Part 1: Basic Accounting Concepts & Conventions
- The “Going Concern Concept” assumes that:
- (a) The business will be liquidated soon.
- (b) The business will continue for the foreseeable future.
- (c) The business will be sold this year.
- (d) The business has a limited life.
- Answer: (b)
- Which accounting convention states that “anticipate no profit and provide for all possible losses”?
- (a) Consistency
- (b) Materiality
- (c) Conservatism (Prudence)
- (d) Full Disclosure
- Answer: (c)
- Revenue is generally recognized when:
- (a) Cash is received.
- (b) An order is received.
- (c) Goods are delivered or services are rendered.
- (d) Production is completed.
- Answer: (c)
- According to the “Money Measurement Concept,” which of the following is recorded in books?
- (a) Quality of management
- (b) Value of machinery bought
- (c) Skill of employees
- (d) Customer satisfaction
- Answer: (b)
- The “Dual Aspect Concept” results in the accounting equation:
- (a) Assets = Liabilities – Capital
- (b) Capital = Assets + Liabilities
- (c) Assets = Liabilities + Capital
- (d) Liabilities = Assets + Capital
- Answer: (c)
Part 2: Journal, Ledger, and Trial Balance
- Goods withdrawn by the owner for personal use should be debited to:
- (a) Sales Account
- (b) Drawings Account
- (c) Purchases Account
- (d) Expenses Account
- Answer: (b)
- A Trial Balance is prepared to:
- (a) Calculate profit or loss.
- (b) Check the arithmetical accuracy of books.
- (c) Determine the financial position.
- (d) Verify bank balances.
- Answer: (b)
- Credit purchase of furniture is recorded in:
- (a) Purchase Book
- (b) Journal Proper
- (c) Cash Book
- (d) Sales Book
- Answer: (b) (Note: Purchase book is only for goods meant for resale.)
- The balance of the Petty Cash Book is:
- (a) An Asset
- (b) A Liability
- (c) An Income
- (d) An Expense
- Answer: (a)
- A “Contra Entry” appears in which book?
- (a) Sales Book
- (b) Purchase Book
- (c) Three Column Cash Book
- (d) Journal Proper
- Answer: (c)
Part 3: Final Accounts & Adjustments
- Closing Stock appearing in the Trial Balance is shown in:
- (a) Trading Account only
- (b) Balance Sheet only
- (c) Both Trading Account and Balance Sheet
- (d) Profit & Loss Account
- Answer: (b)
- Prepaid Insurance is shown in the Balance Sheet as:
- (a) Current Liability
- (b) Current Asset
- (c) Fixed Asset
- (d) Long-term Liability
- Answer: (b)
- Bad debts recovered are:
- (a) Credited to Debtor’s Account
- (b) Debited to Bad Debts Account
- (c) Credited to Profit & Loss Account
- (d) Credited to Bad Debts Recovered Account
- Answer: (c) (Via Bad Debts Recovered A/c)
- Provision for discount on debtors is calculated on:
- (a) Total Debtors
- (b) Good Debtors (after deducting Bad Debts and Provision for Bad Debts)
- (c) Bad Debtors
- (d) Credit Sales
- Answer: (b)
- Expenditure incurred on the installation of new machinery is a:
- (a) Revenue Expenditure
- (b) Capital Expenditure
- (c) Deferred Revenue Expenditure
- (d) Personal Expenditure
- Answer: (b)
Part 4: Depreciation & Rectification of Errors
- Depreciation arises because of:
- (a) Wear and tear
- (b) Inflation
- (c) Fall in market price
- (d) All of the above
- Answer: (a)
- Under the Diminishing Balance Method, depreciation is calculated on:
- (a) Original Cost
- (b) Book Value (Written Down Value)
- (c) Market Value
- (d) Scrap Value
- Answer: (b)
- Which error is NOT disclosed by a Trial Balance?
- (a) Error of Casting
- (b) Error of Omission (complete)
- (c) Error of Posting to wrong side
- (d) Error of Balancing
- Answer: (b)
- Wages paid for the construction of a building debited to Wages Account is an example of:
- (a) Error of Principle
- (b) Error of Commission
- (c) Error of Omission
- (d) Compensating Error
- Answer: (a)
- Amortization refers to writing off:
- (a) Tangible Assets
- (b) Intangible Assets
- (c) Wasting Assets
- (d) Current Assets
- Answer: (b)
Part 5: Non-Profit Organizations (NPO)
- Receipts and Payments Account is a summary of:
- (a) Income and Expenditure
- (b) Cash Book
- (c) Profit and Loss
- (d) Balance Sheet
- Answer: (b)
- Income and Expenditure Account records transactions of:
- (a) Revenue nature only
- (b) Capital nature only
- (c) Both Revenue and Capital nature
- (d) Cash items only
- Answer: (a)
- Life Membership Fees received by a club are treated as:
- (a) Revenue Receipt
- (b) Capital Receipt
- (c) Asset
- (d) Expense
- Answer: (b)
- Donations received for a specific purpose (e.g., Building Fund) should be:
- (a) Credited to Income and Expenditure A/c
- (b) Shown on the Asset side
- (c) Capitalized and shown on the Liability side
- (d) Ignored
- Answer: (c)
- Subscription received in advance is a:
- (a) Liability
- (b) Asset
- (c) Income
- (d) Loss
- Answer: (a)
Part 6: Partnership Accounts
- In the absence of a Partnership Deed, profit sharing ratio is:
- (a) According to capital ratio
- (b) Equal
- (c) According to experience
- (d) Decided by the court
- Answer: (b)
- Interest on Drawings is:
- (a) Loss to the firm
- (b) Income to the firm
- (c) Expense for the firm
- (d) None of the above
- Answer: (b)
- Goodwill is an:
- (a) Intangible Asset
- (b) Fictitious Asset
- (c) Current Asset
- (d) Wasting Asset
- Answer: (a)
- Upon dissolution of a firm, assets are transferred to the Realisation Account at:
- (a) Market Value
- (b) Book Value
- (c) Cost or Market Value whichever is lower
- (d) Sale Price
- Answer: (b)
- Sacrificing Ratio is calculated at the time of:
- (a) Admission of a partner
- (b) Retirement of a partner
- (c) Dissolution of a firm
- (d) Death of a partner
- Answer: (a)
Part 7: Company Accounts (Shares & Debentures)
- Premium received on the issue of shares can be used for:
- (a) Paying dividends
- (b) Writing off preliminary expenses
- (c) Paying manager’s salary
- (d) General operations
- Answer: (b)
- Authorized Capital is also known as:
- (a) Paid-up Capital
- (b) Nominal Capital
- (c) Called-up Capital
- (d) Reserve Capital
- Answer: (b)
- Debenture holders are:
- (a) Owners of the company
- (b) Creditors of the company
- (c) Debtors of the company
- (d) Directors of the company
- Answer: (b)
- Forfeiture of shares results in the reduction of:
- (a) Paid-up Capital
- (b) Authorized Capital
- (c) Fixed Assets
- (d) Reserve Capital
- Answer: (a)
- Balance of Share Forfeiture Account after re-issue of shares is transferred to:
- (a) General Reserve
- (b) Capital Reserve
- (c) Profit & Loss Account
- (d) Share Capital Account
- Answer: (b)
Part 8: Accounting Standards & Analysis
- In India, Accounting Standards are issued by:
- (a) SEBI
- (b) RBI
- (c) ICAI
- (d) Ministry of Finance
- Answer: (c)
- AS-3 deals with:
- (a) Valuation of Inventories
- (b) Cash Flow Statements
- (c) Depreciation Accounting
- (d) Revenue Recognition
- Answer: (b)
- Current Ratio is a type of:
- (a) Profitability Ratio
- (b) Liquidity Ratio
- (c) Solvency Ratio
- (d) Turnover Ratio
- Answer: (b)
- Ideal Current Ratio is generally considered to be:
- (a) 1:1
- (b) 2:1
- (c) 1:2
- (d) 3:1
- Answer: (b)
- Cash Flow from Operating Activities does NOT include:
- (a) Cash receipts from customers
- (b) Payment to suppliers
- (c) Sale of fixed assets
- (d) Payment of wages
- Answer: (c) (This is an Investing Activity)
Part 9: Cost & Computerized Accounting
- Prime Cost refers to:
- (a) Direct Material + Direct Labor + Direct Expenses
- (b) Factory Cost + Admin Overheads
- (c) Total Manufacturing Cost
- (d) Cost of Goods Sold
- Answer: (a)
- Break-Even Point is the point where:
- (a) Total Revenue > Total Cost
- (b) Total Revenue < Total Cost
- (c) Total Revenue = Total Cost
- (d) Variable Cost = Fixed Cost
- Answer: (c)
- Sunk costs are:
- (a) Relevant for decision making
- (b) Irrelevant for decision making
- (c) Future costs
- (d) Variable costs
- Answer: (b)
- In a computerized accounting system, the grouping of accounts is done through:
- (a) Ledger creation
- (b) Codification
- (c) Vouching
- (d) Reporting
- Answer: (b)
- Which of the following is NOT a subsystem of an Accounting Information System (AIS)?
- (a) Transaction Processing System
- (b) General Ledger System
- (c) Financial Reporting System
- (d) Human Resource Management System
- Answer: (d)
Part 10: Miscellaneous Important Concepts
- Contingent Liability is shown:
- (a) In the Balance Sheet
- (b) In the P&L Account
- (c) As a Footnote to the Balance Sheet
- (d) In the Director’s Report
- Answer: (c)
- Window Dressing refers to:
- (a) Showing the true financial position
- (b) Manipulation of accounts to show a better position
- (c) Decorating the office
- (d) Calculating tax accurately
- Answer: (b)
- Secret Reserves are usually created by:
- (a) Public Limited Companies
- (b) Banking and Insurance Companies
- (c) Partnership Firms
- (d) Sole Proprietorships
- Answer: (b)
- Marshalling of Assets and Liabilities means:
- (a) Calculating their value
- (b) Arranging them in a specific order (Liquidity or Permanence)
- (c) Selling them off
- (d) Pledging them as security
- Answer: (b)
- IFRS stands for:
- (a) Indian Financial Reporting Standards
- (b) International Financial Reporting Standards
- (c) International Fund Reporting System
- (d) Indian Fund Regulatory System
- Answer: (b)
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