Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #501

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The basic objective of bookkeeping is:

A. To audit accounts

B. To calculate profit

C. To maintain systematic records of transactions

D. To prepare financial statements only

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Correct Answer: Option C

Explanation:
Bookkeeping is the art of recording business transactions in a systematic manner.

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

Question #502

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The final step in the accounting cycle is:

A. Preparation of trial balance

B. Posting to ledger

C. Preparation of financial statements

D. Journalizing

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Correct Answer: Option C

Explanation:
The accounting cycle ends with the preparation of financial statements from the trial balance and adjustments.

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

Question #503

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A 'Narration' in a journal entry is:

A. The date of transaction

B. The ledger folio

C. The amount

D. A brief description of the transaction

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Correct Answer: Option D

Explanation:
Narration provides a short explanation of the transaction recorded.

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

Question #504

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The rule 'Debit the receiver, Credit the giver' applies to:

A. Nominal accounts

B. Personal accounts

C. All accounts

D. Real accounts

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Correct Answer: Option B

Explanation:
This rule is for personal accounts.

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Question #505

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For real accounts, the rule is:

A. Debit expenses and losses, Credit incomes and gains

B. None of these

C. Debit what comes in, Credit what goes out

D. Debit the receiver, Credit the giver

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Correct Answer: Option C

Explanation:
Real accounts (assets) follow: Debit what comes in, credit what goes out.

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

Question #506

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A sum of ₹10,000 received as rent is credited to:

A. Cash A/c

B. Rent Received A/c

C. Rent A/c

D. Capital A/c

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Correct Answer: Option B

Explanation:
Rent received is income, so Rent Received A/c is credited (nominal account rule: credit incomes).

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

Question #507

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A firm's insurance premium paid for proprietor's life is treated as:

A. Liability

B. Drawings

C. Prepaid expense

D. Business expense

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Correct Answer: Option B

Explanation:
Premium paid for proprietor's personal life policy is not a business expense; it is treated as drawings.

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

Question #508

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A 'Suspense Account' is a:

A. Personal account

B. Real account

C. Temporary account

D. Nominal account

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Correct Answer: Option C

Explanation:
Suspense account is a temporary account opened to make trial balance agree.

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

Question #509

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Which of the following is a capital profit?

A. Discount received

B. Profit on sale of investment (capital nature)

C. Profit on sale of goods

D. Rent received

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Correct Answer: Option B

Explanation:
Profit on sale of a capital asset (like long-term investment) is capital profit. Profit on sale of goods is revenue.

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

Question #510

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In a partnership firm, if a partner retires, the continuing partners:

A. Distribute all assets

B. Close the business

C. Revalue assets and liabilities and adjust capital

D. Dissolve the firm

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Correct Answer: Option C

Explanation:
On retirement, the firm continues, assets and liabilities are revalued, and retiring partner's dues are settled.

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Question #511

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The formula for debt-equity ratio is:

A. Current liabilities / Equity

B. Short-term debt / Equity

C. Total debt / Total assets

D. Long-term debt / Shareholders' funds

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Correct Answer: Option D

Explanation:
Debt-equity ratio = Long-term debt / Shareholders' funds (equity).

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Question #512

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If debt-equity ratio is 2:1 and total assets ₹12,00,000, long-term debt is: (Assume no current liabilities)

A. ₹4,00,000

B. ₹6,00,000

C. ₹8,00,000

D. ₹2,00,000

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Correct Answer: Option C

Explanation:
Total assets = Equity + Debt (since no CL). D/E = 2, so D=2E. E + 2E = 12L => 3E=12 => E=4L, D=8L.

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Question #513

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Cash flow from operating activities includes:

A. Issue of shares

B. Repayment of loan

C. Cash received from customers

D. Sale of machinery

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Correct Answer: Option C

Explanation:
Cash from customers is operating activity. Sale of machinery is investing, issue of shares and loan repayment are financing.

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

Question #514

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As per AS 3, interest paid on loan is classified as:

A. Financing activity

B. Investing activity

C. Operating activity

D. None

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Correct Answer: Option A

Explanation:
Interest paid on borrowings is a financing activity under AS 3.

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Question #515

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A business has a closing stock of ₹60,000, its NRV is ₹55,000. Stock will be valued at:

A. ₹57,500

B. ₹60,000

C. ₹60,000 or ₹55,000 at option

D. ₹55,000

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Correct Answer: Option D

Explanation:
Prudence requires stock at lower of cost or NRV, so ₹55,000.

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Question #516

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A capital expenditure of ₹5,000 erroneously recorded as revenue expenditure will result in:

A. No effect on profit

B. Overstatement of profit

C. Understatement of profit

D. Overstatement of assets

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Correct Answer: Option C

Explanation:
Capital expenditure should be capitalized; if charged as revenue, expenses increase, profit is understated.

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Question #517

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A revenue expenditure wrongly capitalized will lead to:

A. Understatement of assets and profit

B. Overstatement of assets and profit

C. Overstatement of liabilities

D. No effect

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Correct Answer: Option B

Explanation:
Capitalizing revenue expense increases assets and reduces expenses, thus overstating profit and assets.

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Question #518

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Under the diminishing balance method, depreciation is calculated on:

A. Scrap value

B. Original cost

C. Market value

D. Written down value

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Correct Answer: Option D

Explanation:
Diminishing balance method applies the rate to the reducing book value each year.

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Question #519

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A company purchased a machine for ₹2,00,000, installation ₹10,000, scrap value ₹10,000, life 10 years. Depreciation under SLM is:

A. ₹18,000

B. ₹21,000

C. ₹20,000

D. ₹19,000

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Correct Answer: Option C

Explanation:
Cost = 2,00,000 + 10,000 = 2,10,000. Depreciable amount = 2,10,000 - 10,000 = 2,00,000. Annual depreciation = 2,00,000 / 10 = ₹20,000.

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Question #520

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Which of the following is not a capital receipt?

A. Loan from bank

B. Issue of shares

C. Sale of goods

D. Sale of old machinery

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Correct Answer: Option C

Explanation:
Sale of goods is revenue from operations, a revenue receipt.

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

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