Multiple Choice Questions

Sub: Financial Accounting

Q.1 Choose the correct alternative.
1)Which of the following account will be credited in the books of XYZ Co. Ltd, if the business purchased a
Car by cheque of Rs. 4,00,000?
a) Car account
b) Cash account
c) Business account
d) Bank account

2) The balance of Purchase Return book is always ______

a) Debit
b) Credit
c) Debit or credit
d) Neither debit nor credit

3) A person who brings capital in the business is called__________.

a) A debtor
b) A Creditor
c) Proprietor
d) Broker

4) Contra entries are related to _________.

a) Cash
b) Bank
c) Both cash and bank
d) None of the above

5) Which of the following is not appear in the Profit and Loss Account of a business?
a) Drawings
b) Bad debts
c) Provision for doubtful debts
d) Reserve for discount on sundry creditors

6) As per the accounting double-entry system, an account that receives the benefit is__________.
a) No need to show as an accounting record
b) Income
c) Debit
d) Credit

7) The basic function of financial accounting is to_____.

a) Record all business transactions
b) Interpret the financial data
c) Assist the management in performing functions effectively
d) Verification of assets of the business
8) Interest on drawing____.
a) Increase assets and decrease capital
b) Increases and decreases capital
c) Increase expense and decreases liability
d) Increases liability and decreases capital

9) If a trial balance totals do not agree, the difference must be entered in________
a) The Profit and Loss Account
b) A Nominal Account
c) The Capital Account
d) A Suspense Account

10) The asset which is purchased for the use of the business but not for resale is known as _______.
a) Current assets
b) Fixed assets
c) Fictitious assets
d) Intangible Asset

11) Which of the following concepts assumes that a business will last indefinitely?
a) Business entity
b) Going concern
c) Periodicity
d) Conservatism

12) Which item will appear on the credit side of ledger account?
a) Cash received
b) Purchases
c) Discount received
d) Rent Expenses

13) The amount brought in by the proprietor in the business should be credited to__________.
a) Capital Account
b) Cash Account
c) Drawing Account
d) Creditors Account

14) The purpose of financial accounting is to provide information for ________

a) Fixing prices
b) Controlling cost
c) Locating factory leading to wastages and losses
d) Assessing the profitability and financial position of the firm

15) Essential characteristics of accounting is __________.

a) Identification. measurement, recording, classification, analysing and communication.
b) Tracking methods that allows control of operations
c) To satisfy the Wishes of the management
d) To act as a co-ordinator among different financial departments
16) Which account shall be debited on the purchase of furniture of cash from M/s Yoga Ltd.?
a) Cash a/c
b) Yoga Ltd.
c) Purchase a/c
d) Furniture a/c

17) Profit is the difference between?

a) Assets and liabilities
b) Assets and equities
c) The assets purchased with cash contributed by the owner and the cash spent to operate the business
d) The amount received for goods and services and the amounts used to provide the goods and services

18) The art of recording business transactions in a systematic and regular manner refers to________.
a) Accounting
b) Book-Keeping
c) Cost accounting
d) Financial accounting

19) For nominal accounts, the fundamental rule of debit and credit is, debit expenses and losses and
credit___________.
a) What goes out
b) The giver
c) Income and gains
d) What comes in

20) Mr. “A” borrowed Rs.20,000 from the bank; this transaction involves which one of the following
accounts?
a) Cash & Bank Loan
b) Bank & Debtors
c) Drawing & Cash
d) Cash & Bank

21) Wages paid to Rajesh Rs. 12,000. Which account will be credited after the payment of wages?
a) Wages
b) Cash
c) Rajesh A/c
d) Drawing A/c

22) In every transaction at least _______parties are involved.

a) Three
b) Five
c) Two
d) One

23) Sales are equal to____________.

a) Net Income + Expenses + Cost of goods sold
b) Net Income + Cost of goods sold
c) Gross profit + Cost of sales + Expenses
d) Cost of goods sold + Expenses
24) 'Debit the receiver and credit the giver- this rule is applicable to__________
a) Personal Account
b) Real account
c) Nominal account
d) Both (a) and (c)

25) Which one of the following assets could be described as a current asset?
a) Machinery to manufacture goods for resale
b) Stock of goods for resale
c) Buildings to house the machinery
d) Land on which the buildings stand

26) Which one of the following accounts would usually have a debit balance?
a) Account Payable
b) Cash
c) Capital
d) Bank Loan

27) Which one of the following is used to record financial transactions in date wise order?
a) Account
b) Voucher
c) Journal Entry
d) Ledger

29) Why is the Trading Account made?

a) To find the total assets & liabilities
b) To find the total Cash in the business
c) To find the gross profit
d) To find the net profit

30) The rule of debit and credit as regards ------------should be 'debit the debtor and credit the creditor'.
a) Nominal Account
b) Personal Account
c) Real Account
d) Impersonal Account

31) A document which authenticates transaction takes place in an organization.

a) Bank Statement
b) Cashbook
c) Voucher
d) Pass Book

32) Outstanding expenses appearing in the Trial Balance are shown in the ________.
a) Profit and Loss A/c
b) Balance sheet
c) Trading A/c
d) Outstanding Expenses A/c
33) What is the fundamental rule of debit and credit with regards to assets or real accounts?
a) Debit the receiver and Credit the giver
b) Debit what comes in and credit what goes out
c) Debit expenses and losses and credit gains
d) Debit all gains and credit expenses

34) The amount of salary paid to Mahesh should be debited to______.

a) The Account of Mahesh
b) Salaries Account
c) Cash Account
d) Bank A/c

35) Copyrights, Patents, and Trademarks are the example of which type of asset?
a) Current assets
b) Fixed assets
c) Intangible assets
d) Investments

36) The assets that can be easily converted into cash within a short period, i.e., 1 year or less are known as--
a) Current assets
b) Fixed assets
c) Intangible assets
d) Investments

37) Where should a withdrawal of cash from the business by the proprietor be credited to----------?
a) Drawings
b) Proprietor's A/c
c) Capital A/c
d) Cash A/c

38) Goods are drawn by the proprietor from the business for personal use _________
a) Increases capital and decreases assets
b) Decreases capital and decreases assets
c) Increases assets and decreases expenses
d) Increases and decreases assets

39) Profit on the sale of old machinery is shown in________.

a) Manufacturing account
b) Trading account
c) Profit and loss account
d) Balance sheet

40) The account which shows Gross Profit or Gross Loss of the business is called?
a) Profit and Loss Account
b) Balance Sheet
c) Trial Balance
d) Trading Account
41) Which of the following item is not included in the Cash account?
a) Purchases of Rs. 10,000
b) Sales of Rs.5,000
c) Received cash for Salman Rs. 2,000
d) Credit sales of Rs. 22,000
42) Cheques issued but not presented in the bank are called_________.
a) Unpresented cheques
b) Uncredited cheques
c) Uncollected cheques
d) Uncleared cheques

43) The accounting principle which refers to the tendency of accountants to resolve uncertainty and doubt in
favour of understanding assets and revenues and overstating the liabilities and expenses is known
as___________.
a) Conservatism
b) Materiality
c) Consistency
d) Continuity

44) While preparing accounts appearing in the Sales Return book posting is made at their _______ side.
a) Debit
b) Debit or Credit
c) Credit
d) Neither debit nor credit

45) Goodwill would be reported in the ___________section of a classified balance sheet?

a) Current assets
b) Long-term liabilities
c) Intangible assets
d) Long-term investments

46) Which of the following does not appear in the Balance sheet?
a) Building
b) Cash
c) Goodwill
d) Rent Expenses

47) According to which concept, the Proprietor of a business is treated as a creditor to the extent of his
capital?
a) Money Measurement
b) Cost
c) Dual Aspect
d) Business Entity

49) The balance sheet gives information regarding the ___________.

a) Results of operations for a particular period
b) Financial position during a particular period
c) Profit earning capacity for a particular period
d) Financial position as on a particular date
50) In trading Account, closing stock is shown at __________.
a) Cost Price
b) Net Realizable Price
c) Cost Or Market Price whichever Lower
d) Cost Or Market Price whichever higher

51) Rs. 5,000 deposited in the bank account was entered twice in the cash book. Identify the correct
adjustment in cash book.
a) Rs. 5,000 will be credited
b) Rs. 10,000 will be credited
c) Rs. 5,000 will be debited
d) Rs. 10,000 will be debited

52) Book- Keeping is mainly concerned with_______

a) Recording of financial data relating to business operation
b) Designing the systems in Recording, Classifying, Summarizing the recorded data
c) Interpreting the data for internal and external end users
d) Recording only cash transactions

53) Tangible assets used in the business that are of a relatively fixed or permanent nature are called?
a) Fixed assets
b) Revenues
c) Expenses
d) Liabilities

54) Nominal account is _____________.

a) An account of each head of expense or source of income
b) An account of each property or possession dealt in by the trader in his business.
c) An account of each person or firm with whom the trader deals.
d) An account of each property or income source

55) If the Gross profit is Rs. 5,000 and the net profit is 25% of the Gross profit. Then what is the amount of
expenses?
a) Rs. 3,750
b) Rs. 1,250
c) Rs. 4,150
d) Rs. 6,250

56) This software is a package that is used for managing the entire organization in a comprehensive manner.
a) Enterprise Resource Planning Software
b) Pre-packaged accounting software
c) Spreadsheet software
d) Customized accounting packages

57) It refers to the system of recording, organizing, summarizing, analysing, interpreting, and
communicating the financial data of a business.
a) Manual accounting
b) Computerized accounting
c) Auditing
d) Human resources accounting
58) The unfavourable balance of the Profit and Loss account should be_____ .
a) Subtracted from liabilities
b) Subtracted from capital
c) Subtracted from current assets
d) Added in liabilities

59) All the following accounts are transfer to trading account except___________.
a) Factory rent
b) Opening stock
c) Sales
d) Carriage Outwards

60) Posting is made at the _______ side of the account appearing at the debit side of the Cash Book.
a) Debit
b) Credit
c) Either debit or credit
d) Neither debit nor credit

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