(as per UPSC EPFO Syllabus)
Below is a set of 120 multiple-choice questions (MCQs) at UPSC level, based on the UPSC EPFO syllabus for Accountancy and Audit. The questions cover key topics such as accounting principles, financial statements, depreciation, cost accounting, management accounting, auditing principles, types of audits, vouching, verification, and related areas.
Each question has four options, with only one correct answer.
- Management accounting provides information for:
a) Internal decision-making
b) External reporting
c) Statutory compliance
d) Tax assessment - Which of the following is a fundamental accounting assumption as per Accounting Standard (AS) 1?
a) Accrual
b) Consistency
c) Going Concern
d) All of the above - The accounting concept that requires the recording of transactions at their original cost is:
a) Money Measurement Concept
b) Historical Cost Concept
c) Matching Concept
d) Revenue Recognition Concept - Rectification of errors in accounting is done to:
a) Adjust for inflation
b) Correct mistakes in recording transactions
c) Change accounting policies
d) Allocate overheads - Under the diminishing balance method of depreciation, the depreciation charge:
a) Remains constant each year
b) Decreases each year
c) Increases each year
d) Is based on market value - Provisions are created for:
a) Known liabilities of uncertain amount
b) Future profits
c) Fixed assets
d) Equity shares - Reserves that are created out of profits and can be distributed as dividends are called:
a) Capital Reserves
b) Revenue Reserves
c) Secret Reserves
d) Specific Reserves - The primary objective of preparing financial statements is to:
a) Comply with tax laws
b) Provide information for economic decisions
c) Calculate dividends
d) Record daily transactions - In a trial balance, the total of debit balances should equal:
a) Total of credit balances
b) Assets only
c) Liabilities only
d) Capital only - Bank reconciliation statement is prepared to reconcile the difference between:
a) Cash book and passbook
b) Journal and ledger
c) Trial balance and financial statements
d) Assets and liabilities - Bills of exchange are governed by:
a) Negotiable Instruments Act, 1881
b) Companies Act, 2013
c) Income Tax Act, 1961
d) Partnership Act, 1932 - In partnership accounts, interest on capital is treated as:
a) An appropriation of profit
b) An expense
c) A liability
d) An asset - Goodwill in partnership is valued using:
a) Super profit method
b) Average profit method
c) Both a and b
d) None of the above - In company accounts, share capital is classified as:
a) Equity and preference
b) Debentures and bonds
c) Assets and liabilities
d) Revenue and expenses - Cost accounting primarily helps in:
a) Controlling costs
b) Preparing financial statements
c) Tax compliance
d) Auditing - Prime cost includes:
a) Direct materials + direct labour + direct expenses
b) Factory overheads
c) Administrative expenses
d) Selling expenses - Break-even point is the level where:
a) Total revenue equals total costs
b) Profits are maximized
c) Losses are minimized
d) Fixed costs are zero - Auditing is the process of:
a) Verifying the accuracy of financial statements
b) Preparing accounts
c) Filing taxes
d) Managing funds - Internal audit is conducted by:
a) Employees of the organization
b) External auditors
c) Government officials
d) Shareholders - . Statutory audit is mandatory under:
a) Companies Act, 2013
b) Income Tax Act, 1961
c) Both a and b
d) None of the above - . Vouching refers to:
a) Checking the authenticity of transactions
b) Verifying assets
c) Preparing budgets
d) Analyzing variances - Verification in auditing means:
a) Confirming the existence and valuation of assets and liabilities
b) Recording transactions
c) Calculating depreciation
d) Allocating costs - . The auditor’s report should be:
a) Unqualified if financial statements are fair
b) Qualified if there are reservations
c) Both a and b
d) None of the above - . Cost audit is required for certain companies under:
a) Section 148 of Companies Act, 2013
b) Section 44AB of Income Tax Act
c) AS 1
d) Ind AS 1 - . Financial management deals with:
a) Procurement and utilization of funds
b) Cost control
c) Audit planning
d) Tax planning - . Working capital is:
a) Current assets minus current liabilities
b) Fixed assets minus depreciation
c) Equity minus reserves
d) Revenue minus expenses - . Ratio analysis is a tool of:
a) Financial statement analysis
b) Cost accounting
c) Auditing
d) Budgeting - . Liquidity ratios measure:
a) Short-term solvency
b) Long-term profitability
c) Asset utilization
d) Debt coverage - . The matching concept requires:
a) Expenses to be matched with revenues
b) Assets to equal liabilities
c) Debits to equal credits
d) Cash inflows to equal outflows - . Conservatism principle in accounting means:
a) Anticipate no profits but provide for all losses
b) Record all profits immediately
c) Ignore losses
d) Overstate assets - . Suspense account is used for:
a) Temporary placement of unclassified items
b) Permanent reserves
c) Depreciation
d) Goodwill - . In double-entry system, every transaction affects:
a) Two accounts
b) One account
c) Three accounts
d) None - . Ledger is a:
a) Principal book of accounts
b) Subsidiary book
c) Journal
d) Trial balance - . Cash book records:
a) All cash transactions
b) Credit transactions
c) Asset purchases only
d) Liability payments only - Depreciation is a:
a) Non-cash expense
b) Cash outflow
c) Liability
d) Asset - . Straight-line method of depreciation assumes:
a) Equal depreciation each year
b) Decreasing depreciation
c) Usage-based depreciation
d) Market value adjustment - . Sinking fund is created for:
a) Redemption of debentures
b) Daily expenses
c) Salary payments
d) Tax refunds - . Final accounts include:
a) Trading account, profit and loss account, balance sheet
b) Journal and ledger
c) Cash book only
d) Trial balance only - . In partnership, profit-sharing ratio is specified in:
a) Partnership deed
b) Companies Act
c) Income Tax Act
d) Audit report - . Revaluation account in partnership is prepared for:
a) Adjustment of assets and liabilities on admission/retirement
b) Daily transactions
c) Year-end closing
d) Tax calculation - . Shares issued at a premium are recorded in:
a) Securities premium reserve
b) Capital reserve
c) Revenue reserve
d) General reserve - . Debentures are:
a) Long-term borrowings
b) Equity capital
c) Short-term loans
d) Assets - . Marginal costing considers:
a) Variable costs only for decision-making
b) Fixed costs only
c) Both fixed and variable
d) Sunk costs - . Standard costing involves:
a) Comparison of actual costs with standards
b) Historical costs
c) Future estimates only
d) Tax costs - . Budgetary control is a part of:
a) Management accounting
b) Financial accounting
c) Cost accounting
d) Auditing - . Variance analysis measures:
a) Deviations from standards
b) Profit margins
c) Asset values
d) Liability amounts - . Internal check is a part of:
a) Internal control system
b) External audit
c) Tax audit
d) Cost audit - . The auditor is appointed by:
a) Shareholders in AGM for companies
b) Management
c) Government
d) Employees - . Audit evidence should be:
a) Sufficient and appropriate
b) Insufficient
c) Irrelevant
d) Biased - Test checking in auditing means:
a) Checking a sample of transactions
b) Full verification
c) No checking
d) Random errors - . Management audit evaluates:
a) Efficiency of management
b) Financial accuracy
c) Cost control
d) Tax compliance - . Tax audit under Income Tax Act is mandatory for turnover above:
a) Rs. 1 crore (as per current limits)
b) Rs. 50 lakhs
c) Rs. 10 lakhs
d) No limit - . CARO report is required for:
a) Certain companies under Companies Act
b) All partnerships
c) Sole proprietorships
d) NGOs - Forensic audit is conducted for:
a) Detecting frauds
b) Routine checking
c) Cost reduction
d) Budget preparation - . Capital budgeting decisions involve:
a) Long-term investments
b) Short-term loans
c) Daily expenses
d) Petty cash - . NPV method in capital budgeting considers:
a) Time value of money
b) Historical costs
c) Sunk costs
d) Fixed costs only - . Leverage ratios measure:
a) Use of debt in capital structure
b) Liquidity
c) Profitability
d) Efficiency - . DuPont analysis breaks down:
a) Return on equity
b) Current ratio
c) Debt ratio
d) Inventory turnover - . Ind AS are converged with:
a) IFRS
b) US GAAP
c) Indian GAAP
d) None - . AS 2 deals with:
a) Valuation of inventories
b) Revenue recognition
c) Depreciation
d) Leases - . Contingent liabilities are:
a) Disclosed in notes to accounts
b) Recorded as liabilities
c) Ignored
d) Assets - . Prior period items are:
a) Adjusted in current year’s profits
b) Ignored
c) Shown separately
d) Added to reserves - . Segment reporting is as per:
a) AS 17
b) AS 1
c) AS 10
d) AS 5 - . Related party disclosures under:
a) AS 18
b) AS 20
c) AS 15
d) AS 9 - . Earnings per share as per:
a) AS 20
b) AS 13
c) AS 11
d) AS 4 - . Cash flow statement classifies cash flows into:
a) Operating, investing, financing
b) Revenue, expense
c) Asset, liability
d) Debit, credit
67. Process costing is used in:
a) Continuous production industries
b) Job order industries
c) Service sectors
d) Retail
68. Joint products in cost accounting require:
a) Apportionment of joint costs
b) Separate costing
c) No costing
d) Fixed allocation
69. ABC analysis in inventory control focuses on:
a) High-value items
b) Low-value items
c) All items equally
d) Obsolete items
70. EOQ model determines:
a) Optimal order quantity
b) Reorder level
c) Safety stock
d) Maximum stock
71. Responsibility accounting assigns costs to:
a) Cost centers
b) Profit centers
c) Investment centers
d) All of the above
72. Transfer pricing is used for:
a) Inter-divisional transfers
b) External sales
c) Tax evasion
d) Audit
73. Balanced scorecard in management accounting includes:
a) Financial and non-financial measures
b) Financial only
c) Costs only
d) Profits only
74. Risk assessment in auditing is:
a) Identifying material misstatements
b) Ignoring errors
c) Preparing accounts
d) Filing returns
75. Sampling risk in audit is:
a) Risk that sample is not representative
b) Detection risk
c) Control risk
d) Inherent risk
76. Audit program is:
a) Plan of audit procedures
b) Final report
c) Working papers
d) Evidence
77. Working papers are owned by:
a) Auditor
b) Client
c) Government
d) Shareholders
78. Letter of engagement in audit specifies:
a) Scope and responsibilities
b) Fees only
c) Deadlines
d) None
79. Compliance audit checks:
a) Adherence to laws and regulations
b) Financial accuracy
c) Cost efficiency
d) Management performance
80. Environmental audit assesses:
a) Impact on environment
b) Financial impact
c) Tax impact
d) Social impact
81. GST audit is required for turnover above:
a) Rs. 2 crore
b) Rs. 1 crore
c) Rs. 5 crore
d) No limit
82. Internal control questionnaire is used to:
a) Evaluate internal controls
b) Prepare budgets
c) Calculate variances
d) Value assets
83. Flowcharting in auditing helps in:
a) Understanding processes
b) Calculating ratios
c) Vouching
d) Verification
84. Analytical procedures in audit involve:
a) Comparison and analysis of data
b) Full checking
c) Sampling
d) Inquiry
85. Confirmation in audit is:
a) Obtaining third-party evidence
b) Internal check
c) Observation
d) Recalculation
86. Observation in audit evidence is:
a) Watching a process
b) Asking questions
c) Inspecting documents
d) Reperforming
87. Dividend policy in financial management affects:
a) Shareholder wealth
b) Costs
c) Assets
d) Liabilities
88. MM theory on capital structure assumes:
a) No taxes, perfect markets
b) Taxes included
c) Bankruptcy costs
d) Agency costs
89. Working capital financing can be:
a) Aggressive or conservative
b) Only long-term
c) Only short-term
d) None
90. Factoring is a method of:
a) Receivables management
b) Inventory control
c) Cash management
d) Debt management
91. Credit policy involves:
a) Terms of credit sales
b) Cash sales only
c) No credit
d) Fixed terms
92. Treasury management deals with:
a) Liquidity and risk
b) Costs
c) Profits
d) Assets
93. Hedging is used to:
a) Manage financial risks
b) Increase profits
c) Reduce costs
d) Audit
94. IFRS 9 deals with:
a) Financial instruments
b) Revenue
c) Leases
d) Employee benefits
95. Ind AS 115 is on:
a) Revenue from contracts
b) Inventories
c) Property, plant, equipment
d) Intangibles
96. Impairment of assets as per:
a) Ind AS 36
b) Ind AS 19
c) Ind AS 12
d) Ind AS 7
97. Leases under Ind AS 116 require:
a) Recognition of right-of-use asset
b) Off-balance sheet
c) Only operating leases
d) None
98. Employee benefits under Ind AS 19 include:
a) Defined benefit plans
b) Only salaries
c) Bonuses only
d) Leaves
99. Income taxes as per Ind AS 12 involve:
a) Deferred tax
b) Current tax only
c) No tax
d) Exemptions
100. Absorption costing allocates:
a) All costs to products
b) Variable costs only
c) Fixed costs only
d) Sunk costs
101. Job costing is suitable for:
a) Customized products
b) Mass production
c) Services
d) Retail
102. Contract costing is used in:
a) Construction industry
b) Manufacturing
c) Trading
d) Banking
103. Operating costing for:
a) Service industries
b) Product-based
c) Job-based
d) Batch-based
104. Target costing sets:
a) Cost based on target price
b) Price based on cost
c) No target
d) Historical cost
105. Life cycle costing considers:
a) All stages of product life
b) Production only
c) Selling only
d) Disposal only
106. Kaizen costing focuses on:
a) Continuous improvement
b) Standard costs
c) Variances
d) Budgets
107. JIT system reduces:
a) Inventory holding costs
b) Production costs
c) Selling costs
d) Administrative costs
108. Performance audit evaluates:
a) Economy, efficiency, effectiveness
b) Financial accuracy only
c) Compliance only
d) Fraud only
109. Social audit assesses:
a) Corporate social responsibility
b) Financial impact
c) Tax evasion
d) Cost control
110. CAG audits:
a) Government accounts
b) Private companies
c) Partnerships
d) Sole traders
111. Peer review in auditing is:
a) Review by another auditor
b) Self-review
c) Management review
d) Government review
112. SA 200 deals with:
a) Overall objectives of independent auditor
b) Audit evidence
c) Planning
d) Reporting
113. SA 500 on:
a) Audit evidence
b) Risk assessment
c) Related parties
d) Going concern
114. SA 570 covers:
a) Going concern
b) Fraud
c) Estimates
d) Laws
115. IRR method equates:
a) NPV to zero
b) Payback to zero
c) Profit to cost
d) Revenue to expense
116. Payback period ignores:
a) Time value of money
b) Cash flows
c) Initial investment
d) Recovery
117. Profitability index is:
a) PV of inflows / PV of outflows
b) NPV / Investment
c) IRR / Cost
d) None
118. Trade receivables turnover ratio measures:
a) Efficiency in collection
b) Liquidity
c) Solvency
d) Profitability
119. Gross profit ratio is:
a) Gross profit / Net sales × 100
b) Net profit / Sales
c) Operating profit / Assets
d) EBITDA / Revenue
120. Consolidated financial statements for groups as per:
a) AS 21
b) AS 23
c) AS 27
d) All of the above
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