Financial Accounting Multiple Choice Questions
1. Residual value of an asset is
a. The amount realized on the sale of an asset
b. The price paid on the purchase of the asset
c. Reduced value of the asset every year
d. one of the above
2. Depreciation account is closed by
a. Transferring to balance sheet
b. Transferring to profit & loss account
c. Transferring to asset account
d. Totaling
3. In sinking fund method of depreciation, the amount of deprecation
a. Decreasing every year
b. Increasing every year
c. Remains constant every year
d. Increase or decrease every year
4. Which of the following asset is not subject to depreciation
a. Plant & Machinery
b. Land
c. Loose tools
d. Furniture
5. The term depletion is used in relation to
a. Natural resources
b. Fixed assets
c. Current assets
d. None of the above
6. An asset is purchased for Rs.50,000 on which depreciation is provided annually according to the straight line method. the useful life is 10 years and the scrap value is 10,000. The rate of depreciation is
a. 18%
b. 8%
c. 12%
d. 10%
7. Secret reserve may result by
a. Creating genera reserve
b. Overvaluation of stocks
c. Providing excessive depreciation
d. Undervaluation of liabilities
8. Gross profit is 25% on sales and cost of goods sold 75,000. The amount of sales will be
a. 150000
b. 125000
c. 80000
d. 100000
9. Opening capital 9,000; closing capital 16,500; drawings during the year 2,600. The amount of profit will be
a. 10100
b. 4900
c. 9100
d. 10000
10. Specific donation received should be shown on
a. Income side of income and expenditure account
b. The liability side of balance sheet
c. The assets side of balance sheet
d. None of the above
11. Liability- side of the balance-sheet comprises:
a. Capital and reserve
b. Long-term liabilities
c. Current liabilities
d. All of the above
12. Balance Sheet of a firm indicates which of the following?
a. Profit or Loss over a period.
b. Financial position of the unit over a period.
c. Financial position of the unit as on a particular date.
d. Position of assets and liabilities over a period of time.
13. Economic life of an enterprise is split into the periodic interval as per ——- concept
a. Matching
b. Money measurement
c. Periodicity
d. Accrual
14. Provision is provided for doubtful debts is based on the principle of
a. Going concern
b. Objectivity
c. Materiality
d. Conservation
15. Prepaid salary has
a. Debit balance
b. Negative balance
c. Credit balance
d. None of the above
16. X draws a bill on Y. X endorsed the bill to Z. Who is the Payee
a. X
b. Y
c. Z
d. None of the above
17. A promissory note does not require
a. Noting
b. Discontinuing
c. Acceptance
d. Charging
18. When money is withdrawn from the bank, the bank will ——- the account of customer
a. Credit
b. Debit and Credit
c. Debit
d. None of the above
19. An entry with more than one debit or credit is known as
a. Compound entry
b. Singly entry
c. Multiple entry
d. Double entry
20. Loss leads to
a. reduction in income
b. Reduction in capital
c. Reduction in profit
d. Increase in capital
21 The comparison of financial statement of one year with that of another is possible only when concept is followed
A Consistency
B Going concern
C Accrual
D Materiality
Answer: Consistency
22 Which of the following is not the main objective of accounting?
A Solving tax disputes with tax authorities
B Systematic recording of transactions
C Ascertaining profit or loss
D Ascertainment of financial position
Answer: Solving tax disputes with tax authorities
23 An asset was purchased for Rs.1000000 with the down payment of Rs.200000 and bills accepted for Rs.800000/-What would be the effect on the total asset and total liabilities in the balance sheet?
A Assets increased by Rs.800000 and liabilities increased by Rs.800000
B Assets increased by Rs.1000000 and liabilities increased by Rs.800000
C Assets decreased by Rs.800000 and liabilities increased by Rs.800000
D Assets increased by Rs.800000 and liabilities decreased by Rs.800000
Answer: Assets increased by Rs.800000 and liabilities increased by Rs.800000
24 Matching concept means
A Expenses should be matched with the revenue of the period
B Assets = capital + liabilities
C Transactions recorded at accrual concept
D Anticipate no profit but recognize all losses
Answer: Expenses should be matched with the revenue of the period
25 Financial accounting is concerned with
A Recording of day to day business transactions
B Recording of business expenses and revenue
C Recording of costs of products and services
D None of the above
Answer: Recording of day to day business transactions
26 The rule debit all expenses and losses and credit all income and gains relates to
A Nominal accounts
B Personal account
C Real account
D None of the above
Answer: Nominal accounts
27 Double entry system is used in which type of accounting
A Financial
B Cost
C Management
D All
Answer: Financial
28 Rent paid to landlord should be credited to
A Cash account
B Rent account
C Expense account
D Landlords account
Answer: Cash account
29 Cash discount allowed to a debtor should be credited to
A Discount account
B Customer’s account
C Sales account
D Cash account
Answer: Customer’s account
30 Which accounting concept satisfy the valuation criteria
A Cost, Dual aspect, Conservatism
B Realisation, Conservatism, Going concern.
C Going concern, Cost, Dual aspect
D Going concern, Realisation, Cost
Answer: Going concern, Realisation, Cost
31 In which of the following cases, accounting estimates are needed?
A Inventory obsolescence
B Impairment of losses
C Employs benefit schemes
D All of the above
Answer: All of the above
32 In income measurement & recognisation of assets & liabilities which of the following concepts goes together ?
A Cost, Accural, matching
B Going concern, cost, Realization
C Going concern, Periodicity, Reliability
D Periodicity, Accural, Matching
Answer: Periodicity, Accural, Matching
33 Interpretation means
A Concerned with preparation and presentation of classified data
B Systematic analysis of recorded data
C Methodical classification of data given in Financial Statements
D Explanation of meaning and significance of the data in Financial Statements
Answer: Explanation of meaning and significance of the data in Financial Statements
34 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 Conservatism
B Money measurement
C Consistency
D None of these
Answer: Conservatism
35 If nothing is given in the financial statements aboutthe three accounting assumptions then it is to be treated as it
A Is assumed to be followed
B Is assumed that it is not followed
C Is assumed to be followed to some extent
D None of the above
Answer: Is assumed to be followed
36 The proprietor of the business is treated as creditor for the capital introduced by him due to…… concept.
A Entity
B Money measurement
C Cost
D None of these
Answer: Entity
37 Consistency with reference to application of accounting procedures means
A Accounting methods & procedures shall be followed uniform basis year after year
B All companies in the same Industry should use identical accounting procedures
C Income & assets have not been overstated
D Any accounting method can be followed as per convenience
Answer: Accounting methods & procedures shall be followed uniform basis year after year
38 If one of the cars purchased by a car dealer is used for business purpose, instead of resale, then it should be recorded by
A Dr Motor Car A/c & Cr Purchases A/c
B Dr Drawing A/c & Cr Purchases A/c
C Dr Office Expenses A/c & Cr Motor Car A/c
D Dr Motor Car & Cr Sales A/c
Answer: Dr Motor Car A/c & Cr Purchases A/c
39 Human resources will not appear in the balance sheet according to _ concept.
A Money measurement concept
B Accrual
C Going concern
D None
Answer: Money measurement concept
40 Which of the following is not a Real Account?
A Out standing rent A/c
B Cash A/c
C Investments A/c
D Purchases A/c
Answer: Out standing rent A/c
41 M/s Stationery Mart will debit the purchase of stationery to
A General Expenses A/c
B Stationery A/c
C Purchases A/c
D None
Answer: Purchases A/c
42 Debit the receiver & credit the giver is…….. account
A Nominal
B Real
C Personal
D All the above
Answer: Personal
43 A trader calculated his profit as Rs.150000 on 31/03/2014. It is an
A Event
B Transaction
C Transaction as well as event
D Neither transaction nor event
Answer: Event
44 Profit and loss is calculated at the stage of
A Summarising
B Recording
C Posting
D Classifying
Answer: Summarising
45 Sales made to Mahesh for cash should be debited to
A Mahesh Account
B Sales account
C Cash account
D Purchase account
Answer: Cash account
46 A trader has made a sale of Rs.75,500 out of which cash sales amounted to Rs.25,500. He showed trade receivables on 31-3-2014 at Rs.25,500. Which concept is followed by him?
A Accrual
B Going concern
C Cost
D Money measurement
Answer: Accrual
47 If wages are paid for construction of business premises…….A/c is credited and……..A/c is debited.
A Cash, Premises
B Wages, Cash
C Premises, Cash
D Cash, Wages
Answer: Cash, Premises
48 Value of goods withdrawn by the proprietor for his personal use should be credited to
A Purchases A/c
B Capital A/c
C Sales A/c
D Drawings A/c
Answer: Purchases A/c
49 Small items like, pencils, pens, files, etc. are written off within a year according to _ concept.
A consistency
B Conservatism
C Realisation
D Materiality
Answer: Materiality
50 Business enterprise is separate from its owner according to……concept.
A Entity concept
B Money measurement concept
C Matching concept
D Dual aspect concept
Answer: Entity concept
51 The policy of anticipate no profit and provide for all possible losses arise due to the concept of
A Conservatism
B Consistency
C Disclosure
D Matching
Answer: Conservatism
52 According to which concept, the proprietor pays interest on drawings
A Entity concept
B Accrual concept
C Conservatism concept
D Dual Aspect concept
Answer: Entity concept
53 If the Market value of closing Inventory is less than its cost price, inventory will he shown at
A Fair Market value
B Both
C Marketable value
D none
Answer: Marketable value
54 The Market price of good declined than the cost price. Then the concept that plays a key role is
A Realization
B Materiality
C Going concern concept
D None of these
Answer: Realization
55 Cash a/c is a………
A Real a/c
B Nominal
C Personal
D None
Answer: Real a/c
56 Capital A/c is a ……A/c.
A Nominal
B Real
C Personal
D None of these
Answer: Personal
57 Sales –Gross Profit =
A Cost of goods sold
B Net sales
C Gross Sales
D Liabilities
Answer: Cost of goods sold
58 Which of the following is a Real A/c?
A Building A/c
B Shyam A/c
C Rent A/c
D Capital A/c
Answer: Building A/c
59 Cash A/c is a ……A/c.
A Real
B Personal
C Nominal
D None
Answer: Real
60 As per the Matching concept, Revenue –? = Profit
A Liabilities
B Losses
C Assets
D Expenses
Answer: Expenses