Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #1201

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The 'Operating Profit' is calculated as:

A. Gross profit - Operating expenses

B. Sales - Cost of goods sold

C. Net profit + Interest

D. EBITDA - Depreciation

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Correct Answer: Option A

Explanation:
Operating profit = Gross profit - Operating expenses (administrative, selling).

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Question #1202

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The 'Net Profit Margin' is:

A. Gross profit / Net sales

B. Operating profit / Net sales

C. Net profit / Net sales

D. EBIT / Net sales

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Correct Answer: Option C

Explanation:
Net profit margin reflects overall profitability after all expenses.

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Question #1203

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The 'Return on Equity' (ROE) is computed as:

A. EBIT / Equity

B. Gross profit / Equity

C. Net profit / Total assets

D. Net profit / Shareholders' equity

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Correct Answer: Option D

Explanation:
ROE measures return to equity shareholders.

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Question #1204

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The 'Operating Cycle' concept is used to determine:

A. Current asset/liability classification

B. Depreciation method

C. Fixed asset classification

D. Inventory valuation

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Correct Answer: Option A

Explanation:
An asset/liability is current if expected to be realised/settled within the operating cycle or 12 months, whichever longer.

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Question #1205

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Under AS 12, government grants related to depreciable assets are generally:

A. Ignored

B. Recognised as income immediately

C. Added to capital

D. Deducted from the cost of the asset or treated as deferred income

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Correct Answer: Option D

Explanation:
AS 12 permits either reducing the cost of asset or treating grant as deferred income.

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Question #1206

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AS 5 (Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies) requires that extraordinary items should be:

A. Clubbed with regular income

B. Shown as appropriation

C. Not disclosed

D. Disclosed separately in the profit and loss statement

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Correct Answer: Option D

Explanation:
Extraordinary items are disclosed separately to show their nature and amount.

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Question #1207

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The 'Provision' for warranty is an example of:

A. Liability

B. Contingent liability not recognised

C. Asset

D. Reserve

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Correct Answer: Option A

Explanation:
Warranty provision meets recognition criteria (present obligation, probable outflow, reliable estimate) and is recorded as a liability.

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Question #1208

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The 'Contingent Asset' is:

A. Always ignored

B. Recognised in the balance sheet

C. Treated as revenue

D. Disclosed in the notes if inflow of economic benefits is probable

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Correct Answer: Option D

Explanation:
AS 29 prohibits recognition but allows disclosure if probable.

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Question #1209

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The 'Materiality' of an item is determined by:

A. Government rule

B. Decision of auditor

C. Only the amount

D. Size and nature of the item

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Correct Answer: Option D

Explanation:
Materiality depends on relative size and nature; an item is material if its omission/misstatement could influence decisions.

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Question #1210

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The 'Fair Value' measurement is a key feature of:

A. Ind AS

B. Income Tax Act

C. Cash basis accounting

D. Partnership Act

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Correct Answer: Option A

Explanation:
Ind AS extensively uses fair value for financial instruments, investment property, etc.

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Question #1211

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The 'Expected Credit Loss' model under Ind AS 109 requires:

A. Provision only when loss is certain

B. No provision

C. Provision based on incurred loss

D. Recognising expected credit losses from the point of initial recognition

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Correct Answer: Option D

Explanation:
ECL model is forward-looking, recognising impairment based on expected losses rather than incurred losses.

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Question #1212

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The 'Ind AS 115' replaces which earlier standards?

A. AS 9 and AS 7

B. AS 3

C. AS 10

D. AS 2

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Correct Answer: Option A

Explanation:
Ind AS 115 supersedes AS 9 (Revenue Recognition) and AS 7 (Construction Contracts).

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Question #1213

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The 'Revenue Recognition' under Ind AS 115 is based on:

A. Transfer of control of goods or services to the customer

B. Invoice issuance

C. Transfer of risks and rewards

D. Receipt of cash

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Correct Answer: Option A

Explanation:
Ind AS 115 uses a five-step model based on transfer of control.

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Question #1214

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Which of the following is a 'Qualifying Asset' for borrowing cost capitalisation under AS 16?

A. Investment property measured at fair value

B. Inventories routinely manufactured

C. A power plant under construction

D. Assets ready for use

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Correct Answer: Option C

Explanation:
A qualifying asset requires a substantial period to get ready for intended use/sale.

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Question #1215

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The 'Recoverable Amount' is the higher of:

A. Cost and net realisable value

B. Market value and book value

C. Fair value less costs to sell and value in use

D. Replacement cost and realisable value

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Correct Answer: Option C

Explanation:
Recoverable amount = higher of (fair value less costs of disposal) and (value in use).

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Question #1216

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The 'Segment Reporting' (AS 17) applies to:

A. Listed companies and those in the process of listing

B. Only non-profit organisations

C. All entities

D. Only small companies

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Correct Answer: Option A

Explanation:
AS 17 is mandatory for listed and soon-to-be-listed enterprises.

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Question #1217

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The 'Related Party' as per AS 18 includes:

A. All suppliers

B. Government

C. Key management personnel and their relatives

D. All customers

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Correct Answer: Option C

Explanation:
Related parties include key management, enterprises with control or significant influence, etc.

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Question #1218

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Under AS 19 'Leases', a lease is classified as finance lease if:

A. It is an operating lease

B. Lease term is less than one year

C. It transfers substantially all risks and rewards incidental to ownership

D. Lessor retains ownership

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Correct Answer: Option C

Explanation:
Finance lease transfers substantially all risks and rewards of ownership to the lessee.

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Question #1219

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The 'Earnings Per Share' (EPS) as per AS 20 is computed as:

A. Net profit / Number of equity shares outstanding

B. EBIT / Shares

C. Net profit before preference dividend / Equity shares

D. Gross profit / Number of shares

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Correct Answer: Option A

Explanation:
Basic EPS = (Net profit - Preference dividend) / Weighted average equity shares.

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Question #1220

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The 'Consolidation Procedure' under AS 21 requires:

A. Line by line adding of like items of assets, liabilities, income, expenses

B. Only adding assets

C. Only adding profits

D. Ignoring subsidiary's data

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Correct Answer: Option A

Explanation:
Consolidation combines similar items and eliminates intra-group transactions.

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