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

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Question #61
A credit balance in the bank column of a cash book signifies:
A. Cash at bank
B. Error in accounting
C. Fixed deposit
D. Bank overdraft
Discuss
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Correct Answer: Option D

Explanation:
Since bank is an asset (usually debit balance), a credit balance means the business has withdrawn more than deposited, creating an overdraft liability.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #62
In a three-column cash book, the discount columns are:
A. Balanced like cash columns
B. Transferred to suspense account
C. Totalled but not balanced
D. Ignored at month end
Discuss
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Correct Answer: Option C

Explanation:
Discount Allowed and Discount Received are separate nominal accounts. Their columns are only totalled and posted directly to the respective ledger accounts.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #63
The primary objective of a statutory financial audit is to:
A. Guarantee the future viability of the company
B. Detect all frauds and errors
C. Prepare the financial statements for management
D. Express an independent opinion on the financial statements
Discuss
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Correct Answer: Option D

Explanation:
The main objective is to form and express an independent opinion on whether the financial statements present a true and fair view.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #64
Examining documentary evidence to ascertain the accuracy and authenticity of transactions is called:
A. Vouching
B. Valuation
C. Internal checking
D. Verification
Discuss
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Correct Answer: Option A

Explanation:
Vouching is the practice of checking the entries in the books of accounts with supporting documents (vouchers) to prove their accuracy.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #65
Verification of assets primarily ensures:
A. Timely payment to creditors
B. Detection of minor cash thefts
C. Existence, ownership, and correct valuation
D. Arithmetical accuracy
Discuss
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Correct Answer: Option C

Explanation:
Verification goes beyond vouching; it involves physically confirming the existence, legal ownership, possession, and proper valuation of assets.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #66
An auditor is considered a 'watchdog and not a bloodhound'. This implies:
A. The auditor works only at night
B. The auditor must approach the work with reasonable care and skepticism, but not assuming everyone is dishonest
C. The auditor must be aggressive in finding fraud
D. The auditor investigates only cash transactions
Discuss
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Correct Answer: Option B

Explanation:
Coined in the Kingston Cotton Mill case, it means an auditor must exercise reasonable skill and care but isn't required to approach the audit with suspicion of fraud.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #67
Which of the following is a limitation of a financial audit?
A. It provides absolute assurance
B. It detects all minor errors
C. It relies on test checking and sampling
D. It is completely objective with no use of judgment
Discuss
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Correct Answer: Option C

Explanation:
Audits provide reasonable (not absolute) assurance because they heavily rely on sampling and test checking, making it impossible to check every transaction.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #68
The policies and procedures adopted by management to assist in achieving orderly and efficient conduct of business is known as:
A. Statutory Audit
B. Internal Control
C. Continuous Audit
D. Vouching
Discuss
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Correct Answer: Option B

Explanation:
Internal control is the system designed by management to safeguard assets, ensure accurate records, and promote operational efficiency.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #69
The foundational principle of Double Entry Bookkeeping is:
A. Assets must be greater than liabilities
B. Every debit has a corresponding credit
C. Cash received must equal cash paid
D. Expenses must equal incomes
Discuss
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Correct Answer: Option B

Explanation:
Double entry bookkeeping relies on the dual aspect concept, meaning every transaction affects at least two accounts with equal debits and credits.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #70
What is the rule of Double Entry for Real Accounts?
A. Debit the increase, Credit the decrease
B. Debit what comes in, Credit what goes out
C. Debit the receiver, Credit the giver
D. Debit all expenses, Credit all incomes
Discuss
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Correct Answer: Option B

Explanation:
Real accounts relate to tangible or intangible assets. The golden rule is 'Debit what comes in, Credit what goes out'.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #71
What is the golden rule for Personal Accounts?
A. Debit the owner, Credit the bank
B. Debit what comes in, Credit what goes out
C. Debit all expenses and losses, Credit all incomes and gains
D. Debit the receiver, Credit the giver
Discuss
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Correct Answer: Option D

Explanation:
Personal accounts represent individuals, firms, or companies. The rule dictates debiting the person receiving the benefit and crediting the provider.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #72
Wages paid for installation of a new machinery should be debited to:
A. Wages Account
B. Installation Account
C. Cash Account
D. Machinery Account
Discuss
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Correct Answer: Option D

Explanation:
All costs incurred to bring a fixed asset to its working condition are capitalized, hence debited to the Machinery account (Real Account rule).
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #73
Who is considered the father of the Double Entry System?
A. Luca Pacioli
B. F.W. Taylor
C. Henry Fayol
D. Adam Smith
Discuss
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Correct Answer: Option A

Explanation:
Luca Pacioli, an Italian mathematician, first documented the principles of the double-entry bookkeeping system in 1494.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #74
Rent outstanding is an example of which type of account?
A. Artificial Personal Account
B. Real Account
C. Nominal Account
D. Representative Personal Account
Discuss
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Correct Answer: Option D

Explanation:
Outstanding expenses represent amounts payable to specific persons, thus classifying them as representative personal accounts.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #75
A Trial Balance is prepared primarily to check the:
A. Financial position of the business
B. Profitability of the business
C. Arithmetical accuracy of ledger accounts
D. Liquidity of the firm
Discuss
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Correct Answer: Option C

Explanation:
Trial Balance lists all debit and credit balances to ensure total debits equal total credits, verifying mathematical accuracy.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #76
Which of the following errors will NOT be revealed by a Trial Balance?
A. Posting a wrong amount on the correct side
B. Posting an amount on the wrong side
C. Error of casting (totalling)
D. Error of principle
Discuss
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Correct Answer: Option D

Explanation:
Errors of principle (like treating capital expenditure as revenue) affect debit and credit equally, hence the Trial Balance will still agree.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #77
An error where the effect of one error is neutralized by the effect of another error is called:
A. Error of omission
B. Error of commission
C. Compensating error
D. Error of principle
Discuss
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Correct Answer: Option C

Explanation:
Compensating errors mutually cancel each other out, ensuring the Trial Balance continues to tally despite the mistakes.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #78
If the Trial Balance does not tally, the difference is temporarily transferred to:
A. Suspense Account
B. Capital Account
C. Profit & Loss Account
D. Drawings Account
Discuss
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Correct Answer: Option A

Explanation:
A Suspense Account is opened temporarily to bridge the gap in a mismatched trial balance until the errors are located and rectified.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #79
Under-casting of a Sales book by Rs 1,000 will result in:
A. No effect on the Trial Balance totals
B. Debit column of Trial Balance being short by Rs 1,000
C. Suspense account with a debit balance
D. Credit column of Trial Balance being short by Rs 1,000
Discuss
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Correct Answer: Option D

Explanation:
Sales have a credit balance. If it's under-casted, the total credit postings will be Rs 1,000 less, making the credit column short.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #80
A complete omission to record a transaction in the journal will cause the Trial Balance to:
A. Tally without any difference
B. Show double the difference
C. Show a difference equal to half the transaction amount
D. Show a difference equal to the transaction amount
Discuss
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Correct Answer: Option A

Explanation:
Since both debit and credit aspects are omitted completely, the Trial Balance equation remains balanced.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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