Accountancy and Book Keeping MCQs

Accountancy and Statistics

Accountancy and Book Keeping MCQs

Practice the latest Accountancy MCQs with answers and detailed explanations. Explore chapter-wise multiple-choice questions covering important accounting concepts, bookkeeping, financial statements, journal entries, ledger, trial balance, depreciation, ratio analysis, partnership accounts, company accounts, and more. Perfect for Class 11 & 12, B.Com, CA Foundation, CUET, Banking, SSC, JKSSB, JKPSC and competitive exams.

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Practice Questions

Page 28 of 94
Question #541
The balance of 'Petty Cash Book' is:
A. A liability
B. An asset
C. Income
D. An expense
Discuss
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Correct Answer: Option B

Explanation:
Petty cash balance is cash in hand, an asset.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #542
An 'Error of Principle' occurs when:
A. Wrong amount is posted
B. A transaction is completely omitted
C. A capital expenditure is treated as revenue expenditure
D. Posting to wrong personal account
Discuss
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Correct Answer: Option C

Explanation:
Error of principle violates accounting principles, e.g., incorrect classification between capital and revenue.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #543
The profit or loss on sale of an asset is calculated as:
A. Sale price less original cost
B. Sale price less replacement cost
C. Sale price less book value
D. Sale price less market value
Discuss
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Correct Answer: Option C

Explanation:
Profit/loss on sale = Sale consideration - Book value (cost less accumulated depreciation).
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #544
Under the 'Reducing Balance Method' of depreciation, the asset's value:
A. Remains constant
B. Becomes negative
C. Becomes zero at the end of useful life
D. Never becomes zero
Discuss
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Correct Answer: Option D

Explanation:
Under WDV method, the book value never reaches zero, as depreciation is charged on reducing balance.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #545
A firm's 'Capital' is equal to:
A. Total assets
B. Net assets (Total assets - Outside liabilities)
C. Total liabilities
D. Fixed assets
Discuss
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Correct Answer: Option B

Explanation:
Capital (owner's equity) = Total assets - Outside liabilities.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #546
The 'Double Entry System' was first codified by:
A. Adam Smith
B. Luca Pacioli
C. Henry Ford
D. Kautilya
Discuss
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Correct Answer: Option B

Explanation:
Luca Pacioli, an Italian mathematician, described the double-entry system in 1494.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #547
A 'Debit Note' is issued by:
A. Seller to buyer for goods returned
B. Auditor to company
C. Buyer to seller for goods returned
D. Bank to customer
Discuss
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Correct Answer: Option C

Explanation:
A debit note is prepared by the buyer when returning goods, informing the seller that his account is debited.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #548
A 'Credit Note' is issued to:
A. Acknowledge a reduction in amount due
B. Record cash receipt
C. Acknowledge a debt
D. Record purchase
Discuss
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Correct Answer: Option A

Explanation:
Credit note is sent by seller to buyer when goods are returned or an allowance is granted, reducing the amount receivable.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #549
The 'Receipts and Payments Account' is prepared by:
A. Partnership firms
B. Trading concerns
C. Companies
D. Non-profit organizations
Discuss
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Correct Answer: Option D

Explanation:
Non-profit organizations prepare Receipts and Payments Account as a summary of cash transactions.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #550
Income and Expenditure Account is equivalent to:
A. Trading Account
B. Profit and Loss Account
C. Cash Book
D. Balance Sheet
Discuss
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Correct Answer: Option B

Explanation:
Income and Expenditure Account reveals surplus or deficit for a period, similar to P&L Account.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #551
Subscription received in advance by a non-profit organization is:
A. Capital fund
B. An asset
C. An income
D. A liability
Discuss
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Correct Answer: Option D

Explanation:
Advance subscription is a liability as it pertains to future period.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #552
Legacy donation is generally treated as:
A. Revenue receipt
B. Liability
C. Capital receipt
D. Deferred revenue
Discuss
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Correct Answer: Option C

Explanation:
Legacy is a voluntary contribution of a significant nature, usually treated as capital receipt.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #553
The 'Financial Statements' of a company must comply with:
A. Companies Act and Accounting Standards
B. Income Tax Act
C. GST Act
D. Partnership Act
Discuss
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Correct Answer: Option A

Explanation:
Companies Act 2013 and Accounting Standards govern financial statements.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #554
Which of the following is an extraordinary item?
A. Purchase of raw material
B. Loss due to fire in a factory (not regular)
C. Salary paid
D. Sale of goods
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Correct Answer: Option B

Explanation:
Extraordinary items are unusual and infrequent, e.g., loss from natural disaster, expropriation.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #555
The 'Return on Investment' (ROI) formula is:
A. Net profit / Sales
B. Gross profit / Sales
C. Sales / Capital employed
D. Net profit / Capital employed
Discuss
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Correct Answer: Option D

Explanation:
ROI = Net profit before interest and tax / Capital employed, or sometimes PAT/CE. Typically, Net profit / Capital employed.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #556
A 'High Current Ratio' indicates:
A. Insolvency
B. Excess liquidity, possibly inefficient use of assets
C. High profitability
D. Poor liquidity
Discuss
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Correct Answer: Option B

Explanation:
Very high current ratio may indicate idle current assets, not necessarily good.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #557
The 'Quick Ratio' excludes inventory because:
A. Inventory is never sold
B. Inventory may not be easily convertible into cash
C. Inventory is not an asset
D. Inventory is a fixed asset
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Correct Answer: Option B

Explanation:
Quick ratio considers only quick assets (liquid), inventory is less liquid, so excluded.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #558
Net Profit Ratio is calculated on:
A. Total assets
B. Capital
C. Net sales
D. Gross sales
Discuss
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Correct Answer: Option C

Explanation:
Net profit ratio = (Net profit / Net sales) * 100.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #559
In a common-size statement, all items are expressed as percentage of:
A. Capital
B. Net profit
C. Gross profit
D. Total assets or total revenue
Discuss
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Correct Answer: Option D

Explanation:
Common-size balance sheet expresses each item as % of total assets; income statement as % of net sales.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #560
A 'Funds Flow Statement' shows:
A. Changes in working capital
B. Cash inflows and outflows
C. Changes in financial position between two periods
D. Profit for the year
Discuss
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Correct Answer: Option C

Explanation:
Funds flow statement explains the change in financial position (working capital) between two balance sheets.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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