Course: Principles of Accountancy

MCQs
Unit I

1) Accounting does not record non- financial transactions because of

(a) Entity concept (b) Accrual concept
(c) Money measurement concept (d) Cost concept
Answer: (c) Money measurement concept
2) According to the going concern concept, a business entity is assumed to have
(a) A long life (b) A very short life (c) Eternal life (d) No life
Answer: (a) A long life
3) Business is distinct from the owner. This concept is called
(a) Business entity (b) Going concern
(c) Money measurement concept (d) Cost concept
Answer: (a) Business entity
4) Each transaction is first entered in the
(a) Ledger (b) Journal (c) Trial Balance (d) Balance sheet
Answer: (b) Journal
5) Journal is a book of
(a) Primary entry (b) Compound entry (c) Closing entry (d) Adjusting entry
Answer: (a) Primary entry
6) Ledger is a book in which
(a) Only real accounts are opened
(b) Only real and personal accounts are opened
(c) All the real, personal and nominal accounts are opened
(d) Only personal accounts are opened
Answer: (c) All the real, personal and nominal accounts are opened
7) Rent account is a
(a) Real a/c (b) Personal a/c (c) Nominal a/c (d) Asset a/c
Answer: (c) Nominal a/c
8) The return of goods by a customer should be debited to
(a) Customer a/c (b) Sales return a/c (c) Purchases a/c (d) Purchase returns a/c
Answer: (b) Sales return a/c
9) The return of goods by a customer should be credited to
(a) Customer a/c (b) Sales return a/c (c) Purchases a/c (d) Purchase returns a/c
Answer: (a) Customer a/c
10) Interest on drawings is
(a) Expenditure for the business (b) Income to proprietor
(c) Gain for the business (d) Loss for the business
Answer: (c) Gain for the business
 Unit II

1) A lease is an example of
(a) A Current assets (b) A fixed assets (c) A wasting assets (d) liquid assets
Answer: (a) A Current assets
2) When the balance of Reserve for Bad Debts, account is in excess of the estimated sums it is
transferred to
(a) Sundry Debtors Accounts (b) Reserve for Discount on debtors Account
(c) Profit and Loss Account (d) Sundry Creditors Account
Answer: (c) Profit and Loss Account
3) Provision for depreciation account appears on the _______.
(a) Asset side. (b). Liability side.
(c). P & L account debit side. (d). P & L account credit side.
Answer: (b) Liability side
4) Authorized capital, also known as
(a) Nominal capital (b) Paid up capital (c) Issues capital (d) Private capital
Answer: (a) Nominal capital
5) All those to whom business owes money are:
(a) Debtors (b) Investors (c) Creditors (d) Shareholders
Answer: (c) Creditors
6) All direct & indirect expenses related to business are charged:
(a) Profit and loss account
(b) Trading account
(c) Trading account and Profit and loss account
(d) Directly to Balance sheet
Answer: (c) Trading account and Profit and loss account
7) P& l a/c is prepared for a period of one year by following:
(a) Consistency concept (b) Conservatism concept
(c) Accounting period concept (d) Cost Concept
Answer: (c) Accounting period concept
8) Cost of asset should always be equal to the cost of the liabilities. This concept is
(a) Double entry bookkeeping (b) Matching concept
(c) Consistency (d) Money measurement concept
Answer: (b) Matching concept
9) Payment of salary is recorded by:
(a) Debiting salary a/c; crediting cash a/c
(b) Debiting cash a/c; crediting salary a/c
(c) Debiting employee a/c; crediting cash a/c
(d) Debiting employee a/c; crediting salary a/c
Answer: (a) Debiting salary a/c; crediting cash a/c
10) Preliminary expenses are recorded in………………..
(a) Equity and liabilities-Liability side of B/S
(b) Current liabilities- Liability side of B/S
(c) Fixed assets- Asset side of B/S
(d) Asset side of B/S
Answer: (d) Asset side of B/S
 Unit III

1) When a bill is drawn by A on B, it is debited in the books of A to__________________

(a) Cash account. (b) B’s account
(c) Bills Receivable account. (d) Bills Payable account.
Answer: (c) Bills Receivable account.
2) When a bill drawn by A and B endorsed to C is dishonored on the due date, it is credited in
the books of A to__________________
(a) Bank account. (b) Bills Receivable account.
(c) Bank for collection of bills account. (d) Cash Account.
Answer: (b) Bills Receivable account.
3) When a bill is drawn by A on B and before the date of maturity, B becomes insolvent then in
the books of a it is debited to__________________
(a) Bills Receivable account. (b) Bank Account.
(c) B’s account (d) Bank for collection of bills.
Answer: (d) Bank for collection of bills.
4) Bills are drawn by__________________
(a) Creditors. (b) Debtors. (c) Agent. (d) Brokers.
Answer: (c) Agent.
5) Noting charges account is debited by__________________
(a) The presenter of bill. (b) The discounting banker.
(c) The acceptor. (d) The endorser.
Answer: (a) The presenter of bill.
6) While discounting the bill, debit should be given to__________________
(a) Bank account. (b) Bill receivable account.
(c) Acceptors account. (d) Cash account.
Answer: (a) bank account.
7) Cancelling the original bill and drawing a fresh acceptance is known as__________________
(a) Retiring under rebate. (b) Discounting.
(c) Renewal. (d) Bill sent to bank for collection.
Answer: (c) Renewal.
8) At the time of endorsement of a bill, the drawer credits__________________
(a) The drawer. (b) Endorsees personal account.
(c) Bills receivable account. (d) Bills for collection account.
Answer: (c) Bills receivable account.
9) When a bill is discharged, the acceptor debits__________________
(a) Creditors account. (b) Cash account.
(c) Bills payable account. (d) Bills receivable account.
Answer: (c) Bills payable account.
10) Average due date can be called as__________________
(a) Mean due date. (b)Median due date.
(c) Mode due date. (d) Zero date.
Answer: (a) mean due date.
 Unit IV

1) A bank reconciliation statement is ___________

(a) Part of pass book (b) Part of cash book
(c) Part of pass book and cash book (d) Part of credit book
Answer: (c) Part of pass book and cash book
2) A bank Reconciliation statement is prepared by ___________
(a) Business man (b) Debtors (c) Creditors (d) Banker
Answer: (a) Business man
3) Favourable balance of cash book implies that ___________
(a) Credit balance of cash book (b) Debit balance of cash book
(c) Bank overdraft (d) Adjusted balance of cash book
Answer: (b) Debit balance of cash book
4) A cash deposit made by business appears on the bank statement as _______ balance
(a) Debit (b) Credit (c) Expenses (d) Liability
Answer: (b) Credit
5) Bank reconciliation statement is the comparison of a bank statement (sent by bank) with the
_________ (prepared by business)
(a) Cash receipt journal (b) Cash payment journal
(c) Cash book (d) Financial statements
Answer: (c) Cash book
6) Bank reconciliation statement is prepared by
(a) Accountant of the business (b) Manager of the business
(c) Controller of the bank (d) Accountant of the bank
Answer : (a) Accountant of the business
7) Which of the following error results in unadjusted cash book balance?
(a) Outstanding checks (b) Unpresented checks
(c) Deposit in transit (d) Omission of Bank charges
Answer: (d) Omission of bank charges
8) Bank charges amounting to $5000 was not entered in the cash book. Identify the correct
adjustment in cash book
(a) Bank charges will be debited in cash book
(b) Bank charges will be added to cash book balance
(c) Bank charges will be credited in cash book
(d) Bank charges need no adjustment in cash book
Answer: (c) Bank charges will be credited in cash book
9) Unpresented checks also referred as
(a) Uncollected checks (b) Uncredited checks
(c) Outstanding checks (d) Bounced checks
Answer: (c) Outstanding checks
10) _______ are checks that are issued by the business but not yet presented to bank
(a) Uncollected checks (b) Uncredited checks
(c) Outstanding checks (d) Bounced checks
Answer: (c) Outstanding checks
 UNIT V

1) What Is Depreciation?
a) cost of a fixed asset
b) cost of a fixed asset’s repair
c) the residual value of a fixed asset
d) portion of a fixed asset cost consumed during the current account period
Answer: (d) portion of a fixed asset cost consumed during the current account period
2. Under Which Depreciation Method The Amount Of Depreciation Expenses Remains Same
Throughout The Useful Life Of A Fixed asset.
a) straight line method b) reducing balance method c) number of units produced method d)
machine hours method
3. A Company Purchased A Vehicle For 6000. I Will Be Used For 5 Years And Its Residual
Value Is Expected To Be 1000. What Is The Annual Amount Of Deprecation Using Straight
Line Method Of Depreciation? a) Rs.1000 b) Rs.2000 c) Rs. 3000 d) Rs.3300
Answer: a
4. What Is The Accumulated Deprecation? a) sum of all depreciation expenses of a fixed asset b)
depreciation c) cost of depletion of assets d) future value of fixed assets
Answer: a
5. Which Of The Following Is The Normal Balance Of An Accumulated Depreciation Account?
a) debit balance b) credit balance c) nil balance d) surplus amount
Answer: b

Answ 6. Which Of The Following Is A Double Entry For Depreciation Expenses? a)

accumulated depreciation debit and depreciation expenses credit b) depreciation expenses debit
and accumulated depreciation credit c) cash debit and depreciation expenses credit d)
depreciation expenses debit and cash credit
Answer: b
7. An Alternative Term Used For Accumulated Depreciation Expenses? a) provision for
depreciation b) cumulative depreciation c) targeted depreciation
d) depletion
Answer: a
8. A Fixed Asset Was Bought For 5000. Its Accumulated Depreciation Is 3000 And Rate Of
Depreciation Is 20%. Calculate Its Depreciation Expenses For The Current Accounting Period
Using Reducing Balance Method? a) Rs.600 b) Rs.2000 c) Rs.300d) Rs.400
Answer: d
9. Depreciable Amount + Residual Value Of A Fixed Asset =? a) depreciation expenses b)
accumulated depreciation c) cost of the fixed asset
d) future economic benefits of a fixed asset
Answer: c
10. The Purchase Price Of A Software That Will Be Used For More Than 12 Months Should be
Regarded As:
a) capital expenditure b) revenue expenditure c) a long term expense d) an accounting period
expense
Answer: b er: a