Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #281

A tax levied on a commodity at each stage of production and distribution, based only on the value added at that stage, is characteristic of:

A. Value Added Tax (VAT) / GST

B. Corporate Tax

C. Income Tax

D. Wealth Tax

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Correct Answer: Option A

Explanation:
VAT/GST eliminates the cascading effect by taxing only the value added, utilizing the Input Tax Credit mechanism.

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Question #282

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Which accounting concept requires that the life of the business be divided into smaller intervals for performance measurement?

A. Materiality Concept

B. Matching Concept

C. Going Concern Concept

D. Accounting Period Concept

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Correct Answer: Option D

Explanation:
The Accounting Period Concept artificially breaks the continuous life of a business into standard intervals (usually 12 months) for reporting purposes.

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Question #283

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Which of the following is not a fundamental accounting assumption under Indian Accounting Standards?

A. Consistency

B. Going Concern

C. Accrual

D. Materiality

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Correct Answer: Option D

Explanation:
Materiality is a modifying principle, not a fundamental accounting assumption. The three fundamental accounting assumptions as per AS 1 are Going Concern, Consistency, and Accrual.

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Question #284

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The accounting equation 'Assets = Liabilities + Capital' is based on which concept?

A. Going concern concept

B. Cost concept

C. Money measurement concept

D. Dual aspect concept

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Correct Answer: Option D

Explanation:
The dual aspect concept states that every transaction has two aspects, hence the accounting equation always balances.

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Question #285

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A credit purchase of machinery worth ₹50,000 will:

A. Increase assets and increase liabilities

B. Increase assets and decrease liabilities

C. Decrease assets and decrease capital

D. Decrease assets and increase liabilities

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Correct Answer: Option A

Explanation:
Machinery (asset) increases, and a creditor liability increases. So assets and liabilities both increase.

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Question #286

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Which of the following is a revenue expenditure?

A. Annual repairs of machinery

B. Purchase of land for factory

C. Extension of building

D. Legal expenses to acquire a building

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Correct Answer: Option A

Explanation:
Annual repairs are recurring and maintain existing asset's earning capacity, hence revenue expenditure. Others are capital expenditures.

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Question #287

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The journal entry for goods withdrawn by the proprietor for personal use is:

A. Purchases A/c Dr. To Drawings A/c

B. Drawings A/c Dr. To Purchases A/c

C. Drawings A/c Dr. To Sales A/c

D. Capital A/c Dr. To Purchases A/c

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Correct Answer: Option B

Explanation:
Goods taken for personal use reduce drawings and reduce purchases (or stock). Correct entry: Drawings A/c Dr. To Purchases A/c.

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Question #288

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In a voucher system, which voucher is used to record credit sales?

A. Cash voucher

B. Journal voucher

C. Debit voucher

D. Credit voucher

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Correct Answer: Option B

Explanation:
Credit sales involve no immediate cash, so a journal voucher (non-cash voucher) is used to record the transaction.

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Question #289

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While preparing a Bank Reconciliation Statement, a cheque deposited but not yet cleared is:

A. Deducted from the bank statement balance

B. Added to the cash book balance

C. Deducted from the cash book balance

D. Added to the bank statement balance

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Correct Answer: Option D

Explanation:
When starting from bank statement (pass book) balance, a deposit in transit must be added because it's not yet reflected in the bank statement.

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Question #290

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Which of the following items is shown in the Profit and Loss Appropriation Account of a partnership firm?

A. Salary to partners

B. Rent paid to partner's building

C. Office electricity expenses

D. Discount allowed to debtors

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Correct Answer: Option A

Explanation:
Salary to partners is an appropriation of profit, hence shown in P&L Appropriation A/c, not in P&L A/c.

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Question #291

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The balance of the Cash Book is:

A. Always a credit balance

B. Always a debit balance

C. Nil

D. Either debit or credit

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Correct Answer: Option B

Explanation:
Cash Book is a book of original entry and a ledger account. Its balance represents cash in hand, which is always a debit balance (asset).

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Question #292

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Which of the following is not an objective of a financial audit?

A. Detection of errors

B. Detection of fraud

C. Ensuring absolute accuracy of books

D. Expressing an opinion on financial statements

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Correct Answer: Option C

Explanation:
Audit provides reasonable assurance, not absolute accuracy. The objective is to detect material misstatements due to fraud or error and express an opinion.

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Question #293

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Which of the following errors will affect the Trial Balance?

A. One-sided error

B. Error of commission

C. Error of principle

D. Error of omission

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Correct Answer: Option A

Explanation:
A one-sided error (e.g., posting to only one account) causes disagreement in trial balance. Other errors may not affect the trial balance agreement.

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Question #294

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In Trading Account, closing stock is valued at:

A. Cost only

B. Market price only

C. Cost or net realizable value, whichever is lower

D. Market price or cost, whichever is higher

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Correct Answer: Option C

Explanation:
As per the prudence concept and AS 2, closing stock is valued at cost or net realizable value, whichever is lower.

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Question #295

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What is the primary objective of financial management?

A. Maximizing market share

B. Maximizing shareholder wealth

C. Maximizing profits

D. Maximizing sales

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Correct Answer: Option B

Explanation:
The primary objective of financial management is to maximize the wealth of shareholders, reflected in the market price of shares.

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Question #296

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Under the straight-line method of depreciation, the depreciation amount:

A. Is based on usage

B. Increases every year

C. Decreases every year

D. Remains constant every year

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Correct Answer: Option D

Explanation:
Straight-line method charges equal amount of depreciation each year over the useful life of the asset.

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Question #297

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Goodwill is classified as:

A. Tangible asset

B. Fictitious asset

C. Current asset

D. Intangible asset

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Correct Answer: Option D

Explanation:
Goodwill is an intangible asset representing the value of a business's reputation, customer relationships, etc.

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Question #298

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A bill of exchange is drawn on 1st January 2024 for 3 months. Its maturity date is:

A. 31st March 2024

B. 4th April 2024

C. 3rd April 2024

D. 1st April 2024

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Correct Answer: Option B

Explanation:
Three months from 1st Jan is 1st April, plus three days of grace = 4th April 2024.

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Question #299

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In a non-profit organization, the excess of income over expenditure is called:

A. Surplus

B. Net revenue

C. Net income

D. Profit

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Correct Answer: Option A

Explanation:
Non-profit organizations use the term surplus (not profit) for excess of income over expenditure, shown in Income and Expenditure Account.

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Question #300

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Which of the following is not an external user of accounting information?

A. Suppliers

B. Government

C. Management

D. Investors

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Correct Answer: Option C

Explanation:
Management is an internal user. External users include investors, government, suppliers, creditors, etc.

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