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 70 of 94
Question #1381
S1: Cost audit is mandatory for all companies in India. S2: Cost audit is conducted to verify the accuracy of cost records. Which statement(s) is/are correct?
A. Neither S1 nor S2
B. S2 only
C. Both S1 and S2
D. S1 only
Discuss
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Correct Answer: Option B

Explanation:
Cost audit is not mandatory for all companies; it is only required for specific classes of companies (like those in regulated sectors or manufacturing) as prescribed by the Central Government. S2 is correct as it verifies cost records. S1 is incorrect.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1382
S1: Internal audit is a part of internal control. S2: Internal audit is conducted by external auditors. Which statement(s) is/are correct?
A. S1 only
B. Both S1 and S2
C. Neither S1 nor S2
D. S2 only
Discuss
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Correct Answer: Option A

Explanation:
Internal audit is a continuous appraisal system and a vital component of the internal control framework. It is conducted by the management's own staff or appointed internal auditors, not by external statutory auditors. S1 is correct, S2 is incorrect.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1383
A: Vouching is the backbone of auditing. R: Vouching verifies the authenticity and accuracy of transactions. Choose the correct option.
A. Both A and R are true and R is the correct explanation of A
B. Both A and R are true but R is NOT the correct explanation of A
C. A is false but R is true
D. A is true but R is false
Discuss
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Correct Answer: Option A

Explanation:
Vouching is considered the backbone of auditing because it provides the primary evidence for the transactions recorded. It verifies authenticity by checking supporting documents. R correctly explains why it is the backbone.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1384
S1: Direct taxes are levied on income and wealth. S2: Direct taxes can be shifted to others. Which statement(s) is/are correct?
A. Both S1 and S2
B. S2 only
C. Neither S1 nor S2
D. S1 only
Discuss
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Correct Answer: Option D

Explanation:
Direct taxes, like Income Tax and Wealth Tax, are levied directly on the income and wealth of individuals or entities. The burden of direct taxes cannot be shifted to someone else. S1 is correct, S2 is incorrect.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1385
S1: GST is levied on the supply of goods and services. S2: GST subsumed all indirect taxes in India. Which statement(s) is/are correct?
A. Both S1 and S2
B. Neither S1 nor S2
C. S2 only
D. S1 only
Discuss
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Correct Answer: Option D

Explanation:
GST is a comprehensive indirect tax levied on the supply of goods and services. However, it did not subsume *all* indirect taxes; for example, basic customs duty, stamp duty, and electricity duties are still outside GST. S1 is correct, S2 is incorrect.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1386
A: The Public Account of India includes funds like the Provident Fund. R: The government can withdraw money from the Public Account without parliamentary approval. 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
Discuss
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Correct Answer: Option B

Explanation:
The Public Account of India holds money like Provident Funds, where the government acts as a banker. Since these funds belong to others, the government can make payments from this account without parliamentary approval. Both are true and R explains A.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1387
S1: SEBI regulates the primary and secondary capital markets in India. S2: SEBI was established by a legislative act of Parliament. Which statement(s) is/are correct?
A. S1 only
B. Both S1 and S2
C. S2 only
D. Neither S1 nor S2
Discuss
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Correct Answer: Option B

Explanation:
SEBI regulates both primary (new issues) and secondary (trading) markets to protect investors. It was initially established in 1988 and later given statutory powers through the SEBI Act, 1992. Both statements are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1388
S1: Ind AS 109 deals with Financial Instruments. S2: Ind AS 113 deals with Fair Value Measurement. Which statement(s) is/are correct?
A. S2 only
B. Neither S1 nor S2
C. Both S1 and S2
D. S1 only
Discuss
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Correct Answer: Option C

Explanation:
Ind AS 109 prescribes the requirements for the recognition, measurement, impairment, derecognition, and hedge accounting of financial instruments. Ind AS 113 defines fair value and sets out its measurement framework. Both are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1389
A: The Matching Concept requires expenses to be matched with revenues. R: This concept is the basis for the accrual system of accounting. 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 but R is NOT the correct explanation of A
D. Both A and R are true and R is the correct explanation of A
Discuss
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Correct Answer: Option D

Explanation:
The Matching Concept dictates that expenses incurred to earn revenue must be recognized in the same period as the revenue. This necessitates the accrual system, where transactions are recorded when they occur, not when cash changes hands. R correctly explains A.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1390
S1: Capital expenditure increases the earning capacity of the business. S2: Revenue expenditure maintains the earning capacity of the business. Which statement(s) is/are correct?
A. S2 only
B. Neither S1 nor S2
C. Both S1 and S2
D. S1 only
Discuss
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Correct Answer: Option C

Explanation:
Capital expenditure is incurred to acquire or improve assets, thereby increasing earning capacity. Revenue expenditure is incurred for day-to-day operations to maintain the existing earning capacity. Both statements are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1391
S1: Deferred revenue expenditure is a capital expenditure. S2: Deferred revenue expenditure is a revenue expenditure spread over multiple years. Which statement(s) is/are correct?
A. S1 only
B. Both S1 and S2
C. Neither S1 nor S2
D. S2 only
Discuss
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Correct Answer: Option D

Explanation:
Deferred revenue expenditure is essentially a revenue expenditure (like heavy advertising) whose benefit extends over multiple years, so it is written off over those years. It is not a capital expenditure. S1 is incorrect, S2 is correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1392
A: A Trial Balance agrees when total debits equal total credits. R: An agreeing Trial Balance guarantees the absolute accuracy of the books of accounts. Choose the correct option.
A. A is true but R is false
B. Both A and R are true but R is NOT the correct explanation of A
C. A is false but R is true
D. Both A and R are true and R is the correct explanation of A
Discuss
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Correct Answer: Option A

Explanation:
A Trial Balance agrees when total debits equal total credits. However, it does not guarantee absolute accuracy, as errors like compensating errors, errors of principle, or complete omissions do not affect the tally. A is true, R is false.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1393
S1: The Gross Profit Ratio is calculated as (Gross Profit / Net Sales) x 100. S2: A higher Gross Profit Ratio indicates better operational efficiency. Which statement(s) is/are correct?
A. S2 only
B. S1 only
C. Neither S1 nor S2
D. Both S1 and S2
Discuss
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Correct Answer: Option D

Explanation:
The Gross Profit Ratio is indeed (Gross Profit / Net Sales) x 100. A higher ratio indicates that the cost of goods sold is lower relative to sales, implying better operational efficiency and cost control. Both are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1394
S1: The Current Ratio measures long-term solvency. S2: The Debt-Equity Ratio measures short-term liquidity. Which statement(s) is/are correct?
A. Neither S1 nor S2
B. Both S1 and S2
C. S1 only
D. S2 only
Discuss
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Correct Answer: Option A

Explanation:
The Current Ratio measures short-term liquidity, not long-term solvency. The Debt-Equity Ratio measures long-term solvency, not short-term liquidity. Both statements have swapped the definitions. Both are incorrect.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1395
A: A partner has the right to inspect the books of accounts of the firm. R: This right is implied in the Partnership Act, 1932. Choose the correct option.
A. A is true but R is false
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 false but R is true
Discuss
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Correct Answer: Option B

Explanation:
Every partner has the right to access and inspect the firm's books to ensure transparency and protect their interest. This right is expressly provided under Section 12(d) of the Indian Partnership Act, 1932. R correctly explains the legal basis.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1396
S1: Goodwill is an intangible asset. S2: Goodwill can be self-generated and recorded in the books of accounts. Which statement(s) is/are correct?
A. Both S1 and S2
B. S1 only
C. Neither S1 nor S2
D. S2 only
Discuss
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Correct Answer: Option B

Explanation:
Goodwill is an intangible asset representing the firm's reputation. However, AS 26 prohibits the recognition of self-generated goodwill in the balance sheet; only purchased goodwill can be recorded. S1 is correct, S2 is incorrect.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1397
S1: The sacrificing ratio is always in the old profit-sharing ratio. S2: The gaining ratio is always in the new profit-sharing ratio. Which statement(s) is/are correct?
A. S1 only
B. Both S1 and S2
C. S2 only
D. Neither S1 nor S2
Discuss
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Correct Answer: Option D

Explanation:
The sacrificing ratio is calculated as Old Ratio - New Ratio. The gaining ratio is calculated as New Ratio - Old Ratio. They are not necessarily the same as the old or new ratios unless specifically stated. Both are incorrect.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1398
A: Interest on capital is allowed only out of profits. R: If the firm incurs a loss, no interest on capital is allowed. Choose the correct option.
A. A is true but R is false
B. Both A and R are true but R is NOT the correct explanation of A
C. A is false but R is true
D. Both A and R are true and R is the correct explanation of A
Discuss
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Correct Answer: Option D

Explanation:
Interest on capital is an appropriation of profit, not a charge against profit. Therefore, it is only allowed if the firm makes a profit. If there is a loss, it is not allowed. R correctly explains A.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1399
S1: Revaluation Account is prepared to record changes in the values of assets and liabilities. S2: The profit or loss on revaluation is transferred to the old partners' capital accounts in their sacrificing ratio. Which statement(s) is/are correct?
A. Neither S1 nor S2
B. S2 only
C. S1 only
D. Both S1 and S2
Discuss
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Correct Answer: Option D

Explanation:
Revaluation Account records the changes in asset and liability values at the time of admission/retirement. The net profit or loss is distributed among the old partners in their old profit-sharing ratio (which is the sacrificing ratio for the retiring partner). Both are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1400
S1: A joint venture is a temporary partnership. S2: A joint venture has a separate legal entity. Which statement(s) is/are correct?
A. S1 only
B. S2 only
C. Neither S1 nor S2
D. Both S1 and S2
Discuss
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Correct Answer: Option A

Explanation:
A joint venture is formed for a specific, short-term purpose and terminates upon completion, making it a temporary partnership. Unlike a company, it does not have a separate legal entity distinct from its co-venturers. S1 is correct, S2 is incorrect.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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