Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #221

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In partnership accounts, Garner vs. Murray rule applies to the situation of:

A. Retirement of a partner

B. Insolvency of a partner during dissolution

C. Admission of a partner

D. Change in profit sharing ratio

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Correct Answer: Option B

Explanation:
The rule dictates that if a partner becomes insolvent, the capital deficiency is borne by solvent partners in the ratio of their last agreed capital.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #222

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When a firm is dissolved, unrecorded assets taken over by a partner are recorded by:

A. Debiting Partner's Capital A/c, Crediting Realisation A/c

B. Ignored

C. Debiting Cash, Crediting Realisation

D. Debiting Realisation A/c, Crediting Partner's Capital A/c

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Correct Answer: Option A

Explanation:
Taking an asset reduces the amount payable to the partner (debit capital) and is treated as a realization of asset value (credit Realisation A/c).

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Question #223

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An auditor checking the arithmetical accuracy of the books performs what kind of check?

A. Compliance testing

B. Substantive testing

C. Analytical review

D. Routine checking

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Correct Answer: Option D

Explanation:
Routine checking involves casting (totalling), carry-forwards, and ledger posting verifications to ensure basic mathematical accuracy.

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Question #224

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Which of the following errors is an Error of Principle?

A. Treating wages paid for installation of machinery as normal wages

B. Forgetting to record a sales invoice entirely

C. Posting a debit entry to the credit side

D. Posting Rs 500 as Rs 5,000

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Correct Answer: Option A

Explanation:
Treating capital expenditure (installation of machinery) as revenue expenditure (normal wages) violates fundamental accounting principles.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #225

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A credit balance in the Income and Expenditure Account of an NPO indicates:

A. Cash in hand

B. Deficit (Excess of Expenditure over Income)

C. Capital Fund

D. Surplus (Excess of Income over Expenditure)

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Correct Answer: Option D

Explanation:
An Income & Expenditure Account is a nominal account. A credit balance means incomes exceed expenses, resulting in a Surplus.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #226

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Life Membership Fees received by a club is treated as:

A. Revenue Receipt (credited to Income & Expenditure A/c)

B. Deferred Revenue Income

C. Current Liability

D. Capital Receipt (added to Capital Fund)

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Correct Answer: Option D

Explanation:
It is a one-time non-recurring receipt representing a lifetime obligation, hence capitalized and added to the Capital Fund.

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Question #227

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In the Indian Financial System, Treasury Bills (T-Bills) are issued by:

A. RBI on behalf of the Central Government

B. Commercial Banks

C. SEBI

D. State Governments

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Correct Answer: Option A

Explanation:
T-Bills are short-term debt instruments issued by the Reserve Bank of India on behalf of the Government of India to meet short-term liquidity needs.

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Question #228

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Which form of market involves the buying and selling of short-term liquid debt instruments?

A. Derivatives Market

B. Capital Market

C. Money Market

D. Forex Market

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Correct Answer: Option C

Explanation:
The money market deals with short-term borrowing and lending (less than one year), such as Commercial Paper and T-Bills.

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Question #229

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Income Tax is governed under which schedule of the Indian Constitution?

A. 7th Schedule (Concurrent List)

B. 7th Schedule (State List)

C. 7th Schedule (Union List)

D. 8th Schedule

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Correct Answer: Option C

Explanation:
Taxes on income other than agricultural income fall under Entry 82 of List I (Union List) in the Seventh Schedule.

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Question #230

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Which tax reform introduced the concept of 'One Nation, One Tax'?

A. Wealth Tax Abolition

B. Goods and Services Tax (GST)

C. Value Added Tax (VAT)

D. Fringe Benefit Tax

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Correct Answer: Option B

Explanation:
GST integrated multiple indirect taxes across India into a single unified tax structure.

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Question #231

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If a manufacturing company adopts JIT (Just-in-Time) inventory, its main goal is to:

A. Eliminate inventory carrying costs by receiving goods only as needed

B. Increase production cycle time

C. Maximize raw material stock

D. Buy in bulk to get trade discounts

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Correct Answer: Option A

Explanation:
JIT aligns raw-material orders directly with production schedules to reduce waste and eliminate warehouse holding costs.

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Question #232

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Under Cost Accounting, abnormal wastage of material is transferred to:

A. Work in Progress Account

B. Finished Goods Account

C. Costing Profit & Loss Account

D. Factory Overheads Account

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Correct Answer: Option C

Explanation:
Abnormal losses are not treated as a cost of production; they are transferred directly to the Costing P&L account to avoid inflating product costs.

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Question #233

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Which standard ensures consistency in classifying cash flows from operating, investing, and financing activities in India?

A. Ind AS 10

B. Ind AS 7

C. Ind AS 2

D. Ind AS 1

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Correct Answer: Option B

Explanation:
Ind AS 7 (equivalent to IAS 7) deals specifically with the preparation and presentation of the Statement of Cash Flows.

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Question #234

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Which of the following is considered an investing activity in a cash flow statement?

A. Payment of dividend

B. Issue of shares

C. Purchase of machinery

D. Cash received from customers

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Correct Answer: Option C

Explanation:
Investing activities involve the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

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Question #235

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Which of the following is an example of an 'Artificial Personal Account'?

A. Reliance Industries Ltd. Account

B. Ramesh's Account

C. Outstanding Wages Account

D. Capital Account

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Correct Answer: Option A

Explanation:
Corporations and companies are artificial persons created by law, distinguishing them from natural persons (Ramesh) or representative accounts.

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Question #236

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Goods withdrawn by the proprietor for personal use are recorded by:

A. Debiting Drawings, Crediting Purchases

B. Debiting Purchases, Crediting Drawings

C. Debiting Drawings, Crediting Sales

D. Debiting Capital, Crediting Cash

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Correct Answer: Option A

Explanation:
Drawing goods reduces the stock of items bought for resale, so Purchases A/c is credited at cost price.

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Question #237

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A Suspense Account is generally closed when:

A. All errors causing the trial balance difference are rectified

B. The financial year ends

C. The auditor approves it

D. The balance sheet is signed

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Correct Answer: Option A

Explanation:
The Suspense Account exists only as a temporary fix. Once all one-sided errors are found and rectified, its balance becomes zero.

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Question #238

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Which formula determines the Return on Equity (ROE)?

A. Net Profit available to Equity Shareholders / Equity Shareholder's Funds

B. Net Profit / Total Assets

C. Operating Profit / Capital Employed

D. Gross Profit / Sales

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Correct Answer: Option A

Explanation:
ROE measures the profitability of equity funds, showing how much profit a company generates with the money shareholders have invested.

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Question #239

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When shares are forfeited, the Share Capital Account is debited by:

A. Face value of shares

B. Paid up value of shares

C. Called up value of shares

D. Issue price of shares

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Correct Answer: Option C

Explanation:
Upon forfeiture, the share capital account must be reduced (debited) by the amount that was called up by the company until that date.

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Question #240

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The balance in the Share Forfeiture Account after reissue of forfeited shares is transferred to:

A. Profit & Loss Account

B. Capital Reserve

C. General Reserve

D. Securities Premium Account

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Correct Answer: Option B

Explanation:
The profit on reissue of forfeited shares is a capital profit, which is transferred to the Capital Reserve account.

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