Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #1341

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Which of the following statements regarding a Bank Reconciliation Statement (BRS) is TRUE?

A. It updates the cash book balances.

B. It is prepared on a specific date to reconcile the balances.

C. It is prepared by the bank manager.

D. It is a part of the double-entry system.

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Correct Answer: Option B

Explanation:
A BRS is prepared by the account holder (customer) on a specific date to explain differences between the cash book and pass book. It is a statement, not an account, so it does not involve journal entries.

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Question #1342

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S1: Cheques issued but not presented for payment increase the bank balance as per the pass book. S2: Direct deposit by a customer into the bank account decreases the cash book balance. Which statement(s) is/are correct?

A. Both S1 and S2

B. Neither S1 nor S2

C. S1 only

D. S2 only

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Correct Answer: Option B

Explanation:
Cheques issued but not presented decrease the pass book balance, not increase it. Direct deposit by a customer increases the pass book balance but has no immediate effect on the cash book until intimated. Both are incorrect.

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Question #1343

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A: The Trial Balance is a statement, not an account. R: It is prepared to check the arithmetical accuracy of the ledger. Choose the correct option.

A. Both A and R are true but R is NOT the correct explanation of A

B. Both A and R are true and R is the correct explanation of A

C. A is true but R is false

D. A is false but R is true

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Correct Answer: Option A

Explanation:
The Trial Balance is indeed a statement of ledger balances, and its primary purpose is to check arithmetical accuracy. However, the fact that it is a statement does not explain why it checks accuracy; the double-entry system does.

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Question #1344

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S1: An error of principle occurs when a transaction is recorded in the wrong class of account. S2: An error of omission occurs when a transaction is completely omitted from the books. Which statement(s) is/are correct?

A. Neither S1 nor S2

B. Both S1 and S2

C. S2 only

D. S1 only

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Correct Answer: Option B

Explanation:
An error of principle violates fundamental accounting rules (e.g., treating a capital expense as revenue). An error of complete omission means the transaction is not recorded at all. Both definitions are correct.

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Question #1345

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If the Trial Balance totals do not match, the difference is temporarily transferred to:

A. Trading Account

B. Suspense Account

C. Profit and Loss Account

D. Capital Account

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Correct Answer: Option B

Explanation:
When the Trial Balance disagrees, the difference is placed in a Suspense Account to allow the preparation of final accounts. The suspense account is cleared once the errors are located and rectified.

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Question #1346

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S1: Carriage Inwards is added to the Trading Account. S2: Carriage Outwards is added to the Trading Account. Which statement(s) is/are correct?

A. S2 only

B. Both S1 and S2

C. S1 only

D. Neither S1 nor S2

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Correct Answer: Option C

Explanation:
Carriage Inwards is a direct expense related to purchases and is added to the Trading Account. Carriage Outwards is a selling and distribution expense, shown in the Profit and Loss Account.

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Question #1347

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A: Closing stock is valued at cost or net realizable value, whichever is lower. R: This is based on the Conservatism (Prudence) Concept. Choose the correct option.

A. A is false but R is true

B. A is true but R is false

C. Both A and R are true and R is the correct explanation of A

D. Both A and R are true but R is NOT the correct explanation of A

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Correct Answer: Option C

Explanation:
AS 2 mandates inventory valuation at cost or NRV, whichever is lower. This prevents overstating assets and profits, directly applying the Prudence (Conservatism) Concept. R correctly explains A.

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Question #1348

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S1: Depreciation is the gradual decrease in the market value of an asset. S2: Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. Which statement(s) is/are correct?

A. S1 only

B. Neither S1 nor S2

C. Both S1 and S2

D. S2 only

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Correct Answer: Option D

Explanation:
Deprecation is not a valuation process but an allocation process of historical cost over the useful life. It does not measure the decrease in market value. S1 is incorrect, S2 is correct.

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Question #1349

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Under the Written Down Value (WDV) method, if the rate of depreciation is 10% and the original cost is ₹10,000, what is the depreciation for the second year?

A. ₹9,000

B. ₹8,100

C. ₹900

D. ₹1,000

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Correct Answer: Option C

Explanation:
Year 1 depreciation is 10% of ₹10,000 = ₹1,000. The WDV at the start of Year 2 is ₹9,000. Year 2 depreciation is 10% of ₹9,000 = ₹900.

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Question #1350

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S1: The Profit and Loss Account shows the financial position of the business. S2: The Balance Sheet shows the financial position of the business. Which statement(s) is/are correct?

A. Both S1 and S2

B. S1 only

C. S2 only

D. Neither S1 nor S2

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Correct Answer: Option C

Explanation:
The Profit and Loss Account shows the financial performance (profit or loss) over a period. The Balance Sheet shows the financial position (assets and liabilities) at a specific point in time.

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Question #1351

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A: A current ratio of 2:1 is generally considered ideal. R: It indicates that current assets are twice the current liabilities, ensuring good short-term liquidity. Choose the correct option.

A. A is true but R is false

B. A is false but R is true

C. Both A and R are true and R is the correct explanation of A

D. Both A and R are true but R is NOT the correct explanation of A

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Correct Answer: Option C

Explanation:
A current ratio of 2:1 is a standard benchmark for short-term solvency. It means the firm has double the current assets to cover its current liabilities, providing a safety margin. R correctly explains A.

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Question #1352

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S1: In the absence of a partnership deed, partners are entitled to a salary. S2: In the absence of a partnership deed, interest on capital is not allowed. Which statement(s) is/are correct?

A. Neither S1 nor S2

B. S2 only

C. S1 only

D. Both S1 and S2

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Correct Answer: Option B

Explanation:
Under the Indian Partnership Act 1932, if the deed is silent, no partner can claim a salary, and no interest on capital is allowed. However, interest on drawings is also not charged. S1 is incorrect, S2 is correct.

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Question #1353

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S1: The sacrificing ratio is used during the admission of a new partner. S2: The gaining ratio is used during the retirement of a partner. Which statement(s) is/are correct?

A. S1 only

B. Both S1 and S2

C. S2 only

D. Neither S1 nor S2

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Correct Answer: Option B

Explanation:
The sacrificing ratio determines how much share existing partners give up to the new partner. The gaining ratio determines how much share continuing partners acquire from the retiring partner. Both are correct.

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Question #1354

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A: Goodwill is valued at the time of admission, retirement, or death of a partner. R: Goodwill represents the reputation of the firm built by the efforts of the partners. Choose the correct option.

A. A is false but R is true

B. Both A and R are true and R is the correct explanation of A

C. Both A and R are true but R is NOT the correct explanation of A

D. A is true but R is false

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Correct Answer: Option C

Explanation:
Goodwill is indeed valued during changes in the profit-sharing ratio or constitution of the firm. While R is a true statement about goodwill, it doesn't explain *why* it is valued at those specific times (which is to compensate the outgoing/sacrificing partners).

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Question #1355

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S1: Revaluation Account is a nominal account. S2: Revaluation Account is prepared to ascertain the profit or loss on revaluation of assets and liabilities. Which statement(s) is/are correct?

A. S2 only

B. Both S1 and S2

C. Neither S1 nor S2

D. S1 only

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Correct Answer: Option B

Explanation:
Revaluation Account records expenses (decreases in asset values) and incomes (increases in liability values), making it a nominal account. Its purpose is to calculate the net effect of revaluation on partners' capital. Both are correct.

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Question #1356

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In a piecemeal distribution of cash during the dissolution of a partnership firm, which method is typically used?

A. Both B and C

B. Surplus Capital Method

C. Maximum Loss Method

D. Proportionate Capital Method

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Correct Answer: Option A

Explanation:
When cash is realized in installments during dissolution, it is distributed using either the Maximum Loss Method or the Surplus Capital (Proportionate Capital) Method to ensure partners' capital accounts are correctly adjusted.

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Question #1357

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S1: Margin of Safety is the excess of break-even sales over actual sales. S2: Margin of Safety is calculated as (Actual Sales - Break-Even Sales). Which statement(s) is/are correct?

A. S1 only

B. Both S1 and S2

C. Neither S1 nor S2

D. S2 only

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Correct Answer: Option D

Explanation:
Margin of Safety is the excess of *actual* or *budgeted* sales over the break-even sales, not the other way around. S1 is incorrect. S2 correctly states the formula: Actual Sales - Break-Even Sales.

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Question #1358

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A: EOQ (Economic Order Quantity) minimizes the total cost of inventory. R: EOQ balances ordering costs and carrying costs. Choose the correct option.

A. A is true but R is false

B. A is false but R is true

C. Both A and R are true but R is NOT the correct explanation of A

D. Both A and R are true and R is the correct explanation of A

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Correct Answer: Option D

Explanation:
EOQ is the order quantity that minimizes total inventory costs. It achieves this by finding the point where total ordering costs equal total carrying costs. R correctly explains the mechanism of EOQ.

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Question #1359

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S1: ABC analysis is a technique of inventory control. S2: In ABC analysis, 'A' items represent high value and low quantity. Which statement(s) is/are correct?

A. Both S1 and S2

B. S2 only

C. Neither S1 nor S2

D. S1 only

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Correct Answer: Option A

Explanation:
ABC analysis classifies inventory based on usage value. 'A' items are the most valuable, typically representing a small percentage of total quantity but a large percentage of total inventory cost. Both statements are correct.

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Question #1360

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S1: Zero-Based Budgeting (ZBB) starts with a zero base for every new period. S2: Flexible Budget is prepared for a single level of activity. Which statement(s) is/are correct?

A. Neither S1 nor S2

B. S1 only

C. Both S1 and S2

D. S2 only

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Correct Answer: Option B

Explanation:
ZBB requires justifying all expenses from scratch (zero base) for each period. A Flexible Budget is designed to change with different levels of activity, not a single level (which is a Fixed Budget). S1 is correct, S2 is incorrect.

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