602 + Mcqs in Financial Accounting McqOptions

1.	Under single entry system, only personal accounts are kept and in some cases:
A.	Cash account is maintained
B.	Fixed assets accounts are maintained
C.	Liabilities account are maintained
D.	All of the above
Answer» B. Fixed assets accounts are maintained

Discussion

2.	An example of cash flow from investing activity is :
A.	Issue of debenture
B.	Repayment of long-term loan
C.	Purchase of raw materials for cash
D.	Sale of investment by non-financial enterprise.
Answer» E.

Discussion

3.	Cash from operating activities consists of:
A.	Operating Profit
B.	Decrease/Increase in Current Assets
C.	Decrease/Increase in Current Assets
D.	All of the Above
Answer» E.

Discussion

4.	Which of the following is not an activity listed in the statement of cash flows?
A.	Financing activities
B.	Operating activities
C.	Funding activities
D.	Investing activities
Answer» D. Investing activities

Discussion

5.	Buy Back must expenses may be treated as_________________
A.	deffered revenue expenses
B.	revenue expenses
C.	revenue or deffered revenue expenses
D.	capital expenses
Answer» D. capital expenses

Discussion

6.	Principle specifies that cost or expenses should be recorded at the same time as the revenue to which they correspond
A.	Going run concern ;
B.	Matching ;
C.	Historical Cost ;
D.	Prudence
Answer» C. Historical Cost ;

Discussion

7.	Cash from Operating activities will decrease due to :
A.	Increase in Current Assets
B.	Decrease in Current Liabilities
C.	Neither of the two
D.	Both (a) and (b) above
Answer» E.

Discussion

8.	The Income and Expenditure Account includes all revenue expenses and incomeirrespective of its cash flowSol:
A.	True
B.	False
C.	none
D.	all
Answer» B. False

Discussion

9.	All items of revenue in nature are shown in: Sol:
A.	Income and Expenditure A/c
B.	Balance Sheet
C.	(a) and (b) both
D.	None of these
Answer» B. Balance Sheet

Discussion

10.	Property received as a result of the will of the deceased person is called: Sol:
A.	Lagacy
B.	Honorarium
C.	Donation
D.	Subscription
Answer» B. Honorarium

Discussion

11.	Under which of the following concepts are shareholders treated as creditors for the amount they paid on the shares they subscribed to?
A.	Cost Concept
B.	Duality Concept
C.	Business Entity Concept
D.	Since the shareholders own the business, they are not treated as creditors
Answer» C. Business Entity Concept

Discussion

12.	An Example of cash flow from financing activity is :
A.	Payment of dividend
B.	Receipt of dividend on investment
C.	Cash received from customer
D.	Purchase of fixed asset
Answer» B. Receipt of dividend on investment

Discussion

13.	Cash payment to suppliers for goods and services are classified as cash flow from ____________ activities.
A.	operating
B.	financing
C.	investing
D.	all of the above.
Answer» B. financing

Discussion

14.	` 5,500 incurred on sundry expenses inadvertently recorded in the books of account as ` 550. This is an example of
A.	Fraud ;
B.	Error of Commission ;
C.	Error of Principle ;
D.	Compensatory Error
Answer» C. Error of Principle ;

Discussion

15.	While calculating cash flow from operating activities which will be deducted:
A.	Decrease in Prepaid Expenses
B.	Increase in Trade Payables
C.	Increase in Trade Receivables
D.	Decrease in Trade Receivables
Answer» D. Decrease in Trade Receivables

Discussion

16.	The following statement stands true when intangible assets are compared to the currentassetsSol:
A.	Useful life is short
B.	Useful life is moderate
C.	Useful life is long
D.	all
Answer» D. all

Discussion

17.	In cash flows, when a firm invests in fixed assets and short-term financial investments results in
A.	Increased Equity
B.	Increased Liabilities
C.	Decreased Cash
D.	Increased Cash
Answer» D. Increased Cash

Discussion

18.	The components of Computerised Accounting System are : Sol:
A.	Data, Report, Ledger, Hardware, Software
B.	Data, People, Procedure, Hardware, Software
C.	People, Procedure, Ledger, Data, Chart of Accounts
D.	Data, Coding, Procedure, Rules, Output
Answer» C. People, Procedure, Ledger, Data, Chart of Accounts

Discussion

19.	Balance of X's account in creditors ledger is transferred to X's account in debtors ledger, in this case
A.	X's account in debtors ledger will be debited.
B.	X's account in creditors ledger will be debited.
C.	Suspense account will be debit
Answer» C. Suspense account will be debit

Discussion

20.	The Computerised Accounting System refers to : Sol:
A.	Printing of Balance Sheet and Profit and Loss Accounts using computer
B.	Processing of accounting transaction through computer and produce records and reports
C.	Processing of accounting related data and printing reports
D.	None of the above
Answer» C. Processing of accounting related data and printing reports

Discussion

21.	The Buy Back of equity shares is governed by________________ of Companies Act
A.	section 117 c
B.	section 80
C.	section 100 to 104
D.	section 68
Answer» B. section 80

Discussion

22.	When an asset is acquired on hire purchase system, the asset account is debited with _______ of the assets in the books of the hire purchaser.
A.	Hp price
B.	Cash price
C.	Installment price
D.	None of these
Answer» C. Installment price

Discussion

23.	Donation received for a special purpose: Sol:
A.	Should be credited to Income and Expenditure A/c
B.	Should be credited to a separate account and shown in the Balance Sheet
C.	Should be shown on the Assets side of the Balance Sheet
D.	None of these
Answer» C. Should be shown on the Assets side of the Balance Sheet

Discussion

24.	Raw material and components purchased and used at the time of installation of new Plant and Machinery will be debited to
A.	Plant and Machinery A/c ;
B.	Raw Material Consumed A/c ;
C.	Purchase A/c ;
D.	Profit ;and Loss A/c
Answer» B. Raw Material Consumed A/c ;

Discussion

25.	On amalgamation, Share issue Expenses A/c appearing on Assets side of the balance sheet of the vendor company
A.	(a) is closed by debit to Realisation A/c
B.	(b) is closed by debit to Equity Shareholders A/c
C.	(c) is closed by debit to Profit & Loss A/c
D.	(d) is closed by credit to Equity Shareholders A/c
Answer» C. (c) is closed by debit to Profit & Loss A/c

Discussion

26.	The excess of assets over liabilities in non-trading concerns is termed as: Sol:
A.	Capital Fund
B.	Capital
C.	Profit
D.	Net profit
Answer» B. Capital

Discussion

27.	According to the money measurement concept, the following will be recorded in the books of account of the business:
A.	Health of Managing Director of the company
B.	Quality of company s goods
C.	Value of Plant & Machinery
D.	Strike by employees
Answer» D. Strike by employees

Discussion

28.	Transaction& events not capable of being expressed in terms of money are not to be recorded in accounting due to
A.	Going concern
B.	Accounting entity
C.	Money measuremen
Answer» D.

Discussion

29.	Which goodwill is recorded in the books of Accounts Sol:
A.	Purchase Goodwill
B.	Self Generated
C.	Both
D.	None
Answer» B. Self Generated

Discussion

30.	Donation received for a special purpose:
A.	Should be credited to Income and Expenditure Account
B.	Should be credited to separate account and shown in the Balance Sheet
C.	Should be shown on the assets side of the Balance Sheet
D.	Should not be recorded at all
Answer» C. Should be shown on the assets side of the Balance Sheet

Discussion

31.	Donations received for a special purpose will be taken to the
A.	Income and Expenditure A/c
B.	Assets side of the B/S
C.	Liabilities side of the B/S
D.	None of the above
Answer» D. None of the above

Discussion

32.	Donations received for a special purpose are
A.	Asset
B.	Revenue receipt
C.	Capital Receipt
D.	None of the above
Answer» D. None of the above

Discussion

33.	Under single entry system, certain transactions are recorded :
A.	At regular intervals
B.	At the end of the accounting period
C.	Totally
D.	None of the above
Answer» D. None of the above

Discussion

34.	According to which concept, proprietor of a business is treated as a creditors to the extent of his capital
A.	Money measurement
B.	Cost
C.	Dual aspect
D.	Business entity
Answer» E.

Discussion

35.	When the benefits of revenue expenditure is available for a period of two or three years, the expenditure is known as-
A.	Revenue Expenditure ;
B.	Deferred Revenue Expenditure ;
C.	Capital Expenditure ;
D.	Depreciation.
Answer» C. Capital Expenditure ;

Discussion

36.	Receipts and Payments Account of non-trading concerns is a
A.	Nominal Account
B.	Real Account
C.	Personal Account
D.	All of the above
Answer» C. Personal Account

Discussion

37.	While preparing the final a accounts of non trading concerns where do you show receipts and payments of special nature
A.	Balance sheet
B.	P & L account
C.	I & E account
D.	R & P account
Answer» B. P & L account

Discussion

38.	Procedure of conversion of Single entry books into Double entry
A.	Depends upon the nature of the records maintained in the single entry
B.	To prepare a statement of affairs at the starting date of the selected accounting
C.	Some items like allowance, bad debt, dishonoured bills must be included
D.	All the above
Answer» E.

Discussion

39.	General donations of relatively large amount is recorded on the
A.	Income side of Income and Expenditure Account
B.	Liabilities side of Balance Sheet
C.	Receipts side of Receipts and Payments Account
D.	both b. and c.
Answer» E.

Discussion

40.	If Office Equipment is purchased for cash, what effect will this transaction have on the financial position of the company?
A.	There is no change in the Assets, Liabilities and Owners Equity
B.	There is a decrease in Assets, increase in Liabilities and no change in Owners Equity
C.	There is a decrease in Assets, no change in Liabilities and a decrease in Owners Equity
D.	There is an increase in Assets, decrease in Liabilities and no change in Owners Equity
Answer» B. There is a decrease in Assets, increase in Liabilities and no change in Owners Equity

Discussion

41.	_______________ is prepared at the end of the accounting period to show the financial position o f business
A.	Profit & low account
B.	Balance sheet
C.	Trail balanc
Answer» C. Trail balanc

Discussion

42.	The process of converting foreign subsidiary financial statements into the home currency is known as------------
A.	Transmission
B.	Translation
C.	Consolidation
D.	Reconstruction
Answer» C. Consolidation

Discussion

43.	The process of converting foreign subsidiary financial statements into the home currency is known as -------
A.	Transmission
B.	Translation
C.	Consolidation
D.	Reconstruction
Answer» C. Consolidation

Discussion

44.	When Branch assets a/c is kept in the books of H.O., the H.O. will debit following a/c for its depreciation-
A.	Branch P & L A/c
B.	Depreciation A/c
C.	Branch A/c
D.	None of the above
Answer» D. None of the above

Discussion

45.	A heavy balance in the Income and Expenditure Account means
A.	Heavy Surplus
B.	Heavy profit
C.	Heavy Cash
D.	All of the above
Answer» B. Heavy profit

Discussion

46.	Income and Expenditure Account is: Sol:
A.	Personal Account
B.	Real Account
C.	Nominal Account
D.	None of these
Answer» D. None of these

Discussion

47.	Non-trading organization prepares
A.	Income and Expenditure A/c
B.	Trading and profit and loss A/c
C.	Trading A/c only
D.	Profit and loss A/c only
Answer» B. Trading and profit and loss A/c

Discussion

48.	Income and expenditure Account shows a balance of:
A.	Cash in in hand
B.	Capital Account
C.	Net Profit
D.	Excess of revenue over expenditure or vice versa.
Answer» E.

Discussion

49.	The Head office account in the books of branch is debited with
A.	Cash sent to the head office and goods returned to the head office
B.	Cash and goods received from the head office
C.	Head office expenses allocated to branch by the head office
D.	None of the above
Answer» B. Cash and goods received from the head office

Discussion

50.	Income and Expenditure Account records transactions of: Sol:
A.	Capital nature only
B.	Revenue nature only
C.	(a) and (b) both
D.	None of these
Answer» C. (a) and (b) both

Discussion

Explore topic-wise MCQs in Testing Subject.

Under single entry system, only personal accounts are kept and in some cases:

An example of cash flow from investing activity is :

Cash from operating activities consists of:

Which of the following is not an activity listed in the statement of cash flows?

Buy Back must expenses may be treated as_________________

Principle specifies that cost or expenses should be recorded at the same time as the revenue to which they correspond

Cash from Operating activities will decrease due to :

The Income and Expenditure Account includes all revenue expenses and incomeirrespective of its cash flowSol:

All items of revenue in nature are shown in: Sol:

Property received as a result of the will of the deceased person is called: Sol:

Under which of the following concepts are shareholders treated as creditors for the amount they paid on the shares they subscribed to?

An Example of cash flow from financing activity is :

Cash payment to suppliers for goods and services are classified as cash flow from ____________ activities.

` 5,500 incurred on sundry expenses inadvertently recorded in the books of account as ` 550. This is an example of

While calculating cash flow from operating activities which will be deducted:

The following statement stands true when intangible assets are compared to the currentassetsSol:

In cash flows, when a firm invests in fixed assets and short-term financial investments results in

The components of Computerised Accounting System are : Sol:

Balance of X's account in creditors ledger is transferred to X's account in debtors ledger, in this case

The Computerised Accounting System refers to : Sol:

The Buy Back of equity shares is governed by________________ of Companies Act

When an asset is acquired on hire purchase system, the asset account is debited with _______ of the assets in the books of the hire purchaser.

Donation received for a special purpose: Sol:

Raw material and components purchased and used at the time of installation of new Plant and Machinery will be debited to

On amalgamation, Share issue Expenses A/c appearing on Assets side of the balance sheet of the vendor company

The excess of assets over liabilities in non-trading concerns is termed as: Sol:

According to the money measurement concept, the following will be recorded in the books of account of the business:

Transaction& events not capable of being expressed in terms of money are not to be recorded in accounting due to

Which goodwill is recorded in the books of Accounts Sol:

Donation received for a special purpose:

Donations received for a special purpose will be taken to the

Donations received for a special purpose are

Under single entry system, certain transactions are recorded :

According to which concept, proprietor of a business is treated as a creditors to the extent of his capital

When the benefits of revenue expenditure is available for a period of two or three years, the expenditure is known as-

Receipts and Payments Account of non-trading concerns is a

While preparing the final a accounts of non trading concerns where do you show receipts and payments of special nature

Procedure of conversion of Single entry books into Double entry

General donations of relatively large amount is recorded on the

If Office Equipment is purchased for cash, what effect will this transaction have on the financial position of the company?

_______________ is prepared at the end of the accounting period to show the financial position o f business

The process of converting foreign subsidiary financial statements into the home currency is known as------------

The process of converting foreign subsidiary financial statements into the home currency is known as -------

When Branch assets a/c is kept in the books of H.O., the H.O. will debit following a/c for its depreciation-

A heavy balance in the Income and Expenditure Account means

Income and Expenditure Account is: Sol:

Non-trading organization prepares

Income and expenditure Account shows a balance of:

The Head office account in the books of branch is debited with

Income and Expenditure Account records transactions of: Sol: