side of balance sheet c. Both (a) and (b) d. None of these 389. If there is no existing provision for doubtful debts, provision created for doubtful debts is a. Debited to bad debts account b. Debited to sundry debtor’s account c. Credited to bad debts account d. Debited to profit and loss account 390. Which is the accounting concept that requires the practice of crediting closing stock to the trading account a. Going concern b. Cost c. Matching d. Conservatism 391. According to accrual concept of accounting, financial or business transaction is recorded: a. when cash is received or paid b. when transaction occurs c. when profit is computed d. when balance sheet is prepared

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📘 Ch 3 — Basic Accounting Concepts ⭐

going concern, materiality, matching, cost concept · Q392–

392. The John Marketing Company provides advertising services to an investment company in year A but receives the advertising fee in year B. It recognises this revenue in year A. This is justified by: a) business entity concept b) revenue recognition principle c) economic entity concept d) going concern concept — Ans: B

393. A company is a going concern if: a) its balance sheet shows a strong financial position b) its income statement shows huge profit c) there is no evidence it will or will have to cease operations in the foreseeable future d) it is a public limited company — Ans: C

394. The business/economic entity concept is applicable to: a) sole proprietorship b) partnership c) corporate form d) all of the above — Ans: D

395. "Revenue is not recognised until it is earned and realised or at least realisable." This belongs to which principle? a) Separate entity concept b) Revenue recognition principle c) Going concern concept d) Conservatism concept — Ans: B

396. Sony rounds Rupee amounts in its financial statements to the nearest ₹1,000. Which concept justifies this? a) Realization concept b) Business entity concept c) Materiality concept d) Historical Cost concept — Ans: C

397. A fixed asset costing ₹1,00,000 is depreciated over its estimated useful life of 10 years. This is related to: a) matching principle b) monetary unit assumption c) full disclosure concept d) None of the above — Ans: A

398. Which accounting principle/concept allows accountants to ignore other accounting principle/concept if the amount in question is immaterial? a. business entity concept b. conservatism concept c. materiality concept d. full disclosure concept
399. Consistency with reference to application of accounting procedures means a. All companies in the same Industry should use identical accounting procedures b. Income & assets have not been overstated c. Accounting methods & procedures shall be followed uniform basis year after year d. Any accounting method can be followed as per convenience
400. Historical cost concept requires the valuation of an asset at a. Original cost b. Replacement value c. Net realizable value d. Market value
401. The comparison of financial statement of one year with that of another is possible only when ----------------concept is followed a. Going concern b. Accrual c. Consistency d. Materiality
402. A trader purchases goods for Rs. 2500000, of these 70% of goods were sold during the year. At the end of 31st December 2009, the market value of such goods were Rs. 500000. But the trader recorded in his books for Rs. 750000. Which of the following concept is violated? a. Money measurement b. Conservatism c. Consistency d. None of these 403. Which of the following is wrong? a) All real and personal accounts are transferred to balance sheet b) Nominal accounts are transferred to P&L account c) Each account is opened separately in ledger d) Rent is a personal account, outstanding rent is nominal account — Ans: D

404. If wages are paid for construction of business premises, ___ A/c is credited and ___ A/c is debited. a) Wages, Cash b) Premises, Cash c) Cash, Wages d) Cash, Premises — Ans: D

405. The process of recording financial data up to trial balance is a) Book keeping b) Classifying c) Summarising d) Analysing — Ans: A

406. Amount spent on increasing the earning capacity is a ___ expenditure. a) Capital b) Revenue c) Deferred revenue d) Capital Loss — Ans: A

407. Change in the capital A/c of the proprietor may occur due to ___ a) Profit earned b) Loss incurred c) Capital introduced d) All of the above — Ans: D

408. Provision for discount on debtors is calculated on the amount of debtors a) Before deducting provision for doubtful debts b) After deducting provision for doubtful debts c) Before deducting actual bad debts and provision d) After adding actual bad and doubtful debts — Ans: B

409. Value of goods withdrawn by the proprietor for personal use should be credited to ___ a) Capital A/c b) Sales A/c c) Drawings A/c d) Purchases A/c — Ans: D

410. M/s Stationery Mart will debit the purchase of stationery to ___ a) Purchases A/c b) General Expenses A/c c) Stationery A/c d) None — Ans: A

Logic: stationery is this firm's goods, so it is a purchase, not an expense.

411. Cash a/c is a ______ a. Real a/c b. Nominal c. Personal d. None
412. As per the Matching concept, Revenue – ? = Profit a. Expenses b. Liabilities c. Losses d. Assets
413. Which of the following is a Real A/c? a. Building A/c b. Capital A/c c. Shyam A/c d. Rent A/c
414. Valuation of stock in accounting follows the principle of cost price or ____ whichever is lower. a. Market Price b. Average Price c. Net realizable Value d. None of these
415. Which of the following is not a nominal Account? a. Outstanding salaries Account b. Salaries account c. Interest paid d. Commission received
416. A trader calculated his profit as Rs.150000 on 31/03/2014. It is an a. Transaction b. Event c. Transaction as well as event d. Neither transaction nor event
417. For every debit there will be an equal credit according to a. Matching concept b. cost concept c. Money measurement concept d. Dual aspect concept

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418. Profit and loss is calculated at the stage of a) Recording b) Posting c) Classifying d) Summarising — Ans: D

419. Diwali advance given to an employee is a) Revenue Expenditure b) Capital Expenditure c) Deferred Revenue Expenditure d) Not an Expenditure — Ans: D

It is an advance (an asset/receivable), not an expense.

420. If a car purchased by a car dealer is used for business instead of resale, it is recorded by a) Dr Drawings & Cr Purchases b) Dr Office Expenses & Cr Motor Car c) Dr Motor Car A/c & Cr Purchases A/c d) Dr Motor Car & Cr Sales — Ans: C

421. Cost concept basically recognises ___ a) Fair Market value b) Historical cost c) Realisable value d) Replacement cost — Ans: B

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📘 Ch 19 & Ch 26 — Audit and the Financial System

internal control, SEBI, money market, RBI · Q422–

422. Which is of least concern to an auditor regarding the client's internal control system? a) Efficiency and effectiveness of operations b) Controls related to reliability of financial reporting c) Controls over classes of transactions d) Auditors are equally concerned with each — Ans: D

423. Long-term assets with no physical existence but which are rights having value are a) Current Assets b) Fixed Assets c) Intangible Assets d) Investments — Ans: C

424. The capital market in India is controlled by a) RBI b) NABARD c) SEBI d) IRDA — Ans: C

425. The money market where debt and stocks are traded and maturity period is more than a year is known as a. Long-term market b. Counter market c. Capital market d. Shorter term market
426. A ledger is called a book of. a. Primary entry b. Final entry c. Original entry d. None of the above
427. The ledger column that links the entry with the journal is called as. a. J.F column b. L.F column c. Credit column d. Debit column
428. The left hand side of the ledger account is referred to as. a. Footing b. Credit side c. Debit side d. Balance
429. Ledger is a Principal book that contains a. Real Accounts only b. Personal Accounts only c. All accounts d. Nominal Accounts only
430. Among these, which item is used as the base for preparing trial balance? a. Cash Account b. Balance Sheet c. Journal d. Ledger Account
431. From the below mentioned items which are financial assets? a. Machines b. Bonds c. Stocks d. B and C

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432. Net Profit is computed in a. Profit and Loss Account b. Balance Sheet c. Trial balance d. Trading Account
433. Suppliers Personal accounts are seen in? a. Sales Ledger b. Nominal Ledger c. Purchases Ledger d. General Ledger
434. At the balance sheet date, the balance on the Accumulated Provision for Depreciation Account is a. Transferred to Depreciation account b. Transferred to asset account c. Transferred to Profit and Loss account d. Simply deducted from the asset in the Balance Sheet
435. If it is required to maintain fixed capitals then the partners’ shares of profits must be a. Credited to Capital Accounts b. Debited to Capital Accounts c. Credited to Partner’s Current Account d. Debited to Partner’s Current Account
436. Financial instrument such as commercial paper can be sold a. issued by commercial banks b. directly c. with brokers or dealers d. functional buyers
437. A financial market in which short-term papers or bills are brought and sold is known as a. Bill market b. Commercial market c. Capital market d. Call market 438. The financial market for long-term funds is known as a) Capital market b) Money market c) Primary market d) Secondary market — Ans: A

439. The lender of last resort to the market is the ___ a) Commercial banks b) Indigenous banks c) Money lenders d) RBI — Ans: D

440. The market in which securities with less than one year maturity are traded is a) money market b) capital market c) transaction market d) global market — Ans: A

441. To protect investors and regulate stock exchanges, the Government in 1988 set up a) SEBI b) SIDBI c) RBI d) Bank of India — Ans: A

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📘 Ch 17 & Ch 16 — Single Entry and Partnership

statement of affairs, appropriation a/c, fixed capital, goodwill · Q442–

442. ⭐ Opening statement of affairs is usually prepared to find out the a) Capital in the beginning of the year b) Capital at the end of the year c) Profit made during the year d) Loss occurred during the year — Ans: A

443. The excess of assets over liabilities is a) Loss b) Cash c) Capital d) Profit — Ans: C

444. Which statement is not true in relation to incomplete records? a) It is an unscientific method b) Records are maintained only for cash and personal accounts c) It is suitable for all types of organisations d) Tax authorities do not accept — Ans: C

445. Opening capital ₹10,000; drawings ₹6,000; profit ₹2,000; additional capital ₹3,000 → capital at the end? a) ₹9,000 b) ₹11,000 c) ₹21,000 d) ₹3,000 — Ans: A

10,000 − 6,000 + 2,000 + 3,000 = ₹9,000

446. Which is shown in the Profit and Loss Appropriation account? a) Office expenses b) Salary of staff c) Partners' salary d) Interest on bank loan — Ans: C

447. Under the fixed capital method, which item appears in the capital account? a) Additional capital introduced b) Interest on capital c) Interest on drawings d) Share of profit — Ans: A

All the others go to the Current account.

448. In the absence of an agreement, partners are entitled to a) Salary b) Commission c) Interest on loan (@6% p.a.) d) Interest on capital — Ans: C

449. Profit or loss on revaluation of assets and liabilities is transferred to the capital account of a) The old partners b) The new partner c) All the partners d) The sacrificing partners — Ans: A

450. At admission, goodwill brought by the new partner may be credited to the capital accounts of a) all the partners b) the old partners c) the new partner d) the sacrificing partners — Ans: D

COST ACCOUNTING & BUDGETING MCQ’S

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📘 Ch 24 — Cost Accounting ⭐

prime cost, costing methods, cost classification · Q451–

451. All indirect costs are termed as a. Prime Cost b. Factory Cost c. Conversion Cost d. Overheads
452. On the basis of “Relationship with accounting period” costs are classified as a. Historical Costs and Pre-determined Costs. b. Capital Costs and Commercial Costs. c. Capital Costs and Revenue Costs. d. Product Costs and Period Costs.
453. Which of the following is not a method of costing? a. Process Costing b. Batch Costing c. Direct Costing d. Operating Costing
454. The written down value of the abandoned plant less its salvage value is a. Imputed Cost b. Sunk Cost c. Avoidable Cost d. Opportunity Cost
455. Interest on own capital is a. Cash Cost b. Notional Cost c. Part of Prime Cost d. Semi-variable Cost
456. Variable costs are fixed a. for a period. b. per unit. c. for a particular process of production. d. depends upon the entity.
457. A technique and process of ascertaining costs is known as a. Cost b. Costing c. Cost Accounting d. Cost Accountancy

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458. The branch of accounting dealing with the classification, recording, allocation, summarising and reporting of current and prospective costs is known as a) Financial Accounting b) Management Accounting c) Cost Accounting d) Cost Accountancy — Ans: C

459. Costs are classified between direct and indirect according to classification by a) Nature or Element b) Functions c) Degree of traceability to product d) Change in Activity or Volume — Ans: C

460. When output volume increases, the per unit fixed cost will a) increase in proportion to output b) decrease in the reverse proportion of output c) change but not in proportion d) remain unchanged — Ans: B

461. Which costing method suits a Toy Making Industry? a) Contract Costing b) Process Costing c) Job Costing d) Batch Costing — Ans: D

462. Which is not a technique of costing? a) Marginal Costing b) Process Costing c) Standard Costing d) Budgetary Costing — Ans: B

Process costing is a method, not a technique.

463. Works cost plus administration expenses represents a) Total cost b) Cost of production c) Cost of sales d) Factory cost — Ans: B

464. Prime cost may be correctly termed as a) Sum of direct material and labour with all other costs excluded b) The total of all cost items which can be directly charged to production units c) Total costs incurred in producing a finished unit d) The sum of the large costs in a product cost — Ans: B

465. The main purpose of cost accounting is to a. Minimise cost b. Help in valuation of inventory c. Provide information to management for decision making d. Aid in the fixation of selling price
466. Which method of costing is used for determination of costs for printing industry? a. Process costing b. Operating costing c. Batch costing d. Job costing
467. Prime cost plus factory overheads is known as a. Marginal Costing b. Conversion Cost c. Commercial Cost d. Factory Cost
468. Advertisement expenses are treated as a. Selling overhead b.Distribution overhead c. Cost of production d.Direct expenses
469. From the following information, find out purchases when raw material consumed is Rs. 26,500, closing stock Rs. 4,500 and opening stock Rs. 3,000: a. Rs. 26,500 b.Rs. 25,000 c. Rs. 28,000 d.Rs. 34,000
470. Bad debts are included as a. Direct expenses b.Distribution overhead c. Cost of production d.Selling overhead
471. _________ is the value of a benefit where no actual cost is incurred a. Imputed b. Sunk c. Out of pocket cost d. None of the these 472. ___ is the cost which involves payment to outsiders a) Out of pocket cost b) Imputed cost c) Notional cost d) None of these — Ans: A

473. ___ is the maximum possible alternative earning that might have been earned if productive capacity were put to alternative use. a) Opportunity cost b) Incremental revenue c) Alternative revenue d) None of these — Ans: A

474. An item of cost that is direct for one business may be ___ for another. a) Important b) Direct c) Indirect d) None of the above — Ans: C

475. The total of all direct expenses is known as ___ cost. a) Prime b) Works c) Production d) None of these — Ans: A

476. ___ costs are partially fixed and partially variable in relation to output. a) Variable b) Semi-variable c) Fixed d) Both a and b — Ans: B

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📘 Ch 25 — Cost Management: Budget & Budgetary Control ⭐

master/flexible/cash budget, key factor · Q477–

477. Which is not an element of the master budget? a) Capital Expenditure Budget b) Production Schedule c) Operating Expenses Budget d) All above — Ans: B

478. Which is not a potential benefit of using a budget? a) Enhanced coordination of firm activities b) More motivated managers c) Improved interdepartmental communication d) More accurate external financial statements — Ans: D

479. Which of the following is a long-term budget? a) Master Budget b) Flexible Budget c) Cash Budget d) Capital Budget — Ans: D

480. Materials become a key factor if a) quota restrictions exist b) insufficient advertisement prevails c) there is low demand d) there is no problem with supplies of materials — Ans: A

481. The distinction between fixed and variable cost is significant in preparing which budget? a) Master Budget b) Flexible Budget c) Cash Budget d) Capital Budget — Ans: B

482. The budget that is prepared first of all is a) Master budget b) Budget with the key factor c) Cash Budget d) Capital expenditure budget — Ans: B

483. Sales budget is a a) expenditure budget b) functional budget c) Master budget d) None of these — Ans: B

484. The entire budget organisation is controlled and headed by a senior executive known as: a) General Manager b) Accountant c) Budget Controller d) None of the above — Ans: C

485. A flexible budget requires a careful study of a) Fixed, semi-fixed and variable expenses b) Past and current expenses c) Overheads, selling and administrative expenses d) None of these — Ans: A

486. The basic difference between a fixed budget and flexible budget is that a fixed budget a. is concerned with a single level of activity, while flexible budget is prepared for different levels of activity b. Is concerned with fixed costs, while flexible budget is concerned with variable costs. c. is fixed while flexible budget changes d. None of these.
487. Production budget is dependent on a. Purchase budget b. Sales budget c. Cash budget d. Overhead budget
488. Budgetary control helps in implementation of a. Standard costing b. Marginal costing c. Ration analysis d. None of the above
489. Which of the following statement is not true a. In ZBB, Cost benefit analysis is undertaken for each activity of the decision unit. b. Zero base budgeting is appropriate in areas where output is not related to production. c. Zero base budgeting starts with previous year balance d. Zero base budgets start with zero.
490. ________ is the first step of budgetary system and all other budgets depends on it. a. Cost budget b. Sales budget c. Production budget d. None of the above
491. On the basis of period, budgets may be classified into _________ groups. a. Five b. Four c. Three d. Two
492. Usually, the production budget is stated in terms of a. Money

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b. Quantity c. Both d. None 493. Following may be regarded as a summary budget a. Production budget b. Master budget c. Cash budget d. Sales budget 494. Process Costing is suitable for a. Transport Sector b. Oil Refining Firms c. Dam construction d. Furniture making 495. The Electricity department charges fixed charges Rs 500 per month Plus Rs 5 Per Unit of electricity consumed, this is a a. Fixed Cost b. Variable Cost c. Semi-variable Cost d. Administrative Cost 496. The Classification of fixed and variable cost is useful for the preparation of: a. Master Budget b. Flexible Budget c. Cash Budget d. Capital Budget 497. Which of the following is usually a short-term budget? a. Capital expenditure budget b. Research and development budget c. Cash Budget d. Sales Budget 498. Indirect material used in production is classified as a. Office overhead b. Selling Overhead c. Distribution Overhead d. Factory Overhead 499. Total of direct costs is termed as a. Prime Cost b. Works Cost

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c. d. 500. The loss which arises in manufacturing activity on account of the inherent nature of the product is a) Normal Loss b) Abnormal Loss c) Net Loss d) Gross Loss — Ans: A

501. The Income-tax Act came into force in which year? a) 1961 b) 1962 c) 1964 d) 1951 — Ans: B

⭐ Classic trap: the Act was enacted in 1961 but came into force on 1 April 1962.

502. A Panchayat falls under which category of "person"? a) Local Authority b) Artificial Juridical person c) AOP/BOI d) Individuals — Ans: A 503. How many categories of PERSON are defined in the Income-tax Act? a) 6 b) 7 c) 8 d) 5 — Ans: B

Individual · HUF · Company · Firm · AOP/BOI · Local Authority · Artificial Juridical Person. 504. Surcharge rate applicable for a J&K India Private Limited company with total income of ₹12,50,23,400: a) 2 b) 5 c) 7 d) 12 — Ans: D Domestic company, income above ₹10 crore → 12% surcharge. 505. Assessment year means 12 months starting from 1st April and ending on 31st March — a) Mandatorily b) Not necessary, can be less than 12 months c) Starts when we start earning income d) None of the above — Ans: A

a. b. c. d.

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📘 Ch 23 — Taxation: DIRECT TAX ⭐⭐

residential status, advance tax, heads of income, sections · Q501–

501. Act. a. b. c. d.

a. b. c. d. 502. March.

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Cost of sales Cost of Production The Loss which arise in manufacturing activity on account of inherent nature of

Normal Loss Abnormal Loss Net Loss Gross Loss

TAXATION MCQ’S

DIRECT TAX

506. Previous Year for the AY 2021-22 would be: - a. 2019-20 b. 2020-21 c. 2022-23 d. None of the above
507. Rounding off of total tax liability before cess is to be done as per Income tax Act. a. True b. False
508. Direct taxation is a. Progressive in nature b. Regressive in nature c. Can be both d. None of the above
509. Income tax rate for domestic company for the AY 2021-22 having total turnover in PY 2020-21 Rs. 300 Crore and in PY 2018-19 Rs. 401 Crore a. 25% b. 30% c. 5% d. 20%
510. Return of Income of Firm having total income of Rs. 1,00,000 is not required to be filed. a. True b. False c. Optional
511. Rebate under section 87A is applicable to every PERSON having total income up to Rs. 5,00,000. a. True b. False 512. Residential status of individuals is to be checked for the purpose of computing a) Total Income b) Tax rate c) Rebate d) All of the above — Ans: D

513. Total income-tax liability on total income of ₹52,35,246 of Mr. A, aged 62, would be a) ₹15,79,380 b) ₹14,35,796 c) ₹15,79,377 d) ₹14,35,798 — Ans: A

514. Due date for payment of advance tax — 2nd instalment: a) 15th September b) 15th October c) 15th August d) 15th December — Ans: A

515. Mr. A, aged 68, having no income under "Profits and gains of business or profession" — is he liable for advance tax? a) Yes b) No c) If advance tax liability exceeds ₹10,000 d) None of the above — Ans: B

A resident senior citizen without business income is exempt from advance tax.

516. Total tax liability on total income of ₹51,00,246 of Mr. A, aged 54, would be a) ₹14,69,260 b) ₹15,35,910 c) ₹15,35,904 d) ₹13,96,278 — Ans: A

517. Surcharge is applicable on a) Total Income b) Basic Income tax c) Total tax liability d) Basic Income tax + Cess — Ans: B

518. Income-tax payment made in the Assessment year is called a) Self-assessment tax b) Tax deducted at source c) Advance tax d) None of the above — Ans: A

519. 🚩 How many heads of income are defined in the Income-tax Act? a) 5 b) 7 c) 6 d) 4 — Key says: B (7)

🚩 The key is wrong. Section 14 lists 5 heads — Salaries · House Property · PGBP · Capital Gains · Other Sources → the correct answer is A. (The key appears to have copied the answer to Q503, where 7 is right.)

520. Who administers Income tax? a) CBDT b) CBIC c) CBEC d) Both A and B — Ans: A

521. Burden of tax borne by the consumer is a) Direct tax b) Indirect tax c) Both A and B d) None of the above — Ans: B

522. Income tax is applicable on a) Whole of India b) Whole of India except Jammu and Kashmir c) Whole of India except UTs without legislature — Ans: A

(The source prints only three options for this question.)

523. Which Article of the Constitution provides that tax may be levied only by authority of law? a) Article 265 b) Article 246 c) Article 245 d) None of the above — Ans: A

524. Which section is the charging section of Income tax? a) Section 2 b) Section 4 c) Section 6 d) Section 1 — Ans: B

525. Abusing tax loopholes and manipulating the law against its moral intent is a) Tax avoidance b) Tax Evasion c) Tax Management d) Tax Planning — Ans: A

526. Under new section 115BAC, the tax rate for an individual aged 54 with income ₹8,50,000 a) 5% b) 10% c) 15% d) 20% — Ans: C

⚠️ Dated — this reflects the original 115BAC slab (₹7.5–10 lakh = 15%). The slabs have since been revised; verify against the current Finance Act.

527. Mr. A left India on 12 Dec 2019 and visited India in PY 2020-21: arrived 4 April–30 April; again 5 Sep–12 Dec; again 1 Jan and stayed till 31 March. Determine his residential status. a) Resident and ordinarily resident b) Non-resident c) Resident but not ordinarily resident d) None of the above — Ans: A

528. Compute the tax liability of Mr. A (DOB 1 April 1961), total income ₹6,25,000, eligible deduction ₹1,50,000. a) NIL b) 36,400 c) 11,700 d) 11,250 — Ans: B

⚠️ Dated — depends on the slab year in force. Re-check against the current Finance Act.

529. When does a Finance Budget presented in the Lok Sabha become the Finance Act? a) When passed in both Houses b) When presented in Lok Sabha c) When presented in Rajya Sabha d) When the President gives assent — Ans: D

⭐ Directly matches 2024·Q54 ("Finance Bill becomes the Finance Act when passed by…" → both Houses + President's assent).

530. Mr. A, age 60, total income ₹2,00,000, Chapter VI-A deduction ₹1,00,000. Is he required to file a Return of Income? a) Yes b) No — Ans: A

Filing is judged on income before Chapter VI-A deductions, which exceeds the basic exemption limit.

531. Mr. A, total income ₹4,50,000, has not filed his return on or before the due date. Penalty under section 234F? a) ₹1,000 b) ₹5,000 c) ₹10,000 d) None of the above — Ans: A

Income up to ₹5 lakh → the 234F fee is capped at ₹1,000.

5% 10% 15% 20% Mr. A who left India on 12 th Dec’2019 visited India in the PY 2020-21 as

th April and left on 3oth April th Sep and left on 12 h Dec st Jan and was continuously in India on 31 st March.

Resident and ordinary resident Non-resident Resident but not ordinary resident None of the above Compute tax liability of Mr. A whose date of birth is 1 st April, 1961 having total

NIL 36,400 11,700 11250 When Finance budget presented in Lok Sabha become Finance Act When passed in both the house When presented in Lok Sabha When presented in Rajya Sabha When president gives assent. Mr. A, age 60, having total income of Rs. 200,000 and having eligible

Yes No Mr. A having total income of Rs. 450,000 has not filed his income tax return

1,000 5,000 10,000

income of Rs. 625,000.00 and eligible deduction of Rs. 1,50,000.

deduction under Chapter VI-A of Rs. 100,000. Is he is require to file Return of Income as per Income tax ?

on or before due date. What will be the penalty as per section 234F of income tax

d. None of the above. 532. Mr. A, age 54 years, having estimated total income for the PY 2020-21 from profession is Rs. 12,00,000 and interest from Fixed deposit is Rs. 2,00,000. Estimated TDS for PY 20-21 is Rs. 24,000. Compute the advance tax liability to be paid on 1 st Installment.

533. What is the full form of PAN? a. Permanent Account Number b. Present Account number c. Permanent assessee number d. None of the above
534. How much percentage of advance tax liability is to be paid off by 3 rd installment of advance tax?

a. 45% b. 65% c. 75% d. 90% 535. What is the surcharge rate of Foreign company having total income of Rs. 2 Crore a. 2% b. 5 % c. 7% d. 12% 536. What is the maximum amount which is not chargeable to tax for non-resident senior citizen. a. 2,50,000 b. 3,00,000 c. 5,00,000 d. None of the above. 537. Mr. A non-resident individual, age 36, having total income of Rs. 3,50,000. Compute tax liability. a. NIL b. 5,200 c. 5,000 d. 18,2000 538. Due date of filing of return for M/s ABC LLP with total turnover ₹2 crore in PY 2020-21 a) 31st July b) 31st October c) 30th November d) 31st December — Ans: B

539. Due date of filing return for Mr. A, gross professional receipts ₹75 lakh (PY 2020-21), total income ₹7,50,000: a) 31st July b) 31st October c) 30th November d) 31st December — Ans: B

Receipts exceed the audit threshold → audit case → 31 Oct.

540. M/s ABC HUF, control partly in India and partly overseas, karta Mr. A has never left India. Residential status of the HUF? a) Resident b) Non-resident c) ROR (Resident & Ordinarily Resident) d) RNOR — Ans: C

541. Residential status is determined for the: a) Previous year b) Assessment year c) Accounting year d) Financial year — Ans: A

542. Income tax is a a) Professional tax b) Direct tax c) Indirect tax d) Service tax — Ans: B

543. 🚩 A person aged ___ or more is a super senior citizen. a) 56 b) 60 c) 80 d) 85 — Key says: D

🚩 The key looks wrong. A super senior citizen is 80 years or more → the defensible answer is C. Go with 80.

544. The special tax rates in sec 115BAC for individuals are a) Optional b) Mandatory c) Not applicable for individuals d) Only for senior citizens — Ans: A

545. Rebate of income tax is defined under section ___ a) 81A b) 87A c) 81C d) 87C — Ans: B

546. Assessment year is a period of 12 months commencing from ___ every year. a) 1st March b) 31st March c) 1st April d) 30th April — Ans: C

547. As per the Income-tax Act, "Person" includes a) Individual b) HUF c) Local Authority d) All of the above — Ans: D

548. CBDT stands for a) Central Bureau of Direct Taxes b) Central Board of Direct Taxes c) Citizen's Board of Direct Taxes d) Citizen's Bureau of Direct Taxes — Ans: B

549. An Indian citizen going abroad for employment must stay in India for at least ___ days in the previous year to be a resident. a) 90 days b) 162 days c) 180 days d) 182 days — Ans: D

550. Income received in India is taxable in the hands of a) Resident only b) Resident and ordinarily resident only c) Non-resident only d) All assessees — Ans: D

⭐ Core rule: income received in India is taxable for everyone, regardless of residential status.

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📘 Ch 23 — Taxation: INDIRECT TAX / GST ⭐⭐

CGST/SGST/IGST, composition scheme, reverse charge, HSN · Q551–

551. What is the full form of GST? a) Goods and Supply Tax b) Goods and Services Tax c) General Sales Tax d) Government Sales Tax — Ans: B

552. GST was implemented in India from a. 1st January 2017 b. 1st April 2017 c. 1st March 2017 d. 1st July 2017
553. In India, the GST is based on the dual model GST adopted in: a. UK b. Canada c. USA d. Japan
554. GST is a consumption of goods and service tax based on a. Development b. Dividend c. Destiny d. Destination
555. GST rates applicable on goods and services are: a. 0% 5% 12% 18% 26% b. 0% 6% 12% 18% 28% c. 0% 5% 12% 18% 28% d. 0% 5% 12% 16% 28%
556. Taxes that are levied on any Intra-State Supply are? a. IGST b. CGST and SGST/UTGST c. SGST d. CGST
557. What does “I” in IGST stands stand for? a. Internal b. Integrated c. Internal d. Intra
558. What kind of Tax is GST? a. Direct Tax b. Indirect Tax

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c. Depends on the type of goods and services d. None of the above 559. GST was introduced in Jammu and Kashmir with effect from a. 1.8.2017 b. 1.7.2017 c. 1.1.2018 d. 8.7.2017 560. Constitution Amendment Act, 2016 for GST was a. 80th b. 101st c. 122nd d. None of these 561. As a result of constitution amendment for GST a Separate List — has been inserted in the constitution. a. Article 246A b. Article 146B c. Article 122 C d. Article 101B 562. The incidence of tax on tax is called a. Tax Cascading b. Tax Pyramidding c. Tax evasion d. Indirect tax 563. Integrated Goods and Services Tax is applicable when – a. Sold in Union territory b. Sold from one GST dealer to another GST dealer within same state c. Sold within a state d. There is interstate supply 564. Introduction of GST affects the revenue of a. Consuming states b. Manufacturing states c. All the states d. Central Government 565. Under GST law, tax rates are determined by a. Central Government b. State Government c. GST Council

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d. Central Government in consultation with state governments 566. The rate of IGST is equal to the rate of a. CGST b. SGST c. CGST plus the rate of SGST d. SGST plus UTGST 567. IGST collected belong to a. Central Government b. To the State in which supply occurs c. to the State to which supply occurs d. The Centre and state to which supply occurs 568. Where the location of the supplier and the place of supply are in two different States – a. IGST is applicable b. CGST is applicable c. SGST plus CGST is applicable d. CGST plus IGST is applicable 569. Tax paid on goods or services involved in supply is called a. Output tax b. Input tax c. Composite tax d. Reverse tax 570. Tax collected at the time of supply of goods or services is called a. Output tax b. Input tax c. Composite tax d. Reverse tax 571. Input tax credit shall be allowed only on the support of a. Delivery note b. Payment slip c. Credit note d. Tax invoice 572. GST number does not include a. PAN b. State Code c. Aadhaar Number d. Alphabet Z

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573. After the introduction of GST, export from India is subject to a) IGST b) CGST plus SGST c) Zero rated d) SGST plus CGST plus IGST — Ans: C

574. Who administers indirect taxes? a) CBDT b) CBIC c) CBEC d) Both A and B — Ans: B

575. Which central tax has been subsumed into GST? a) Central Excise duty b) Service Tax c) CVD on import d) All of the above — Ans: D

576. Which tax applies on supply of goods from Gujarat to Assam? a) CGST b) SGST c) UTGST d) IGST — Ans: D

Inter-state supply → IGST.

577. Can a person who opts for the composition scheme collect tax from the recipient? a) Yes b) No c) Yes, if the recipient is registered d) Yes, if the recipient is unregistered — Ans: B

578. Which code classifies goods and services under GST? a) HSN Code b) SAC/HSN Code c) GST Code d) SAC Code — Ans: B

HSN for goods, SAC for services.

579. Liability to pay tax by the recipient of supply is called a) Output tax b) Reverse charge c) Input tax d) None of these — Ans: B

580. Transfer of the title in goods is a supply of a. Goods b. Services c. Both goods and services d. None
581. Which of the goods have been kept outside the ambit of GST? a. Petroleum Crude b. High Speed Diesel c. Motor Spirit d. All of the above
582. VAT is imposed– a. Directly on consumer b. On final stage of production c. On first stage of production d. On all stages between production and final sale
583. The main object for introduction of GST is :- a. Nationwide Uniformity in tax structure b. Elimination of multiple taxes c. Creation pan India uniform market d. All of the above
584. In India, GST structure is in nature. a. Single b. Dual c. Triple d. (a) & (b) both
585. Taxable event under GST Act is. a. Sale b. Service c. Supply d. Manufacturing
586. Alcoholic liquor for Human Consumption is subject to – a. CGST b. SGST c. IGST d. None of the above
587. Five petroleum products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel have been kept out of GST.

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a. Permanently b. Temporarily c. For one year d. None of the above 588. GST is a comprehensive tax regime covering a. Goods b. Services c. Both goods and services d. None of the above 589. Supply of the following is not liable to GST a. Alcoholic liquor for industrial consumption b. Alcoholic liquor for medicinal consumption c. Alcoholic liquor for human consumption d. Alcoholic liquor for animal consumption 590. Petroleum products have been temporarily been kept out of GST. a. One b. Two c. Three d. Five 591. Which of the following tax is not subsumed by GST? a. Purchase tax b. Entry tax c. Octroi tax d. Vehicle registration tax 592. Taxes that are levied on any Inter-State Supply are? a. IGST b. CGST and SGST c. SGST d. CGST 593. What is the difference between a direct & an indirect tax? a. Charge of levy b. Shifting of burden c. Different collection pattern of tax d. All of the above 594. Who amongst the following will be considered as the chairman of GST Council a. Union Minister of State b. Union Finance Minister

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c. Minister of state revenue d. Chief Minister of state 595. Whether IGST revenue is to be apportioned to state? a. No b. Yes- apportioned to origin state c. Yes- apportioned to destination state d. Discretion of Parliament 596. Which of the following "tax" is levied at every stage of sale? a. VAT b. Income tax c. Custom duty d. None of the above 597. If 'Tata Company' imports a product from abroad, then which tax will be levied on it? a. VAT b. Custom duty c. Income tax d. Corporation tax 598. Customs duties are imposed on commodities as they cross: a. State boundaries b. District boundaries c. National boundaries d. Municipal boundaries 599. After Introduction of GST, import in India is subject to a. BCD Plus IGST b. CGST Plus SGST Plus BCD c. Zero rated d. SGST Plus CGST Plus IGST 600. Under GST law SAC refers to – a. Systematic Accounting Code b. Services Accounting Code c. System administration code d. Scientific accounting code

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ANSWER KEY

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DIRECT TAX INDIRECT TAX

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Corrigendum to Previous Book and Answer Key of MCQ’s of Previous Book.

v Please ignore Test for Understanding in Chapter 2 – pg. 10 & 11 v At page 26, read Purchases account & sales account as Nominal Accounts under Traditional Approach. v At page 29, delete (ii) (d) Cash Memo Received from Seller. It is an external supporting voucher. v The correct answer of below mentioned Questions may be considered as

3. A
4. A
5. Ignore this question. However, if this question comes in exam then go for D option.
6. D
7. A
8. Ignore this Question

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