Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #241

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A debenture is a:

A. Short-term asset

B. Form of preference share

C. Instrument acknowledging a debt

D. Document of ownership

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Correct Answer: Option C

Explanation:
A debenture is a written instrument issued under the common seal of the company acknowledging a long-term debt to the holders.

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Question #242

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Which of the following is NOT an advantage of Zero Based Budgeting?

A. Fosters efficient resource allocation

B. Eliminates redundant expenses

C. Prevents arbitrary budget inflation

D. It is less time-consuming than traditional budgeting

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Correct Answer: Option D

Explanation:
ZBB is actually heavily time-consuming because it requires managers to justify every single expenditure from scratch annually.

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Question #243

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Opportunity Cost can be best described as:

A. A cost that cannot be changed

B. The cost of idle time

C. The benefit sacrificed when choosing one alternative over the next best alternative

D. The direct cost of making a product

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Correct Answer: Option C

Explanation:
Opportunity cost is a crucial economic and management concept reflecting the value of the foregone alternative in decision making.

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Question #244

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Assertion (A): Indirect Taxes are regressive in their impact. Reason (R): They are levied at a uniform rate irrespective of the income level of the consumer.

A. Both A and R are true but R is not the correct explanation of A

B. Both A and R are true and R is the correct explanation of A

C. A is true but R is false

D. A is false but R is true

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Correct Answer: Option B

Explanation:
Because indirect taxes (like GST) are charged flatly on goods, lower-income people pay a higher proportion of their income, causing a regressive effect.

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

Question #245

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The concept of 'Cost Drivers' is fundamental to which costing technique?

A. Marginal Costing

B. Activity Based Costing (ABC)

C. Standard Costing

D. Batch Costing

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Correct Answer: Option B

Explanation:
ABC uses cost drivers (e.g., number of setups, machine hours) to allocate overheads to products based on the activities they consume.

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Question #246

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Which government initiative relies on PFMS to ensure that farmers receive minimum income support seamlessly?

A. PM KISAN

B. Make in India

C. Smart Cities Mission

D. Skill India

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Correct Answer: Option A

Explanation:
PM KISAN uses the Direct Benefit Transfer (DBT) mechanism of the PFMS to transfer funds directly into the bank accounts of farmers.

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Question #247

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TDS (Tax Deducted at Source) must be deposited to the credit of the Central Government by the deductor usually within:

A. Same day of deduction

B. 30 days of deduction

C. End of the financial year

D. 7th day of the next month

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Correct Answer: Option D

Explanation:
Generally, TDS deducted in a month must be deposited to the government by the 7th of the following month.

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Question #248

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According to the Indian Financial System, 'Repo Rate' is the rate at which:

A. RBI borrows from commercial banks

B. RBI lends short-term funds to commercial banks

C. Banks lend to each other overnight

D. Commercial banks lend to the public

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Correct Answer: Option B

Explanation:
The Repurchase (Repo) rate is the rate at which the RBI lends money to commercial banks to manage short-term liquidity.

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Question #249

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In a partnership firm, if the Profit Sharing Ratio is changed, accumulated profits are distributed among partners in their:

A. Gaining Ratio

B. New Ratio

C. Old Ratio

D. Sacrificing Ratio

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Correct Answer: Option C

Explanation:
Accumulated profits were earned in the past when the old ratio was applicable; thus, they belong to the partners in their old profit sharing ratio.

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Question #250

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Which principle states that an asset must be recorded at the price paid to acquire it?

A. Historical Cost Principle

B. Realization Principle

C. Matching Principle

D. Conservatism Principle

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Correct Answer: Option A

Explanation:
The historical cost principle requires that assets be recorded at their original purchase price, irrespective of changes in market value over time.

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Question #251

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Voucher approach implies that every financial transaction must be supported by:

A. Verbal approval

B. An audit report

C. A trial balance

D. Documentary evidence

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Correct Answer: Option D

Explanation:
The essence of the voucher system is to ensure no entry is made in the books without an authentic, authorized documentary evidence (voucher).

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Question #252

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When analyzing Cost Accounting data, 'Contribution' is useful for:

A. Determining depreciation

B. Calculating Income Tax

C. Valuing Goodwill

D. Make or Buy decisions

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Correct Answer: Option D

Explanation:
Contribution (Sales - Variable Cost) is a key metric in marginal costing used for managerial decisions like 'Make or Buy', dropping a product, or accepting special orders.

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Question #253

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In the context of the Trial Balance, which of the following is correct?

A. It provides a summary of all ledger balances.

B. It is prepared at the beginning of the year.

C. It proves that no errors have been made.

D. It is an account in the ledger.

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Correct Answer: Option A

Explanation:
A Trial Balance is a statement (not an account) that summarizes all ledger balances to check arithmetical accuracy.

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Question #254

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If ending inventory is overstated, what is the effect on the Net Profit of that year?

A. Cannot be determined

B. No effect

C. Overstated

D. Understated

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Correct Answer: Option C

Explanation:
Closing stock is credited to the Trading A/c. An overstatement of closing stock reduces Cost of Goods Sold, thereby inflating (overstating) the Gross and Net Profit.

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Question #255

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Which audit is conducted by an organization's own employees to evaluate the effectiveness of its internal controls?

A. Cost Audit

B. Statutory Audit

C. Internal Audit

D. Tax Audit

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Correct Answer: Option C

Explanation:
Internal audit is an independent, objective assurance function within an organization, distinct from external statutory audits.

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Question #256

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Under the concept of 'Social Return on Investment' (SROI), a ratio of 3:1 indicates:

A. Taxes are 300% of profit

B. Rs 3 of investment creates Rs 1 of social value

C. Financial profit is 3 times the social profit

D. Rs 1 of investment creates Rs 3 of social value

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Correct Answer: Option D

Explanation:
SROI expresses the social value created for every unit of currency invested. A 3:1 ratio means Rs 3 of value is created per Rs 1 invested.

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Question #257

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Assertion (A): Single Entry System is considered unscientific. Reason (R): It does not strictly follow the dual aspect principle for all transactions.

A. Both A and R are true and R is the correct explanation of A

B. A is true but R is false

C. Both A and R are true but R is not the correct explanation of A

D. A is false but R is true

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Correct Answer: Option A

Explanation:
Single entry is unscientific and incomplete because it ignores the two-fold aspect (debit and credit) for many transactions, maintaining only cash and personal accounts.

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Question #258

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In a Cash Book with discount columns, the total of the 'Discount Received' column is posted to the:

A. Debit of Creditors A/c

B. Credit of Discount Received A/c

C. Debit of Discount Received A/c

D. Credit of Cash A/c

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Correct Answer: Option B

Explanation:
Discount Received is a gain (nominal account rule: credit all gains), so the periodic total is posted to the credit side of the Discount Received ledger account.

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Question #259

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Which of the following describes a 'Fictitious Asset'?

A. Expenses/losses written off over a period of time, having no realizable value

B. Assets created to evade taxes

C. Assets without physical existence but having realizable value like patents

D. Current assets held in foreign currency

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Correct Answer: Option A

Explanation:
Fictitious assets (e.g., preliminary expenses, debit balance of P&L) are not true assets; they are unamortized expenses/losses with zero resale value.

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Question #260

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The concept of 'Matching Principle' implies that:

A. Expenses of a period must be matched with revenues of the same period

B. Cash inflows must match cash outflows

C. Debits must always equal credits

D. Assets should match liabilities

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Correct Answer: Option A

Explanation:
The matching concept ensures that all expenses incurred to earn a specific revenue are recognized in the same accounting period to find the true profit.

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