Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #81

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The Trading Account is prepared to ascertain:

A. Financial Position

B. Net Profit or Net Loss

C. Cash Flow

D. Gross Profit or Gross Loss

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Correct Answer: Option D

Explanation:
Trading account compares direct revenues (sales) with direct costs (purchases, direct expenses) to find the Gross Profit or Loss.

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

Question #82

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Which of the following is considered a Direct Expense?

A. Carriage outwards

B. Advertising

C. Wages paid to factory workers

D. Salary to office clerk

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Correct Answer: Option C

Explanation:
Direct expenses are directly linked to the purchase or manufacturing of goods. Factory wages are a prime example.

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Question #83

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Closing stock is valued at:

A. Cost Price or Market Value, whichever is lower

B. Market (Net Realizable) Value

C. Cost Price

D. Cost Price or Market Value, whichever is higher

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Correct Answer: Option A

Explanation:
Based on the principle of conservatism (prudence), inventory is valued at Cost or Net Realizable Value (Market Value), whichever is less.

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Question #84

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If Cost of Goods Sold (COGS) is Rs 1,50,000 and Gross Profit is 20% on Sales, what is the Sales value?

A. Rs 2,00,000

B. Rs 1,80,000

C. Rs 1,87,500

D. Rs 1,75,000

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Correct Answer: Option C

Explanation:
If GP is 20% on sales, COGS is 80% on sales. Sales = COGS / 80% = 1,50,000 / 0.8 = Rs 1,87,500.

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

Question #85

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Adjusted Purchases is calculated as:

A. Opening Stock + Net Purchases

B. Opening Stock + Net Purchases - Closing Stock

C. Net Purchases - Closing Stock

D. Opening Stock + Net Purchases + Direct Expenses

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Correct Answer: Option B

Explanation:
Adjusted purchases represent the cost of materials actually consumed during the year, removing the stock left unsold.

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

Question #86

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Carriage inwards is shown on the:

A. Credit side of P&L Account

B. Debit side of P&L Account

C. Debit side of Trading Account

D. Asset side of Balance Sheet

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Correct Answer: Option C

Explanation:
Carriage inwards is the transportation cost of bringing raw materials/purchases to the factory, hence it's a direct expense charged to the Trading Account.

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

Question #87

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The primary purpose of preparing a Profit and Loss Account is to find out:

A. Total Assets

B. Gross Profit

C. Net Profit or Net Loss

D. Financial Position

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Correct Answer: Option C

Explanation:
The P&L account deduces all indirect expenses from the gross profit to ascertain the final Net Profit or Loss for the period.

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Question #88

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Provision for doubtful debts created at the year-end is debited to:

A. Sundry Debtors Account

B. Trading Account

C. Suspense Account

D. Profit & Loss Account

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Correct Answer: Option D

Explanation:
Creating a provision is an expected indirect loss based on conservatism, so it is charged to the Profit and Loss Account.

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

Question #89

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A manager is entitled to a commission of 10% on net profit AFTER charging such commission. If the profit before commission is Rs 1,10,000, the commission amount is:

A. Rs 9,000

B. Rs 10,000

C. Rs 12,100

D. Rs 11,000

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Correct Answer: Option B

Explanation:
Formula: Profit * (Rate / (100 + Rate)). 1,10,000 * (10 / 110) = Rs 10,000.

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

Question #90

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Income tax paid by a sole proprietor is treated as:

A. Business expense in P&L Account

B. Statutory liability in Balance Sheet

C. Drawings and deducted from Capital

D. Direct expense in Trading Account

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Correct Answer: Option C

Explanation:
For a sole proprietor, income tax is a personal expense on the owner's income, hence treated as drawings and reduced from capital.

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Question #91

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Abnormal loss of stock by fire (fully uninsured) is treated by:

A. Only crediting Trading A/c

B. Crediting Trading A/c and Debiting P&L A/c

C. Only debiting P&L A/c

D. Crediting P&L A/c and Debiting Trading A/c

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Correct Answer: Option B

Explanation:
The loss reduces the stock (Credit Trading A/c). Being an uninsured abnormal loss, it is transferred entirely to the debit side of P&L A/c.

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Question #92

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Interest on drawings is shown in the Profit & Loss Account on the:

A. Credit side

B. Both sides

C. Debit side

D. It is not shown in P&L A/c

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Correct Answer: Option A

Explanation:
Interest on drawings is an income for the business, hence it is credited to the Profit and Loss Account.

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Question #93

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Which of the following is NOT an Intangible Asset?

A. Goodwill

B. Patents

C. Franchise rights

D. Prepaid Rent

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Correct Answer: Option D

Explanation:
Prepaid rent is a current asset representing a right to services, but it is not classified as an intangible fixed asset under AS-26.

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Question #94

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Grouping of similar items and arranging them in a specific order in the Balance Sheet is called:

A. Marshalling

B. Journalising

C. Valuation

D. Summarising

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Correct Answer: Option A

Explanation:
Marshalling is the arrangement of assets and liabilities in a defined sequence, typically by liquidity or permanence.

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Question #95

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A reserve created out of normal operating profits is called a:

A. Secret Reserve

B. Specific Reserve

C. Revenue Reserve

D. Capital Reserve

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Correct Answer: Option C

Explanation:
Revenue reserves are built from day-to-day operational net profits and can be utilized for distributing dividends.

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Question #96

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Securities Premium Account is shown on the liabilities side of the Balance Sheet under the heading:

A. Long-term Provisions

B. Share Capital

C. Reserves and Surplus

D. Current Liabilities

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Correct Answer: Option C

Explanation:
Securities premium is a capital profit and is classified under 'Reserves and Surplus' in the balance sheet.

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Question #97

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If closing stock is given inside the Trial Balance, it will be shown only in the:

A. P&L Account

B. Trading Account

C. Both Trading Account and Balance Sheet

D. Balance Sheet

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Correct Answer: Option D

Explanation:
If it appears inside the trial balance, the double entry is already complete (adjusted against purchases). It appears only as an asset in the Balance Sheet.

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Question #98

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A liability arising from a past event, whose existence depends on a future uncertain event, is known as:

A. Fixed Liability

B. Current Liability

C. Contingent Liability

D. Deferred Liability

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Correct Answer: Option C

Explanation:
Contingent liabilities depend on the outcome of a future event (like a pending lawsuit) and are disclosed in footnotes.

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Question #99

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The system of accounting where revenue is recognized only when cash is received is:

A. Hybrid system

B. Cash basis

C. Mercantile system

D. Accrual basis

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Correct Answer: Option B

Explanation:
Under the cash basis of accounting, transactions are recorded strictly upon the actual receipt or payment of cash.

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Question #100

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The Companies Act, 2013 mandates that all companies must maintain their books of accounts under the:

A. Accrual (Mercantile) System

B. Cash System

C. Single Entry System

D. Hybrid System

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Correct Answer: Option A

Explanation:
Section 128 of the Companies Act, 2013 strictly requires companies to maintain accounts on an accrual basis and according to the double-entry system.

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