Accountancy MCQs | Chapter-wise Multiple Choice Questions with Answers

Question #1801

In the context of PFMS, what does the term 'Plan' and 'Non-Plan' expenditure classification refer to, and what recent change was made to it?

A. It refers to central and state schemes; it was retained for better tracking.

B. It refers to recurring and non-recurring expenditure; it was replaced by the 'Revenue and Capital' classification.

C. It refers to capital and revenue expenditure; it was merged into a single classification.

D. It refers to development and non-development expenditure; it was abolished in 2017-18.

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Correct Answer: Option D

Explanation:
The distinction between Plan and Non-Plan expenditure was abolished in the Union Budget of 2017-18. It was replaced by a more meaningful classification of Capital and Revenue expenditure to improve the quality of government spending.

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Question #1802

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Under the Income Tax Act, the deduction under Section 80D for health insurance premiums paid for self, spouse, and dependent children is:

A. ₹25,000 for senior citizens

B. ₹75,000 for individuals below 60 years

C. ₹25,000 for individuals below 60 years

D. ₹50,000 for individuals below 60 years

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Correct Answer: Option C

Explanation:
Section 80D allows a deduction of up to ₹25,000 for health insurance premiums paid for self, spouse, and dependent children (if below 60 years). For senior citizens, the limit is ₹50,000.

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Question #1803

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S1: In a cash flow statement, the purchase of an investment in the shares of another company is classified under investing activities. S2: The receipt of dividends on those shares is always classified under operating 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 A

Explanation:
S1 is correct; purchasing investments is an investing activity. S2 is incorrect because under Ind AS 7, dividends received can be classified as either operating (as a return on investments) or investing (as a return on investments) activities, providing flexibility.

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Question #1804

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Under the General Financial Rules (GFR) 2017, every government servant is expected to maintain absolute integrity and:

A. Absolute honesty

B. Both absolute honesty and absolute devotion to duty

C. Absolute devotion to duty

D. Absolute political neutrality

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Correct Answer: Option B

Explanation:
Rule 3 of GFR 2017 states that every government servant is expected to maintain absolute integrity, absolute honesty, and absolute devotion to duty in the performance of their official duties.

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Question #1805

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In financial management, the 'Degree of Financial Leverage' (DFL) is calculated at a given level of EBIT as:

A. Both A and B depending on the presence of preference shares

B. Contribution / EBIT

C. EBIT / (EBIT - Interest)

D. EBIT / (EBIT - Interest - Preferred Dividend / (1 - Tax Rate))

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Correct Answer: Option A

Explanation:
DFL measures the sensitivity of EPS to changes in EBIT. If only debt is present, DFL = EBIT / (EBIT - I). If preference shares are also present, the formula includes the pre-tax equivalent of preference dividends, making D option correct.

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Question #1806

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S1: Under Ind AS 10, events after the reporting period are classified as adjusting and non-adjusting events. S2: If a customer of a company goes bankrupt after the reporting period due to a sudden natural disaster, it is an adjusting event. Which statement(s) is/are correct?

A. Neither S1 nor S2

B. S2 only

C. Both S1 and S2

D. S1 only

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Correct Answer: Option D

Explanation:
S1 is correct. S2 is incorrect because a bankruptcy due to a sudden natural disaster after the reporting period is a condition that arose *after* the reporting period, making it a non-adjusting event. Adjusting events relate to conditions that existed *at* the reporting period date.

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Question #1807

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Under GST, the 'Composition Levy' scheme has a threshold limit of ₹1.5 Crore (₹75 Lakhs for NE states). What is the tax rate payable by a composition dealer for manufacturers/traders?

A. 5% (2.5% CGST + 2.5% SGST)

B. 6% (3% CGST + 3% SGST)

C. 2% (1% CGST + 1% SGST)

D. 1% (0.5% CGST + 0.5% SGST)

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Correct Answer: Option D

Explanation:
Under the GST Composition Scheme, manufacturers and traders are required to pay tax at a concessional rate of 1% (0.5% CGST + 0.5% SGST) of their turnover in India.

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Question #1808

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In the context of the Indian Financial System, the 'Deposit Insurance and Credit Guarantee Corporation' (DICGC) provides insurance coverage for bank deposits up to:

A. ₹2,00,000 per depositor per bank

B. ₹1,00,000 per depositor per bank

C. ₹5,00,000 per depositor per bank

D. ₹10,00,000 per depositor per bank

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Correct Answer: Option C

Explanation:
The DICGC insures all bank deposits (savings, fixed, current, recurring) up to a maximum limit of ₹5,00,000 per depositor per bank.

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Question #1809

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Assertion (A): Under Ind AS 23, borrowing costs directly attributable to the acquisition of a qualifying asset must be capitalized. Reason (R): A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. Choose the correct option.

A. A is true but R is false

B. A is false but R is true

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

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

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Correct Answer: Option C

Explanation:
Ind AS 23 requires capitalization of borrowing costs for qualifying assets. A qualifying asset is defined precisely as one that takes a substantial period to be ready for use or sale. R correctly defines the term and explains the basis for capitalization.

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Question #1810

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Under the Income Tax Act, the 'TDS' on the sale of an immovable property (other than agricultural land) by a resident is governed by which section, and what is the rate?

A. Section 194J at 10%

B. Section 194IA at 10%

C. Section 194IA at 1%

D. Section 194C at 1%

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Correct Answer: Option C

Explanation:
Section 194IA mandates TDS at 1% on the transfer of immovable property (other than agricultural land) if the consideration exceeds ₹50,00,000.

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Question #1811

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S1: In standard costing, the 'Idle Time Variance' is always adverse. S2: 'Abnormal Idle Time' is treated as a cost of the period and transferred to the Costing P&L. Which statement(s) is/are correct?

A. Neither S1 nor S2

B. S2 only

C. Both S1 and S2

D. S1 only

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Correct Answer: Option C

Explanation:
Idle time represents unproductive time, so the variance is always adverse (actual > standard). Normal idle time is absorbed in overheads, but abnormal idle time (due to strikes, accidents) is treated as a period cost and charged to the Costing P&L. Both are correct.

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Question #1812

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Under the Companies Act 2013, a 'Small Company' is defined based on paid-up share capital and turnover. As per the latest amendments, the paid-up share capital should not exceed:

A. ₹50 Lakhs

B. ₹1 Crore

C. ₹10 Crores

D. ₹4 Crores

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Correct Answer: Option D

Explanation:
The Companies (Specification of Definition Details) Amendment Rules, 2021, increased the paid-up share capital limit for a Small Company to ₹4 Crores (or ₹10 Crores as per turnover, whichever is lower, but the capital limit was raised to ₹4 Cr).

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Question #1813

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S1: Under GST, the 'E-invoice' system generates an Invoice Reference Number (IRN) and a QR code. S2: The IRN is generated by the taxpayer's own accounting software without connecting to the government portal. Which statement(s) is/are correct?

A. Neither S1 nor S2

B. S2 only

C. Both S1 and S2

D. S1 only

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Correct Answer: Option D

Explanation:
S1 is correct; e-invoicing generates an IRN and QR code. S2 is incorrect because the IRN is generated by the Invoice Registration Portal (IRP) of the government, not locally by the taxpayer's software without validation.

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Question #1814

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In the context of PFMS, the 'Treasury Single Account' (TSA) is maintained with:

A. Controller General of Accounts

B. State Bank of India

C. Comptroller and Auditor General

D. Reserve Bank of India

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Correct Answer: Option D

Explanation:
The TSA is a unified bank account of the government, and it is maintained with the Reserve Bank of India (RBI), which acts as the banker to the government.

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Question #1815

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Assertion (A): Under Ind AS 41, biological assets are measured at fair value less costs to sell. Reason (R): This is because biological transformation makes historical cost accounting less relevant for these assets. 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

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Correct Answer: Option D

Explanation:
Ind AS 41 requires biological assets to be measured at fair value less costs to sell. This is because biological growth, degeneration, and production (transformation) make historical cost less meaningful. R correctly explains A.

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Question #1816

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Under the Income Tax Act, if a taxpayer has a business profit of ₹3,00,000 and a brought forward business loss of ₹2,00,000, what is the total income after set-off?

A. ₹1,00,000

B. ₹5,00,000

C. ₹2,00,000

D. ₹3,00,000

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Correct Answer: Option A

Explanation:
Brought forward business loss can be set off against current year business profit. Total income = ₹3,00,000 (Profit) - ₹2,00,000 (B/F Loss) = ₹1,00,000.

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Question #1817

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S1: Under Ind AS 115, if a contract contains multiple performance obligations, the transaction price must be allocated to each obligation based on their relative standalone selling prices. S2: If the standalone selling price is not directly observable, the entity must estimate it using the adjusted market assessment approach or the expected cost plus a margin approach. Which statement(s) is/are correct?

A. S1 only

B. S2 only

C. Both S1 and S2

D. Neither S1 nor S2

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Correct Answer: Option C

Explanation:
Both statements are correct as per Ind AS 115. The transaction price must be allocated based on standalone selling prices, and if not directly observable, the entity must estimate it using approved methods like adjusted market assessment or expected cost plus margin.

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Question #1818

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In cost accounting, the 'Re-order Level' is calculated as:

A. Average consumption rate x Average re-order period

B. Normal consumption rate x Normal re-order period

C. Minimum consumption rate x Minimum re-order period

D. Maximum consumption rate x Maximum re-order period

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Correct Answer: Option D

Explanation:
The Re-order Level is the level at which a new order is placed. To ensure stock doesn't run out during the maximum lead time, it is calculated as Maximum consumption rate multiplied by Maximum re-order period.

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Question #1819

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Under the Companies Act 2013, the 'Independent Directors' must hold a special training as per Section 149. Who is exempted from this training requirement?

A. No one is exempted

B. A qualified Chartered Accountant or Company Secretary

C. A person who has been a director for more than 10 years

D. A person who has already undergone the training or is a whole-time director in a listed company

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Correct Answer: Option D

Explanation:
The Companies Act exempts individuals who have already undergone the prescribed independent director training, or those who are already serving as whole-time directors in listed companies, from the mandatory training requirement.

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Question #1820

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S1: Under GST, the 'Input Tax Credit' (ITC) on goods lost, stolen, destroyed, or written off is not available. S2: ITC on goods used for personal consumption is fully available. 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 B

Explanation:
S1 is correct as per Section 17(5) of the CGST Act; ITC is blocked for lost, stolen, destroyed, or written-off goods. S2 is incorrect because ITC is explicitly blocked for goods used for personal consumption.

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