Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #1461

S1: Ind AS 116 deals with Leases. S2: Ind AS 116 requires lessees to recognize a right-of-use asset and a lease liability. 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 B

Explanation:
Ind AS 116 is the standard for Leases. It introduced a single lessee accounting model, requiring lessees to recognize a right-of-use asset and a corresponding lease liability for all leases (with minor exceptions). Both are correct.

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Question #1462

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A: The Accounting Equation is Assets = Liabilities + Capital. R: This equation is based on the Dual Aspect Concept. 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. A is true but R is false

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

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Correct Answer: Option B

Explanation:
The accounting equation represents the balance sheet. It is derived from the Dual Aspect Concept, which states that every transaction has two equal and opposite effects, ensuring the equation always balances. R correctly explains A.

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Question #1463

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Consider the following statements about the 'Money Measurement Concept': 1. Only transactions that can be expressed in monetary terms are recorded. 2. Non-monetary events like a strike or labour unrest are also recorded if they affect business. 3. The concept assumes that the purchasing power of money remains stable. Which of the above statements are correct?

A. 1 and 3 only

B. 1 and 2 only

C. 1, 2 and 3

D. 2 and 3 only

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Correct Answer: Option A

Explanation:
Statement 1 is correct, 2 is incorrect because non-monetary events are not recorded. 3 is correct as an inherent assumption of the money measurement concept.

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Question #1464

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Assertion (A): Wages paid for erection of a new plant are debited to Plant and Machinery account. Reason (R): All expenses incurred to bring an asset to its working condition are capitalised. 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. A is false but R is true.

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

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Correct Answer: Option A

Explanation:
Wages for plant installation are capital expenditure, so A is true. R correctly explains why.

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Question #1465

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Which of the following is/are correct regarding the accounting equation? 1. The equation always holds true under the double entry system. 2. Purchase of goods on credit increases assets and liabilities. 3. Payment to creditors decreases assets and increases liabilities. 4. Introduction of capital by the proprietor increases both assets and capital.

A. 1, 2 and 3

B. 2, 3 and 4

C. 1, 2 and 4

D. All of the above

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Correct Answer: Option C

Explanation:
Statement 3 is incorrect because payment to creditors decreases both assets (cash/bank) and liabilities (creditors). 1, 2, and 4 are correct.

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Question #1466

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A firm's assets total ₹10,00,000 and its owner's equity is ₹4,00,000. The firm borrows ₹2,00,000 from a bank. After the borrowing, what is the total liabilities to outsiders?

A. ₹10,00,000

B. ₹4,00,000

C. ₹6,00,000

D. ₹8,00,000

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Correct Answer: Option D

Explanation:
Initially, liabilities = Assets - Equity = 10,00,000 - 4,00,000 = 6,00,000. After borrowing 2,00,000, liabilities become 8,00,000.

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Question #1467

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Which of the following transactions will not affect the total of the Balance Sheet?

A. Cash deposited into bank

B. Payment to a creditor

C. Purchase of machinery on credit

D. Sale of goods on credit at a profit

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Correct Answer: Option A

Explanation:
Cash to bank is just a change in composition of assets; total assets unchanged. Other transactions change total assets/liabilities.

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Question #1468

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Consider these journal entries: 1. Drawings A/c Dr., To Purchases A/c 2. Machinery A/c Dr., To Cash A/c 3. Rent A/c Dr., To Outstanding Rent A/c 4. Bank A/c Dr., To Interest Received A/c. Which combination represents a compound journal entry?

A. 2 and 3

B. All are simple entries

C. 1 and 2

D. 2 and 4

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Correct Answer: Option B

Explanation:
All given entries involve only two accounts, hence are simple journal entries.

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Question #1469

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Which of the following statements about a 'Voucher' is incorrect?

A. A debit voucher is prepared for cash payments.

B. A credit voucher is used for recording non-cash transactions.

C. A journal voucher is used for recording depreciation.

D. A voucher is a documentary evidence of a transaction.

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Correct Answer: Option B

Explanation:
Credit voucher is used for cash receipts, not non-cash transactions. Non-cash are recorded via journal/transfer vouchers.

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Question #1470

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Assertion (A): A Bank Reconciliation Statement is a part of the books of accounts. Reason (R): It is prepared to find out the correct bank balance. 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.

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Correct Answer: Option D

Explanation:
BRS is not a part of books of accounts; it's a memorandum statement. R is true.

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Question #1471

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While preparing a BRS, starting from the overdraft as per Cash Book, a cheque deposited but dishonoured, already recorded in Cash Book but not in Pass Book, will be:

A. Ignored

B. Treated as an error

C. Deducted from the overdraft

D. Added to the overdraft

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Correct Answer: Option C

Explanation:
Overdraft as per Cash Book means negative balance. Dishonoured cheque was credited in Cash Book, increasing (debit) balance, but actually bank didn't credit. So to reconcile to Pass Book overdraft, we need to reverse that effect: deduct from overdraft in Cash Book (i.e., make it more negative). So deducted.

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Question #1472

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A bank statement shows an overdraft of ₹15,000. Cheques issued ₹8,000 not yet presented. Deposits in transit ₹5,000. The overdraft as per Cash Book will be:

A. ₹22,000

B. ₹12,000

C. ₹18,000

D. ₹2,000

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Correct Answer: Option C

Explanation:
Start with Pass Book overdraft: -15,000. Add unpresented cheques (+8,000) = -7,000. Less deposits in transit (-5,000) = -12,000? Wait, correct logic: Starting from Pass Book overdraft, to get Cash Book overdraft: Unpresented cheques: Cash Book already reduced, Pass Book not. So Cash Book overdraft would be lower (less negative)? Let's derive: Pass Book balance = -15,000. Unpresented cheques mean cash book recorded payment, so Cash Book balance = -15,000 - 8,000 = -23,000? Let's do properly: If we want Cash Book balance (Dr/Cr). Overdraft as per Pass Book = credit balance ₹15,000. Cheques issued not presented: Cash Book already credited ₹8,000, so Cash Book credit balance = 15,000 + 8,000 = 23,000 overdraft. Deposits in transit: Cash Book already debited ₹5,000, so Cash Book debit reduces overdraft: Cash Book overdraft = 23,000 - 5,000 = 18,000. So ₹18,000 overdraft as per Cash Book. Option B ₹18,000.

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Question #1473

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Which of the following items is not an appropriation of profit in a partnership firm?

A. Rent paid to a partner's premises

B. Interest on partners' drawings

C. Salary to partners

D. Interest on partners' capital

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Correct Answer: Option A

Explanation:
Rent paid to partner is a charge against profit (debited to P&L A/c), not an appropriation. Others are appropriations.

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Question #1474

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Assertion (A): In the absence of a partnership deed, partners are entitled to interest on capital at 6% p.a. Reason (R): The Indian Partnership Act, 1932 allows interest on capital only if there is an agreement. 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. A is false but R is true.

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

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Correct Answer: Option C

Explanation:
A is false because no interest on capital is allowed without agreement. R is true.

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Question #1475

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X and Y share profits 3:2. They admit Z for 1/5th share, which he gets entirely from X. The new profit sharing ratio will be:

A. 1:2:2

B. 3:2:1

C. 2:2:1

D. 2:1:2

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Correct Answer: Option C

Explanation:
X's new share = 3/5 - 1/5 = 2/5. Y = 2/5. Z = 1/5. Ratio = 2:2:1.

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Question #1476

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Which of the following is true regarding a Trial Balance?

A. It is a part of the double entry system.

B. It proves the arithmetical accuracy of books.

C. It detects errors of principle.

D. It is prepared at the end of every month.

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Correct Answer: Option B

Explanation:
Trial balance only checks arithmetical accuracy; it does not detect all errors, especially errors of principle.

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Question #1477

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A trial balance shows the following: Debtors ₹50,000; Provision for doubtful debts ₹5,000. It is decided to maintain provision at 10% of debtors. The amount to be charged to Profit & Loss Account will be:

A. ₹5,000

B. ₹2,500

C. Nil

D. ₹10,000

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Correct Answer: Option C

Explanation:
Required provision = 10% of 50,000 = 5,000. Existing provision is also ₹5,000. So no additional charge needed. Thus, nil.

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Question #1478

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In the Trading Account, which of the following is not debited?

A. Opening stock

B. Customs duty on imports

C. Freight inward

D. Octroi duty on goods sold

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Correct Answer: Option D

Explanation:
Octroi on goods sold is a selling expense, debited to P&L Account, not Trading Account. Octroi on purchases is direct expense.

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Question #1479

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Which of the following adjustments would not affect the net profit of a sole trader?

A. Outstanding salary

B. Prepaid insurance

C. Increase in provision for doubtful debts

D. Interest on drawings

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Correct Answer: Option D

Explanation:
Interest on drawings is an appropriation of profit in sole proprietorship? Actually in sole proprietorship, drawings are not subject to interest unless specifically decided for managerial accounting. But in financial accounting for sole traders, interest on drawings is not charged to P&L. It reduces capital directly if considered. So it does not affect net profit. Others affect P&L.

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Question #1480

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Which of the following decisions relates to 'Capital Structure' in financial management?

A. Dividend payment

B. Mix of debt and equity financing

C. Working capital management

D. Selection of fixed assets

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Correct Answer: Option B

Explanation:
Capital structure decision determines the proportion of debt and equity.

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