QUESTIONS ON ACCOUNTANCY

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1 1. is prepared at the end of the period to show the financial position of business a) P\L account b) Balance sheet c) Trial balance 2. Payment of monthly rent to landlord is a) Economic event b) Non-economic event c) None 3. is the original form of accounting a) Cost accounting b) Management accounting c) Financial accounting 4. is an example of fixed asset a) Receivable b) Stock c) Land/Building 5. A person who owes money to the firm is a a) Debtor b) Creditor c) None 6. is an example of wasting asset a) Land and Building b) Closing stock c) Mines d) Cash 7. expenditure is incurred to maintain the business or to keep the assets in good working condition a) Capital expenditure b) Deferred expenditure c) Revenue expenditure d) None 8. A transaction is one wherein items are exchanged for other items a) Sales b) Barter c) Exchange d) None 9. The comparison of one accounting period with that of the past is possible when one of the concepts given below is followed a) Consistency b) Cost c) Going concern d) Matching 10. Contingent liabilities are shown as tool note in the balance sheet as per accounting principle a) Full disclosure b) Objectivity c) Materiality d) Consistency 11. Adjustment made for outstanding expenses; accrued income etc in the financial statements is due to the principle a) Matching b) Business entity c) Materiality d) Consistency 12. According to concept it is assumed that the business will last for a long time a) Money management b) Materiality c) Going concern d) Business entity

2 13. Accounting equation is developed with the help of a) Money management concept b) Dual aspect concept c) Revenue realization concept d) Historical cost. concept 14. Revenue from sale is realized when a) Sale is made b) Order is placed c) Cash is received d) Production is completed 15. Accounting principles are based on a) Convenience in accounting b) Objectivity c) Subjectivity d) Practicability 16. Normally, assets are recorded at cost price. This is because of a) Going concern concept b) Historical cost concern c) Both a & b d) None 17. The principle of prudence is the outcome of the criticism of the accounting principle of a) Materiality b) Conservation c) Business entity concept d) None 18. The practice of appending notes regarding contingent liabilities in financial statements is in pursuant to the convention of a) Revenue realization b) Dual aspect c) Matching principle d) Full disclosure 19. The process of transferring entries from the journal into appropriate accounts in the ledger is called a) Journalizing b) Posting c) Balancing d) Transferring 20. Debit note is associated with a) Purchase returns b) Sales return c) Purchases d) Sales 21. The total purchase made during a particular period can be arrived at from a) Purchases journal b) Purchases account c) Cash book d) None 22. Cash book is a a) Journal b) Ledger c) Both a & b d) None 23. Sales book makes a record of a) Total sales b) Cash sales c) Credit sales d) None\ 24. Bank reconciliation statement is prepared by a) Bank b) Account holder c) Tax authorities d) None

3 25. Find the odd one a) Furniture purchase treated as purchase b) Withdrawal by proprietor treated as establishment charges c) Sale of old machinery treated as sales d) Cash received from Mohan debited to his accounts 26. Gross profit is the difference between a) Sales & purchases b) Sales & cost of sales c) Sales & total expenses d) Sales & sales returns 27. Which one of the following is different from others a) Import duty b) Octroi c) Repairs d) Dock dues 28. This will be added along with the respective item and shows on the debit side of Income statement. This is also Shown on the liabilities side of Balance Sheet. a) Prepaid Expenses b) Outstanding Expense c) Accrued Income d) Prepaid Income 29. This is deducted from the respective item and shown on the credit side of Income Statement. This is also shown on the liabilities side of balance sheet. a) Outstanding Income b) Commission on profit c) Prepaid Income d) Outstanding Expenses 30. It is debited in the profit & Loss Account and is shown as a deduction from the respective Asset in the balance Sheet. a) Maintenance Charges b) Repair Charges c) Depreciation d) Appreciation 31. This is an expenditure, the benefit of which is expected to be received for more than the particular year in which it is incurred a) Revenue expenditure b) Capital expenditure c) Deferred revenue expenditure d) None 32. This is irrecoverable sale proceed which would be deducted from book debts a) Discount b) Bad debt c) Provision for discount on debtor d) Provision for discount on creditor 33. Advertisement a/c Dr To purchase a/c Cr a) Advertisement given b) Goods distributed as free samples c) Goods taken by proprietor for domestic use d) Goods sent on approval basis

4 34. What is the accounting treatment for goods sold but not delivered and included in the stock? a) Add it along with closing stock b) Deduct it from closing stock c) Deduct it from sales d) No treatment is required 35. Proprietor took certain goods from business for domestic use. It is shown as a deduction from a) Drawings b) Purchase c) Sales d) Closing stock 36. When goods are destroyed by fire, the total value of such loss is a) Debited to trading account b) Credited to trading account c) Debited to profit and loss account d) Credited to profit and loss account 37. Increase or decrease in the value of current assets is a) Depreciation b) Fluctuation c) Depletion d) Obsolesce 38. This term is used to write-off intangible assets such as patents, copyrights, etc. What is this term called? a) Amortization b) Depletion c) Depreciation d) Fluctuation 39. The following steps are to be taken when the bill is renewed a) Cancel the old bill b) Make an entry for investment c) Entry for past payment if any d) Make payment to bank 40. Cash received from debtors can be obtained from a) Total debtors account b) Statement of affairs c) Cash book d) Both a & c 41. A bill of exchange is called a by the person who is entitled to receive the amount due on it a) Bill receivable b) Bills payable c) Bills sent for collection d) None 42. Evidence of dishonor of bill is done through a) Endorsing b) Recording c) Noting d) Signing 43. When the drawee makes the payment before maturity, the holder allows to the drawee a) Discount b) Bill c) None 44. Interest on capital is credited to account a) Profit & loss a/c b) Trading a/c c) Profit & loss Appropriation a/c d) None

5 45. Expenses which remain unpaid at the end of the accounting period are termed as expenses a) Accrued expenses b) Outstanding liability c) Long term liability d) Current liability 46. Prepaid expense is to the business a) Current asset b) Current liability c) Fixed asset d) None 47. Capital will be increased with the amount of a) Gross profit b) Sundry debtors c) Net profit d) Closing stock 48. Expenditure incurred in acquiring fixed asset is called expenditure a) Revenue b) Deferred expenditure c) Capital expenditure d) None 49. account is prepared to find out cost of goods produced a) Profit & loss a/c b) Current a/c c) Trading a/c d) Balance sheet 50. Gross profit is the difference between sales and a) Closing stock b) Cost of goods sold c) Opening stock d) None

110 Questions(with Answers) On Accounting Basics FREE E-book from http://basiccollegeaccounting.com

110 Questions(with Answers) On Accounting Basics FREE E-book from http://basiccollegeaccounting.com (http://basiccollegeaccounting.com) Dedicated to helping Students & Teachers NOTE: 110 Questions & Answers on True Or False on Accounting Basics ACCOUNTING CONCEPTS & DOUBLE ENTRY SYSTEM True False 1.