Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #361

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In journal, a compound entry involves:

A. More than one debit or more than one credit

B. One debit and one credit only

C. Only two accounts

D. Only nominal accounts

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Correct Answer: Option A

Explanation:
A compound journal entry has more than one debit or more than one credit, affecting multiple accounts.

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Question #362

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A credit balance in the bank column of cash book indicates:

A. Petty cash balance

B. Fixed deposit

C. Bank overdraft

D. Cash at bank (favourable)

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Correct Answer: Option C

Explanation:
A credit balance in bank column means the firm owes money to bank, i.e., bank overdraft.

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Question #363

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The main purpose of preparing a Trial Balance is:

A. To detect frauds

B. To prepare final accounts

C. To know the financial position

D. To check the arithmetical accuracy of ledger accounts

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Correct Answer: Option D

Explanation:
Trial balance ensures that total debits equal total credits, verifying posting and balancing accuracy.

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Question #364

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If a purchase of ₹5,000 is posted as ₹500 in the ledger, it is an error of:

A. Commission

B. Omission

C. Compensating

D. Principle

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Correct Answer: Option A

Explanation:
Error of commission is when a wrong amount is posted to the correct account.

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Question #365

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A suspense account is opened when:

A. Final accounts are prepared

B. A fraud is detected

C. Trial balance does not agree

D. Cash book shows overdraft

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Correct Answer: Option C

Explanation:
When trial balance totals do not match, the difference is temporarily placed in a suspense account to allow final accounts preparation.

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Question #366

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Which of the following is shown on the credit side of Trading Account?

A. Sales

B. Wages

C. Purchases

D. Opening stock

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Correct Answer: Option A

Explanation:
Sales (net) appears on the credit side of Trading Account. Opening stock, purchases, wages appear on debit side.

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Question #367

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Depreciation is provided on:

A. Fictitious assets

B. Current assets

C. Fixed assets (tangible)

D. Intangible assets only

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Correct Answer: Option C

Explanation:
Depreciation is charged on tangible fixed assets like machinery, buildings to reflect wear and tear.

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Question #368

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Provision for doubtful debts is created based on:

A. Convention of disclosure

B. Convention of consistency

C. Convention of conservatism

D. Convention of materiality

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Correct Answer: Option C

Explanation:
Creating provision for doubtful debts is an application of conservatism, anticipating possible losses.

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Question #369

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In financial statement analysis, the current ratio is calculated as:

A. Current liabilities / Current assets

B. Quick assets / Current liabilities

C. Current assets / Current liabilities

D. Total assets / Total liabilities

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Correct Answer: Option C

Explanation:
Current ratio = Current assets / Current liabilities, measuring short-term liquidity.

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Question #370

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A company's debt-equity ratio is 1:1. If total assets are ₹10,00,000, the amount of debt is:

A. ₹10,00,000

B. ₹2,00,000

C. ₹5,00,000

D. ₹4,00,000

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Correct Answer: Option C

Explanation:
Debt-equity 1:1 implies Debt = Equity. Total assets = Debt + Equity = 2x. So x = ₹5,00,000, hence debt ₹5,00,000.

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Question #371

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In a partnership, interest on drawings is charged to:

A. Balance Sheet

B. Partners' Capital A/c

C. P&L A/c

D. Trading A/c

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Correct Answer: Option B

Explanation:
Interest on drawings is a gain for the firm, credited to P&L Appropriation A/c and debited to partners' capital/current accounts.

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Question #372

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Which of the following is an example of a capital receipt?

A. Loan received from bank

B. Rent received

C. Sale of old newspapers

D. Commission received

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Correct Answer: Option A

Explanation:
Loan is a capital receipt as it creates a liability. Others are revenue receipts.

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Question #373

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Deferred revenue expenditure is written off over:

A. Never

B. A number of years over which benefit is expected

C. Immediately in the year of incurrence

D. One year

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Correct Answer: Option B

Explanation:
Deferred revenue expenditure like heavy advertisement is written off over a period of benefit, typically 3-5 years.

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Question #374

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The term 'Imprest System' is related to:

A. Petty cash book

B. Cash book

C. Purchase book

D. Sales book

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Correct Answer: Option A

Explanation:
Under imprest system, a fixed amount of petty cash is maintained and reimbursed periodically.

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Question #375

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In the three-column cash book, discount columns are:

A. Not posted, only totalled and transferred

B. Balanced like cash columns

C. Posted to ledger accounts individually

D. Used for bank reconciliation

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Correct Answer: Option A

Explanation:
Discount columns in cash book are merely memorandum; total discount allowed and received are posted to respective ledger accounts, not individually.

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Question #376

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Which of the following is a fictitious asset?

A. Patent

B. Preliminary expenses

C. Trade mark

D. Goodwill

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Correct Answer: Option B

Explanation:
Preliminary expenses are a fictitious asset because they are not realizable and have to be written off. Goodwill, trademark, patent are intangible assets.

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Question #377

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An asset is classified as current if it is expected to be realised within:

A. Operating cycle, whichever is longer

B. Both A and B are correct

C. 12 months from the date of Balance Sheet

D. Operating cycle, whichever is shorter

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Correct Answer: Option B

Explanation:
As per Schedule III, a current asset is one that is expected to be realized within 12 months from reporting date or within the operating cycle, whichever is longer.

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Question #378

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Under the Indian Companies Act, 2013, financial statements include:

A. Only balance sheet

B. Only profit & loss account

C. Only balance sheet and profit & loss account

D. Balance sheet, profit & loss account, cash flow statement, statement of changes in equity and notes

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Correct Answer: Option D

Explanation:
As per Companies Act 2013, financial statements comprise balance sheet, profit and loss account, cash flow statement, statement of changes in equity and any explanatory notes.

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Question #379

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The concept of 'Materiality' implies that:

A. Only material items need to be disclosed as per accounting standards

B. All items must be disclosed irrespective of amount

C. All transactions are material

D. Only large companies follow materiality

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Correct Answer: Option A

Explanation:
Materiality means that items of significant value or nature should be disclosed; trivial items may be ignored.

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Question #380

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A 'Voucher' in accounting is:

A. A document evidencing a transaction

B. A trial balance

C. A journal entry

D. A ledger account

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Correct Answer: Option A

Explanation:
A voucher is a written document serving as evidence of a business transaction.

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