EXAMBAY

120 General Accounting Principles MCQs

Q.1 Reserves and surpluses are shown on which side and under which head
in the balance sheet?
a. Liability side and under capital head.
b. Asset side and under investment head
c. Liability side and under provisions.
d. Asset side and under cash in hand
Q.2 Which of the following statements is FALSE in relation to the term
depreciation?
a. It is a decline in the book value of fixed assets.
b. It is a continuing process.
c. It is an unexpired cost.
d. It is a non cash expense.
Q.3 What is/are the objective(s) of preparing the trial balance?
a. To confirm the arithmetical accuracy of the ledger accounts.
b. To help in locating errors.
c. To help in the preparation of the financial statements.
d. All of the above
Q.4 General Ledger Adjustment Account is prepared as part of
a. Contract account
b. Self balancing ledger
c. Ledger folio system
d. Consignment adjustment account
Q.5 A company returned damaged office supplies and received Rs 10,000 via
refund. The account to be credited is ______.
a. office supplies account
b. cash account
c. purchase return account
d. debtors account
Q.6 Income and Expenditure account is
a. Real Account
b. Personal Account
c. Nominal Account
d. Capital Account
Q.7 Which is the last step of accounting as a process of information?
a. Recording of data in accounting books
b. Preparation of financial statements

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 EXAMBAY
c. Preparation of Trial Balance
d. Analysis and interpretation of information
Q.8 Use of common format of reporting promotes
a. Comparability
b. Understandability
c. Relevance
d. Reliability
Q.9 A concept that a business enterprise will not be sold or liquidated in the
near future is known as :
a. Going concern
b. Economic entity
c. Monetary unit
d. None of the above
Q.10 Goods purchased on cash are recorded in the :
a. Purchases (journal) book
b. Sales (journal) book
c. Cash book
d. Purchases return (journal) book
Q.11 Which of the following nature of transactions is not recorded in a Cash
book?
a. Cash transaction
b. Credit transaction
c. Bank transaction
d. None of these
Q.12 Accounting conventions are established through
a. Common accounting practices
b. Laws and Statutes
c. Rules
d. Both b and c
Q.13 Import duty incurred on purchase of raw material from abroad is
a. Capital expenditure
b. Deferred capital expenditure
c. Deferred revenue expenditure
d. Revenue expenditure
Q.14 Import duty incurred on purchase of machinery from abroad is
a. Capital expenditure
b. Deferred capital expenditure
c. Deferred revenue expenditure

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 EXAMBAY
d. Revenue expenditure
Q.15 Which of the following is NOT true about a Joint Venture?
a. New firm name for joint venture is not necessary
b. Partners are called co-venturers
c. It is a partnership for a specific purpose
d. It is a continuing business
Note: JV is temporary and is created for a specific purpose

Q.16 Which of the following options is/are an example of current liability?

a. Salaries
b. Short term debt
c. Bills payable
d. All of the above
Q.17 Underestimation of useful life of a depreciable asset leads to
a. Over charging of depreciation every year
b. Valuation of assets in Balance Sheet will increase
c. Increase in profit
d. None of these
Note: Think if useful life of an asset decreases from 10 years to 5 years, what
will happen

Q.18 A firm earned interest on investment made. Which account is credited in

the journal?
a. Cash A/C
b. Bank A/C
c. Interest A/C
d. Liability A/C
Note: Cash A/C is debited and Interest A/C is credited

Q.19 A decrease in one asset A/C may lead to

a. Decrease in liability A/C
b. Increase in another asset A/C
c. Both a and b are possible
d. Neither a nor b is possible
Q.20 What is the full form of FASB?
a. Financial Auditing Simplification Board
b. Finance and Accounting Standardisation Bureau

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 EXAMBAY
c. Financial Accounting Standards Board
d. None of the above
Q.21 Which of the following is NOT one of the qualities that an accounting
information should have?
a. Accounting information should be reliable
b. Accounting information should be understandable
c. Accounting information should be relevant
d. All above represent qualities that an accounting information should
have
Q.22 Use of commonly accepted standard of reporting financial information
means that the information is
a. Comparable
b. Understandable
c. Relevant
d. Reliable
Q.23 Financial statements present a true and fair view if
a. It is free from any material error and is not biased.
b. It is prepared using the appropriate accounting policy and proper
accounting standards.
c. It is prepared in the format prescribed by the regulator and
government.
d. It conforms to all of the above points.
Q.24 Revenue from sales is recorded in accounting books if a transaction
meets the following condition(s):
a. The seller has passed the legal ownership of the goods/services to the
buyer.
b. The seller and the buyer have agreed on the price of the goods.
c. The buyer has already paid the price of the goods or it is certain that he
will pay.
d. All of the above conditions are true.
Q.25 If the net sales are Rs. 40,000, Net Purchases Rs.30,000 and the
Closing Stock is Rs.5,000, what will be the amount of Gross Profit?
a. Rs.15,000
b. Rs.10,000
c. Rs.75,000
d. Rs.5,000
Note: (Gross Profit = Net sales + Closing stock - Net purchases )
Q.26 A business owner can find out what his business owns and what it owes
from ______.

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 EXAMBAY
a. Profit & Loss A/c
b. Balance Sheet
c. Trial Balance
d. Bank Reconciliation Statement
Q.27 A machine (having a scrap value of Rs.2,000) is purchased for
Rs.10,000. It has a useful life of 10 years of 1000 hours each, what will be the
amount of depreciation on a per hour basis?
a. Rs. 2.00
b. Rs.1.20
c. Re.1.00
d. Re.0.80
Q.28 Which of the following gives a list of revenue receipts as well as capital
receipts in case of Non-Profit Organization?
a. Profit & Loss Statement
b. Receipt and Payment Account
c. Income & Expenditure Account
d. Balance Sheet
Q.29 If the two sides of the Trial Balance tally, it shows that ____.
a. Accounting books are completely accurate.
b. Accounting books are arithmetically accurate.
c. The business is financially sound.
d. There is no cash in accounts of business.
Q.30 Self balancing entries are only made for those transactions which affect
a. One journal
b. Three journals
c. Four ledgers
d. Two ledgers
Q.31 Which one of the following is a revenue expenditure?
a. Spent Rs.5000 on repairing a car.
b. Rs.2000 spent on paying electricity bill of office.
c. Sale of old furniture
d. Cost of advertising Rs.2,00,000 for the purpose of introducing a new
product.
Q.32 Creating provision for doubtful receipts from debtors means a business
is following
a. Money measurement principle
b. Conservatism principle
c. Business entity principle
d. Materiality principle

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 EXAMBAY
Q.33 If liability of a business is decreased, then asset remains constant if
a. Capital remains same
b. Capital increases
c. Capital decreases
d. Owner’s equity remains same
Q.34 If the owner of a business firm takes out some quantity of finished goods
from the stock for his personal use, then which of the accounts is credited?
a. Owner’s account
b. Drawing account
c. No transaction as no money is involved
d. Stock account
Q.35 If a debtor clears his debts, how will it affect the balance sheet?
a. Asset side of the balance sheet will increase
b. Liabilities side of the balance sheet will decrease
c. Only capital will increase
d. Balance sheet will remain balanced.
Q.36 Wages paid to a technician to set up a new machinery in a factory is
a. Nominal expenditure
b. Revenue expenditure
c. Capital expenditure
d. Deferred revenue expenditure
Q.37 Which of the following options shows a cause of depreciation on which
business has no control?
a. Improper maintenance
b. Misuse
c. Obsolescence
d. Improper transportation of machine
Q.38 Receipts and Payments account of a Non-Profit Organization is a
a. Personal account
b. Nominal account
c. Profit and Loss account
d. Real account
Q.39 The minimum salary or remuneration that can be paid to a working
partner if in partnership deed nothing is mentioned about it?
a. Rs. 25000
b. Profit is proportionately divided
c. 5% of total profit
d. No remuneration

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 EXAMBAY
Q.40 A suspense account records
a. All personal transections
b. All ambiguous entries which require further clarification
c. All accounting entries which will happen in future
d. All credit entries which were wrong
Q.41 Which of the following is an example of preliminary expenses?
a. Purchasing office furniture
b. Purchasing raw material for the first time
c. Legal charges for drafting Memorandum of association
d. Legal charges to defend business against a case filed by an employee
Q.42 According to Income Tax Act, 1961, preliminary expenses will have to
be amortised
a. Within 5 years of commencement of business
b. Within 8 years of commencement of business
c. Within 15 years of commencement of business
d. 50% of the preliminary expenses to be amortised in first year
Q.43 Preliminary expenses are shown on
a. Asset side of balance sheet
b. Liabilities side of balance sheet
c. Not at all shown in a balance sheet as it is an expense
d. Cash flow statement
Q.44 Expenses incurred by a firm are recorded in an accounting period in
which related revenues are earned. This statement is following which concept
of GAAP?
a. Conservatism concept
b. Materiality concept
c. Dual aspect concept
d. Matching concept
Q.45 A company filed a patent for its new technology. Which type of account
is a patent account?
a. Nominal Account
b. Real Account
c. Personal Account
d. Manufacturing Account
Q.46 Reserves and Surplus are shown in the balance sheet under
a. Current assets
b. Long term assets
c. Shareholders’ funds
d. Provisions

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 EXAMBAY
Q.47 Balance sheet is also known as
a. Statement of operations of a company
b. Statement of financial position of a company
c. Statement of cash balance of a company
d. Statement of operational health of a company
Q.48 Which of the following is not shown in the balance sheet?
a. Share capital
b. Deferred tax liabilities
c. Trade payables
d. Cost of materials consumed
Q.49 Which of the following is shown as an asset in a balance sheet?
a. Short term provisions
b. Long term provisions
c. Prepaid insurance
d. Unearned revenue
Note: Prepaid expenses are future expenses that have been paid in advance.
Generally, the amount of prepaid expenses that will be used up within one
year are reported on a company's balance sheet as a current asset.

Q.50 Sundry creditors are shown in a balance sheet as

a. Intangible assets
b. Current liabilities
c. Long term borrowings
d. They are not at all adjusted in balance sheet
Q.51 Deferred tax assets result in
a. Reducing future tax liability
b. Increase in future tax liability
c. No change in future tax liability
d. Increase in total liabilities
Note: A deferred tax asset is an item on the balance sheet that results from
overpayment or advance payment of taxes. It is the opposite of a deferred tax
liability. This asset helps in reducing the company’s future tax liability.

Q.52 The ownership of goods in a consignment remains with

a. Consignor
b. Consignee
c. First consignor and then consignee
d. Insurance company

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 EXAMBAY
Note: Ownership of goods remains with the manufacturer (consignor).
Consignment is just a transfer of possession of goods but not ownership of
goods.
Q.53 Who is responsible for loss if a consignment gets damaged during
transportation?
a. Consignor
b. Consignee
c. Equal responsibility is shared between consignor and consignee
d. Transport company
Note: Since the owner is the consignor, risk is also of the consignor.
Q.54 Commission paid to the consignee in event of extraordinary sales (much
more than expected) is called
a. Normal commission
b. Del - credere commission
c. Overriding commission
d. Extraordinary commission
Q.55 Commission paid to the consignee by the consignor in order to protect
goods against bad debts is called
a. Normal commission
b. Del - credere commission
c. Overriding commission
d. Extraordinary commission
Note : If this commission is paid, then loss arises due to bad debts is borne by
consignee
Q.56 If a part of goods in the consignment suffer normal loss (due to storage,
wear and tear etc.), then how is this loss adjusted?
a. By increasing per unit cost proportionately without recording in any
separate account
b. By a debit in normal loss account
c. By a credit in normal loss account
d. Charged from consignee
Q.57 The abnormal loss on a consignment is credited to
a. Consignment account
b. Consignee’s account
c. Trading account
d. Profit and Loss account
Note: Abnormal loss account is debited and consignment account is credited
Q.58 The term ‘Financial Statement’ covers

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 EXAMBAY
a. Only Profit & Loss Statement
b. Balance sheet, Profit & Loss Statement and Appropriation account
c. Profit & Loss Statement, Balance sheet and Cash flow statement
d. All of above statements are true
Q.59 Schedules attached with balance sheet
a. Form part of financial statements
b. Don’t form a part of financial statements
c. Form part of trial balance
d. Schedules are optional and depends on a company to disclose
Note: Schedules provide detailed information about components of a balance
sheet.
Q.60 A consignment which is insured had suffered abnormal loss. Insurance
claim was filed and accepted by the insurance company. Which account is
credited in this transaction?
a. Consignment account
b. Abnormal loss account
c. Insurance company account
d. Consignee account
Note: Account of Insurance company is debited while abnormal loss account
is credited.
Q.61 Commission for sales is given by consignor to consignee. Which
account is credited in books of consignor?
a. Consignment account
b. Cash account
c. Income and receipt account
d. Consignee’s account
Note: Debit the receiver , Credit the giver (Golden rule)

Q.62 When goods are purchased for the joint venture, the account debited is
a. Sales account
b. Venturer’s account
c. Purchase account
d. Joint venture account
Note: Cash account is credited in case of cash purchase and creditor’s
account is credited in case of credit purchase
Q.63 When goods or services are sold by a joint venture on debt, the account
debited is
a. Joint venture account

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b. Creditor’s account
c. Debtor’s account
d. Cash account
Note : Joint venture account is credited
Q.64 If a joint venture makes loss at the end of accounting period, then
a. P&L account is debited
b. P&L account is credited
c. Joint venture account is debited
d. Joint bank is credited
Note: P&L account is debited and Joint venture account is credited. (Also, if
you remember, debit balance in P&L account denotes loss)
Q.65 Which kind of account is a consignment account ?
a. Real account
b. Nominal account
c. Personal account
d. Joint venture type of account
Q.66 Which kind of account is a joint venture account ?
a. Real account
b. Nominal account
c. Personal account
d. Special category account
Q.67 Income and Expenditure account is a
a. Real account
b. Personal account
c. Capital account
d. Nominal account
Note: Receipts and payments account is a real account.
Q.68 Which of the following is incorrect regarding Income and Expenditure
accounts?
a. Income and Expenditure account is a nominal account.
b. Capital receipts and capital expenditure are excluded while preparing
an income and expenditure account.
c. The income and expenditure account is prepared by the non-trading
entities to determine surplus or deficit of income over expenditure.
d. Opening cash in hand and closing cash in hand are recorded.
Q.69 Donation received by an Non-Profit Organization for a specific purpose
is shown
a. On assets side of balance sheet

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 EXAMBAY
b. On credit side of P&L account
c. On liabilities side of balance sheet
d. On debit side of Income and Expenditure statement
Q.70 Legacies are generally
a. Capitalised and taken to balance sheet
b. Recorded in Income and Expenditure account
c. Capitalised and taken to suspense account
d. Treated as expenditure
Note: Legacy is the amount received by an organisation as per the will of a
person. It is like a donation. It is of a non-recurring nature and generally
treated as a capital receipt, and hence appears in the liabilities side of a
Balance sheet.

Q.71 Which of the following statements is/are TRUE about provisions?

a. A provision is an amount set aside from a company’s profits to cover
an expected liability.
b. Provisions are generally made for bad and doubtful debts, Repair &
Renewals, discounts & depreciation.
c. Provisions are debited from the P & L account and shown on the
liabilities side of the balance sheet.
d. All above are true.
Q.72 Which of the following statements is/are TRUE about Reserves?
a. Reserves is that portion of profits of an organisation which is
appropriated for a general or a specific purpose other than making
provisions.
b. Shown in shareholders’ equity on a balance sheet.
c. Reserve increases working capital of a company to strengthen the
financial position. If remaining un-utilized for some period, reserves can
be distributed as dividends among shareholders.
d. All above are true.
Note: Reserves can be used to meet out any probable future liabilities or
losses. ( A situation such as COVID-19, many companies had to use reserves
to meet working requirements of their company. Sales became negligible so
reserves rescued many jobs etc.)
Q.73 Which of the following statements is/are TRUE about Sinking Fund?
a. Sinking fund is created as a charge from profits to pay off a future
liability or debt.
b. Sinking funds may help in paying debt at maturity or help in buying
back bonds from the open market.

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 EXAMBAY
c. Sinking fund adds an element of financial security and lowers default
risk. So, it helps in improving credit ratings of a company.
d. All above are true.
Note: A sinking fund also helps a company to mitigate concerns of
default risk, and as a result, attract more investors when a company
issues bonds to raise money from the market.

Q.74 Which of the following is an example of revenue expenditure?

a. Purchase of computers for office
b. Expenditure incurred on erection and installation of machinery
c. Expenditure on construction of an extra floor on an already existing
building of the company.
d. Selling and distribution expenditure.
Note: All others are example of capital expenditure
Q.75 Which of the following is an example of deferred revenue expenditure?
a. Preliminary expenses
b. Assets purchased for resale
c. Salaries to employees
d. All above are revenue expenditure
Q.76 How many main parties are involved in a lease agreement?
a. Two
b. Three
c. Four
d. One
Note: A Lease is an agreement which has two parties; lessee (the
person/entity, who takes possession of the property) and Lessor (owner).
Lessor has an ownership right of assets, but a right to use that asset is with
the lessee in lieu of rent paid to the lessor.

Q.77 Which of the following is NOT an advantage of leasing?

a. Lessor can claim for the depreciation in his accounting books because
he/she remains the owner of the asset.
b. Leasing provides an opportunity to earn additional profit to lessee.
c. Lease agreement protects the lessee against inflation as rent is
decided at the time of agreement.
d. Land is an appreciable asset and leasing does not provide ownership
to the lessee.

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 EXAMBAY
Q.78 A lease in which lessee can share economic risk and returns along with
lessor is known as
a. Operating lease
b. Finance lease
c. Control lease
d. Absolute lease
Note: A finance lease is also known as a capital lease. It is a type of lease
agreement in which a finance company is the legal owner of the asset for the
duration of the lease. The lessee has operating control over the asset and
some pre-agreed share of the economic risks and returns from the asset. In
operating lease, lessee only has operational control.
Q.79 In an operational lease, rental income from lease should be recorded as
a. Credit entry in P&L account
b. Debit entry in P&L account
c. Asset in balance sheet
d. Contingent liability in balance sheet
Note: Rental income should be treated as income and is recorded as a credit
entry in P&L account of lessor. Assets should be treated as fixed in the
balance sheet of the lessor. For lessee, rental payment is an expense and
recorded as debit entry in his P&L account.
Q.80 Which of the following accounts is debited on purchase of investment
meant for future capital appreciation?
a. Cash/bank account
b. Personal account
c. Investment account
d. P&L account
Note: Investment account is an account opened for the purpose of the
investment (such as fixed income or variable income securities). On purchase
of investment, investment account is debited and cash/bank account is
credited. On sale of investment, reverse happens.
Q.81 If dividend or interest is received on investments made, which of the
following accounts is credited?
a. Cash/bank account
b. Investment account
c. P&L account
d. Dividend/Interest account
Note: Cash/bank account is debited
Q.82 A non-profit organisation can be registered under
a. Trusts Act

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 EXAMBAY
b. Societies Registration Act
c. Companies Act, 1956
d. All of the above
Note: An NPO can also be registered under section 25 of Companies
Act,1956.

Q.83 Which of the following accounts are maintained by a Cooperative

Society?
a. Cash book
b. Receipts and Payments account
c. Balance sheet
d. All of the above
Q.84 What are the different types of royalties paid to an owner of the
property/asset?
a. Copyrights royalty
b. Mining royalty
c. Patents royalty
d. All of the above
Note: Royalty is paid by a user to the owner of the asset or something which
has been protected by the owner with some special rights. Payment made by
the user is debited to the royalty account in books of the user and the
cash/bank account is credited.
Q.85 Which kind of account is a royalty account?
a. Real account
b. Trading account
c. Capital account
d. Nominal account
Note: Balance in the royalty account of the user is transferred to the P & L
account at the end of the accounting year.
Q.86 For a royalty account, short working is
a. Lesser than minimum rent
b. Equal to ground rent
c. Equal to annual royalty amount
d. More than minimum rent
Note: Suppose minimum rent or royalty to be paid is Rs. 10,000 but the sales
of user is just Rs. 8,000, then 10,000 - 8,000 = 2,000 is the short working. It is
the loss of use or lessee.

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 EXAMBAY
Q.87 Plant and machinery purchased for the purpose of contract work is
debited from
a. Plant and machinery account
b. Contract account
c. Contractor’s account
d. Cash account
Note: Materials used, plant and machinery, labour etc. brought to be utilized in
contract are debited from contract account and their respective accounts are
credited.

Q.88 Ashok purchased a washing machine from a showroom worth Rs.

20,000 but the showroom accountant by mistake, posted the amount in ledger
as Rs. 2000. Which type of error has been committed?
a. Error of Omission
b. Compensating Error
c. Error of principle
d. Commission Error
Q.89 Which of the following errors in recording transactions will not affect
tallying of trial balance?
a. Error of commission
b. Error of partial omission
c. Compensating error
d. All kinds of error affects tallying of trial balance
Q.90 Which of the following is not included in Inventory?
a. Stocks of a company
b. Finished product which a company sells
c. Work in progress goods
d. Raw material needed to manufacture finished product
Q.91 Which of the following is true about the maturity of a bill ?
a. The date on which a BoE or PN becomes due for payment.
b. If the holder of the bill needs money, he can approach the bank for
encashment of the bill before the maturity date.
c. Holder of the bill may transfer it unless its transfer is restricted.
d. None of the above
Q.92 In a cash book, what does debit balance indicate ?
a. Favourable balance
b. Unfavourable balance
c. Bank Overdraft
d. Neutral balance

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 EXAMBAY
Q.93 If a company deposits some cash in its bank account, which type of
entry will indicate this transaction?
a. Debit entry
b. Credit entry
c. Can be debit or credit depending on method of deposit
d. Overdraft entry
Q.94 Trial balance is prepared to check the arithmetical accuracy of
a. Journal balances
b. P&L balances
c. Ledger balances
d. Bank passbook balances
Q.95 When debit balance of a trial balance is tallied with credit balance, it
means
a. All the transactions have been recorded correctly
b. All the ledger entries are correct
c. All the GAAP principles were followed
d. There is no mathematical error in credit and debit balances
Q.96 Which of the following is NOT true about Bill of Exchange?
a. It is prepared by the creditor and given to the debtor.
b. Binds one party to pay a fixed agreed sum of money to another party
on a predetermined future date.
c. There are only 2 parties to a BoE: Drawer and Drawee.
d. In India, a Bill of Exchange is governed by Negotiable Instruments Act,
1881.
Q.97 Inventory is always considered to be a
a. Current asset
b. Current Liability
c. Reserve
d. Fixed asset
Q.98 Which of the following costs/expenses are NOT included in the finalising
of cost of inventory?
a. Taxes paid in purchasing raw material
b. Freight inward costs
c. Packaging costs of finished product
d. Distribution costs
Q.99 Which inventory valuation method should be preferably used when
multiple types of inventory items are mixed so that it is impossible to assign
cost to an individual item?
a. FIFO
b. LIFO
c. Weighted average
d. Cost flow assumption

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 EXAMBAY
Q.100 A person who sells goods or services to a business on credit and does
not receive the payment immediately is called
a. Sundry creditor
b. Sundry debtor
c. Preferential shareholder
d. None of the above

Q. 101 Which is not one of the components of a cash flow statement?

a. Operating activities
b. Manufacturing activities
c. Investment activities
d. Financial activities
Q.102 Positive cash flow indicates that
a. More money has come into the business than went out of the
business.
b. Cash reserves increase
c. Business can carry out its operations on its own without needing any
immediate loan.
d. All of the above
Q.103 An intangible asset should be derecognised on disposal or when no
future economic benefits are expected from its use. Any gain or loss on
derecognition should be debited /credited in
a. Balance sheet
b. Cash flow statement
c. P&L statement
d. Manufacturing account
Q.104 At the end of accounting period, depreciation on tangible assets is
debited to
a. Assets in balance sheet
b. Liabilities in balance sheet
c. Profit and Loss statement
d. Contra account
Q.105 At the end of accounting period, accumulated depreciation on tangible
assets is credited to
a. Straight account in liabilities side in balance sheet
b. Contra liability account in liabilities in balance sheet
c. Expenses side in Profit and Loss statement
d. Contra asset account on assets side in balance sheet
Note: Normal asset accounts have a debit balance, while contra asset
accounts are in a credit balance. Accumulated depreciation decreases the net
value of an asset. So it is shown as a credit entry on the assets side.

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 EXAMBAY
Q.106 Which of the following costs are not taken into account while
calculating depletion of an oil field asset?
a. Acquisition costs
b. Finance costs
c. Exploration costs
d. Development costs
Note : Generally 4 types of costs are taken into account while calculating
depletion of a mineral asset : Acquisition costs, Exploration costs,
Development costs, Restoration costs

Q.107 Which of the following terms denote decrease in the value of assets in
the mining industry?
a. Depletion
b. Amortisation
c. Depreciation
d. Markdown

Q.108 Which of the following is/are TRUE about Branch accounting?

a. Branch accounting is a bookkeeping system in which separate
accounts are kept for each branch or location of an organization.
b. Branch accounting provides better accountability and control
since profitability can be easily tracked for each branch/location.
c. A branch account is maintained in this system which is a
temporary/nominal ledger account.
d. All are true
Note: There are many offices, factories etc. of an organisation. Each
office, factory maintains its own accounting. This system is called
branch accounting.

Q.109 Which of the following is NOT a system of branch accounting?

a. Debtors system
b. Stock and debtors system
c. Wholesale price system
d. Retail creditors system
Q.110 Branch account maintained under debtors system of branch
accounting is a type of
a. Real account
b. Personal account

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 EXAMBAY
c. Cash flow account from branch to another branch
d. Nominal account

Q.111 Under the debtors system of branch accounting, which account is

debited when cash is sent by head office to a branch office to purchase
fixed assets?
a. Cash/Bank account
b. Branch account
c. Head office account
d. Fixed asset account
Note : Under this system, the head office maintains a separate branch
account for each branch. It will be prepared to find out the profit or loss of
each branch. Branch account is debited whenever there is a flow of money
from head office to branch and is credited for reverse flow.
Q.112 Under the debtors system of branch accounting, which account is
debited when a branch makes profit?
a. Cash/Bank account
b. Branch account
c. Head office account
d. Fixed asset account
Note : In case of loss, branch account is credited

Note: 1. Under the stock and debtors system of branch accounting , several
accounts are maintained for each branch instead of just one account (Branch
account) in the debtors system. These accounts are:
● Branch stock account (Real account)
● Branch debtors account (Personal account)
● Branch expenses account (Nominal account)
● Branch assets account (Real account)
● Branch adjustment account etc..
2. Under the final accounts system of branch accounting, the head office
prepares a memorandum branch trading and profit and loss account apart
from the branch account to find out the profit or loss of a branch.
3. Under the wholesale price system of branch accounting, the goods are
invoiced at the wholesale price to a branch office.

Q.113 Under which schedule of the Companies Act, 2013, the format of
financial statements are prescribed? (EPFO
EO/AO 2017)
a. Schedule I

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 EXAMBAY
b. Schedule II
c. Schedule III
d. Schedule IV
Q.114 Licenses and franchise are an example of
a. Intangible assets
b. Current assets
c. Long term liabilities
d. Investment assets
Note: Other less common examples are Mining rights, Recipes, formulae,
models, designs, prototypes, Brands etc.

Q.115 Which of the following is TRUE for extraordinary items reported in a

P&L statement?
a. Extraordinary items are income or expenses that may arise from
events or transactions that are not from the ordinary or operational
activities of the business.
b. Extraordinary items are not recurring in nature.
c. Selling stake in a subsidiary company is an example of an
extraordinary item.
d. All above are true
Q.116 Which of the following is TRUE for exceptional items as reported in a
P&L statement?
a. Exceptional items arise from ordinary activity of a business.
b. They are not recurring in nature.
c. Profit or loss by selling a machinery can be an example
d. All above are true

Q.117 Which of the following is NOT an essential feature of a partnership?

a. At least two persons are needed
b. There is an agreement among all partners
c. Profits and losses are always shared equally among partners
d. Partnership agreement/deed is for carrying out some business activity.
Q.118 Which of the following is true about partnership agreement ?
a. The agreement can be either in written or oral form.
b. Partnership agreement contains information about capital invested by
each partner.
c. Partnership agreement should contain information about the duration of
the firm's existence.
d. All of the above

Q.119 Which of the following reasons can lead to dissolution of partnership?

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 EXAMBAY
a. Death of an existing partner
b. Admission of a new partner or retirement of an existing partner
c. Insolvency of an existing partner
d. All of the above

Q.120 Which of the following reasons does not lead to dissolution of a

partnership firm?
a. If all the partners give their consent to do so
b. If a condition of dissolution of partnership firm has been met
c. When a partner has transferred the whole of his interest in the firm to a
third party
d. When a partnership firm starts a new line of business without taking
permission from the court.

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 EXAMBAY
ANSWERS
1. A
2. C
3. D
4. B
5. A
6. C
7. B
8. A
9. A
10. C
11. B
12. A
13. D
14. A
15. D
16. D
17. A
18. C
19. C
20. C
21. D
22. A
23. D
24. D
25. A
26. B
27. D
28. B
29. B
30. D
31. B
32. B
33. B
34. D
35. D
36. C
37. C
38. D
39. D
40. B
41. C
42. A

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 EXAMBAY
43. A
44. D
45. B
46. C
47. B
48. D
49. C
50. B
51. A
52. A
53. A
54. C
55. B
56. A
57. A
58. C
59. A
60. B
61. D
62. D
63. C
64. A
65. B
66. B
67. D
68. D
69. C
70. A
71. D
72. D
73. D
74. D
75. A
76. A
77. D
78. B
79. A
80. C
81. D
82. D
83. D
84. D
85. D
86. A

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 EXAMBAY
87. B
88. D
89. C
90. A
91. A
92. A
93. B
94. C
95. D
96. C
97. A
98. D
99. C
100. A
101. B
102. D
103. C
104. C
105. D
106. B
107. A
108. D
109. D
110. D
111. B
112. B
113. C
114. A
115. D
116. D
117. C
118. D
119. D
120. D

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