Financial Accounting MCQ with Answers

Financial Accounting MCQ

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MCQ on Basic Fundamentals

Financial Accounting MCQ – 1

1.  Recording of transactions and events as & when they occur and classifying them into suitable account heading is the subject matter of

(a) Book-keeping

(b) Management Accounting

(c) Cost Accounting

(d) Financial Accounting

Answer (a) Book-keeping

2. Book-keeping is mainly concerned with the recording of financial data relating to the in significant and orderly manner.

(a) Company

(b) Business

(c) Monetary

(d) Personal

Answer (b) Business

3. Basic function of accounting is to

(a) Summarise the data

(b) Assist the management in performing functions effectively

(c) Interpret the financial data

(d) Record all business transactions of monetary nature

Answer (d) Record all business transactions of monetary nature

4. There are two systems of accounting i.e. cash basis system of accounting and basis system of accounting

(a) Dual Aspect

(b) Accrual

(c) Single Entry

(d) Double entry

Answer (b) Accrual

5. The alternative to cash basis of accounting is called ……… basis of accounting

(a) Accrual

(b) Due

(c) Receipt

(d) Credit

Answer (a) Accrual

6. The system of recording transactions based on dual aspect concept is called

(a) Double Entry System

(b) Single Entry System

(c) Accrual Basis of Accounting

(d) Double Account System

Answer (a) Double Entry System

7.  As per dual aspect concept

(a) Assets + Capital Liabilities

(b) Assets + Liabilities = Capital

(c) Assets = Liabilities + Capital

(d) Assets = Liabilities-Capital

Answer (c) Assets = Liabilities + Capital

8.  Liabilities of a firm are 8,00,000 and capital of the proprietor is 7,00,000. Then total

assets are:

(a) 2,00,000

(b) 15,00,000

(c) 4,00,000.

(d) 6,00,000

Answer (b) 15,00,000

9. Assets are 14,00,000 and liabilities are 6,00,000. His capital would be

(a) 12,00,000

(b) 10,00,000

(c) 2,00,000.

(d) 8,00,000

Answer (d) 8,00,000

10. Capital + Liabilities =

(a) Fixed Assets

(b) Current Assets

(c) Losses

(d) Total Assets

Answer (d) Total Assets

11.  Which of the following will be goods for a business run by a footwear merchant?

(a) Tables and Chairs

(b) Pens and Pencils

(c) Shoes

(d) Electrical Appliances

Answer (c) Shoes

12. Which of the following is not a business transaction?

(a) Goods purchased from 1000

(b) Placed an order for purchasing the goods for 2000

(c) Received interest from Bank 5000

(d) Rent paid to Landlord 3000

Answer (b) Placed an order for purchasing the goods for 2000

13. Which of the following item is not financial in nature :

(a) Purchase of machine for cash

(b) Withdrawal of cash by proprietor for his domestic use

(c) Dismissing an employee from job

(d) Purchase of a bike on credit

Answer (c) Dismissing an employee from job

14. Total assets of a trader are 7,25,000 and outside liabilities are 4,25,000; owner’s equity will be:

(a) 2,50,000

(b) 3,00,000

(c) None of the above

(d) 6,00,000

Answer (b) 3,00,000

15. Maintaining of systematic records of all the business transactions is termed as

(a) Recording

(b) Accounting

(c) Classification of Records

(d) None of the above

Answer (c) Classification of Records

16. Accounting in the modern time is treated as

(a) The source of business information

(b) The language of business

(c) An art of recording, classifying and summarizing transactions in monetary units

(d) All of the above

Answer (d) All of the above

17.External users of accounting information may involve

(a) Purchase Manager

(b) Sales Manager

(c) Customer

(d) Board of Directors

Answer (c) Customer

18. Which is not dependent on accounting?

(a) Book keeping

(b) Cost accounting

(c) Financial accounting

(d) Management decision making

Answer (a) Book keeping

19. Accounting is treated as both science and an

(a) Economics

(b) Commerce

(c) Science

(d) Art

Answer (d) Art

20. Book Keeping is made to maintain a detail record of

(a) None of the above

(b) College transaction

(c) Business transaction

(d) Selling transaction

Answer (c) Business transaction

21. The primary objective of accounting is to.

(a) Abnormal records

(b) Normal records

(c) Unsystematic record

(d) Systematic record

Answer (d) Systematic record

22. Users of accounting informations are classified in to two parts i.e. External Users and

(a) Share holder

(b) Customer

(c) Internal users

(d) External users

Answer (c) Internal users

23. Book Keeping is regarded as the step of accounting.

(a) Fourth

(b) Secondary

(c) Third

(d) Primary

Answer (d) Primary

24.The actual record making phase (l.e. accounting is usually called. recording, classifying and summarising) of accounting is called

(a) Trail balance

(b) Ledger

(c) Book keeping

(d) Accounting

Answer (c) Book keeping

25. Accounting is both

(a) None of the above

(b) History and geography

(c) Commerce and management

(d) Arts and science

Answer (d) Arts and science

26. There are three approaches to accounting which are widely accepted: (a) Cash basis (b)

(a) Book keeping

(b) Accrual basis and Accounting basic

(c) Mixed or hybrid

(d) None of the above

Answer (c) Mixed or hybrid

 27. Under which basis of accounting actual cash receipts and actual cash payments are

Recorded.

(a) Noncash

(b) Cash

(c) Accrual

(d) All of the above

Answer (b) Cash

28. The alternative to cash basis of accounting is called basis of accounting

(a) Hybrid

(b) Accrual

(c) Cash

(d) None of the above

Answer (b) Accrual

29. The system of accounting in which only personal accounts with or without subsidiary books are maintained is known as

(a) Double

(b) Triple

(c) Single entry

(d) None

Answer (c) Single entry

30. This method of writing every transaction in two accounts is known as

(a) Double entry

(b) Triple

(c) Single entry

(d) None

Answer (a) Double entry

31. Under which basis of accounting both cash basis and accrual basis are followed

(a) Accrual basis

(b) Cash basis

(c) Mixed or hybrid

(d) None of the above

Answer (c) Mixed or hybrid

32. Any exchange of money or money’s worth between two parties is called

(a) Business transaction

(b) Non business transaction

(c) Register transaction

(d) None of the above

Answer (a) Business transaction

33. In accounting, transactions of similar nature are added or subtracted at a particular place.

known as

(a) Khata

(b) Account

(c) Register

(d) Book

Answer (b) Account

34. A person to whom money is owing or payable is called a

(a) Creditor

(b) Debtor

(c) Owner

(d) None of the above

Answer (a) Creditor

35. owner’s financial interest or holding in the business and is represented by the value of net assets (L.e., total assets less liabilities.) is termed as

(a) None of the above

(b) Liability

(c) Assets

(d) Capital

Answer (d) Capital

36. Any physical thing or right owned that has a money value is an

(a) Assets

(b) Liabilities

(c) Money

(d) All of the above

Answer (a) Assets

37. A claim which can be enforced against the assets of the firm is called

(a) Debenture

(b) Money

(c) Equity

(d) None of the above

Answer (c) Equity

38.  An inflow of assets which results in an increase in the owner’s equity is termed as

(a) Liability

(b) Expenses

(c) Income

(d) None of the above

Answer (c) Income

39. Any amount or goods withdrawn by the owner of a business for personal use is called

(a) Drawing

(b) Liability

(c) Expenses

(d) Income

Answer (a) Drawing

40. Any written document in support of a business transaction is called a

(a) Voucher

(b) Bill

(c) Account

(d) Register

Answer (a) Voucher

MCQ on GAAP(Generally Accepted Accounting Principles)

Financial Accounting MCQ – 2

1. According to the going concern concept, a business entity should assumed to have

(a) a very short life

(b) an indefinite life

(c) a long life

(d) None of the above

Answer (c) a long life

2.  In the balance sheet, Contingent liability is shown because of

(a) Convention of disclosure

(b) Convention of materiality

(c) Convention of consistency

(d) None of the above

Answer (a) Convention of disclosure

3. Revenue is considered as earning, when

(a) Sale is effected

(b) Production is done

(c) Cash is received

(d) None of the above

Answer (a) Sale is effected

4. Accounting does not record non-financial transactions because of which accounting principle

(a) Accrual concept

(b) Entity concept

(c) Measurement concept

(d) None of the above

Answer (c) Measurement concept

5. Which concepts states that even the owner of the capital may be treated as a creditor of the business?

(a) Money measurement concept

(b) Cost concept

(c) Business Entity concept

(d) None of the above

Answer (c) Business Entity concept

6. Appending notes to the financial statements as per …… convention

(a) Convertism

(b) Disclosure

(c) Consistency

(d) Materiality

Answer (b) Disclosure

7.  Accounting of a pen as an expense and not as an asset is due to

Convention

(a) Materiality

(b) Conservatism

(c) Consistency

(d) Disclosure

Answer (a) Materiality

8. Following the written down value method of depreciation on particular is because of ……… convention

(a) Conservatism

(b) Consistency

(c) Materiality

(d) Disclosure

Answer (b) Consistency

9. Valuation of stock is done at lower of cost or market value because

(a) Consistency

(b) Conservatism

(c) Disclosure

(d) Materiality

Answer  (b) Conservatism

10. Making provision for doubtful debts is as per …… convention

(a) Consistency

(b) Disclosure

(c) Conservatism

(d) Materiality

Answer (c) Conservatism

11. Contingent liability shown in the balance sheet, arises

(a) Consistency

(b) Materiality

(c) Conservatism

(d) Disclosure

Answer (d) Disclosure

12. Accounting principles are generally based on

(a) Subjectivity

(b) Practicability

(c) Objectivity

(d) Convenience in Recording

Answer  (b) Practicability

13. According to money measurement concept the following will be recorded in the books

accounts of the business:

(a) Value of Plant and Machinery

(b) Quality of Company Goods

(c) Utility of Managers

(d) Health of Director

Answer (a) Value of Plant and Machinery

14. The convention of Prudence when applied to the balance sheet results

(a) Overstatement of Assets

(b) Understatement of Liability

(c) Understatement of Assets

(d) Overstatement of Liabilities

Answer (c) Understatement of Assets 

15. Accounting concepts include those assumptions upon which the science of ………… is based.

(a) Book-keeping

(b) Accounting

(c) Double Entry System

(d) Recording

Answer (b) Accounting

16. A firm follows the straight line method of depreciating fixed assets year after year due to:

(a) Objectivity

(b) Convenience

(c) Consistency

(d) Prudence

Answer (c) Consistency

17. A change in accounting policy is justified:

(a) To comply with accounting standard

(b) To ensure better presentation of the financial statements of the firm

(c) To comply with law

(d) All of the above

Answer (d) All of the above

18.  Which of the following is fundamental accounting assumption?

(a) Accounting period

(b) Materiality

(c) Going Concern

(d) Full disclosure

Answer (c) Going Concern

19. Revenue Should be recognised at the point of sale. Which principle is applied here ?

(a) Consistency

(b) Cost Realization

(c) Marketing

(d) Realization

Answer (d) Realization

20. Which assumption says a business entity will not be sold or liquidated in the near future

(a) Conservatism

(b) Going Concern

(c) Periodic

(d) Separate Entity

Answer (b) Going Concern

21. Corporate must prepare financial statements by time to time due to

(a) Accrual concept

(b) Going Concern concept

(c) Period Concept

(d) Business Entity concept

Answer (c) Period concept

22. Which principle states that same accounting methods should be used from one

accounting period to the next.

(a) Consistency

(b) Accounting period

(c) Conservatism

(d) Materiality

Answer (a) Consistency

23. Expenses not yet paid still recorded in accounting according which concept ?

(a) Realisation

(b) Conservatism

(c) Money Measurement

(d) Accrual

Answer(d) Accrual

24. Classification of assets as current assets and fixed assets is as per…

(a) Going Concern concept

(b) Dual aspect

(c) Cost

(d) Money Measurement

Answer (a) Going Concern concept

25. The convention that sates that the accounting practice should be followed consistently over

(a) Consistency

(b) Full disclosure

(c) Conservatism

(d) Materiality

Answer (a) Consistency

26. Which Accounting Principles says personal expenses should be debited to Drawings Account.

(a) Money measurement concept

(b) Going Concern Concept

(c) Business entity concept

(d) Accounting Period Concept

Answer (c) Business entity concept

27. which principle says quality should not recorded in the book of accounts?

(a) Business entity concept

(b) Money measurement concept

(c) Going Concern Concept

(d) Dual aspect concept

Answer (b) Money measurement concept

28. Which concept assumes that a business entity will not be liquidated in the near future?

(a) Money measurement concept

(b) Business entity concept

(c) Dual aspect concept

(d) Going Concern Concept

Answer (d) Going Concern Concept

29. Which accounting concept requires that the life of a business be divided into smaller parts?

(a) Business entity concept

(b) Dual aspect concept

(c) Accounting Period Concept

(d) Matching Concept

Answer (c) Accounting Period Concept

30. Under which concept assets is recorded at cost, even if the market price is more or less?

(a) Accounting Period Concept

(b) Matching Concept

(c) Matching Concept

(d) Cost Concept

Answer (d) Cost Concept

31. Under which concept advance received against sale of goods is recorded as ‘Advance

against Sale’ and not Sales ?

(a) Dual aspect concept

(b) Cost Concept

(c) Revenue Recognition Concept

(d) Matching Concept

Answer (c) Revenue Recognition Concept

32. Which Accounting Principle is Applied for “Closing stock is valued at lower of cost or market price”

(a) Matching Concept

(b) Prudence Concept

(c) Matching Concept

(d) Money measurement concept

Answer (b) Prudence Concept

33. General Reserve is created on the basis of convention of

(a) Materiality

(b) Uniformity

(c) Prudence

(d) Account Period

Answer (c) Prudence

MCQ on Accounting Standards

Financial Accounting MCQ – 3

1. IASC Stands for

(a) International accounting standard committee

(b) Indian accounting standard committee

(c) International accounting standard company

(d) Indian accounting standard company

Answer (a) International accounting standard committee

2. IASC established in the year

 (a) 1963

(b) 1973

(c) 1983

(d) 1993

Answer (b) 1973

3. IASB Stands for

 (a) International accounting standard Board

(b) International accounting standard Board

(c) Indian accounting standard Board

(d) None of the above

Answer   (a) International accounting standard Board

4. IASB established in the year

 (a) 2000

(b) 2001

(c) 2003

(d) 2004

Answer (b) 2001

5. ICAI established under

(a) Chartered accountant act 1949

(b) Company act 1956

(c) Partnership act 1930

(d) Company act 2013

Answer (a) Chartered accountant act 1949

6. When accounting standard board has been constitute

(a) 21 Feb 1977

(b) 21 March 1977

(c) 21 April 1977

(d) 21 May 1977

Answer (c) 21 April 1977

7. National advisory committee on accounting standard (NACAS) established in the year

(a) August 2001

(b) August 2002

(c) August 2003

(d) August 2004

Answer (a) August 2001

8. IAS in accounting stands for

 (a) Indian administrative services

(b) International accounting standard

(c) Indian accounting standard

(d) None of the above

Answer (b) International accounting standard

9. How many Ind AS are there in India

(a) 39

(b) 38

(c) 42

(d) 41

Answer (d) 41

10. Income taxes Comes under

 (a) Ind AS 11

(b) Ind AS 12

(c) Ind AS 13

(d) Ind AS 14

Answer (b) Ind AS 12

11. Intangible assets come under

 (a) AS 22

(b) AS 23

(c) AS 24

(d) AS 26

Answer (d) AS 26

12. Intangible assets come under

(a) Ind AS 37

(b) Ind AS 23

(c) Ind AS 26

(d) Ind AS 38

Answer (d) Ind AS 38

13. XBRL stands for

(a) Extensible Business Reporting league

(b) Extensible Boards Reporting language

(c) Extensible Business Reporting language

(d) Estimated Business Reporting language

Answer (c) Extensible Business Reporting language

14. The main aim of accounting standard is

 (a) Standardize diverse accounting policies

(b) Lower the accounting dissimilarities

(c) Ensuring the comparability of financial statement

(d) All of the above

Answer (d) All of the above

15. GAAP of India has been established by

(a) MCA

(b) ICAI

(c) Ministry of Finance

(d) ICSI

Answer (b) ICAI

16. How many number of accounting standard have been issued by ICAI

(a) 38

(b) 41

(c) 32

(d) 12

Answer (c) 32

17. The global recognized set of standard for the preparation of financial statement by business entity used in multiple countries is termed as

(a) IFRS

(b) ICAI

(c) ASB

(d) IAS

Answer (a) IFRS

18. The board which was constitute by ICAI to formulate accounting standard is known as

 (a) IFRS

(b) ICAI

(c) ASB

(d) IAS

Answer (c) ASB

19. A language used for the electronic communication of business and financial data which revolutionizing business reporting around the world is known as

(a) XBRL

(b) ASB

(c) IAS

(d) IFRS

Answer (a) XBRL

20. Interim financial reporting comes under

(a) Ind AS 31

(b) Ind AS 32

(c) Ind AS 33

(d) Ind AS 34

Answer (d) Ind AS 34

MCQ on Depreciation

Financial Accounting MCQ – 4

1. Erosion, rust, rot, and decay cause of depreciation is an example of

 (a) Physical deterioration

(b) Economic factor

(c) Time factors

(d) None of the above

Answer (a) Physical deterioration

2. Lease, patents and copy right related to which cause of depreciation

(a) Physical deterioration

(b) Economic factor

(c) Time factors

(d) None of the above

Answer (c) Time factors

3. Obsolescence means is

(a) Update

(b) Out of date

(c) Up to date

(d) None of the above

Answer (b) Out of date

4. Decrease in the value of natural assets is

(a) Depreciation

(b) Depletion

(c) Amortization

(d) None of the above

Answer (b) Depletion

5. Decrease in the value of fixed assets is

(a) Depletion

(b) Amortization

(c) Depreciation

(d) None of the above

Answer (c) Depreciation

6. Decrease in the value of intangible assets is

(a) Amortization

(b) Depreciation

(c) Depletion

(d) None of the above

Answer (a) Amortization

7. Depreciation is a process of

(a) Allocation

(b) Valuation

(c) Both

(d) None of the above

Answer (a) Allocation

8. Depreciation arise because due to

(a) Physical wear and tear

(b) Fall in money value

(c) Fall in market price

(d) None of the above

Answer (a) Physical wear and tear

9. Under straight line methods of charging depreciation, value of depreciation

(a) Increase every year

(b) Decrease every year

(c) Constant every year

(d) None of the above

Answer (c) Constant every year

10. Under Diminishing Balance methods of charging depreciation, value of depreciation

(a) Constant every year

(b) Decrease every year

(c) Increase every year

(d) None of the above

Answer (b) Decrease every year

11. Under straight line methods of charging depreciation, value of depreciation charge on

 (a) Original cost

(b) Written down value

(c) Scrap value

(d) None of the above

Answer  (a) Original cost

12. Under Diminishing Balance methods of charging depreciation, value of depreciation charge on

(a) Originalcost

(b) Scrap value

(c) Written down value

(d) None of the above

Answer (c) Written down value

13. Value of assets may be reduce to zero in which methods, if depreciation charge throughout the life of the assets

(a) Fixed installment methods

(b) Written down value methods

(c) Insurance policy methods

(d) None of the above

Answer (a) Fixed installment methods

14. The amount of depreciation charge on machinery will be debited to

(a) Machinery account

(b) Cash account

(c) Depreciation account

(d) None of the above

Answer (c) Depreciation account

15. Loss on sale of machinery should be written off against

(a) Assets account

(b) Depreciation fund account

(c) Sale account

(d) Loss account

Answer (b) Depreciation fund account

16. Depreciation is ……..of cost of fixed assets

 (a) Apportionment

(b) Allocation

(c) Expenses

(d) None of the above

Answer  (a) Apportionment

17. Mines assets related to

(a) Depreciation

(b) Amortization

(c) Depletion

(d) None of the above

Answer (c) Depletion

18. The term refer to the damage done to a building or other property during tenancy is called as

(a) Dilapidation

(b) Depreciation

(c) Depletion

(d) All of the above

Answer (a) Dilapidation

19. Why depreciation is charged

(a) To know the true profit

(b) To make provision for replacement

(c) To show true financial position

(d) All of the above

Answer (d) All of the above

20. What is the cause of depreciation?

(a) Rot & Rust

(b) Out of date

(c) Extraction of oil from oil well

(d) All of the above

Answer (d) All of the above

MCQ on Financial Statements

Financial Accounting MCQ – 5

1. The balance of the petty cash is

(a) An expense

(b) An asset.

(c) An income

(d)None of the above

Answer (b) An asset

2. Fixed assets are:

(a) kept in the business for use over a long time for earning income

(b) meant for conversion into cash as quickly as possible.

(c) meant for resale

(d) None of the above

Answer (a) kept in the business for use over a long time for earning income

3. Goodwill is :

(a) tangible asset

(b) Intangible asset

(c) A current asset

(d) None of the above

Answer (b) Intangible asset

4. Stock is:

(a) Part of current assets

(b) Intangible.

(c) Included in the category of fixed assets

(d) None of the above

Answer (a) Part of current assets

5. The profit and loss account shows:

(a) The gross profit earned.

(b) Net profit earned

(c) Financial position of the concern

(d) None of the above

Answer (b) Net profit earned

6. Closing stock is valued at

(a) Cost or market prices whichever is lower

(b) Cost

(c) Market value,

(d) None of the above

Answer (a) Cost or market prices whichever is lower

7. The manufacturing account is prepared

(a) To ascertain the cost of the manufactured goods

(b) To show the sale proceeds from the goods produced during the year.

(c) To ascertain the profit or loss on the goods purchased

(d) None of the above

Answer (a) To ascertain the cost of the manufactured goods

8. Unearned Income Account is  

(a) Expense

(b) Liability

(c) Asset

(d) None of the above

Answer (b) Liability

9. Assets are held for the purpose of:

(a) Resale

(b) Conversion into cash.

(c) Earning revenue

(d) None of the above

Answer (c) Earning revenue

10. Stock is valued at:

(a) Market price

(b) Cost or market prices whichever is lower

(c) Cost price,

(d) None of the above

Answer (b) Cost or market prices whichever is lower

11. Depreciation is provided on

(a) Fixed assets

(b) Outward charges,

(c) Current assets

(d) Intangible assets.

Answer (a) Fixed assets

12. Heavy advertising to launch a new product is a:

(a) Deferred revenue expenditure

(b) Capital expenditure

(c) Revenue expenditure

(d) None of the above

Answer (a) Deferred revenue expenditure

13……………… shown on the debit side of Trading Account

(a) Sales

(b) Closing stock

(c) Opening stock

(d) Gross Profit b/d

Answer (c) Opening stock

14………….is arrived at by deducting cost of goods sold from sales

(a) Cost of Production

(b) Gross Profit

(c) Net Profit

(d) None of the above

Answer (b) Gross Profit

15. In………. excess of debit over credit is known as…………

(a) Trading A/c, Gross Profit

(b) Profit & Loss A/c, Gross Profit

(c) Profit & Loss A/c, Net Loss

(d) Profit & Loss A/c, Net Profit.

Answer (c) Profit & Loss A/c, Net Loss

16. Closing stock balance given in the debit side of the trial balance will be written in financial statement in………

(a) Trading A/c Credit Side

(b) Liabilities

(c) Asset Side

(d) None of the above

Answer (c) Asset Side

17. The properties owned by the business are

(a) Capital

(b) Assets

(c) Accounting Equation.

(d) None of the above

Answer (b) Assets

18. A debit means

(a) Decrease in Assets

(b) Increase in Liability

(c) An increase in Asset

(d) Increase in Liability.

Answer (c) An increase in Asset

19. A debit balance in which of the following accounts would indicate a likely error

(a) Fees Earned

(b) Cash

(c) Accounts Receivable

(d) Miscellaneous Expenses.

Answer (a) Fees Earned

MCQ on Partnership Accounts

Financial Accounting MCQ – 6

1. Partnership act enacted in which year?

(a) 1942

(b) 1936

(c) 1932

(d) 1928

Answer (c) 1932

2. Change in constitution of the firm may be due to

(a) Admission of a new partner

(b) Retirement of a partner

(c) Death of the partner

(d) All of the above

Answer (d) All of the above

3. Sacrificing ratios equal to

(a) Old ratio – New ratio

(b) New ratio – old ration

(c) Both of the above

(d) None of the above

Answer (a) Old ratio – New ratio

4. On the admission of a partner if the goodwill is raised at full value, it should be debited to…..

(a) Goodwill account

(b) Cash account

(c) Capital account

(d) None of the above

Answer (a) Goodwill account

5. Any amount to be written off after the admission of a partner is transfer to the capital account of all partners in……

(a) New profit sharing ratio

(b) Old profit sharing ration

(c) Capital ratio

(d) None of the above

Answer (a) New profit sharing ratio

6. Revaluation account is a

(a) Real account

(b) Nominal account

(c) Personal account

(d) None of the above

Answer (b) Nominal account

7. In case of retirement of partner, profit on revaluation is credited to the capital account of partner…

(a) Profit sharing ratio

(b) Equally

(c) Capital ratio

(d) None of the above

Answer (a) Profit sharing ratio

8. Revaluation account is also known as

(a) Profit and loss adjustment account

(b) Personal account

(c) Real account

(d) None of the above

Answer (a) Profit and loss adjustment account

9. Methods of valuation of goodwill is

(a) Average profit

(b) Super profit

(c) Capitalization

(d) All of the above

Answer (d) All of the above

10. In case of retirement of a partner, goodwill at its full value is credited to the accounts of…..

(a) Retiring partner

(b) Old partner

(c) New partner

(d) All partners

Answer (d) All partners

11. At the time of admission of a new partner, reserve and undistributed profit are credited to old partner capital account

 (a) New profit sharing ratio

(b) Old profit sharing ratio

(c) Capital ratio

(d) None of the above

Answer (b) Old profit sharing ratio

12. Goodwill bought in by an incoming partner in cash to join a partnership firm is share by the old partner in their

(a) New profit sharing ratio

(b) Old profit sharing ratio

(c) Capital ratio

(d) Sacrificing ratio

Answer (d) Sacrificing ratio

13. If partnership deed silent, interest allowed on partner capital account will be

(a) 5%

(b) 6%

(c) 7%

(d) Nil

Answer (d) Nil

14. The maximum number of partner in case of non-banking partnership firm is

(a) 10

(b) 15

(c) 20

(d) 25

Answer (c) 20

15. In the absence of an agreement, interest on partner loan shall be paid @….

(a) 5%

(b) 6%

(c) 7%

(d) Nil

Answer (b) 6%

16. The written form of partnership agreement is call as

(a) Partnership deed

(b) Partnership bond

(c) Both of the above

(d) None of the above

Answer (a) Partnership deed

17. Current account of partner should be open when capitals are……?

(a) Fixed

(b) Fluctuating

(c) Up and down

(d) None of the above

Answer (a) Fixed

18. In the absence of partnership deed, profit and loss will divided among the partner

(a) Profit sharing ratio

(b) Equally

(c) Capital ratio

(d) None of the above

Answer (b) Equally

19. Which partner does not have liability to share the loss incurred by the firm

 (a) Minor

(b) Sleeping

(c) Dormant

(d) None of the above

Answer  (a) Minor

20. The additional account prepared at the time of preparation of final account of partnership

(a) Profit and loss appropriation account

(b) Revaluation account

(c) Balance sheet

(d) None of the above

Answer (a) Profit and loss appropriation account

MCQ on Hire Purchase System

Financial Accounting MCQ – 7

1. Hire purchase act enacted in the year

 (a) 1971

(b) 1972

(c) 1973

(d) 1974

Answer (b) 1972

2. Hire purchase act came in to force with effect from

 (a) 1st Sept 1972

(b) 1st Sept 1973

(c) 1st Sept 1974

(d) 1st Sept 1975

Answer (b) 1st Sept 1973

3. In Hire purchase system, Hire purchase price comes under section

 (a) Sec 2(d)

(b) Sec 3(d)

(c) Sec 4(d)

(d) Sec 5(d)

Answer  (a) Sec 2(d)

4. In hire purchase system, Net hire purchase price comes under section

 (a) Sec 8(1)(e)

(b) Sec 8(2)(e)

(c) Sec 8(3)(e)

(d) Sec 8(4)(e)

Answer  (a) Sec 8(1)(e)

5. Net hire purchase price excluded

 (a) Delivery expenses

(b) Registration fees

(c) Cost of insurance

(d) All of the above

Answer (d) All of the above

6. In Hire purchase system, Net hire purchase charges comes under section

 (a) Sec 8(1)(d)

(b) Sec 8(1)(e)

(c) Sec 8(1)(f)

(d) Sec 8(1)(g)

Answer  (a) Sec 8(1)(d)

7. In Hire purchase system, Cash price comes under

 (a) Sec 4(1)(a)

(b) Sec 4(1)(b)

(c) Sec 4(1)(c)

(d) Sec 4(1)(d)

Answer (b) Sec 4(1)(b)

8. The amount paid at the time of hire purchase agreement is known as

(a) Installment

(b) Down payment

(c) Cash price

(d) Hire purchase price

Answer (b) Down payment

9. In hire purchase system cash price plus interest is known as

 (a) Book value of assets

(b) Capital value of assets

(c) Hire purchase price of assets

(d) Hire purchase charges

Answer (c) Hire purchase price of assets

10. Depreciation on hire purchase assets is claimed by

(a) Vendor

(b) Hire purchaser

(c) Buyer

(d) Seller

Answer (b) Hire purchaser

11. Under installment payment system ownership of goods

(a) Is transfer at the time of agreement

(b) Is transfer at the time of last installment

(c) Is not transfer

(d) None of the above

Answer (a) Is transfer at the time of agreement

12. The persons who obtained delivery of possession of goods from the owner under the hire purchase agreement is known as

(a) Purchaser

(b) Hirer

(c) Vendor

(d) None of the above

Answer (b) Hirer

13. The different between the net hire purchase price and net cash price of the goods is termed as

 (a) Hire purchase charges

(b) Installment

(c) Down payment

(d) None of the above

Answer  (a) Hire purchase charges

14. In hire purchase system, cash price instalment comes under section

(a) Sec 7(1)(a)

(b) Sec 7(1)(b)

(c) Sec 7(1)(c)

(d) Sec 7(1)(d)

Answer (a) Sec 7(1)(a)

15. The sum payable periodically by the hirer under the agreement

(a) Installment

(b) Consolidation

(c) Hire

(d) None of the above

Answer (c) Hire

16. Section of Right of owner to termination

(a) Sec 17

(b) Sec 18

(c) Sec 19

(d) Sec 20

Answer (c) Sec 19

17. The hire purchaser may terminate the hire purchase agreement after giving the owner at least …..Days’ notice in writing

(a) 14

(b) 21

(c) 51

(d) 41

Answer (a) 14

18. In hire purchase , the maximum statutory charge should not exceed …….. of the installment

(a) 20%

(b) 30%

(c) 40%

(d) 50%

Answer (b) 30%

19. Hire purchase price – cash price =?

 (a) Total interest

(b) Down payment

(c) Share

(d) None of the above

Answer  (a) Total interest

20. Hire Purchase Debtors is also known as

(a) Stock with costumer

(b) Installments Due

(c) Both of the above

(d) None of the above

Answer (b) Installments Due

MCQ on Lease Accounting

Financial Accounting MCQ – 8

1. The person who undertake an agreement, conveys to another person the right to use in return for rent, an assest for an agreed period of time

(a) Lessor

(b) Lessee

(c) Both

(d) None of the above

Answer (a) Lessor

2. The person who under an agreement , obtains from another person the right to use, in return for rent, an assest for an agreed period of time.

(a) Lessor

(b) Lessee

(c) Both

(d) None of the above

Answer (b) Lessee

3. Accounting standard for lease is

(a) As 17

(b) As 18

(c) As 19

(d) As 20

Answer (c) As 19

4. There are twon parties involved in a lease agreement namely

 (a) Lessor and lessee

(b) Indemnifier and surety

(c) Buyer and seller

(d) Bailor and bailee

Answer  (a) Lessor and lessee

5. The amout for which an assest could be exchanged or a liability settled between knowledgeable, willing parties in an arm length transaction in termed as

(a) Invoice value

(b) Market value

(c) Fire value

(d) Dual value

Answer (c) Fire value

6. The estimated fire value of the assets at the end of the lease term is known as

(a) Residual value

(b) Invoice value

(c) Dual value

(d) Market value

Answer (a) Residual value

7. As 19 classifies lease in to how many types?

(a) 2

(b) 1

(c) 3

(d) 4

Answer (a) 2

8. Operating lease is a

(a) Revocable contract

(b) Non revocable contract

(c) Operating contract

(d) None of the above

Answer (a) Revocable contract

9. Which lease transfer substantially all the risk and rewards incident to ownership of an asset?

(a) Operating lease

(b) Finance lease

(c) Both

(d) None of the above

Answer (b) Finance lease

10. The different between the lessor’s gross investment in the lease and its present value is called as

(a) Finance income

(b) Nonfinancial income

(c) Unearned finance income

(d) None of the above

Answer (c) Unearned finance income

11. The expected fire value of the leasehold property at the end of the term included in the minimum lease payment is termed as

 (a) Unguaranteed residual value

(b) Guaranteed residual value

(c) Both

(d) None of the above

Answer (a) Unguaranteed residual value

12. A portion of the lease payment that is not fixed in amount but is based on a factor other than just the passage of time is termed as

 (a) House rent

(b) Outstanding rent

(c) Contingent rent

(d) None of the above

Answer (c) Contingent rent

13. Financial lease is

 (a) Non revocable contract

(b) Revocable contract

(c) Contingent contract

(d) None of the above

Answer  (a) Non revocable contract

14. In which types of lease expenses like maintenance, repair, and taxes are born by the lessor

 (a) Operating lease

(b) Financial lease

(c) Both

(d) None of the above

Answer  (a) Operating lease

15. In financial lease the risk of obsolescence is taken by the

 (a) Lessor

(b) Lessee

(c) Both

(d) None of the above

Answer (b) Lessee

MCQ on Branch Accounting

Financial Accounting MCQ – 9

1. Branch not keeping the full system of accounting is also known as

 (a) Foreign branch

(b) Dependent branch

(c) Independent branch

(d) None of the above

Answer (b) Dependent branch

2. Branch keeping the full system of accounting is also known as

 (a) Independent branch

(b) Dependent branch

(c) Foreign branch

(d) None of the above

Answer  (a) Independent branch

3. Stock and debtor system is popularly known as

 (a) Foreign branch methods

(b) Analytical methods

(c) Synthetic methods

(d) Analytical methods

Answer (d) Analytical methods

4. Branch debtor system is otherwise known as

 (a) Synthetic methods

(b) Stock and debtor methods

(c) Foreign branch methods

(d) Analytical methods

Answer  (a) Synthetic methods

5. Branch account is prepared to ascertain

 (a) Profit and loss of the branch

(b) Financial statement of the business

(c) Assets and liability of the head office

(d) None of the above

Answer  (a) Profit and loss of the branch

6. The system in which profit and loss made by the branch is determined by preparing branch trading and profit & loss account at cost price is

 (a) Synthetic methods

(b) Stock and debtor methods

(c) Final account methods

(d) Analytical methods

Answer (c) Final account methods

7. The account prepaired for the ascertaining  the amount of gross profit earned by the branch under stock and debtor system is

 (a) Branch adjustment account

(b) Branch stock account

(c) Goods sent to branch account

(d) Branch debtor account

Answer  (a) Branch adjustment account

8. The account prepared to adjust the loading included in the value of opening and closing stock at branch is termed as

 (a) Branchadjustmentaccount

(b) Stock reserve and surplus account

(c) Goods sent to branch account

(d) Branch debtor account

Answer (b) Stock reserve and surplus account

9. The account prepared in the same way as that when goods are invoice at cost, except that all entries are made at invoice price is termed as

 (a) Branch adjustment account

(b) Branch stock account

(c) Goods sent to branch account

(d) Branch debtor account

Answer (b) Branch stock account

10. Which methods is adopted generally in those branches which are small in size

 (a) Debtors method

(b) Stock and debtor methods

(c) Foreign branch methods

(d) Analytical methods

Answer  (a) Debtors method

11. In which methods goods are sent by the head office to the branch at invoice price

 (a) Invoice price method

(b) Debtors method

(c) Stock and debtor methods

(d) Foreign branch methods

Answer  (a) Invoice price method

12. Which account is prepaired when branch sells goods on credit

 (a) Branch adjustment account

(b) Branch debtors account

(c) Goods sent to branch account

(d) Branch debtor account

Answer (b) Branch debtors account

13. Which books is prepared to maintaining the small expenses like carriage postage, entertainment etc.

(a) Management books

(b) Petty cash book

(c) Accounting books

(d) None of the above

Answer (b) Petty cash book

14. The goods sent by the head office may be either at ……..or cost plus profit

 (a) Cost price

(b) Selling price

(c) Market price

(d) Invoice price

Answer  (a) Cost price

15. Which account is prepared for recording all cash transaction relating to the branch?

 (a) Goods sent to branch account

(b) Branch debtor account

(c) Branch cash account

(d) None of the above

Answer (c) Branch cash account

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Financial Accounting MCQ with Answers

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