Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #141

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Under GST, which constitutional amendment act was passed to implement it?

A. 103rd Amendment Act

B. 100th Amendment Act

C. 101st Amendment Act

D. 102nd Amendment Act

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Correct Answer: Option C

Explanation:
The Constitution (101st Amendment) Act, 2016 paved the way for the introduction of GST in India.

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Question #142

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Which body is responsible for making recommendations on GST rates, exemptions, and thresholds?

A. GST Council

B. CBDT

C. NITI Aayog

D. Finance Commission

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Correct Answer: Option A

Explanation:
Formed under Article 279A, the GST Council is chaired by the Union Finance Minister and comprises state finance ministers.

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Question #143

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The Central Board of Direct Taxes (CBDT) functions under which department of the Ministry of Finance?

A. Department of Financial Services

B. Department of Revenue

C. Department of Expenditure

D. Department of Economic Affairs

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Correct Answer: Option B

Explanation:
CBDT handles direct tax administration and forms part of the Department of Revenue.

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Question #144

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If a person fails to link PAN with Aadhaar, the PAN becomes:

A. Invalid

B. Suspended

C. Cancelled permanently

D. Inoperative

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Correct Answer: Option D

Explanation:
Under Income Tax rules, an unlinked PAN becomes 'inoperative', preventing the filing of ITRs and inviting higher TDS.

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Question #145

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Advance tax must be paid in instalments during the financial year if the estimated tax liability exceeds:

A. Rs 5,000

B. Rs 50,000

C. Rs 10,000

D. Rs 1,00,000

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Correct Answer: Option C

Explanation:
Under Section 208, advance tax is mandatory if the estimated tax liability for the year is Rs 10,000 or more.

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Question #146

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The concept of 'Cost Control' differs from 'Cost Reduction' in that Cost Control:

A. Challenges existing standards to find cheaper methods

B. Is applicable only to research and development

C. Seeks to maintain costs within predefined standards/budgets

D. Assumes a permanent reduction in unit cost

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Correct Answer: Option C

Explanation:
Cost control ensures costs do not exceed the set budget/standard, while cost reduction seeks to permanently lower the standard itself.

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Question #147

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Prime Cost consists of:

A. Indirect Material + Indirect Labor + Indirect Expenses

B. Direct Material + Direct Labor + Direct Expenses

C. Direct Material + Direct Labor + Factory Overheads

D. Factory Cost + Administrative Overheads

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Correct Answer: Option B

Explanation:
Prime cost is the aggregate of all direct costs: direct materials, direct labor, and direct/chargeable expenses.

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Question #148

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Under Activity Based Costing (ABC), costs are allocated based on:

A. Direct Labor Hours

B. Machine Hours

C. Volume of Production only

D. Cost Drivers

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Correct Answer: Option D

Explanation:
ABC traces overheads to specific activities and allocates them to products based on the consumption of 'cost drivers'.

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Question #149

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A costing system that focuses on continuous small improvements in manufacturing processes to reduce costs is known as:

A. Standard Costing

B. Life Cycle Costing

C. Kaizen Costing

D. Target Costing

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Correct Answer: Option C

Explanation:
Kaizen costing is a Japanese concept involving continuous, incremental improvements to reduce costs during the manufacturing phase.

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Question #150

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Target Cost is calculated as:

A. Current Cost - Desired Profit

B. Expected Selling Price - Desired Profit Margin

C. Variable Cost + Fixed Cost

D. Prime Cost + Factory Overheads

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Correct Answer: Option B

Explanation:
Target costing starts with market price, subtracts the required profit, to find the maximum allowable cost (Target Cost).

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Question #151

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Which of the following is NOT a functional budget?

A. Materials Budget

B. Sales Budget

C. Production Budget

D. Master Budget

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Correct Answer: Option D

Explanation:
The Master Budget is a summary budget incorporating all functional budgets (like sales, production) into a projected P&L and Balance Sheet.

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Question #152

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A budget that is designed to change in accordance with the level of activity actually attained is a:

A. Fixed Budget

B. Zero-based Budget

C. Flexible Budget

D. Rolling Budget

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Correct Answer: Option C

Explanation:
A flexible budget adjusts for varying levels of output, clearly separating fixed and variable costs.

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Question #153

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Zero-Based Budgeting (ZBB) requires managers to:

A. Base the new budget on last year's actuals

B. Justify every expense from scratch for every new period

C. Keep all expenses at zero

D. Increase the budget by a flat zero percent

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Correct Answer: Option B

Explanation:
ZBB starts from a 'zero base', requiring a fresh justification for all funding rather than relying on historical data.

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Question #154

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In standard costing, an 'Adverse Variance' occurs when:

A. Actual cost is greater than standard cost

B. Actual cost is less than standard cost

C. Actual profit is greater than budgeted profit

D. Standard quantity equals actual quantity

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Correct Answer: Option A

Explanation:
When the actual expenses exceed the predetermined standard cost, it negatively impacts profits, termed an adverse/unfavorable variance.

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Question #155

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The Margin of Safety is the difference between:

A. Total Revenue and Total Cost

B. Total Cost and Variable Cost

C. Selling Price and Variable Cost

D. Actual Sales and Break-Even Sales

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Correct Answer: Option D

Explanation:
Margin of safety indicates how much sales can drop before the business starts incurring a loss. Formula: Actual Sales - Break-Even Sales.

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Question #156

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If Sales are Rs 1,00,000, Variable Cost is Rs 60,000, what is the Contribution Margin Ratio (P/V Ratio)?

A. 20%

B. 60%

C. 40%

D. 100%

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Correct Answer: Option C

Explanation:
Contribution = Sales - Variable Cost = 40,000. P/V Ratio = (Contribution / Sales) * 100 = 40%.

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Question #157

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To calculate the Break-Even Point in units, Fixed Costs are divided by:

A. Selling price per unit

B. Total cost per unit

C. Contribution per unit

D. Variable cost per unit

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Correct Answer: Option C

Explanation:
BEP (Units) = Total Fixed Costs / Contribution per unit. It shows how many units must be sold to cover all fixed costs.

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Question #158

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Sunk costs are:

A. Future costs that differ among alternatives

B. Variable costs of a project

C. Costs that have already been incurred and cannot be recovered

D. Relevant for decision making

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Correct Answer: Option C

Explanation:
Sunk costs are past expenditures. Since they cannot be changed by present or future decisions, they are considered irrelevant for decision making.

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Question #159

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Ind AS (Indian Accounting Standards) are converged with:

A. IFRS (International Financial Reporting Standards)

B. UK GAAP

C. US GAAP

D. Chinese Accounting Standards

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Correct Answer: Option A

Explanation:
To align with global practices, India developed Ind AS which are substantially converged with IFRS.

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Question #160

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Fair Value Accounting requires assets and liabilities to be measured at:

A. Current market price or estimated exit price

B. Historical Cost

C. Written Down Value

D. Book Value

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Correct Answer: Option A

Explanation:
Under Fair Value, items are reported based on current market valuations, replacing the traditional historical cost concept for many financial instruments.

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