FINANCIAL ACCOUNTING - MCQS

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SEMESTER - 2

FINANCIAL ACCOUNTING

(FA)

MCQS - UNIT 1

1. _________ is not one of the Branches of Accounting.

(a) Cost Keeping
(b) Cost Accounting
(c) Financial Accounting
(d) Management Accounting

2. Which of the following is not a sub field or branch of Accounting?

(a) Cost Accounting
(b) Management Accounting
(c) Financial Accounting
(d) Book- Keeping

3. Management Accounting provides invaluable services to management in performing _____.

(a) All management functions
(b) Controlling function
(c) Interpret the financial data
(d) Recording the financial data

4. External users of accounting information are ________.

(a) Investors

(b) Suppliers

(c) Government

(d) All of the above

5. Who of the following is/are not the External Users of accounting information?

(a) Managers and Owners

(b) Government and Public

(c) Customers and Labour Unions

(d) Researchers

6. Mr. Arjun is a Doctor by profession. He records transactions like revenues, cost, assets and liabilities which are reflected in the account when actual receipts or actual payments are made, that means he is following:

(a) Mercantile system of accounting
(b) Double entry system of accounting
(c) Cash system of accounting
(d) All of these

7. The accounting for the unpaid salary and advanced receipt of rent for ascertaining the correct profit and loss is based on ________.

(a) Cash System of Accounting
(b) Single Entry System of Accounting
(c) Mercantile System of Accounting
(d) Double Entry System of Accounting

8. Using Single Entry Book-keeping method ________.

(a) All effects of the transactions are recorded

(b) Only single effects of the transactions are recorded

(c) No uniformity in recording effects of transactions are followed

(d) None of the above

9. Use of common units of measurement and common format of reporting promotes:

(a) Reliability
(b) Relevance
(c) Understandability
(d) Comparability

10. The major considerations governing the selection and application of accounting policies are___. 

(a) Prudence

(b) Substance over form

(c) Materiality

(d) All of these

11. Accounting Principles are generally based on _______.

(a) Practicability

(b) Convenience in recording

(c) Subjectivity

(d) None of the above

12. Accounting policies should not be changed from one period to another, according to:

(a) Accounting periods

(b) Materiality

(c) Consistency

(d) Prudence

13. A change in the accounting policy should be made _______

(a) For compliance with an accounting standard
(b) When state so directs
(c) For better presentation of financial statements
(d) All of these

14. The assets without physical substance are known as _______ assets.

(a) Tangible
(b) Intangible
(c) Immovable
(d) All of above

15. Which of the following is not an Example of Intangible Asset?

(a) Trade Mark and Copy Right

(b) Goodwill

(c) Patents

(d) Land

16. The Assets acquired by the business with an intention to produce goods or provide services and are not held for resale is known as :

(a) Current Assets

(b) Merchandise,

(c) Stock

(d) Fixed Assets

17. Outstanding Rent is a type of _______.

(a) Nominal Account

(b) Representative Personal Account 
(c) Real Account
(d) None of the above

18. Outstanding salary is ________

(a) Real Account
(b) Representative Personal Account
(c) Nominal Account
(d) None of these

19. As per Accounting Equation Approach, accounts are classified as _______

(a) Assets Accounts & Liabilities Accounts

(b) Assets Accounts, Liabilities Accounts, Capital Accounts, Revenue Account, Expense Account

(c) Real Account, Personal Account and Nominal Account

(d) None of the above

20. ______ are all claims against, or rights in, assets.

(a) Short term liability

(b) Assets

(c) Equities

(d) Revenue

21. Match the following :

Type of Account	Nature of expense/Asset
i. Personal Account	a. Salesman commission
ii. Real Account	b. Outstanding expense
iii. Nominal Account	c. Goodwill

(a) i-b, ii-c, iii-a

(b) i-a, ii-b, iii-c

(c) i-c, ii-a, iii-b

(d) i-a, ii-c, iii-b

22. Match the following:

Nature of Account	Type of Account
i. Prepaid expenses	(a) Liability
ii. Bad debts	(b) Income
iii. Outstanding expenses.	(c) Asset
iv. Interest on investment	(d) Expense

(a) i-b, ii-a, iii-b, iv-c

(b) i-b, ii-d, iii-c ,iv-a

(c) i-b, ii-d, iii-a, iv-c

(d) i-c, ii-d, iii-a, iv-b

23. The sequence of accounting procedures used to record, classify and summaries the business transaction is known as _______

(a) Accounting Framework
(b) Accounting Cycle
(c) Accounting Transaction
(d) Accounting Assets

24. Accounting cycle begins with :

(a) Preparation of Final Accounts
(b) Identification of business transactions
(c) Recording of business transactions
(d) Preparation of Ledger book

25. The second stage of Accounting Cycle in Accounting is _______.

(a) Preparation of Journal or Subsidiary books
(b) Preparation of Trial Balance
(c) Preparation of Ledger
(d) Preparation of Final Account

26. Which is the third stage of an Accounting Cycle in Accounting?

(a) Preparation of Financial Statement
(b) Preparation of Journal books
(c) Preparation of Ledger
(d) Preparation of Trial Balance

27. Which of following is the final stage of Accounting Cycle?

(a) Preparation of financial statements
(b) Recording of business transactions
(c) Preparation of Trail Balance
(d) Preparation of Ledger Book

28. Which of the following is not a stage of an Accounting Cycle?

(a) Recording business transaction in Journal or Subsidiary Books

(b) Preparation of Ledger

(c) Verify the books of Accounts

(d) Preparation of Trial balance

29. Rs. 10,000 paid as wages for erecting a machine (installation charges) should be debited to ________.

(a) Wages account

(b) Machine account

(c) Capital account

(d) None of these

30. A firm received Rs. 2,500 from Satish, whose account was previously written off as Bad-debt. The amount received will be credited to_______.

(a) Satish’s Account

(b) Cash a/c

(c) Bad-debts Recovered A/c

(d) Bad debts a/c

31. Irrecoverable amount from the customer is recorded in the journal as ______.

(a) Bad-debts

(b) Rebate

(c) Provision for bad-debts

(d) None of the above

32. The amount set aside to meet probable losses on account of bad debts is a ________.

(a) Provision

(b) Investment

(c) Reserve

(d) Capital

33. Which of the following is not a business transaction?

(a) Paid son’s fees from business Rs.30,000

(b) Bought Furniture of Rs.1,00,000 for business

(c) Paid for salaries of employees Rs. 24,000

(d) Paid son’s fees from the personal Bank Account of owner

34. Goods of Rs. 20,000 destroyed by fire is :

(a) an event

(b) a transaction

(c) a asset

(d) an equation

35. Which of the following is/are considered as transactions?

(i) Cash of Rs. 50,000 brought by the owner and started business,

(ii) Goods destroyed by fire Rs. 10,000,

(iii) Received an order of Rs. 20,000 from the customer,

(iv) Goods supplied to customer as per his order worth Rs.20,000.

(a) i, ii and iii

(b) Only i

(c) i, ii and iv

(d) Both i and ii

36. Select the odd one out :

(i) Price list sent to prospective customer

(ii) Goods supplied to the customer as per the order

(iii) Dismissed the Assistant from his job

(iv) Took 20 in coins in exchange for 20 note

(a) I

(b) III

(c) II

(d) IV

37. Principal book of Accounting :

(a) Journal

(b) Subsidiary

(c) Ledger

(d) Trial Balance

38. Journal records all transactions in :

(a) alphabetical order

(b) random manner

(c) chronological order

(d) none of the above

39. Journal is a :

(a) memorandum record

(b) primary record

(c) secondary record

(d) none of the above

40. ______is not referred as one of books of original entry.

(a) Journal Proper

(b) Purchases book

(c) Journal

(d) Ledger Book

41. In Journal the transaction are recorded in _______.

(a) An analytical Order
(b) Chronological Order
(c) Unsystematic manner
(d) None of the above

42. An account of which the total is heavier on debit side to have a ____

(a) Nil balance

(b) Credit balance

(c) Debit balance

(d) None of these

43. As per the rules of Accounting Equation Approach, goods withdrew for own use by owner from business

(a) Increase Assets and decrease Capital

(b) Decrease Assets and increase Capital
(c) Decrease Assets and decrease Capital

(d) Increase Assets and increase Capital

44. Introduction of fresh Capital into the business results into _______

(a) Increase in Assets and increase in Equity

(b) Decrease in Assets and Decrease in Liabilities

(c) Increase in Liabilities and Increase in Bank

(d) All of these

45. Mr. Balani introduces his car into his business. Which parts of the business accounting equation will change?

(a) capital and liability
(b) liabilities and assets
(c) capital and profit
(d) assets and capital

46. Which of the following is a correct entry to rectify the error?
Wages paid for erection of new machinery are debited to wages A/c.

(a) Purchase A/c Dr, Wages A/c Cr
(b) Machine A/c Dr, Wages A/c Cr
(c) Machine A/c Dr, Suspense A/c Cr
(d) Wages A/c Dr, Machine A/c Cr

47. A trial balance of the business is affected due to overcasting Sales Return A/c by Rs.100 then the rectification treatment will be ________.

(a) Suspense A/c Dr, Sales Return A/c Cr.

(b) Goods Return A/c Dr, Suspense A/c Cr.

(c) Sales Return A/c Dr, Suspense A/c Cr.

(d) Sales A/c Dr, Sales Return A/c Cr.

48. From the following information, Find out the total of each side i.e. Debit and Credit side, of Trial balance:

Capital A/c Rs. 50,000, Drawing A/c Rs.10,000, Purchase A/c Rs.10,000,
Sales A/c Rs.20,000, Salaries A/c Rs. 5,000, Furniture A/c Rs.15,000,
Debtors A/c Rs. 20,000, Creditors A/c Rs.10,000, Cash A/c Rs.12,000 and
Bank A/c Rs. 8,000

(a) 1,00,000

(b) 40,000

(c) 80,000

(d) 1,60,000

49. Any written evidence in support of a business transaction is called ____

(a) Ledger

(b) Voucher

(c) Trial Balance

(d) Journal

50. Goods return by customer worth Rs. 30,000. In which of the following voucher it will be recorded?

(a) Debit Note

(b) Cheque

(c) Bank Payment voucher

(d) Credit Note

51. On 15th February, 2018, Mr. Sailesh purchased goods from M/s Mehta & Co. for Rs. 1,00,000 of which he has paid Rs. 50,000 by cash and Rs. 50,000 by cheque of Bank of  Baroda. From this available information identify which of following vouchers are to be prepared by the Mr. Sailesh for the Accounting purpose?

(a) Cash Payment voucher Rs. 50,000 and Bank Receipt voucher Rs. 50,000
(b) Cash Payment voucher Rs.50,000 and Bank Payment voucher Rs. 50,000
(c) Cash Receipt voucher Rs. 50,000 and Bank Receipt voucher Rs. 50,000
(d) Cash Payment voucher Rs. 50,000 and Bank Receipt voucher Rs. 50,000

52. All revenue expenses are recorded in :

(a) Annual Report

(b) Directors Report

(c) Profit and loss Account

(d) Balance sheet

53. The difference between Capital and Revenue expenditure depends upon _____

(a) Whether amount of expenditure incurred is large or small

(b) Duration of benefit to be gained from such expenditure

(c) The nature of liability arising out of expenditure
(d) None of the above

54. Any Expenditure results in to increase in earning Capacity of the business will be referred to as _______

(a) Revenue expenditure
(b) Deferred Revenue Expenditure
(c) Capital Expenditure
(d) All of these

55. Rs. 5,000 spent on replacement of worn-out part of the machine will be charged as ______.

(a) Capital Expenditure

(b) Revenue Expenditure

(c) Deferred Revenue Expenditure
(d) Capital Loss

56. The cost of removing the stock of material from an old site to the new site is _______.

(a) Capital profit

(b) Capital Expenditure

(c) Revenue Loss

(d) Revenue Expenditure

57. A manufacturing unit has three different units. Raw material, work in progress, finished goods within distance of 10 kms. The transfer of goods from one unit to another unit is termed as ___

(a) Revenue expenditure
(b) Deferred revenue expenditure
(c) Capital expenditure
(d) None of these

58. Payment of Bonus, Provident Fund, and Retrenchment compensation is _______.

(a) Capital Expenditure

(b) Revenue Expenditure

(c) Both (A) & (B)

(d) None of these

59. An amount received as Bank loan is considered as :

(a) Revenue Loss

(b) Capital Receipt

(c) Revenue Expenditure

(d) Revenue Receipt

60. Cost of Rs. 1,000 incurred in increasing the sitting accommodation in a cinema house is ______.

(a) Capital Expenditure
(b) Revenue Expenditure
(c) Deferred Revenue Expenditure
(d) Revenue Loss

61. Expenditure on making a few more Exits in a Cinema hall to comply with Government orders is _______

(a) Capital Expenditure

(b) Revenue Expenditure

(c) Both (A) & (B)

(d) None of these

62. Mr. Swayam carrying on real estate business, sold a piece of land for Rs. 40,00,000 (cost Rs. 35,00,000) then the type of receipt is ____

(a) Capital

(b) Revenue

(c) Deferred Revenue

(d) None of the above

63. Excise duty paid on goods manufacturing :

(a) Capital expenditure
(b) Deferred revenue expenditure
(c) Capital receipt
(d) Revenue expenditure

64. _______ arises out of a casual and non-recurring transaction.

(a) Revenue profit

(b) Capital profit

(c) Capital loss

(d) Both A & B

65. The term loan Rs. 1,00,000 obtained from the IDBI for the purchase of Machinery on 1/4/2015. Interest accrued for Rs. 15,000 on the loan for the year 2015-2016. The productions have been commenced since 1/4/2016. Interest accrued on the loan for the year 2015-2016 is treated as :

(a) Capital Expenditure
(b) Revenue Expenditure
(c) Deferred Revenue Expenditure
(d) Capital Loss

66. An Accounting, heavy loss arising from the fire of the non insured assets is treated as

(a) Revenue Expenditure
(b) Capital Expenditure
(c) Revenue Loss
(d) Deferred Revenue Expenditure

67. If sales price of fixed asset more than cost of the fixed asset sold, the difference is _______.

(a) Revenue Profits

(b) Capital Profits

(c) Capital Loss

(d) Revenue Loss

68. Discount on issue of shares is an example of______

(a) Capital Expenditure
(b) Revenue Loss
(c) Deferred Revenue Expenditure
(d) Capital Loss

69. What is the full form of GAAP?

(a) Generally Accepted Auditing Principle

(b) Generally Accepted Administration Principle

(c) Generally Accepted Accounting Principle

(d) Generally Accepted Auditing Practices

70. AICPA stands for ____.

(a) American Institute of Certified Public Association

(b) American Institute of Certified Public Accountants

(c) Accounting Institute of Chartered Public Association

(d) None of the above

71. The concept of Separate Legal Entity is applicable to which of the following types of business?

(a) Sole proprietorship

(b) Partnership

(c) Joint Stock Company

(d) All of the above

72. A company does not include the value of skills gained by its employees from training programmes in its financial statements. Which accounting concept is being applied?

(a) consistency

(b) materiality

(c) money measurement

(d) substance over form

73. As per which concept, General health condition of the Chairman of the company, working condition in which a worker has to work, sales policy pursued by the enterprise, quality of products introduced by the enterprise, etc are not recorded in the books.

(a) Money measurement concept
(b) Cost concept
(c) Periodicity concept
(d) Business entity concept

74. The same accounting policy and procedure should be followed every year is in accordance to ________

(a) Convention of Consistency

(b) Periodicity Concept
(c) Matching Concept
(d) Going Concern Concept

75. The practice of appending notes for contingent liabilities in accounting statements is in pursuance to _____.

(a) Convention of Consistency
(b) Convention of Conservatism
(c) Money Measurement Concept
(d) Convention of disclosure

76. The Financial Statements must show all the relevant and reliable information in accordance with the:

(a) Convention of Consistency
(b) Convention of Conservatism
(c) Convention of Materiality
(d) Convention of Full Disclosure

77. A trader has included rent, which is due but not paid, in his Profit and Loss Account. Which accounting concept has been applied?

(a) Historical cost

(b) matching

(c) Money measurement

(d) prudence

78. Small amount of Advertisement Expenditure recorded as a general expense is based on :

(a) Materiality

(b) Conservatism

(c) Realization

(d) Accrual

79. Two companies (one a giant company and the other a tiny company) buy identical furniture. The giant company writes it off immediately but the tiny company treats it as a fixed asset. Which accounting concept are the companies applying?

(a) business entity

(b) going concern

(c) materiality

(d) money measurement

80. The accounting treatment and presentation of transaction and events should be governed by their substance and financial reality and not merely with their ________ form.

(a) Prudence

(b) Materiality

(c) Legal

(d) Accounting standard

81. Valuing Closing Stock at Market price or cost price whichever is less, is based on convention of ____.

(a) Consistency

(b) Conservatism

(c) Materiality

(d) None of the above

82. Cost or Market price whichever is lower is based on ______.

(a) Going Concern Concept
(b) Conservatism Convention
(c) Materiality Concept
(d) Realization Concept

83. Provide for bad-debt reserve @ 5% on debtors of Rs. 30,000 after charging Bad-Debts of Rs. 3000, is of what amount and that is provided as per which convention?

(a) 2,700 & Conservatism convention
(b) 1,350 & Prudence Convention
(c) 2,700 & Materiality
(d) 2,650 & Consistency

84. Applying different methods for charging Depreciation on the same asset for different years is violation of ____

(a) Going Concern Concept
(b) Money Measurement Concept
(c) Convention of Consistency
(d) None of these

85. ______ ensures the reliability of business transactions recorded in the books of accounts.

(a) Accounting Period Concept
(b) Objectivity Concept
(c) Money Measurement Concept
(d) Convention of Conservatism

86. Cost of fixed asset becomes expense over the periods of its use on the basis of

(a) Business Entity Concept
(b) Accounting Period Concept
(c) Money Measurement Concept
(d) Going Concern Concept

87. Going Concern Concept forms the basis for ______

(a) Subsequent accounting for an asset

(b) Disclosing market value of securities
(c) Preparing financial statements

(d) Depreciating fixed assets over their useful lives

88. Accrual means -

(a) Recognition of revenue as it is earned and that of costs as they are paid
(b) Recognition of revenue as it is received and that of costs as they are incurred
(c) Recognition of revenue and costs on payment basis
(d) Recognition of revenue as it is earned and that of costs as they are incurred

89. Accrual Concept is based on______.

(a) Mercantile system

(b) Cash System

(c) Barter System

(d) Desi Nama System

90. Madhav purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting Rs. 18,00,000 and met expenses amounting Rs. 2,50,000 during the year, 2017. He counted net profit as Rs. 3,50,000. Which of the accounting concept was followed by him?

(a) Entity
(b) Periodicity
(c) Matching
(d) Conservatism

91. During the year 2015, Rohan purchased goods of Rs.25,00,000, of which he sold 80% of the goods for Rs.30,00,000 and spent expenses amounting to Rs.3,00,000. The net profit earned by him is Rs. ________ applying Concept of ________

(a) 5,00,000, Going Concern
(b) 2,00,000, Realization
(c) 7,00,000, Matching
(d) None of these

92. The Economic life of an enterprise is artificially spilt into periodic intervals in accordance with _______.

(a) Going Concern Concept
(b) Revenue Recognition Concept
(c) Matching Concept
(d) Accounting Period Concept

93. The primary considerations in the selection of accounting policies are

(a) Substance over form, Consistency and Prudence
(b) Substance over form, Subjectivity and Prudence
(c) Substance over form, Materiality and Prudence
(d) Substance over form, Consistency and Subjectivity

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