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 #1481
A company's earnings before interest and tax (EBIT) is ₹2,00,000. It has 12% debentures of ₹5,00,000. The interest coverage ratio is:
A. 2 times
B. 3.33 times
C. 4 times
D. 1.67 times
Discuss
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Correct Answer: Option B

Explanation:
Interest = 12% of 5,00,000 = 60,000. Interest coverage ratio = EBIT / Interest = 2,00,000 / 60,000 = 3.33 times.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1482
A partnership firm is dissolved. Which of the following accounts is prepared at the time of dissolution?
A. Revaluation Account
B. Memorandum Revaluation Account
C. Realisation Account
D. Profit and Loss Adjustment Account
Discuss
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Correct Answer: Option C

Explanation:
Realisation Account is prepared to close the books on dissolution.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1483
On dissolution of a firm, an asset taken over by a partner is credited to:
A. Bank Account
B. Realisation Account
C. Partner's Capital Account
D. Asset Account
Discuss
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Correct Answer: Option B

Explanation:
Asset taken over is recorded: Partner's Capital A/c Dr., To Realisation A/c. So Realisation A/c is credited.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1484
The 'Cost of Debt' is computed as:
A. Dividend / Market price
B. EBIT / Total capital
C. Interest rate
D. Interest rate * (1 - tax rate)
Discuss
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Correct Answer: Option D

Explanation:
Cost of debt is after tax because interest is tax deductible.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1485
In a common size income statement, all items are expressed as a percentage of:
A. Revenue from operations (net sales)
B. Gross profit
C. Total assets
D. Net profit
Discuss
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Correct Answer: Option A

Explanation:
Common size income statement base is net sales/revenue from operations.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1486
Which of the following ratios is a measure of long-term solvency?
A. Current ratio
B. Inventory turnover ratio
C. Quick ratio
D. Debt-equity ratio
Discuss
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Correct Answer: Option D

Explanation:
Debt-equity ratio indicates financial leverage and long-term solvency.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1487
A firm's current ratio is 1.5:1. It wants to maintain a current ratio of 2:1 by paying off some current liabilities. Which of the following will happen?
A. Working capital will decrease
B. Current assets will decrease
C. Working capital will remain unchanged
D. Working capital will increase
Discuss
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Correct Answer: Option C

Explanation:
Paying current liabilities reduces both current assets (cash) and current liabilities equally, leaving working capital (CA - CL) unchanged, though ratio improves.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1488
The term 'Capitalisation' of reserves means:
A. Writing off fictitious assets
B. Distributing reserves as dividend
C. Transfer of reserves to capital account
D. Utilising reserves for issue of bonus shares
Discuss
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Correct Answer: Option D

Explanation:
Capitalisation of reserves refers to converting reserves into share capital, i.e., bonus issue.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1489
Under the 'Net Profit Method' of goodwill valuation, goodwill is:
A. Number of years purchase of average profits
B. Capitalised value of average profits less net tangible assets
C. Number of years purchase of super profits
D. Capitalised value of super profits
Discuss
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Correct Answer: Option A

Explanation:
The net profit method uses a multiplier on average profits, not super profits. Capitalisation of super profits is different.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1490
A firm's average profit is ₹1,20,000, normal rate 10%, capital employed ₹8,00,000. Goodwill by capitalisation of average profit method will be: (Capitalised value of average profit less net assets)
A. ₹4,00,000
B. ₹12,00,000
C. ₹8,00,000
D. ₹2,00,000
Discuss
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Correct Answer: Option A

Explanation:
Capitalised value = 1,20,000 / 10% = 12,00,000. Goodwill = 12,00,000 - 8,00,000 = 4,00,000.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1491
Consider these statements about 'Single Entry System': 1. Only personal accounts are maintained completely. 2. Profit is ascertained by comparing opening and closing capital. 3. It is based on dual aspect concept. Which are correct?
A. 2 and 3 only
B. 1 and 3 only
C. 1 and 2 only
D. All of the above
Discuss
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Correct Answer: Option C

Explanation:
Single entry does not follow dual aspect; 3 is incorrect. 1 and 2 are true.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1492
Under the 'Cash Basis' of accounting, outstanding expenses are:
A. Not recorded
B. Recorded as liability
C. Recorded as income
D. Recorded as asset
Discuss
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Correct Answer: Option A

Explanation:
Cash basis only records cash transactions, so outstanding expenses are ignored.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1493
Social Accounting primarily benefits:
A. Government only
B. Competitors
C. Shareholders only
D. Society at large by disclosing social costs and benefits
Discuss
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Correct Answer: Option D

Explanation:
It provides information to stakeholders about the social impact of an entity.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1494
The 'Social Audit' under Indian schemes is mandated for:
A. All companies
B. All government schemes
C. Private hospitals
D. Mahatma Gandhi NREGA
Discuss
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Correct Answer: Option D

Explanation:
Social audit is statutory for MGNREGA.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1495
PFMS facilitates 'Just-in-Time' release of funds. This means:
A. Funds are released when required, minimising idle balances
B. Funds are never released
C. Funds are released in advance
D. Funds are released annually
Discuss
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Correct Answer: Option A

Explanation:
Just-in-Time in PFMS reduces float and improves cash management for government.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1496
The 'Indian Government Accounting Standards' (IGAS) are based on:
A. Accrual basis
B. Mixed basis
C. Cash basis
D. Mercantile basis
Discuss
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Correct Answer: Option C

Explanation:
IGAS are primarily cash-based, with certain disclosures on accrual basis.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1497
Which of the following is a direct tax levied by the Union Government?
A. Entertainment tax
B. Income tax
C. Sales tax
D. Excise duty on alcohol
Discuss
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Correct Answer: Option B

Explanation:
Income tax is a direct tax. Excise on alcohol is state subject. Sales tax/VAT is state. Entertainment tax is local.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1498
The 'Input Tax Credit' under GST is not available for:
A. Motor vehicles for transportation of goods
B. Works contract services for construction of immovable property
C. Inputs used for zero-rated supplies
D. Inputs used for taxable supplies
Discuss
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Correct Answer: Option B

Explanation:
ITC on works contract for immovable property is blocked under Section 17(5) of CGST Act.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1499
Which of the following statements about GST is/are correct? 1. It is a destination-based consumption tax. 2. It subsumes all central and state indirect taxes. 3. Petroleum products are presently outside GST. 4. The GST Council is a constitutional body.
A. All of the above
B. 1, 3 and 4
C. 1, 2 and 3
D. 2, 3 and 4
Discuss
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Correct Answer: Option B

Explanation:
Statement 2 is incorrect because some taxes like basic customs duty, stamp duty are not subsumed. 1, 3, 4 are correct.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #1500
The 'Composition Scheme' under GST is not available to a:
A. Service provider (other than restaurant) with aggregate turnover exceeding ₹50 lakh
B. Manufacturer of goods
C. Trader of goods
D. Restaurant not serving alcohol
Discuss
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Correct Answer: Option A

Explanation:
Composition scheme for services is restricted. The general scheme for goods allows manufacturers and traders.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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