Fundamentals of Accounting – Multiple Choice Questions (MCQ) with Answers

1-Accounting provides information on

(A) Cost and income for managers

(B) Company’s tax liability for a particular year
(C) Financial conditions of an institution
(D) All of the above

2-The long term assets that have no physical existence but are rights that
have value is known as
(A) Current assets
(B) Fixed assets
(C) Intangible assets
(D) Investments
3-The assets that can be converted into cash within a short period (i.e. 1
year or less) are known as

(A) Current assets

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(B) Fixed assets

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(C) Intangible assets

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(D) Investments

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4-Patents, Copyrights and Trademarks are

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(A) Current assets
(B) Fixed assets
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(C) Intangible assets
(D) Investments
5-The following is not a type of liability
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(A) Short term

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(B) Current
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(C) Fixed
(D) Contingent

6-The liabilities that are payable in more than a year and are not be
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liquidated from current assets

(A) Current liabilities
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(B) Fixed liabilities

(C) Contingent liabilities
(D) All of the above
7-The debts, which are to be repaid within a short period (year or less) are
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known as
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(A) Current liabilities

(B) Fixed liabilities
(C) Contingent liabilities
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(D) All of the above

8-The sales income (Credit and Cash) of a business during a given period is
called
(A) Transactions
(B) Sales returns
(C) Turnover

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 (D) Purchase returns

9-Any written evidence in support of a business transaction is called

(A) Journal
(B) Ledger
(C) Ledger posting
(D) Voucher

10-The accounts that records expenses, gains and losses are

(A) Personal accounts
(B) Real accounts
(C) Nominal accounts
(D) None of the above

11-Real accounts records

(A) Dealings with creditors or debtors

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(B) Dealings in commodities

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(C) Gains and losses

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(D) All of the above

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MULTIPLE CHOICE QUESTIONS ON BASIC ACCOUNTING

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Q1] Which accounting concept satisfy the valuation criteria:
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a) Going concern, Realisation, Cost b) Going concern, Cost, Dual aspect
c) Cost, Dual aspect, Conservatism d) Realisation, Conservatism, Going concern.
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Q2] A trader has made a sale of Rs.75, 500 out of which cash sales amounted to
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Rs.25, 500. He showed trade receivables on 31-3-2014 at Rs.25,500. Which concept is

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followed by him?

a) Going concern b) Cost c) Accrual d) Money measurement

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Q3] In which of the following cases, accounting estimates are needed?

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a) Employs benefit schemes b) Impairment of losses c) Inventory obsolescence d) All of

the above

Q4] Deewali advance given to an employee is

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a) Revenue Expenditure b) Capital Expenditure c) Deferred Revenue Expenditure

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d) Not an Expenditure

Q5] A firm has reported a profit of Rs.1,47,000 for the year ended 31-3-2014 after
taking into consideration the following items.
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(i) The cost of an asset Rs.23,000 has been taken as an expense

(ii) The firm anticipated a profit of Rs.12,000 on the sale of an old furniture
(iii) Salary of Rs.7,000 outstanding for the year has not been taken into account.
(iv) An asset of Rs.85,000 was purchased for Rs.75,000 and was recorded in the books at
Rs.85,000.

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 What is the correct amount of profit to be reported in the books?

a) Rs.1,47,000 b) Rs. 1,51,000 c) Rs.1,63,000 d) Rs.1,41,000

Q6] The process of recording financial data upto trial balance is

a) Book keeping b) Classifying c) Summarising d) Analyzing

Q7] Rohit carrying on real estate business sold a piece of land for Rs.4,00,00,000 (cost
Rs.3,50,00,000) then the type of receipt is ______ nature and profit on sale is

a) Capital & transferred to capital reserve b) Revenue & transferred to P & L a/c
c) Capital & transferred to P & L a/c d) Revenue & transferred to general reserve

Q8] In income measurement & recognition of assets & liabilities which of the
Following concepts goes together?

(a) Periodicity, Accural, Matching

(b) Cost, Accural, matching

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(c) Going concern, cost, Realization
(d) Going concern, Periodicity, Reliability

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Q9] Interpretation means

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(a) Explanation of meaning and significance of the data in Financial Statements.
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(b) Concerned with preparation and presentation of classified data
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(c) Systematic analysis of recorded data
(d) Methodical classification of data given in Financial Statements.
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Q10] 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
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were Rs. 500000. But the trader recorded in his books for Rs. 750000. Which of the
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following concept is violated.

(a) Money measurement

(b) Conservatism
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(c) Consistency
(d) None of these
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Q11] Which of the following is wrong?

(a) All real and personal accounts are transferred to balance sheet
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(b) Nominal accounts are transferred to P & L account

(c) Each account is opened separately in ledger
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(d) Rent is a personal account, outstanding rent is nominal account

Q 12] is root cause for financial accounting

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(a) Stewardship accounting

(b) Social accounting
(c) Management accounting
(d) Human resource accounting

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 Q 13] If nothing is given in the financial statements about the three 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

Q14] 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

Q15] Fixed assets are held by business for _____

a) Converting into cash b) Generating revenue c) Resale d) None of the above

Q16] Which accounting concept specifies the practice of crediting closing stock to
the trading account?

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a) Cost b) Realisation c) Going concern d) Matching

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Q17] Amount spent to increasing the earning capacity is a ______ expenditure.

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a) Capital b) Revenue c) Deferred revenue d) Capital Loss
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Q18] Change in the capital A/c of proprietor may occur due to ______

a) Profit earned b) Loss incurred c) Capital Introduced d) All of the above

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Q19] Consistency with reference to application of accounting procedures means

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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
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Q20] If one of the cars purchased by a car dealer is used for business purpose,
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instead of resale, then it should be recorded by_____

a) Dr Drawing A/c & Cr Purchases A/c b) Dr Office Expenses A/c & Cr Motor Car A/c
c) Dr Motor Car A/c & Cr Purchases A/c d) Dr Motor Car & Cr Sales A/c
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Q21] If wages are paid for construction of business premises ______ A/c is credited
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and _____ A/c is debited.

a) Wages, Cash b) Premises, Cash c) Cash, Wages d) Cash, Premises

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Q22] Human resources will not appear in the balance sheet according to ______
concept.

a) Accrual b) Going concern c) Money measurement concept d) None

Q23] Provision for discount on debtors is calculated on the amount of debtors.

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 a) Before deducting provision for doubtful debts.
b) After deducting provision for doubtful debts.
c) Before deducting actual debts and provision for doubtful debts.
d) After adding actual bad and doubtful debts.

Q24] Which of the following is not a Real Account?

a) Cash A/c b) Investments A/c c) Out standing rent A/c d) Purchases A/c

Q25] Value of goods withdrawn by the proprietor for his personal use should be
credited to ____

a) Capital A/c b) Sales A/c c) Drawings A/c d) Purchases A/c

Q26] Which of the following is incorrect?

a) Good will intangible asset b) Sundry debtors - current asset

c) Loose tools tangible fixed asset d) Outstanding expenses -current asset.

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Q27] M/s Stationery Mart will debit the purchase of stationery to _______

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a) Purchases A/c b) General Expenses A/c c) Stationery A/c d) None

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Q28] Small items like, pencils, pens, files, etc. are written off within a year according
to _ concept. rs e
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a) Materiality b) consistency c) Conservatism d) Realisation
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Q29] Business enterprise is separate from its owner according to _____ concept.
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a) Money measurement concept b) Matching concept c) Entity concept d) Dual aspect

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concept.

Q30] The policy of anticipate no profit and provide for all possible losses arise due
to the concept of _____
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a) Consistency b) Disclosure c) Conservatism d) Matching

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Q31] According to which concept, the proprietor pays interest on drawings

a) Accrual concept b) Conservatism concept c) Entity concept d) Dual Aspect concept

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Q32] Cost concept basically recognises ____

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a) Fair Market value b) Historical cost c) Realisable value d) Replacement cost

Q33] If the Market value of closing Inventory is less than its cost price, inventory will
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he shown at ____
a) Marketable value b) Fair Market value c) Both d) none

Q34] The Market price of good declined than the cost price. Then the concept that
plays a key role is ____

a) Materiality b) Going concern concept c) Realization d) Consistency

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 Q35] Fixed assets are double the current assets and half the capital. The current
assets are Rs.3,00,000 and investments are Rs.4,00,000. Then the current
liabilities recorded in balance sheet will be

a) 2,00,000 b) 1,00,000 c) 3,00,000 d) 4,00,000

Q36] Which of the following provide frame work and accounting policies so that the
financial statements of different enterprises become comparable.

a) Business Standards b) Accounting Standards c) Market Standards d) None

Q37] Which of the following factor is not considered while selecting accounting policies?

a) Prudence b) Substance over form c) Accountancy d) Materiality

Q38] Debit the receiver & credit the giver is _____ account.

a) Personal b) Real c) Nominal d) All the above

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Q39] Cash a/c is a ______

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a) Real a/c b) Nominal c) Personal d) None

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Q40] As per accrual concept, which of the followings is not true.
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a) revenue – expenditure = profit b) revenue – profit = expenditure
c) sales + gross profit = revenue d) revenue = profit + expenditure
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Q41] Mr. X sold goods to Mr. Y ask Mr. X to keep the goods with him for some time
a) symbolic delivery b) actual delivery c) constructive delivery d) none of these
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Q42] If nothing is written about the accounting assumption to be followed it is

presumed that:

a) They have been followed b) They have not been followed

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c) They are followed to some extent d) none of these

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Q43] Capital A/c is a _______ A/c.

a) Personal b) Real c) Nominal d) None

Q44] Cash A/c is a ________ A/c.

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a) Personal b) Real c) Nominal d) None

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Q45] The principle “Debit the receiver and credit the giver” is related to_____
a) Personal a/c b) Real a/c c) Nominal a/c d) None

Q46] As per the Matching concept, Revenue – ? = Profit

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a) Expenses b) Liabilities c) Losses d) Assets

Q47] Sales – Gross Profit = ________
a) Cost of goods sold b) Net sales c) Gross Sales d) Liabilities.

Q48] 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

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 Q49] Valuation of stock in accounting follows the principle of cost price or ____ which ever is
lower.
a) Market Price b) Average Price c) Net realizable Value d) None of these.

Q50] Which of the following is not a nominal Account?

A] Outstanding salaries A/C B] Salaries A/C C] Interest paid D] Commission received

Q51] Mr. X is a dealer in electronic goods (refrigerator, washing machine, air

conditioners, televisions, etc.) He purchased two air conditioners and installed in his
showroom. In the books of X the cost two air conditioners will be debited to
A] Drawing account B] Capital Account
C] Fixed assets D] Purchases account

Q52] 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

Q53] For every debit there will be an equal credit according to

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A] Matching concept B] cost concept
C] Money measurement concept D] Dual aspect concept

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Q54] Historical cost concept requires the valuation of an asset at
A] Original cost B] Replacement value

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C] Net realizable value D] Market value
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Q55] The comparison of financial statement of one year with that of another is
possible only when ----------------concept is followed
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A] Going concern B] Accrual C] Consistency D] Materiality

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Q56] Profit and loss is calculated at the stage of

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A] Recording B] Posting C] Classifying D] Summarising

Q57] Which of the following is not the main objective of accounting?

A] Systematic recording of transactions B] Ascertaining profit or loss
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C] Ascertainment of financial position D] Solving tax disputes with tax authorities

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Q58] 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 decreased by Rs.800000
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B] Assets decreased by Rs.800000 and liabilities increased by Rs.800000

C] Assets increased by Rs.1000000 and liabilities increased by Rs.800000
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D] Assets increased by Rs.800000 and liabilities increased by Rs.800000

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Q59] The rule debit all expenses and losses and credit all income and gains relates to
A] Personal account B] Real account C] Nominal accounts D] All

Q60] 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.

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