Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #1781

Assertion (A): Under Ind AS 16, land and buildings are separable assets and are accounted for separately. Reason (R): Land generally has an infinite useful life, whereas buildings have a limited useful life. 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

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Correct Answer: Option D

Explanation:
Ind AS 16 requires separate accounting for land and buildings because they have different useful lives. Land is usually not depreciated (infinite life), while buildings are depreciated over their finite useful lives. R correctly explains A.

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Question #1782

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Under the Income Tax Act, if a house property is self-occupied, what is the Annual Value of that property?

A. Nil (Zero)

B. The fair rent of the property

C. The municipal valuation of the property

D. The actual rent received

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Correct Answer: Option A

Explanation:
Under Section 23(2) of the Income Tax Act, if a house property is used for the owner's own residence (self-occupied), its Annual Value is taken as Nil (Zero).

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Question #1783

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S1: In a cash flow statement under Ind AS 7, dividends paid can be classified as either operating or financing activities. S2: Interest paid can be classified as either operating or financing activities. Which statement(s) is/are correct?

A. S1 only

B. Both S1 and S2

C. S2 only

D. Neither S1 nor S2

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Correct Answer: Option B

Explanation:
Ind AS 7 allows flexibility. Dividends paid can be classified as financing (cash outflow for financing) or operating (to assist in determining cash from operations). Interest paid can be operating or financing. Both are correct.

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Question #1784

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A company's standard cost for a product includes 10 kg of material at ₹5 per kg. The actual production was 1,000 units, and 10,500 kg of material was used at ₹4.50 per kg. What is the Material Usage Variance?

A. ₹5,000 (Adverse)

B. ₹2,500 (Favorable)

C. ₹5,000 (Favorable)

D. ₹2,500 (Adverse)

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Correct Answer: Option D

Explanation:
Standard Quantity for Actual Production (SQ) = 1,000 * 10 = 10,000 kg. Actual Quantity (AQ) = 10,500 kg. Standard Price (SP) = ₹5. Usage Variance = (SQ - AQ) * SP = (10,000 - 10,500) * 5 = -500 * 5 = ₹2,500 Adverse.

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Question #1785

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Under the Companies Act 2013, the 'Serious Fraud Investigation Office' (SFIO) is empowered to investigate frauds that are:

A. Above ₹10 Crores or involving public interest

B. Only related to listed companies

C. Of any amount

D. Involving public interest

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Correct Answer: Option A

Explanation:
As per the Companies Act and related notifications, the SFIO (now often operating under the EBOW) investigates cases involving ₹10 Crores or more, or cases that involve public interest, or affect multiple states.

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Question #1786

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S1: Under GST, the 'Input Tax Credit' (ITC) on motor vehicles is available if they are used for further supply of motor vehicles. S2: ITC on food and beverages is available if they are used for making an outward taxable supply of the same category. Which statement(s) is/are correct?

A. S2 only

B. Both S1 and S2

C. S1 only

D. Neither S1 nor S2

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Correct Answer: Option B

Explanation:
Both statements correctly describe the exceptions under Section 17(5) of the CGST Act. ITC is blocked for motor vehicles and food/beverages generally, but it becomes available if they are used in the same line of business for making an outward taxable supply.

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Question #1787

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In the context of PFMS, what is the primary purpose of the 'Online Payroll and Attendance System' (e-Payroll) module?

A. To process pensions for retired employees

B. To manage the procurement of office supplies

C. To generate and process salary bills for government employees digitally

D. To collect tax deductions from private sector employees

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Correct Answer: Option C

Explanation:
The e-Payroll module in PFMS is designed to digitize the generation, processing, and payment of salary bills for government employees, ensuring transparency and reducing paperwork.

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Question #1788

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Assertion (A): Under Ind AS 107, an entity must disclose information that enables users to evaluate the significance of financial instruments for its financial position. Reason (R): This includes disclosing the nature and extent of risks arising from financial instruments. 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 true but R is false

D. A is false but R is true

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Correct Answer: Option A

Explanation:
Ind AS 107 requires extensive disclosures about financial instruments. The primary goal is to help users evaluate their significance, which inherently requires disclosing the nature and extent of risks (credit, liquidity, market) associated with them. R correctly explains A.

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Question #1789

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Under the Income Tax Act, the deduction under Section 80TTA is available for interest earned on savings bank accounts. What is the maximum limit for this deduction?

A. ₹1,00,000

B. ₹10,000

C. ₹50,000

D. ₹25,000

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Correct Answer: Option C

Explanation:
Section 80TTA allows a deduction of up to ₹50,000 for interest income earned from savings accounts maintained with banks or co-operative societies. (Note: 80TTB provides ₹50,000 for senior citizens on all deposits).

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Question #1790

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S1: In a partnership, if the existing profit-sharing ratio is 3:2 and the new ratio is 1:1, the sacrificing/gaining ratio is 1:1. S2: If the old ratio is 3:2 and the new ratio is 2:3, Partner A sacrifices 1/5th and Partner B gains 1/5th. Which statement(s) is/are correct?

A. S2 only

B. S1 only

C. Neither S1 nor S2

D. Both S1 and S2

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Correct Answer: Option D

Explanation:
In S1, Sacrificing = Old - New. A: 3/5 - 1/2 = 1/10. B: 2/5 - 1/2 = -1/10. Ratio is 1:-1, which means 1:1 sacrificing/gaining. In S2, A: 3/5 - 2/5 = 1/5 sacrifice. B: 2/5 - 3/5 = -1/5 (gain). Both are correct.

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Question #1791

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Under Ind AS 2, which of the following costs are excluded from the cost of inventory and recognized as expenses in the period they are incurred?

A. Abnormal amounts of wasted materials, labor, or other production costs

B. Design costs incurred before the production stage for a specific customer order

C. Costs of conversion

D. Fixed production overheads allocated based on normal capacity

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Correct Answer: Option A

Explanation:
Ind AS 2 explicitly excludes abnormal waste, storage costs (unless necessary in the production process), administrative overheads not contributing to bringing inventories to their present location/condition, and selling costs from inventory cost.

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Question #1792

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A company has an operating cycle of 90 days. Its average daily cash outflow is ₹2,00,000. It maintains a minimum cash balance of 10% of its cash outflow during the operating cycle. What is the minimum cash balance it should maintain?

A. ₹18,000

B. ₹18,00,000

C. ₹1,62,00,000

D. ₹1,80,000

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Correct Answer: Option B

Explanation:
Total cash outflow during the operating cycle = 90 days * ₹2,00,000 = ₹1,80,00,000. Minimum cash balance = 10% of ₹1,80,00,000 = ₹18,00,000.

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Question #1793

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S1: Under GST, the 'E-way bill' is required for the movement of goods where the consignment value exceeds ₹50,000. S2: The E-way bill is generated on the common portal by the registered person before the commencement of the movement of goods. Which statement(s) is/are correct?

A. S1 only

B. S2 only

C. Neither S1 nor S2

D. Both S1 and S2

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Correct Answer: Option D

Explanation:
Both statements are correct. Rule 138 of the CGST Rules mandates an e-way bill for goods valued over ₹50,000, and it must be generated by the supplier/recipient before the goods are moved.

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Question #1794

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In the context of the Indian Financial System, the 'National Housing Bank' (NHB) was established as a wholly owned subsidiary of which institution?

A. State Bank of India

B. Reserve Bank of India

C. Ministry of Finance

D. Securities and Exchange Board of India

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Correct Answer: Option B

Explanation:
The National Housing Bank (NHB) was set up in 1988 as a wholly owned subsidiary of the Reserve Bank of India (RBI) to regulate and promote housing finance institutions. (Note: It was later transferred to the central government in 2019, but historically it was an RBI subsidiary).

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Question #1795

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Assertion (A): Under Ind AS 32, a preference share that mandates redemption by the issuer is classified as a financial liability. Reason (R): The issuer has a contractual obligation to deliver cash or another financial asset to the holder. 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. Both A and R are true and R is the correct explanation of A

D. A is true but R is false

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Correct Answer: Option C

Explanation:
Ind AS 32 requires classifying an instrument based on its substance. If a preference share is mandatorily redeemable, the issuer has an unavoidable contractual obligation to pay cash, making it a financial liability, not equity. R correctly explains A.

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Question #1796

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Under the Income Tax Act, if a taxpayer incurs a short-term capital loss of ₹2,00,000 and a long-term capital gain of ₹1,50,000 in the same year, what is the net taxable capital gain?

A. ₹50,000 (Short-term)

B. ₹3,50,000

C. Nil

D. ₹50,000 (Long-term)

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Correct Answer: Option C

Explanation:
Short-term capital loss can be set off against both STCG and LTCG. Here, the STCL of ₹2,00,000 is set off against the LTCG of ₹1,50,000. The remaining STCL of ₹50,000 is carried forward. The net taxable capital gain for the year is Nil.

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Question #1797

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S1: Under Ind AS 116, short-term leases (12 months or less) and leases of low-value assets are exempt from recognizing right-of-use assets and lease liabilities. S2: For these exempt leases, the lease payments are recognized as an expense on a straight-line basis over the lease term. Which statement(s) is/are correct?

A. S2 only

B. S1 only

C. Both S1 and S2

D. Neither S1 nor S2

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Correct Answer: Option C

Explanation:
Both statements are correct. Ind AS 116 provides a recognition exemption for short-term and low-value leases, allowing lessees to simply recognize the lease payments as an expense, typically on a straight-line basis.

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Question #1798

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In cost accounting, if the 'Margin of Safety' is 20% of actual sales, and the actual sales are ₹5,00,000, what is the break-even sales?

A. ₹4,00,000

B. ₹3,00,000

C. ₹1,00,000

D. ₹5,00,000

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Correct Answer: Option A

Explanation:
Margin of Safety = Actual Sales - BEP Sales. 20% of 5,00,000 = 1,00,000. Therefore, BEP Sales = Actual Sales - MOS = 5,00,000 - 1,00,000 = ₹4,00,000.

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Question #1799

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Under the Companies Act 2013, the 'National Company Law Tribunal' (NCLT) has the power to approve schemes of amalgamation. Before approving, it must receive a report from:

A. The Official Liquidator or a person designated by the Central Government

B. The Registrar of Companies

C. The Reserve Bank of India

D. The Securities and Exchange Board of India

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Correct Answer: Option A

Explanation:
Section 232 of the Companies Act requires the NCLT to receive a report from the Official Liquidator or a designated expert regarding the affairs of the company and whether the scheme prejudices the interests of members or creditors.

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Question #1800

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S1: Under GST, the 'Reverse Charge Mechanism' (RCM) is applicable on the import of services. S2: Under RCM, the supplier is liable to pay the GST. Which statement(s) is/are correct?

A. Neither S1 nor S2

B. Both S1 and S2

C. S1 only

D. S2 only

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Correct Answer: Option C

Explanation:
S1 is correct; RCM applies to the import of services. S2 is incorrect because under RCM, the liability to pay GST shifts from the supplier to the recipient of the goods or services.

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