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 72 of 94
Question #1421
S1: Depreciation is a non-cash expense. S2: Depreciation reduces the book value of the asset. Which statement(s) is/are correct?
A. Neither S1 nor S2
B. S1 only
C. S2 only
D. Both S1 and S2
Discuss
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Correct Answer: Option D

Explanation:
Depreciation is charged to the Profit and Loss Account but does not involve any cash outflow, making it a non-cash expense. It is also credited to the Provision for Depreciation or Asset account, reducing its book value. Both are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1422
A: The Current Ratio is a liquidity ratio. R: It measures the ability to pay off long-term debts. Choose the correct option.
A. Both A and R are true and R is the correct explanation of A
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. A is false but R is true
Discuss
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Correct Answer: Option B

Explanation:
The Current Ratio is indeed a liquidity ratio. However, it measures short-term liquidity (ability to pay current liabilities), not long-term debts (which is measured by solvency ratios like Debt-Equity). A is true, R is false.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1423
S1: In the absence of a partnership deed, profits are shared equally. S2: In the absence of a partnership deed, interest on drawings is charged. Which statement(s) is/are correct?
A. Neither S1 nor S2
B. S1 only
C. Both S1 and S2
D. S2 only
Discuss
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Correct Answer: Option B

Explanation:
The Partnership Act 1932 mandates equal profit sharing if the deed is silent. It also states that no interest on drawings shall be charged if the deed is silent. S1 is correct, S2 is incorrect.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1424
S1: The Profit and Loss Appropriation Account is prepared after the Profit and Loss Account. S2: It shows the distribution of net profit among partners. 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:
The P&L Appropriation Account is an extension of the P&L Account, prepared after it. Its purpose is to distribute the net profit among partners by accounting for interest, salaries, and profit shares. Both are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1425
A: Goodwill is valued when there is a change in the profit-sharing ratio. R: The change in ratio means some partners sacrifice and some gain, requiring compensation. 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:
Goodwill is valued during admission, retirement, death, or change in profit-sharing ratio. This is because partners who sacrifice their share must be compensated by those who gain. R correctly explains the reason for valuation.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1426
S1: Revaluation Account is a real account. S2: Revaluation Account is prepared to show the effect of revaluation on partners' capital. 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 D

Explanation:
Revaluation Account is a nominal account, not a real account, as it records expenses and incomes related to revaluation. Its purpose is indeed to show the net effect on partners' capital. S1 is incorrect, S2 is correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1427
S1: Marginal costing distinguishes between fixed and variable costs. S2: Absorption costing distinguishes between fixed and variable costs. Which statement(s) is/are correct?
A. Both S1 and S2
B. S1 only
C. S2 only
D. Neither S1 nor S2
Discuss
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Correct Answer: Option B

Explanation:
Marginal costing strictly separates costs into fixed and variable components. Absorption costing (traditional costing) charges all manufacturing costs (both fixed and variable) to the product, without this strict separation for decision making. S1 is correct, S2 is incorrect.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1428
A: Zero-Based Budgeting requires justification for all expenses. R: It starts with a zero base for every new period. Choose the correct option.
A. A is false but R is true
B. Both A and R are true but R is NOT the correct explanation of A
C. A is true but R is false
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:
ZBB requires managers to justify every item of expenditure from scratch. This is because it starts with a 'zero base' for each new period, rather than using the previous year's budget as a baseline. R correctly explains A.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1429
S1: Audit is an independent examination of financial information. S2: Audit is conducted to express an opinion on the financial statements. Which statement(s) is/are correct?
A. S2 only
B. S1 only
C. Both S1 and S2
D. Neither S1 nor S2
Discuss
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Correct Answer: Option C

Explanation:
Audit is an independent, objective examination of financial statements and related data. The primary objective is to express an opinion on whether they present a true and fair view. Both statements are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1430
S1: Vouching is the examination of documentary evidence. S2: Verification is the proof of ownership, existence, and valuation of assets. 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:
Vouching involves checking vouchers to verify the authenticity of transactions. Verification goes beyond vouching to confirm the physical existence, legal ownership, and proper valuation of assets and liabilities at the balance sheet date. Both are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1431
A: Internal audit is a continuous process. R: Internal audit is conducted by the statutory auditor. Choose the correct option.
A. Both A and R are true but R is NOT the correct explanation of A
B. A is true but R is false
C. Both A and R are true and R is the correct explanation of A
D. A is false but R is true
Discuss
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Correct Answer: Option B

Explanation:
Internal audit is a continuous, ongoing appraisal system by the management. It is conducted by internal audit staff, not the statutory (external) auditor, who conducts the annual financial audit. A is true, R is false.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1432
S1: Direct taxes are progressive in nature. S2: Indirect taxes are regressive in nature. Which statement(s) is/are correct?
A. Neither S1 nor S2
B. S1 only
C. Both S1 and S2
D. S2 only
Discuss
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Correct Answer: Option C

Explanation:
Direct taxes (like Income Tax) are progressive, meaning the tax rate increases as income increases. Indirect taxes (like GST) are regressive, as they take a larger percentage of income from low-income earners than high-income earners. Both are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1433
S1: GST is a destination-based tax. S2: GST revenue goes to the state where the goods are manufactured. Which statement(s) is/are correct?
A. S1 only
B. Neither S1 nor S2
C. Both S1 and S2
D. S2 only
Discuss
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Correct Answer: Option A

Explanation:
GST is a destination-based consumption tax. The revenue goes to the state where the goods or services are *consumed*, not where they are manufactured (which was the case under the origin-based CST). S1 is correct, S2 is incorrect.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1434
A: The Consolidated Fund of India is mentioned in Article 266 of the Constitution. R: It includes all revenues received by the Government of India. Choose the correct option.
A. Both A and R are true and R is the correct explanation of A
B. A is false but R is true
C. A is true but R is false
D. Both A and R are true but R is NOT the correct explanation of A
Discuss
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Correct Answer: Option D

Explanation:
Article 266 of the Constitution establishes the Consolidated Fund of India. It includes all revenues, loans, and repayments. Both are true, but R describes the contents, not the constitutional basis (which is Article 266).
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1435
S1: PFMS is a platform for all direct benefit transfers. S2: PFMS is integrated with the Core Banking System of banks. 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 A

Explanation:
PFMS is the primary platform for Direct Benefit Transfers (DBT) under various government schemes. It is integrated with the Core Banking Systems (CBS) of all banks to ensure seamless and direct credit to beneficiaries' accounts. Both are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1436
S1: Ind AS 115 uses a five-step model for revenue recognition. S2: The five steps include identifying the contract, performance obligations, transaction price, allocating price, and recognizing revenue. Which statement(s) is/are correct?
A. Both S1 and S2
B. Neither S1 nor S2
C. S1 only
D. S2 only
Discuss
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Correct Answer: Option A

Explanation:
Ind AS 115 prescribes a five-step model for revenue recognition. The steps are exactly as listed: identify contract, identify performance obligations, determine transaction price, allocate price, and recognize revenue when obligations are satisfied. Both are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1437
A: The Business Entity Concept treats the business and owner as separate. R: This concept is the basis for the Accounting Equation. 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 false but R is true
D. A is true but R is false
Discuss
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Correct Answer: Option B

Explanation:
The Business Entity Concept separates the owner's personal transactions from the business's. This separation allows the business to recognize the owner's contribution as 'Capital' (a liability for the business), forming the basis of the Accounting Equation (Assets = Liabilities + Capital). R correctly explains A.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1438
S1: A Journal Voucher is used for non-cash transactions. S2: A Contra Voucher is used for cash and bank transactions. Which statement(s) is/are correct?
A. Both S1 and S2
B. Neither S1 nor S2
C. S1 only
D. S2 only
Discuss
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Correct Answer: Option A

Explanation:
A Journal Voucher (or Transfer Voucher) is used for internal adjustments and non-cash transactions like depreciation. A Contra Voucher is used for transactions involving both cash and bank, like depositing cash into the bank. Both are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1439
S1: The Purchases Return Book records returns of goods purchased on credit. S2: The Purchases Return Book is also called the Returns Outwards Book. Which statement(s) is/are correct?
A. S2 only
B. Neither S1 nor S2
C. S1 only
D. Both S1 and S2
Discuss
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Correct Answer: Option D

Explanation:
The Purchases Return Book records goods returned to suppliers that were originally purchased on credit. It is also known as the Returns Outwards Book because goods are going out of the business. Both statements are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1440
A: The Ledger is the book of final entry. R: All transactions from subsidiary books are posted to the Ledger. 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 C

Explanation:
The Ledger is indeed the book of final entry (or principal book) where all transactions are ultimately classified. Transactions from subsidiary books are posted to it. Both are true, but R describes the process, not why it's called the book of final entry.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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