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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Question #1301
The 'Government Company' as per Companies Act is one in which not less than 51% of paid-up share capital is held by:
A. Foreign investors
B. Public
C. Central/State Government(s)
D. RBI
Discuss
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Correct Answer: Option C

Explanation:
As per Section 2(45) of Companies Act, 2013, government company has at least 51% government shareholding.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1302
The 'Stratified Sampling' in audit is used to:
A. Audit only large value items
B. Select a representative sample from sub-populations
C. Select all items
D. Ignore sampling
Discuss
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Correct Answer: Option B

Explanation:
Stratification divides population into subgroups with similar characteristics to improve audit efficiency.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1303
The 'Materiality Level' in audit is set to:
A. Avoid audit
B. Reduce sample size
C. Determine the significance of misstatements that could influence economic decisions
D. Increase fees
Discuss
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Correct Answer: Option C

Explanation:
Materiality is a threshold to guide audit procedures and evaluation of misstatements.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1304
The 'Audit Risk' is composed of:
A. Inherent risk, control risk, detection risk
B. Business risk and financial risk
C. Only detection risk
D. Only inherent risk
Discuss
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Correct Answer: Option A

Explanation:
Audit risk = Inherent risk × Control risk × Detection risk.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1305
The 'Substantive Procedures' in audit include:
A. Only compliance testing
B. Test of details and analytical procedures
C. Only discussion
D. Only internal control review
Discuss
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Correct Answer: Option B

Explanation:
Substantive procedures detect material misstatements through tests of details and substantive analytical procedures.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1306
The 'Test of Controls' is performed when:
A. No controls exist
B. Never performed
C. Auditor intends to rely on the entity's internal controls
D. Internal controls are weak
Discuss
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Correct Answer: Option C

Explanation:
Test of controls evaluates the operating effectiveness of internal controls.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1307
The 'Going Concern' assumption in audit is evaluated by:
A. Tax department
B. Management only
C. Auditor to assess whether the entity can continue in operation
D. Shareholders
Discuss
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Correct Answer: Option C

Explanation:
Auditor must consider the appropriateness of management's use of going concern basis.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1308
The 'Emphasis of Matter' paragraph in audit report is used to:
A. Qualify the opinion
B. Draw attention to a matter appropriately presented or disclosed that is fundamental to users' understanding
C. Give adverse opinion
D. Disclaim opinion
Discuss
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Correct Answer: Option B

Explanation:
Emphasis of Matter does not affect the audit opinion; it highlights significant matters.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1309
An 'Adverse Opinion' is issued when:
A. Auditor is unable to obtain evidence
B. There is a limitation of scope
C. Financial statements are true and fair
D. Misstatements are pervasive and material, and financial statements do not present a true and fair view
Discuss
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Correct Answer: Option D

Explanation:
Adverse opinion indicates that financial statements are materially misstated.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1310
A 'Disclaimer of Opinion' is issued when:
A. Misstatements are trivial
B. Auditor cannot obtain sufficient appropriate evidence and possible effects are pervasive
C. Everything is fine
D. Financial statements are correct
Discuss
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Correct Answer: Option B

Explanation:
Disclaimer means the auditor does not express an opinion due to scope limitation.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1311
The 'Management Letter' in audit is:
A. Tax letter
B. Communication to management on internal control weaknesses and other observations
C. The audit report
D. Engagement letter
Discuss
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Correct Answer: Option B

Explanation:
Management letter (letter of weakness) suggests improvements in internal controls.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1312
The 'Engagement Letter' in audit is:
A. Tax notice
B. A written agreement between auditor and client detailing scope and terms of audit
C. A letter of appointment of auditor
D. The audit programme
Discuss
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Correct Answer: Option B

Explanation:
Engagement letter formalises the audit engagement.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1313
The 'Subsequent Events' in audit refer to:
A. All future events
B. Events occurring between the balance sheet date and date of auditor's report
C. Events before the balance sheet date
D. Events after auditor's report
Discuss
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Correct Answer: Option B

Explanation:
Auditors consider events after the reporting period up to the date of the report.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1314
The 'Audit Documentation' (working papers) is the property of:
A. Government
B. Client
C. Auditor
D. Shareholders
Discuss
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Correct Answer: Option C

Explanation:
Working papers belong to the auditor; client does not have a right to them.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1315
The 'Retention Period' for audit working papers is generally:
A. 7 years (or as per SQC 1)
B. 1 year
C. No requirement
D. 10 years
Discuss
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Correct Answer: Option A

Explanation:
As per ICAI's Standard on Quality Control, retention period is at least 7 years.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1316
The 'Audit Evidence' is more reliable if:
A. Oral
B. Obtained from independent external sources
C. Obtained from management
D. Internally generated
Discuss
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Correct Answer: Option B

Explanation:
External evidence is generally more reliable than internal evidence.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1317
The 'Confirmation' from debtors is an example of:
A. No evidence
B. External evidence
C. Internal evidence
D. Oral evidence
Discuss
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Correct Answer: Option B

Explanation:
Direct confirmation from third parties provides reliable external audit evidence.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1318
The 'Physical Verification' of inventory is a part of:
A. None
B. Compliance procedure
C. Substantive procedure
D. Internal control evaluation
Discuss
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Correct Answer: Option C

Explanation:
Physical verification is a substantive audit procedure to verify existence of inventory.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1319
The 'Cut-off' procedures in audit relate to:
A. Selecting sample
B. Ensuring transactions are recorded in the correct accounting period
C. Stopping audit
D. Setting materiality
Discuss
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Correct Answer: Option B

Explanation:
Cut-off tests ensure revenues and expenses are recognised in the proper period.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1320
The 'Going Concern' evaluation period as per SA 570 is:
A. Indefinite
B. At least 12 months from the balance sheet date
C. Not defined
D. 6 months
Discuss
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Correct Answer: Option B

Explanation:
Management assesses going concern for at least 12 months from the reporting date.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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