Sunk costs are: MCQ with Answer and Explanation

Sunk costs are:
A. Costs that have already been incurred and cannot be recovered
B. Future costs that differ among alternatives
C. Relevant for decision making
D. Variable costs of a project
Answer: Option A
Solution (By JKSSB Mock Tests)
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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Practice More Accountancy and Book Keeping Questions

Question #1
Internal audit is conducted by:
A. Employees of the company
B. External auditor
C. Government auditor
D. Statutory auditor

Correct Answer: Option A


Explanation:
Internal audit is an independent appraisal function within the organization, performed by internal staff or outsourced, but it's internal to the management.

Question #2
A: A Ledger account is opened for each type of asset, liability, equity, income, and expense. R: The Ledger is the principal book of accounts. Choose the correct option.
A. A is true but R is false
B. Both A and R are true and R is the correct explanation of A
C. Both A and R are true but R is NOT the correct explanation of A
D. A is false but R is true

Correct Answer: Option C


Explanation:
A ledger account is indeed opened for every element of the financial statements to classify and summarize transactions. It is the principal book of accounts. Both are true, but R doesn't explain *why* accounts are opened for each element.

Question #3
The journal entry for income tax paid by a sole proprietor from the business bank account is:
A. Debit P&L Account, Credit Bank
B. Debit Income Tax, Credit Bank
C. Debit Capital, Credit Income Tax
D. Debit Drawings, Credit Bank

Correct Answer: Option D


Explanation:
For a sole trader, income tax is a personal expense. Paying it from business funds is treated as Drawings.