Accountancy and Book Keeping MCQs

Accountancy and Statistics

Accountancy and Book Keeping MCQs

Practice the latest Accountancy MCQs with answers and detailed explanations. Explore chapter-wise multiple-choice questions covering important accounting concepts, bookkeeping, financial statements, journal entries, ledger, trial balance, depreciation, ratio analysis, partnership accounts, company accounts, and more. Perfect for Class 11 & 12, B.Com, CA Foundation, CUET, Banking, SSC, JKSSB, JKPSC and competitive exams.

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Practice Questions

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Question #1
Which of the following qualitative characteristics of accounting information requires that information should not be biased?
A. Comparability
B. Reliability
C. Relevance
D. Understandability
Discuss
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Correct Answer: Option B

Explanation:
Reliability ensures that the accounting information is free from error and bias, faithfully representing what it purports to represent.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #2
Under the accrual basis of accounting, expenses are recognized when they are:
A. Paid in cash
B. Incurred
C. Approved by management
D. Budgeted
Discuss
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Correct Answer: Option B

Explanation:
The accrual concept dictates that expenses are recognized when incurred, regardless of when the cash is actually paid.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #3
Which accounting principle mandates that a business will continue its operations indefinitely?
A. Accounting Period Concept
B. Business Entity Concept
C. Dual Aspect Concept
D. Going Concern Concept
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Correct Answer: Option D

Explanation:
The Going Concern Concept assumes the enterprise has neither the intention nor the need to liquidate or curtail materially the scale of its operations.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #4
Assertion (A): Capital is treated as an internal liability of the business. Reason (R): The business and its owner are considered distinct entities under the Business Entity Concept.
A. A is false but R is true
B. Both A and R are true and R is the correct explanation of A
C. A is true but R is false
D. Both A and R are true but R is not the correct explanation of A
Discuss
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Correct Answer: Option B

Explanation:
The Business Entity Concept treats the owner as a separate entity from the business, making the capital invested by the owner an internal liability.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #5
If a company changes its depreciation method from Straight Line to Written Down Value to manipulate profits, which accounting convention is violated?
A. Conservatism
B. Materiality
C. Consistency
D. Full Disclosure
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Correct Answer: Option C

Explanation:
The convention of Consistency requires that accounting policies remain unchanged from one period to another to allow valid comparisons.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #6
Contingent liabilities are shown as a footnote to the balance sheet to comply with which accounting convention?
A. Consistency
B. Materiality
C. Conservatism
D. Full Disclosure
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Correct Answer: Option D

Explanation:
Full disclosure requires all significant information to be completely and fairly disclosed, including contingent liabilities via footnotes.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #7
If total assets are Rs 5,00,000 and outside liabilities are Rs 2,00,000, what is the owner's equity?
A. Rs 7,00,000
B. Rs 2,00,000
C. Rs 3,00,000
D. Rs 2,50,000
Discuss
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Correct Answer: Option C

Explanation:
According to the accounting equation (Assets = Liabilities + Equity), Equity = 5,00,000 - 2,00,000 = Rs 3,00,000.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #8
A business purchased goods for Rs 50,000 on credit. What is the effect on the accounting equation?
A. Assets increase, Liabilities increase
B. Liabilities increase, Capital decreases
C. Assets decrease, Liabilities decrease
D. Assets increase, Capital increases
Discuss
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Correct Answer: Option A

Explanation:
Stock (Asset) increases by Rs 50,000 and Creditors (Liability) increase by Rs 50,000, maintaining the equation balance.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #9
Payment of a liability out of cash will result in:
A. Increase in an asset and increase in a liability
B. Decrease in an asset and decrease in capital
C. Decrease in an asset and decrease in a liability
D. Increase in a liability and decrease in capital
Discuss
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Correct Answer: Option C

Explanation:
Cash (Asset) decreases and the corresponding Liability also decreases, keeping the accounting equation balanced.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #10
An amount of Rs 10,000 withdrawn by the proprietor for personal use will cause:
A. No change in total assets
B. Decrease in Cash and Increase in Capital
C. Decrease in Cash and Decrease in Capital
D. Increase in Drawings and Increase in Liabilities
Discuss
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Correct Answer: Option C

Explanation:
Drawings reduce cash on the asset side and simultaneously reduce the proprietor's capital on the equity side.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #11
Which of the following transactions leaves the total of the accounting equation unchanged?
A. Collection of cash from debtors
B. Introduction of fresh capital
C. Purchasing machinery on credit
D. Paying electricity bill
Discuss
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Correct Answer: Option A

Explanation:
Collecting cash from debtors increases one asset (Cash) and decreases another (Debtors) by the same amount, leaving total assets unchanged.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #12
If opening capital is Rs 1,00,000, closing capital is Rs 1,50,000, and drawings are Rs 20,000, what is the profit for the year assuming no additional capital?
A. Rs 1,70,000
B. Rs 30,000
C. Rs 70,000
D. Rs 50,000
Discuss
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Correct Answer: Option C

Explanation:
Profit = Closing Capital + Drawings - Opening Capital. Profit = 1,50,000 + 20,000 - 1,00,000 = Rs 70,000.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #13
The fundamental accounting equation is a mathematical expression of which concept?
A. Cost Concept
B. Dual Aspect Concept
C. Going Concern Concept
D. Money Measurement Concept
Discuss
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Correct Answer: Option B

Explanation:
The Dual Aspect Concept states that every transaction has a two-fold effect, expressed as Assets = Liabilities + Capital.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #14
Which of the following books is known as the book of original entry?
A. Balance Sheet
B. Trial Balance
C. Ledger
D. Journal
Discuss
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Correct Answer: Option D

Explanation:
The Journal is the primary book where transactions are first recorded in chronological order.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #15
In a journal entry, a brief explanation of the transaction written below the entry is called:
A. Voucher
B. Folio
C. Narration
D. Posting
Discuss
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Correct Answer: Option C

Explanation:
Narration is a short description of the transaction written in brackets immediately below the journal entry.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #16
Goods distributed as free samples should be credited to which account?
A. Free Samples Account
B. Sales Account
C. Purchases Account
D. Advertisement Account
Discuss
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Correct Answer: Option C

Explanation:
Goods distributed as free samples reduce the stock of purchased goods, hence Purchases Account is credited at cost price.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #17
A trade discount is:
A. Recorded separately in the books of accounts
B. Deducted from the list price and not recorded in the books
C. Treated as a non-operating expense
D. Given for prompt payment
Discuss
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Correct Answer: Option B

Explanation:
Trade discount is a reduction from the catalogue price given for bulk purchases and is not recorded in the accounting books.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #18
When bad debts previously written off are recovered, which account is credited?
A. Bad Debts Account
B. Debtor's Personal Account
C. Bad Debts Recovered Account
D. Suspense Account
Discuss
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Correct Answer: Option C

Explanation:
Bad debts recovered represent a gain for the business and are credited to a separate nominal account called 'Bad Debts Recovered Account'.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #19
What is the correct journal entry for depreciation charged on machinery?
A. Debit Depreciation A/c, Credit Cash A/c
B. Debit Machinery A/c, Credit Depreciation A/c
C. Debit Depreciation A/c, Credit Machinery A/c
D. Debit P&L A/c, Credit Machinery A/c
Discuss
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Correct Answer: Option C

Explanation:
Depreciation is an expense (Debit), and it reduces the value of the asset, so Machinery Account is credited.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #20
A compound journal entry is an entry that:
A. Involves more than one debit or more than one credit account
B. Is passed at the end of the year
C. Corrects previous errors
D. Affects only two accounts
Discuss
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Correct Answer: Option A

Explanation:
A compound entry contains multiple debits and/or multiple credits, combining related transactions on the same date.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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