Principles of Accounting Multiple Choice Questions
1. The assets that can be easily converted into cash within a short period, i.e., 1 year or less are known as
A. Current assets
B. Fixed assets
C. Intangible assets
D. Investments
Answer: A. Current assets
2. According to which principle the same accounting methods should be used each year:
A. Prudence
B. Full disclosure
C. Materiality
D. Consistency
Answer: D. Consistency
3. The elements of the accounting equation are
A. Assets, Liabilities,Capital
B. Liabilities,Capital
C. Liabilities
D. Capital
Answer: A.Assets, Liabilities,Capital
4. 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
Answer: D. Purchase of Stationery
5. The expenses due but not paid is known as –
A. Prepaid Expenses
B. Debtors
C. Outstanding Expense
D. Bills Receivable
Answer: C. Outstanding Expense
6. Which is correct.I)Dr. the receiver,Cr. the Giver II)Dr. what goes out,Cr. what comes in III)Dr. all Expenses,Cr.All Losses
A. Only I
B. Only II and III
C. ALL I,II and III
D. Only I and II
Answer: A. Only I
7. Goods destroyed by fire should be credited to
A. Puchases A/c
B. Sales A/c
C. Loss by fire A/c
D. InsuranceA/c
Answer: A. Puchases A/c
8. In the books of account if a transaction is completely deleted, will it affect the trial balance?
A. No
B. Yes
C. A transaction cannot be omitted
D. May be
Answer: A. No
9. The respective normal account balances of Sales, Sales Returns , and Discounts allowed are?
A. Credit, Credit, Credit
B. Debit, credit,debit
C. Credit, Debit,Debit
D. Credit, Debit,Credit
Answer: C. Credit, Debit,Debit
10. Trial balance is not a conclusive proof of accuracy due to which errors.I)Error of omission II)Error of Principle III)Error of Commission IV)Compensatory Errors
A. All I,II,III and IV
B. Only I,II and III
C. Only I,II and IV
D. Only II and III
Answer: A. All I,II,III and IV
11. Which of the following is not the external user ofaccounting information?
A. Government
B. Shareholders
C. Tax Authorities
D. Financial institutions
Answer: B. Shareholders
12.——— refers to the order in which the various assets and liabilities are shown in the Balance Sheet.
A. Grouping
B. Order of permanence
C. Marshaling
D. Order of liquidity
Answer: C. Marshaling
13. If closing stock is mentioned in trial balance,Where is it shown in Final Accounts?
A. Credit side of TradingA/c
B. Asset side of Balance Sheet
C. Both A and B
D. Not shown anywhere
Answer: B. Asset side of Balance Sheet
14. Which one is false. I)Capital Expenditure is non recurring in nature and shown in P&L account. II)Revenue expenditure is incurred to conduct day today activities
A. Both I and II
B. Only I
C. Only II
D. None is false
Answer: B. Only I
15. Where do we show Provision of bad debts in final accounts if given in adjustments? I)Debit side of P&L II)Credit side of P&L III)Deduct from Debtors in BalanceSheet IV)Add to Debtors in Balance Sheet
A. I and III
B. II and IV
C. II and III
D. I and IV
Answer: A. I and III
16. Which is true. I)Fixed installation method is recognised by income tax department. II)The amount of depreciation in WDV method remains same.
A. Both I and II
B. None is true
C. Only II
D. Only I
Answer: B. None is true
17. Cost of machine=1,90,000 Installation=10,000 Scrap=50,000 Life=6 yrs Calculate depreciation as per SLM method
A. 25,000
B. 23,333
C. 33,333
D. 21,666
Answer: A.25,000
18. Machinery purchased on 1 Oct,2016 for 40,000.This machinery was sold on Dec 2017.Calculate the total depreciation charged on machinery till date if co charges 10% as per WDV method if accounts are closed on 31st March every year.
A. 6700
B. 8000
C. 5000
D. 4850
Answer: D. 4850
19. 1 oct Opening balance=400 units @Rs 20 each, 3 Oct:Purchase=300 units @Rs 10 ,5 Oct Sales=500 units.What will be total Sales value(in Rs) as per FIFOMethod?
A. Rs 9000
B. Rs 15000
C. Rs 10000
D. Rs 7500
Answer: A.Rs 9000
20. 2 oct Opening balance=200 units @Rs 15 each, 4 Oct:Purchase=500 units @Rs 10 ,5 Oct Sales=600 units.What will be Closing Inventory value (in Rs) asper LIFO Method?
A. Rs 1000
B. Rs 500
C. Rs 8000
D. Rs 1500
Answer: D.Rs 1500
21. Business enterprise is separate from its owner according to concept.
A. Money measurement
B. Cost
C. business entityconcept
D. Dual aspect
Answer: C. business entityconcept
22. When proprietor withdrew cash from business for personal use , it is known as –
A. Drawings
B. Investment
C. Furniture
D. BillsReceivable
Answer: A. Drawings
23. In trial balance, which accounts with is/are recorded at the credit side? I)Sales II)Sales return III)Cash IV)Loan
A. Only I and II
B. All of these
C. Only I,II and IV
D. Only I and IV
Answer: D. Only I and IV
24. When Salary is paid by cheque, which account iscredited.
A. Cash A/c
B. Bank A/c
C. Salary A/c
D. Personal A/c
Answer: B. Bank A/c
25. The process of transferring the debit and credit items from a journal to their respective account in the ledgeris termed as?
A. Balancing
B. Posting
C. Arithmetic
D. Entry
Answer: B. Posting
26. What are the two statements prepared for summarising the transactions?I)Balance SheetII)Journal III)P&L IV)Cash Book
A. Only I and II
B. Only I,II and III
C. Only I,II and IV
D. Only I and III
Answer: D. Only I and III
27. Where do we show Gas and Fuel in final accounts?
A. Trading A/c
B. P&L Account
C. Balance Sheet
D. Not shownanywhere
Answer: A. Trading A/c
28. What are the causes of depreciation?
A. Wear and Tear
B. Obsolescence
C. Expiration oflegal rights
D. All of theabove
Answer: D. All of theabove
29. What is the formula for calculating depreciation in SLMMethod?
A. Cost+Scrap/No of Yrs
B. Scrap-Cost/No ofyrs
C. Cost -Scrap/Useful Life
D. None ofthese
Answer: C. Cost -Scrap/Useful Life
30. 4 oct Opening balance=500 units @Rs 20 each, 5 Oct:Purchase=1000 units @Rs 15 ,6 Oct Sales=500 units.What will be rate at which the sales unit will bevalued as per weighted avg method?
A. Rs20
B. Rs 15
C. Rs 16.66
D. 17.5
Answer: C. Rs 16.66