Dee iple Choice Questions 4. Accounting principles are generally based on Aa) Object (b) Subjectivity (c) Convenience and personal interpretation {@)_ None of the above 2 ‘The policy ‘anticipate the profit and provide for all possible Tosses” arises due to _ (a) Convention of consistency Convention of conservatism (c) Convention of full disclosure (a Convention of materiality 3, Revenue is generally recognized as being carned at the point of time 2 Ja) Sale is made and ownership of goods is transferred (b) Cash is received (c) Production is eompleted (a) Sales are affected or cash is received, whichever is earlier. 4. The system of recording transactions based on dual aspect is called (a) Dual Account system Double Entry system (c) Cash accounting (d) Single Entry system 5. Double entry system of accounting means to record any transaction a) In the debit side of one account and on the credit side of the other account (b) In the debit side of two accounts le (c) In the credit side of two accounts 6. According to which of the following accounting concepts, even then propricior of a business is treated as a creditor of the business to the extent of his capital? (a) Money measurement concept (6) Dual entry concept (c) Going concern concept JA). Separate entity concept 7, According to going concern concept, a business is viewed as having (@) A limited life (b) Going to be liquidated after 100 years U4) An indefinite life {d) None of the abave & According to concept of conservatism, stock-in-trade is valued at A (a) Cost price (b) Market price JA) Cast price or market price whichever is Tess (a) Cost price or market price whichever is. more Answers: 1. (a), 2. (b). 3. (a). 4. (D), 5. fas 6 (d), 7 (0), & ©).| Multiple Choice Questions | Choice Questions ‘The account which is to be credited by the amount brought in the business by the proprietor is (a) Bank account (b) Capital account (c) Drawings account (d) Goods account 2, The account which is debited by the cost of goods taken by the proprietor is, (@) Goods. account (by Capital account () Sales account (@ Drawings account 3. Cash account normally has 7 (a) Debit balance (b) Credit balance {c) Debit or Credit balance (d)_ None of the above 4, Classification of accounts is made in 2 (@) Journal (b) Subsidiary books (©) Ledger (@) Balance sheet 5. Use of Journal (a) Increases the documentation (b) Classifies the transactions (©) Records all the transactions at one place @)_ Divides work 6. In double-entry system, every transaction is recorded at (a) Both sides of one account (b) Debit side of two accounts (c) Credit side of two accounts (4) On the same side7. Mis. Ram & Sons account is a (a) Personal accourit (b) Real account {c) Nominal account {@) None of the above 8 Creditors Account is a (a) Personal account (by Real account (e) Nominal account (d)- None of the above 9. Which of the following accounts is not a real account? (a) Building account (0) Rameshwar account (©) Closing Stock account (6) Goodwill account 10. Sale of office furniture on cash is debited to (a) Office furniture account (b) Sales account {c) Cash account (d) None of the above In an insured godown of a businessman, goods warth Rs. 8,000 were destroyed. For debit entry will be in (a) Stock account (b) Loss by fire account (©) Insurance company’s account - (4) Purchases account Posting means ‘ (a) Preparation of tial balance by the balances of accounts in Ledger (b) Recording of business transactions in journal (©) Taking up the balances. of accounts from Balance Sheet for next year (@) Recording transactions from primary books to ledger accounts 13. The stage of double entry system with which the financial position of the business is (a) Primary books (b) Ledger Account (©) Trial Balance (d) Final Accounts 14. Which of the following statement is true? (a) Capital = Assets + Liabilities (b) Assets = Capital - Liabilities (c) Assets = Capital + Liabilities (4) Liabilities = Capital + Assets15. Which of the following is a real account? (a) Drawings account (b} Outstanding Rent account (c) Bank account ’ (d) Closing Stock account 16. Which of the following is a nominal account? (a) Drawings account (b) Outstanding interest account (c) Salary account (8) Machinery account 47. Mr. 4 (who is proprietor of business) purchased a car for his son Mr. B (for personal use) from ‘Competent Motors and paid in cash from business. The entry for this transaction in the business books of Mr. A will be (@) Bhaskar Dr. To Cash Ale (b) Alfa Motors A/c Dr. To Cash Ae (©) Car ale Dr. To Cash Me (d) Drawings A/c Dr. To Cash alc 18 Account to be debited by the proprietor of business for purchasing furniture for his private use for cash from Furniture House will be (a) Purchase account (b) Furniture account (c) Drawings account (@) Furniture House's account 19. Fill in the Journal entries. (a) Purchases A/c Dr 7,000 or Alc Dr. os To Cash A/c 7,500 (Goods purchased for Rs. 7,000 and carriage paid Rs. 500) (b) Goods afc Dr. 12,000 To rn AMC _ 12,000 (Goods worth Rs. 12,000 were purchased from Ram.) 20. Give narration on the basis of following journal entries: Journal (a) Cash Ale Dr 1,960 Discount Ae Dr 40 To Mahesh 2,000 & 7(b) Drawings Alc Dr. 2,000 To Cash Ae 2,000 G ~) Answers: 1. (b), 2. (d), 3. (a), 4. (6), 5. ©), 6 (©), 7. @), 8. (a), 9. (b), 10. (c), 11. (C), 12. (d), 13. Ud), 14. (c), 15. (d), 16. (c), 17. (A), 18. (6), 19 (a) Carriage A/c, Rs. 500, (b) Credit Ram AJe, 20 (a) Received Rs. 1,960 in full settlement from Mahesh, (b) The owner withdrew cash Rs. 2,000.Dane Choice Question. 1. Trading account is prepared ‘ (a) To find out total sales 7” 0b) Te find out net profit © To find out gross profit from operations (a) To find out financial position of the: business 2. Ibis shown in Trading account (a) Expenses relating to purchase of goods (6) Expenses relating to advertisement {c) Daily expenses of the shop (a) Expenses relating to sale Out of the following direct expenses is (a) Salaries (b) Carriage outwards ) Rent of office building Carriage inwards 4. Balance of Trading account discloses {a} Gross profit (b) Gross profit oF loss (c) Net profit (a) Manufacturing cost and selling cost _ Se Opening Stok was shown a Bs 8000, which ma three-fourth of its actual cost. What wil be LH” the effect of this? Gross profit will increase by Rs. 3,000 Gross profit will decrease by Rs. 3,000 {e) Gross profit will be more by Rs. 9,000 (d) There will be no effect on gross profit 6, If Closing Stock is Rs. 106,800, Cost of goods sold is Rs. 150,000, Gross Profit is Rs. 10,000 and Purchases are Rs. 164,000, then what will be the amount of Opening Stock? (a) Rs. 90,600 (b) Rs. 120,800 {o)_ Rs. 110,800 (a) Rs. 92,800 7. If Sales Returns are Rs. 25,000, Sales are Rs. 125,000. Net Purchases are Rs. 34,000 and Gross. Profit is Rs. 21,000, then the cost of goods sold will be (a) Rs. 79,000 (b) Rs. 84,000 (©) Rs. 64,000 qd) Rs. 92,000: Eorvos figures are related to a trader: pening Stock Rs. 10,000; Closing Stock Rs. 11,000; Purchases Rs, 70,000. If goods are sold @ 30% profit on cost, then the amount of sales will be (a) Rs. 86,000 \ (b) Rs. 89,700 \ (c) Rs. 21,000 (@) Rs. 91,000 \ 9% If Sales are Rs, 60,000, Gross Profit is 1/3 of cost, Purchases are Rs. 29,000 and Closing stock is Rs, 9,000, then Opening stock will be SS (a) Rs. 5,000 (b) Rs. 20,000 (c) Rs. 15,000 (¢) Nil ~ 10. If Opening stock is Rs. 75,000; Purchases are Rs. 200,000; Cost of goods sold is Rs. 260,000; and Sales are Rs. 300,000, the Gross Profit or Loss will be fa) Rs. 40,000 (b) Rs. 30,000 (c) Rs. 35,000 (d)_ Rs. 25,000 11. If the rate of Gross Profit is 33-4 % on cost and Sales are Rs. 211,200, then amount of Gross Profit will be fa) Rs. 70,400 (b) Rs. 44,000 (©) Rs. 52,800 (d) Rs. 34,000 12. If Opening stock is Rs. 8,000; Closing stock is Rs, 5,280 and Cost of goods Sold is Rs. 91,520, the amount of purchases will be fa) Rs. 77,440 (b) Rs. 82,720 (c) Rs. 88,000 (@) Rs. 72,160 13. If Cost of goods sold is Rs. 188,800 and rate of Gross Profit is 20% on sales, then the amount of Sales will be fa) Rs, 236,000 (b) Rs. 283,200 (©) Rs. 212,000 @ Rs, 220,000 14, Contingent liability is shown (a) On the Liability side of Balance Sheet * (b) On the Assets side of Balance Sheet (c) In Profit and Loss account (d) As a foot note below the Balance Sheet i15. Sales tax collected is show (a) On debit side of Trading account (b) On debit side of Profit and Loss account (c) On the liability side of Balance Sheet (d) Qa credit side of Profit and Loss account 16. Which of the following is not a current asset? (a) Cash at Bank (b) Debtors (©) Machines (@) Stores in hand 17. Added in opening balance of Capital is (a) Net Profit (6) Drawings (c) Net Loss (d) Operating expenses 18, Bad Debts given in Trial Balance are shown in final accounts by (a) Deducting from debtors on the assets side of Balance Sheet (b) Adding in creditors on the liabilities side of Balance ‘Sheet (c) On the credit side of Profit and Loss account (a) On the debit side of Profit and Loss account 19. A trader did not record wages of Rs. 1,500 while preparing Trading account and found out gross oss Rs. 150. If the wages had been recorded the Trading account, it would have disclosed (a) Gross Profit of Rs. 1,850 (b) Gross Loss of Rs. 1,350 (c) Gross Loss of Rs. 1,650 (a) Gross Profit of Rs. 1,350 0. Which of the following is a trade Liability? a (a) Goodwill 7 by Bank Overdraft (c) Debtors (@) Machine © 21, Balance of personal accounts are shown (a) Only in Profit and Loss account (b) Only in Balance Sheet (c) Only in Trading account and Machinery account (d) Both in Trading account and Profit and Loss account 22, Balance Shect is prepared (a) To cheek the accuracy of books (b) To know the financial positien (©) To know the net profit or loss (d) To find out value of assets23. 25, 27. 28. 29. From Income Statement we find out (a) The gross profit (b) The financial position of business (c) The net profit (d)_ All of the above Trading and Profit Loss account discloses Profit or Loss of business (a) On a particular date (b) For the given period (©) Of the previous and current year (d) All of the above Which equation is correct out of the following? (a) Opening Stock + Purchases + Closing Stock = Cost of goods sold (b} Cost of goods sold = Closing Stock — Purchases = Opening Stock (c) Cost of goods sold + Closing Stock = Opening Stock = Purchases (d) Opening Stock + Cost of goods sold — Purchases = Closing Stock Balance Sheet discloses financial position of business (a) For a particular period (by On a particular date (©) For the entire life of business operations (@) All of the above Goodwill is (a) Fixed asset (b) Current asset (c)_ Intangible asset (@)_ Fictitious asset Which of the following is not related to the head “Current Asset”? (a) Debtors (b) Furniture () Sundry Debtors (d) Closing Stock ‘An example of intangible asset is (a) Goodwill (b) Preliminary Expenses (c) Discount on issue of Debentures (d) Loss on the asset side Which of the following is not an intangible asset fa) Goodwill (b) ‘Trademarks (c) Patents (d) Stock-in-trade31. Which of the following is a fictitious asset? (a) Goodwill (B) Copyright (c) Patents (a) Discount on issue 32, An example of fixed asset is (a) Furniture and Fixtures (b) Land and Building () Plant and Machinery (d) All of the above 33. The assets which are kept for resale or converted into cash are (a) Fixed Assets (b) Current Assets (©) Fictitious Assets (a) Intangible Assets 34. What is credit balance in Bank account? (a) An asset (b) A liability (©) Part of Share Capital (@)_ An expenditure 35. What is Bank Overdraft account? (a) Personal Account (b) Real Account (©) Nominal Account (d) None of the above we Which transaction out of the following results in increase: in assets and inérease in liabilities? oo (a) Goodwill written off () Issue of Bonus Shares in the ratio 2:1 (e) Credit Purchase of Machine (a) Payment to Mr. ABC 37. Return outwards appearing in Trial Balance is to be deducted from (a) Sales (b) Purchases (c) Returns Inwards (d) Closing Stock 38. Returns Inwards appearing in Trial Balance is to be deducted from (a) Purchases (b) Sales (c) Returns Outwards (@) Closing Stock3. 41. 42. See se to Salaries appearing in Trial Balance are shown (a) On the debit side of Trading Account (b) On the debit side of Profit and Loss Account (©) On the Liabilities side of the Balance Sheet (@) On the Assets side of the Balance Sheet ‘Wages appearing in Trial Balance are shown {a) On the debit side of Profit and Loss Account (b) On the debit side of Trading Account (©) On the Liabilities side of the Balance Sheet (d) On the Assets side of the Balance Sheet Freight inwards/Carriage inwards appearing in Trial Balance are shown {a) On the debit side of Profit and Loss Account (b) On the debit side of Trading Account (©) On the Liabilities side of the Balance Sheet Carriage outwards is shown (a) On the debit side of Profit and Loss Account (b) On the debit side of Trading Account (©) On the Liabilities side of the Balance Sheet Apprenticeship Premiums received appearing in the Trial Balance are shown (a) On the debit side of Profit and Loss Account (b) On the credit side of Profit and Loss Account tc) On the Assets side of the Balance Sheet |. XYZ, manager of business, is paid Rs, 5,000 for December 2004. The two accounts affected by this transaction are (@) Salary account and XYZ account (b) XYZ’s account and Cash account (c) Cash account and Salary account (d) Salary account and Manager’s account Vinod purchased books from Pragati Maidan Book Fair costing Rs. 2,000 at 5% trade discount and 2% cash discount. Vinod will immediately pay for the hooks (a) Rs. 1,862 () Rs. 1,866 (c) Rs. (@) Rs Vinod is our debtor-by Rs. 1,600. He becomes insolvent and 70 paise in a rupee is recavered from him. In the journal entry for this transaction, Vinod’s account will be credited by (a) Rs. 1,600 (b) Rs. 1,400 (c) Rs. 600 (dé) Rs. 2,600a $8__ Management Accounting: Text and Cases Answers: 1. 4c), 2. (a), 3. (d), 4. (b), 5. (a), 6. (4), 7. fa). 8. (b), 9 (a), 10. (a), 11. (c), 12. (e), 13, (a), 14. (@), 15. (¢), 16. (6), 17. (a), 18. (A), 19. (€), 20, (bp, 21. (b), 22. (b), 23. (c), 24. (b), 25. (e), 26. (b), 27. (c), 28. (b), 29. (a), 30. (d), 31. (d), 32. (d), 33. (b), 34. (6), 35. (a), 36. (C), 37. (b), 38. (b), 39. (b), 40. (b), 41. (b), 42. (a), 43. (@), 44. (c), 45. (a), 46. (a).Eee Choice Questions J. The main object of preparing Trial Balance is (a) To check the arithmetical accuracy of accounts (b) To check complete accuracy of accounting books (ce) To know the profit & loss (gd) To know the financial position 2, Trial Balance includes (@) Balance of personal accounts {b)_ Balance of real accounts (©) Balance of nominal accounts (@) Balance of all of the ledger : i 3. One reason of disagreement of Trial Balance is (a) Non-recording of any amount equal to the difference in Trial Balance (b) Recording half of the difference on wrong side of Trial Balance (c) Amount equal to difference not posted in account ' {d) Due to any of the above reasons - 4, What is prepared with the help of Trial Balance? (a) Only Trading account (b) Only Profit and Loss account (c) Only Balance Sheet (d)_ Final accounts 5. There will be no agreement of Trial Balance due to (a) Error of omission (b) Error of princi (c) Non-recording of balance of account in Trial Balance (d) Any of the above } 6. The disagreement of Trial Balance indicates that (a) The transaction is not recorded in the primary books of aceount (b) There is any compensating error (c) A nominal account was debited in place of any personal aceount (d) No double entry was passed in Ledger for any transaction T. Due to following (a) Sale of Rs. 2.500 to Ramesh was recorded as Rs. 1,500 in Sales Book (b) Overcasting of Purchases Returns Book by Rs. 1,000 (c) Discount received from Ramesh was credited in Commission account (d) Credit sale of old machine was recorded in Sales Book. error Trial Balance will not agree 8. The account which is opened in case of disagreement of Trial Balance is (a) Suspense account (b) Capital account (©) Profit and Lass account (d) Trading account Answers: 1. (b), 2. (d), 3. (d), 4. (d), 5. (A). 6. (d), 7. tb), 8. a).Eee iple Choice Questions 1. Which one out of the following is Revenue Expenditure? (a) Interest on capital (b) Cost of Building (c) Installation expenses of machine purchased é (d) Price of New Car purchased for the Managing Director 2. Which one out of the following is Capital Expenditure? (a) Expense incurred on acquisition of machine (b) Heavy repairs expenditure on used building (c) Purchase of land for factory (d) All of the above 3. Which one of the following is deferred revenue expenditure? (a) Expenditure on specific research and development (b) Expenses on the purchase of patents (c) Legal expenses on purchase of trademark (d) Heavy repairs expenditure on used machine at the time of purchase 4. Out of the following, capital loss is (a) Interest paid on debentures {b) Redemption of debentures at par (c) Underwriting commission on the issue of debentures (d) Redemption of debentures below face value 5. Out of the following, capital expenditure is (a) Amount donated in Prime Minister's Relief Fund (b) Factory expansion cost ic) Cash embezzled by the accountant (d) Deepawali gift distributed to all employees 6. Expenditure incurred to get the copyright by a publisher is a {a} Revenue expenditure (b) Deferred revenue expenditure (@) Capital expenditure (4) None of the above: 10. 1. 12. 13. 14. A cinema hall makes its curtain cinemascope. It is a (a) Revenue expenditure ' (b) Deferred revenue expenditure (©) Capital expenditure (4) Depends on trhe manager assumption Discount received on payment made to creditors is a (a) Capital receipt (>) Capital expenditure (c) Revenue receipt (@) Revenue expenditure Which of the following is deferred revenue expenditure (a) Compensation paid on breach of contract of warranty (b) Heavy advertisement expenditure incurred for the sale of a new product (c) Heavy expenditure on a second-hand machine to put it in working condition (@)_ Heavy installation expenses on a new machine A motor car purchased for Rs. 80,000, whose book value is Rs. 48,000, was sold for Rs. 100,000, Capital profit is (a) Rs. 15,000 (b) Rs. 20,000 (©) Rs. 30,000 (@) Rs. 40,000 Amount incurred to increase the seating capacity of a picture hall is a (a) Deferred revenue expenditure (b) Capital expenditure (c) Revenue expenditure (4) None of the above ‘Wages paid on the repairs of old furniture at the time of purchase will be debited in (a) Furniture account (by Cash account (c) Wages account (d) Owners’ account Amount incurred on electric (a) Revenue expenditure (b)} Capital expenditure (6) Deferred revenue expenditure (d) Capital loss Legal expenses at the time of purchase of building paid by the company are (a) Capital expenditure (>) Revenue expenditure (©) Deferred revenue expenditure (4) Neither capital nor revenue expenditure tallations of a new building is15. Capital profit is . (a) Balance of Profit and Loss account (b) Sale of goods (©) Profit on purchase of a business (@) Premium on redemption of preference shares 16. What is the nature of Capital profits? (a) Which do not arise from the normal operations of the business (b) Which arise duc to specific transactions such as sale of assets, issue of shares, redemption of capital, ete. (©) Which is of non-recurring nature (d) All of the above 17. Expenses incurred on development and registration of trade marks are (a) Revenue expenditure (b) Capital expenditure () Operating expenses (@) Indirect expenses 18, Revenue expenditure is intended to benefit (a) Future period (b) Current period (c) Past records (4) Both future and current period 19. Preliminary expenses are an example of (a) Revenue expenditure (b) Deferred revenue expenditure (©) Capital loss (d) Capital expenditure 20. Depreciation of fixed assets is an example of (a) Revenue expenditure (>) Capital expenditure (c) Deferred revenue expenditure (@) None of the above 21. Premium received on issue of shares in an example of (a) Capital receipt (b) Revenue receipt (©) Capital profit (d)_ None of the above 22. The distinction between capital and revenue is necessary for the preparation of (a) Final accounts (b) Profit Centre accounts (c) Funds Flow statement (@)_ Cash Flow statement25. 26. 29. Cost of goods purchased for resale is an example of (a) Deferred Revenue Expenditure (b) Revenue Expenditure (©) Capital Expenditure Rs. 15,000 spent on replacement of worn-out part of the machine will be charged as (a) Capital Expenditure (b) Revenue Expenditure (©) Deferred Revenue Expenditure Discount allowed on issues of shares is an example of (a) Capital Expenditure (b) Revenue Expenditure (©) Deferred Revenue Expenditure Preliminary Expenses are an example of (a) Revenue Expenditure (b) Deferred Revenue Expenditure (©) Capital Expenditure An expenditure is treated as of capital nature, when (a) The receiver of the amount is going to use it for the purchase of fixed assets (b) The asset is not intended for sales and will be used fo: productive purpose (©) Iis paid for meeting the normal expenses of the business Depreciation of fixed assets is an example of {@) Revenue Expenditure (b) Capital Expenditure (©) Deferred Revenue Expenditure Repairs incurred before using a second hand truck purchased recently is a (a) Capital Expenditure (b) Revenue Expenditure (c) Deferred Revenue Expenditure Answers: 1. (a), 2. (@), 3. (a). 4, (6), 5. (b). 6. (A), 7. (6), 8. (C), 9. (b), 10. (bI, LI. (B), 12. (a), 13. (6). 14. (a), 15. (@), 16. (d), 17. (b), 18. (b), 19. (b), 20. (a), 24. (e), 22. (a), 23. (b), 24. (b), 25, (¢), 20. (b), 27. (b), 28. (a), 29. (a).