Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #181

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Under the double-entry system, a decrease in an asset is recorded by:

A. Debiting a liability account

B. Debiting the asset account

C. Crediting the capital account

D. Crediting the asset account

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Correct Answer: Option D

Explanation:
Assets have normal debit balances. A decrease is recorded by crediting the account.

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Question #182

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An unpaid electricity bill of Rs 5,000 at the end of the year requires an adjusting entry. It will:

A. Debit Outstanding Expense, Credit Electricity A/c

B. Debit Electricity A/c, Credit Outstanding Expense

C. Debit P&L A/c, Credit Cash

D. Debit Cash, Credit Electricity A/c

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Correct Answer: Option B

Explanation:
Recognizing the expense (Debit Electricity A/c) and creating the liability (Credit Outstanding Electricity Expense).

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Question #183

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Identify the non-cash item from the following:

A. Depreciation

B. Purchase of machinery

C. Dividend paid

D. Wages paid

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Correct Answer: Option A

Explanation:
Depreciation is the systematic allocation of asset cost; it does not involve any actual outflow of cash.

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Question #184

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In cost accounting, Idle Time wages are usually charged to:

A. Direct Labor Account

B. Both B and C

C. Profit & Loss Account (if abnormal)

D. Factory Overheads

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Correct Answer: Option B

Explanation:
Normal idle time is charged to Factory Overheads, while abnormal idle time (e.g., strikes, power failure) is charged to the Costing P&L Account.

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Question #185

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Which of these is a Direct Tax?

A. Excise Duty

B. Income Tax

C. Goods and Services Tax

D. Customs Duty

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Correct Answer: Option B

Explanation:
Income tax is a direct tax because the liability and burden of the tax fall on the same individual.

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Question #186

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Expenditure incurred on overhauling a second-hand machinery purchased recently to put it in working condition is:

A. Loss

B. Revenue Expenditure

C. Capital Expenditure

D. Deferred Revenue Expenditure

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Correct Answer: Option C

Explanation:
All costs incurred before a fixed asset is ready for its intended use are capitalized.

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Question #187

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A ledger is a book of:

A. Original entry

B. Rectification entry

C. Adjusting entry

D. Final entry

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Correct Answer: Option D

Explanation:
The ledger is the book of final entry because transactions are ultimately classified and posted here from the journal.

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Question #188

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Under the Straight Line Method of depreciation, the amount of depreciation:

A. Remains constant every year

B. Fluctuates based on usage

C. Decreases every year

D. Increases every year

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Correct Answer: Option A

Explanation:
SLM calculates depreciation on the original cost, resulting in the same amount being charged each year.

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Question #189

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An amount received from a debtor whose account was previously written off as bad debt is:

A. Credited to Debtor's A/c

B. Debited to Bad Debts A/c

C. Credited to Bad Debts Recovered A/c

D. Credited to Sales A/c

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Correct Answer: Option C

Explanation:
It represents a new gain and is credited to Bad Debts Recovered, a nominal account, without reopening the debtor's account.

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Question #190

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In the context of the Cash Book, the term 'C' written against an entry stands for:

A. Credit

B. Carry forward

C. Contra

D. Cash

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Correct Answer: Option C

Explanation:
The letter 'C' in the Ledger Folio column signifies a contra entry, which impacts both cash and bank columns.

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Question #191

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According to the Companies Act, which financial statement details cash inflows and outflows?

A. Balance Sheet

B. Cash Flow Statement

C. Statement of Profit and Loss

D. Statement of Changes in Equity

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Correct Answer: Option B

Explanation:
The Cash Flow Statement provides historical information about changes in cash and cash equivalents, categorized into operating, investing, and financing activities.

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Question #192

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The accounting standard dealing with Property, Plant and Equipment (PPE) is:

A. AS 10

B. AS 26

C. AS 2

D. AS 9

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Correct Answer: Option A

Explanation:
AS 10 regulates the accounting for Property, Plant, and Equipment, covering recognition, measurement, and depreciation.

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Question #193

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Income received in advance is a:

A. Current Liability

B. Fictitious Asset

C. Current Asset

D. Fixed Asset

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Correct Answer: Option A

Explanation:
Money received for services yet to be performed creates an obligation to provide the service, thus it is a liability.

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Question #194

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Which ratio measures the firm's ability to meet its short-term obligations?

A. Return on Investment

B. Current Ratio

C. Debt-Equity Ratio

D. Inventory Turnover Ratio

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Correct Answer: Option B

Explanation:
Current Ratio (Current Assets / Current Liabilities) is a primary liquidity ratio testing short-term solvency.

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Question #195

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A high Inventory Turnover Ratio generally indicates:

A. Efficient inventory management and fast sales

B. Slow-moving inventory

C. Low sales volume

D. Overstocking

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Correct Answer: Option A

Explanation:
It means the company replenishes and sells its inventory quickly, pointing to strong sales and efficient management.

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Question #196

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Which of the following is NOT an objective of Cost Accounting?

A. Cost control and reduction

B. Ascertaining profit for tax authorities

C. Determining selling price

D. Assisting management in decision making

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Correct Answer: Option B

Explanation:
Tax authorities require financial accounting statements (P&L, Balance Sheet). Cost accounting is an internal management tool.

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Question #197

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Under Marginal Costing, stock is valued at:

A. Variable Manufacturing Cost

B. Fixed Cost

C. Total Cost

D. Prime Cost

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Correct Answer: Option A

Explanation:
Marginal costing values inventory strictly on variable costs, treating fixed overheads as period costs written off immediately.

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Question #198

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An example of a Semi-Variable Cost is:

A. Insurance Premium

B. Direct Material

C. Factory Rent

D. Telephone Bill

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Correct Answer: Option D

Explanation:
A telephone bill typically has a fixed rental component plus a variable component based on call volume.

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Question #199

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The point at which Total Revenue equals Total Cost is known as:

A. Margin of Safety

B. Break-Even Point

C. Maximum Profit Point

D. Shut-down Point

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Correct Answer: Option B

Explanation:
At the break-even point, a business makes neither a profit nor a loss (Total Revenue = Total Costs).

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Question #200

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Which budget forms the basis of all other budgets?

A. Master Budget

B. Sales Budget

C. Production Budget

D. Cash Budget

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Correct Answer: Option B

Explanation:
The Sales Budget is typically the starting point (key factor) because production and cash needs depend directly on expected sales volume.

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