Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #601

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The 'ASB' stands for:

A. Accounting Standards Board of ICAI

B. Accounting Standards Bureau

C. Auditing Standards Board

D. Audit and Standards Bureau

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Correct Answer: Option A

Explanation:
ASB is Accounting Standards Board, constituted by ICAI to formulate accounting standards.

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Question #602

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Which of the following is a personal account?

A. Rent A/c

B. Discount A/c

C. Capital A/c

D. Furniture A/c

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Correct Answer: Option C

Explanation:
Capital account represents the proprietor, hence personal account. Others are nominal or real.

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Question #603

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The 'Traditional Approach' classifies accounts into:

A. Assets, liabilities, equity

B. Real, personal, nominal

C. Income, expenses, assets

D. Current and non-current

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Correct Answer: Option B

Explanation:
Under traditional British approach, accounts are classified as personal, real, and nominal.

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Question #604

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In the modern approach, an increase in asset is:

A. Credited

B. No entry

C. Debited

D. Transferred

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Correct Answer: Option C

Explanation:
In modern equation approach, increase in asset is debited; decrease credited.

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Question #605

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The 'Ledger Folio' (L.F.) column in journal is filled when:

A. Trial balance is prepared

B. Transaction is recorded

C. Final accounts are made

D. Posting is done to ledger

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Correct Answer: Option D

Explanation:
Ledger folio is written in journal after posting to ledger, indicating the page number of ledger.

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Question #606

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The 'Journal Proper' is used to record:

A. All cash transactions

B. Transactions that cannot be entered in any subsidiary book

C. All credit purchases

D. All credit sales

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Correct Answer: Option B

Explanation:
Journal proper is for opening entries, closing entries, transfer entries, rectification entries, etc.

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Question #607

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A 'Contra Entry' is recorded in:

A. Sales book

B. Purchase book

C. Cash book (with bank and cash columns)

D. Journal proper

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Correct Answer: Option C

Explanation:
Contra entries (like cash deposited into bank) involve both cash and bank, recorded in cash book.

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Question #608

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Which of the following is not a column in a three-column cash book?

A. Cash

B. Discount

C. Bank

D. Journal folio

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Correct Answer: Option D

Explanation:
Three-column cash book has discount, cash, and bank columns. Journal folio is not a column; ledger folio might appear.

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Question #609

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Goods destroyed by fire ₹8,000, insurance company admitted claim of ₹5,000. Loss charged to P&L A/c will be:

A. ₹3,000

B. ₹5,000

C. ₹8,000

D. ₹13,000

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Correct Answer: Option A

Explanation:
Net loss = Total loss - Insurance claim = 8,000 - 5,000 = ₹3,000, charged to P&L.

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Question #610

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A company declares dividend at 10% on equity shares of ₹10 each. On 5,000 shares, dividend amount is:

A. ₹10,000

B. ₹5,000

C. ₹50,000

D. ₹500

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Correct Answer: Option B

Explanation:
Dividend = 10% of (5,000 * 10) = 10% of 50,000 = ₹5,000.

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Question #611

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Which of the following is a capital receipt?

A. Interest on investment

B. Commission earned

C. Sale of old machinery at profit (excess over WDV)

D. Dividend received

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Correct Answer: Option C

Explanation:
Sale of fixed asset, even if profit, is a capital receipt; the profit portion may be revenue, but the sale proceeds are capital.

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Question #612

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A 'Debenture Redemption Reserve' is required to be created as per:

A. SEBI regulations

B. Companies Act, 2013

C. GST Act

D. Income Tax Act

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Correct Answer: Option B

Explanation:
Companies Act 2013 requires creation of Debenture Redemption Reserve for debentures issued.

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Question #613

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The 'Cost of Control' (Goodwill) arises on consolidation when:

A. Purchase consideration is more than net assets acquired

B. Subsidiary makes loss

C. Parent company pays less

D. Net assets are more than purchase consideration

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Correct Answer: Option A

Explanation:
Goodwill on consolidation arises when cost of investment exceeds the fair value of net assets of subsidiary.

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Question #614

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Which of the following is an accounting standard on 'Impairment of Assets'?

A. AS 28

B. AS 14

C. AS 10

D. AS 2

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Correct Answer: Option A

Explanation:
AS 28 deals with Impairment of Assets, ensuring assets are not carried at more than recoverable amount.

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Question #615

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As per AS 2, cost of inventory includes:

A. Only conversion cost

B. Cost of purchase, cost of conversion, and other costs to bring inventory to present location and condition

C. Only purchase price

D. Selling expenses

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Correct Answer: Option B

Explanation:
AS 2 defines cost of inventory to include all costs of purchase, conversion, and other costs incurred in bringing the inventory to its present location and condition.

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Question #616

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The 'Proprietary Ratio' establishes relationship between:

A. Current assets and current liabilities

B. Debt and equity

C. Proprietors' funds and total assets

D. Sales and debtors

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Correct Answer: Option C

Explanation:
Proprietary ratio = Shareholders' funds / Total assets, indicating the proportion of assets financed by owners.

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Question #617

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A high debt-equity ratio implies:

A. High profitability

B. No risk

C. Low financial risk

D. High financial risk

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Correct Answer: Option D

Explanation:
Higher debt means higher fixed interest obligations, increasing financial risk.

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Question #618

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The 'Interest Coverage Ratio' is:

A. EBIT / Interest

B. Sales / Interest

C. Equity / Interest

D. Net profit / Interest

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Correct Answer: Option A

Explanation:
Interest coverage ratio = Earnings before interest and taxes (EBIT) / Interest expense.

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Question #619

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A firm's current ratio is 2.5:1. If current assets are ₹5,00,000, current liabilities are:

A. ₹2,00,000

B. ₹1,25,000

C. ₹5,00,000

D. ₹2,50,000

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Correct Answer: Option A

Explanation:
2.5 = 5,00,000 / CL => CL = 5,00,000 / 2.5 = ₹2,00,000.

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Question #620

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Which of the following is not a method of depreciation?

A. Perpetual inventory method

B. Straight-line

C. Sum of years' digits

D. Machine hour rate

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Correct Answer: Option A

Explanation:
Perpetual inventory method is a method of inventory valuation, not depreciation.

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