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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Page 43 of 94
Question #841
At the time of retirement of a partner, the balance of General Reserve is distributed among:
A. Only continuing partners in new ratio
B. Only the retiring partner
C. All partners in their old profit sharing ratio
D. Equally among all partners
Discuss
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Correct Answer: Option C

Explanation:
General reserve represents accumulated past profits earned by all partners, so it is credited to all partners in their old ratio.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #842
Under the capitalization of super profit method, goodwill is calculated as:
A. Average Profit / Normal Rate of Return
B. Capital Employed - Super Profit
C. Super Profit * Number of Years Purchase
D. Super Profit / Normal Rate of Return
Discuss
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Correct Answer: Option D

Explanation:
Capitalization of super profit determines the capital value of the excess profits by dividing Super Profit by the Normal Rate of Return.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #843
During dissolution of a partnership, realization expenses paid by a partner on behalf of the firm are:
A. Debited to Realisation A/c, Credited to Partner's Capital A/c
B. Debited to Partner's Capital A/c, Credited to Cash A/c
C. Ignored in the books
D. Debited to Cash A/c, Credited to Realisation A/c
Discuss
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Correct Answer: Option A

Explanation:
Because the firm owes the partner for this expense, it is charged to Realisation (Debit) and credited to the Partner's Capital account.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #844
According to the Garner vs. Murray rule, the deficiency of an insolvent partner must be borne by solvent partners in their:
A. Gaining Ratio
B. Profit Sharing Ratio
C. Capital Ratio just before dissolution
D. Equal Ratio
Discuss
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Correct Answer: Option C

Explanation:
The landmark ruling states that a capital loss due to insolvency must be borne by solvent partners in proportion to their last agreed capitals.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #845
In 'Piecemeal Distribution' during dissolution, the first priority for payment of outside liabilities is:
A. Unsecured trade creditors
B. Partners' loans
C. Secured creditors up to the value of security
D. Partners' capital balances
Discuss
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Correct Answer: Option C

Explanation:
Secured creditors have the first right over the assets they hold as security. Any remaining dues become unsecured.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #846
If a partner takes over an unrecorded liability during dissolution, the accounting entry is:
A. Debit Realisation A/c, Credit Partner's Capital A/c
B. Debit Partner's Capital A/c, Credit Realisation A/c
C. Debit Liability A/c, Credit Cash
D. No entry is required
Discuss
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Correct Answer: Option A

Explanation:
The firm is assuming a cost (Debit Realisation) and compensating the partner who took the liability (Credit Partner's Capital).
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #847
Financial Management aims at 'Wealth Maximization', which means maximizing:
A. Book value of assets
B. Sales volume
C. Market value per share
D. Net profit after tax
Discuss
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Correct Answer: Option C

Explanation:
Wealth maximization implies increasing the net present value of the firm, reflected in the increased market price of its equity shares.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #848
Which ratio is a strict measure of a firm's immediate ability to pay off current liabilities?
A. Current Ratio
B. Debt-Equity Ratio
C. Quick Ratio (Acid Test Ratio)
D. Proprietary Ratio
Discuss
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Correct Answer: Option C

Explanation:
The Quick Ratio excludes inventory and prepaid expenses, comparing only highly liquid assets (cash, receivables) to current liabilities.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #849
The concept of 'Cost of Capital' is primarily used to evaluate:
A. Working capital adequacy
B. Capital Budgeting projects
C. Dividend declarations
D. Inventory turnover
Discuss
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Correct Answer: Option B

Explanation:
Cost of capital serves as the discount rate or hurdle rate for evaluating long-term investment opportunities (capital budgeting).
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #850
The term 'Trading on Equity' refers to:
A. Using borrowed funds (debt) to magnify the return on equity
B. Distributing dividends from reserves
C. Trading equity shares in the stock market
D. Issuing more equity shares
Discuss
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Correct Answer: Option A

Explanation:
Trading on equity (financial leverage) means using fixed-cost debt to increase the earnings per share for equity shareholders when return on assets exceeds interest costs.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #851
Which working capital financing approach uses short-term funds to finance temporary current assets and long-term funds to finance permanent current assets?
A. Aggressive Approach
B. Zero Working Capital Approach
C. Matching (Hedging) Approach
D. Conservative Approach
Discuss
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Correct Answer: Option C

Explanation:
The matching approach synchronizes the maturity of the financing source with the life of the asset being financed.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #852
Under the Indian Financial System, 'Commercial Paper' is issued by:
A. Highly rated corporate borrowers
B. Commercial Banks only
C. Reserve Bank of India
D. Central Government
Discuss
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Correct Answer: Option A

Explanation:
Commercial Paper is an unsecured short-term debt instrument issued by large corporations with high credit ratings to meet short-term funding needs.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #853
The primary regulator of Mutual Funds in India is:
A. SEBI
B. IRDAI
C. RBI
D. AMFI
Discuss
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Correct Answer: Option A

Explanation:
The Securities and Exchange Board of India (SEBI) regulates all capital market entities, including mutual funds.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #854
Call money market deals in loans for a maximum period of:
A. 1 day to 14 days
B. 24 hours only
C. 5 years
D. 1 year
Discuss
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Correct Answer: Option A

Explanation:
Call money refers to overnight loans, while notice money covers loans from 2 to 14 days, generally used for inter-bank transactions.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #855
In financial management, 'Float' refers to:
A. The time difference between writing a cheque and its actual clearance from the bank
B. Issuing new shares
C. Sinking fund investments
D. The amount of petty cash
Discuss
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Correct Answer: Option A

Explanation:
Float is the delay in the clearing system, creating a temporary discrepancy between the firm's cash balance and the bank's ledger balance.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #856
What is the primary scope of a 'Tax Audit' under Section 44AB of the Income Tax Act?
A. To find accounting errors
B. To value the shares of the company
C. To ensure books are maintained per tax laws and compute taxable income correctly
D. To assess social impact
Discuss
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Correct Answer: Option C

Explanation:
A tax audit ensures compliance with the Income Tax Act, preventing tax evasion by verifying deductions and income reporting.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #857
The audit conducted continuously throughout the year is known as:
A. Annual Audit
B. Management Audit
C. Continuous Audit
D. Statutory Audit
Discuss
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Correct Answer: Option C

Explanation:
A continuous audit involves the auditor visiting the client regularly throughout the financial year, ideal for large organizations with voluminous transactions.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #858
A 'Clean Report' issued by an auditor is also known as an:
A. Disclaimer of Opinion
B. Unqualified Opinion
C. Adverse Opinion
D. Qualified Opinion
Discuss
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Correct Answer: Option B

Explanation:
An unqualified opinion indicates the auditor found the financial statements to be free from material misstatements and in accordance with GAAP.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #859
When an auditor issues a 'Qualified Opinion', it implies that:
A. The financial statements are completely false
B. Except for specific issues, the statements present a true and fair view
C. The auditor could not gather any evidence
D. The auditor lacks independence
Discuss
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Correct Answer: Option B

Explanation:
A qualified opinion means the statements are generally accurate, 'except for' certain matters detailed in the report.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #860
Verification of liabilities ensures that:
A. Liabilities stated exist and correctly represent the firm's obligations
B. Interest rates are lowest
C. No new loans will be taken
D. All liabilities are paid off
Discuss
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Correct Answer: Option A

Explanation:
Verification confirms the existence, completeness, and accurate valuation of liabilities recorded in the balance sheet.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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