DR. G.R.

DAMODARAN COLLEGE OF SCIENCE, COIMBAORTE – 641 014

(Autonomous and affiliated to Bharathiar University & recognized by the UGC)
School of Commerce and International Business
B.Com
BATCH: 2010-2013
SEM: 2
MULTIPLE CHOICE QUESTIONS
Core: FINANCIAL ACCOUNTING – 202A

1. Depreciation is a process of _________.

a. valuation.
b. allocation.
c. reduction.
d. appreciation.
Answer: B
2. The main objective of providing depreciation is _______.
a. to calculate true profit.
b. to calculate financial position.
c. to reduce tax burden.
d. to reduce profit.
Answer: A
3. Depreciation arises because of_____.
a. fall in the market value of an asset.
b. physical wear and tear.
c. fall in the value of money.
d. rise in the value of money.
Answer: B
4. Under the straight line method of charging depreciation, depreciation ____.
a. increases every year.
b. decreases every year.
c. is constant.
d. fluctuate every year.
Answer: C
5. Under the diminishing balance method depreciation is calculated on____.
a. original value.
b. written down value.
c. scrap value.
d. market value.
Answer: B
6. The amount of depreciation charged on machinery will be debited to_____.
a. machinery account.
b. depreciation account.
c. cash account.
d. bank account.
Answer: B
7. Loss on the sale of machinery should be written off against____.
a. share premium account.
b. sales account.
c. depreciation fund account.
d. general reserve account.
Answer: C
8. The annual installment to depreciation fund for replacement of a fixed asset is______.
a. charge against profit.
b. an appropriation of profits.
c. charge against reserve.
d. charge against cash.
Answer: A
9. Depreciation is provided on ________.
a. current asset.
b. fixed assets.
c. fictitious assets.
d. investment.
Answer: B
10. The permanent, continuing and gradual shrinkage in the book value of a fixed asset is
called _______.
a. depreciation .
b. appreciation.
c. reduction.
d. computation.
Answer: A
11. Depreciation is charged on the_________.
a. market value.
b. Depreciable value.
c. purchase value.
d. sale value.
Answer: B
12. “Depreciation is the allocation of the depreciable amount of an asset over its
estimated useful life. Depreciation for the accounting period is charged to income either
directly or
indirectly.” This definition is given by __________.
a. company law. .
b. Income Tax Law.
c. International accounting standard.
d. Indian accounting standard.
Answer: C
13. Depreciation is charged on_________.
a. continuous basis.
b. temporary basis.
c. daily basis.
d. monthly basis.
Answer: A
14. Loss of usefulness occasioned by improved production methods is known as_______.
a. physical deterioration.
b. obsolescence.
c. disuse.
d. inadequacy.
Answer: B
15. Mines, quarries, oilfields and forest are example of _______.
a. fixed assets.
b. current assets.
c. wasting assets.
d. intangible assets.
Answer: C
16. Depreciation applies to________.
a. current assets.
b. wasting assets.
c. intangible assets.
d. fixed assets.
Answer: D
17. Depletion applies to________.
a. current assets.
b. wasting assets.
c. intangible assets.
d. fixed assets.
Answer: B
18. Amortization applies to________.
a. current assets.
b. wasting assets.
c. intangible assets.
d. fixed assets.
Answer: C
19. Estimated sale value of the asset at the end of its economic life is known as _____.
a. purchase value.
b. market value.
c. written down value.
d. residual value.
Answer: D
20. Provision for depreciation account appears on the _______.
a. Asset side.
b. Liability side.
c. P & L account debit side.
d. P & L account credit side.
Answer: B
21. If the asset is sold, the provision for depreciation relating to the asset sold is
transferred to _______.
a. asset account.
b. liability account.
c. P & L account.
d. trading account.
Answer: A
22. The asset account appears in the books at original cost when a ______.
a. P & L account is maintained.
b. balance sheet is maintained.
c. provision for depreciation account is maintained.
d. provision for depreciation account is not maintained.
Answer: C
23. The value of asset can be reduced to zero under this method _____.
a. straight line method.
b. written down value method.
c. annuity method.
d. depreciation fund method.
Answer: A
24. The balance in the asset account will not be reduced to zero under this method _____.
a. straight line method.
b. written down value method.
c. annuity method.
d. depreciation fund method.
Answer: B
25. Income tax authorities recognize this method ______.
a. straight line method.
b. written down value method.
c. annuity method.
d. depreciation fund method.
Answer: B
26. Under which method of depreciation, the earlier year of the life of the asset, profits
are more _____.
a. straight line method.
b. written down value method.
c. annuity method.
d. depreciation fund method.
Answer: A
27. Straight line method is also called _________.
a. written down value method.
b. annuity method.
c. depreciation fund method.
d. Fixed installment method.
Answer: D
28. Diminishing balance method is also called _________.
a. written down value method.
b. annuity method.
c. depreciation fund method.
d. Fixed installment method.
Answer: A
29. Reducing installment method is also called __________.
a. straight line method.
b. written down value method.
c. annuity method.
d. depreciation fund method.
Answer: B
30. Written down value method is also called ________.
a. diminishing balance method.
b. annuity method.
c. depreciation fund method.
d. Fixed installment method.
Answer: A
31. Straight line method is also called _______.
a. written down value method.
b. annuity method.
c. original cost method.
d. depreciation fund method.
Answer: C
32. Original cost method of depreciation is also called ____.
a. straight line method.
b. written down value method.
c. annuity method.
d. depreciation fund method.
Answer: A
33. Original cost method of depreciation is also called _______.
a. diminishing balance method.
b. annuity method.
c. depreciation fund method.
d. Fixed installment method.
Answer: D
34. Fixed installment method of depreciation is also called ________.
a. straight line method.
b. written down value method.
c. annuity method.
d. depreciation fund method.
Answer: A
35. Fixed installment method of depreciation is also called ______.
a. written down value method.
b. annuity method.
c. original cost method.
d. depreciation fund method.
Answer: C
36. Diminishing balance method of depreciation is also called ____.
a. reducing balance method.
b. annuity method.
c. depreciation fund method.
d. fixed installment method.
Answer: A
37. Reducing balance method of depreciation is also called ____.
a. straight line method.
b. written down value method.
c. annuity method.
d. depreciation fund method.
Answer: B
38. Written down value method of depreciation is also called ______.
a. annuity method.
b. insurance policy method.
c. fixed installment method.
d. reducing balance method.
Answer: D
39. Under annuity method the amount of depreciation is found out from _____.
a. log tables.
b. sinking fund tables.
c. annuity tables.
d. present value tables.
Answer: C
40. Annuity factor can be obtained from _________.
a. log tables.
b. sinking fund tables.
c. annuity tables.
d. present value tables.
Answer: C
41. Depreciation fund is also called ______.
a. reserve fund.
b. compensation fund.
c. workers fund.
d. sinking fund.
Answer: D
42. Sinking fund of depreciation is also called _______.
a. reserve fund.
b. compensation fund.
c. depreciation fund.
d. workers fund.
Answer: C
43. Under depreciation fund method, the amount of depreciation is calculated with
reference to ________.
a. log tables
b. sinking fund tables
c. annuity tables
d. present value tables
Answer: B
44. Under sinking fund method, the amount of depreciation is calculated with reference
to _________.
a. log tables.
b. annuity tables.
c. sinking fund tables.
d. present value tables.
Answer: C
45. Under depreciation fund method depreciation is charged to ______.
a. profit and loss account.
b. trading account.
c. balance sheet.
d. p & l appropriation account.
Answer: A
46. Under which method, a policy is taken for amount of the asset to be replaced____.
a. annuity method
b. insurance policy method
c. fixed installment method
d. reducing balance method
Answer: B
47. Under insurance policy method the premium is paid in the __________.
a. beginning of each year.
b. end of each year.
c. beginning of each month.
d. end of each month.
Answer: A
48. The difference between the book value at the beginning and at the end (revaluation
amount) is __________.
a. depreciation.
b. appreciation.
c. reduction.
d. computation.
Answer: A
49. The difference between the book value at the beginning and at the end (revaluation
amount) is depreciation and charged to __________.
a. profit and loss account.
b. trading account.
c. balance sheet.
d. p & l appropriation account.
Answer: A
50. Depletion method is also called _________.
a. annuity method.
b. insurance policy method.
c. output method.
d. reducing balance method.
Answer: C
51. Expenses which can be directly identified with or incurred for particular department
are called __________.
a. direct expenses .
b. indirect expenses.
c. monthly expenses.
d. weekly expenses.
Answer: A
52. Expenses which cannot be identified with a particular department are called_______.
a. direct expenses.
b. indirect expenses.
c. monthly expenses.
d. weekly expenses.
Answer: B
53. Selling expenses should be divided among the different department on the basis of
_______.
a. light points.
b. H.P of machine.
c. sales ratio.
d. floor area.
Answer: C
54. Rent and rates should be divided among the different departments on the basis of
____.
a. light points.
b. H.P of machine.
c. sales ratio .
d. floor area.
Answer: C
55. Fire insurance and repairs on assets should be divided among the different
departments on the basis of _________.
a. light points.
b. H.P of machine.
c. value of each assets.
d. floor area.
Answer: C
56. Repairs to buildings, maintenance of premises should be divided among the different
departments on the basis of _________.
a. light points.
b. H.P of machine.
c. sales ratio.
d. floor area.
Answer: D
57. Lighting expenses should be divided among the different departments on the basis of
_________.
a. light points.
b. H.P of machine.
c. sales ratio.
d. floor area.
Answer: A
58. Carriage inward expenses should be divided among the different departments on the
basis of ___________.
a. light points.
b. purchase value.
c. sales ratio.
d. floor area.
Answer: B
59. Power expenses should be divided among the different departments on the basis of
_____.
a. light points.
b. H.P of machine.
c. sales ratio .
d. floor area.
Answer: B
60. Workmen’s amenities and welfare expenses should be divided among the different
departments on the basis of ____________.
a. number of worker in each department.
b. number of machines in each department.
c. wages of each department.
d. floor area occupied by each department.
Answer: A
61. ESI, PF payable by employer should be divided among the different departments on
the basis of ________.
a. number of worker in each department.
b. number of machines in each department.
c. wages of each department.
d. floor area occupied by each department.
Answer: C
62. Factory manger’s salary should be divided among the different departments on the
basis of ________________-.
a. time devoted to each department.
b. time spent in each department.
c. time assigned to each department.
d. time wasted in each department.
Answer: A
63. Indirect expenses is also called____________.
a. prime cost.
b. common expenses.
c. direct expenses.
d. management expenses.
Answer: B
64. Indirect expenses is also called_____________.
a. prime cost.
b. management expenses.
c. joint expenses .
d. notional cost.
Answer: C
65. Expenses which cannot be apportioned to department must be shown in the _____.
a. balance sheet.
b. trading account.
c. P & L account.
d. P & L Appropriation account.
Answer: C
66. When goods are transferred from one department to other department, they are called
__________.
a. inter-departmental transfers.
b. outer-departmental transfers.
c. not a transfer.
d. regular transfer.
Answer: A
67. When goods are transferred from one department to other, the department transferring
the goods should be ___________.
a. debited.
b. credited.
c. added.
d. subtracted .
Answer: B
68. When goods are transferred from one department to other, the department transferring
the goods should be credited and department receiving the goods should be _________.
a. debited.
b. credited.
c. added.
d. subtracted.
Answer: A
69. In departmental accounts expenses like director fees, interest is transferred to ______.
a. balance sheet.
b. trading account.
c. general P & L account .
d. P & L Appropriation account.
Answer: C
70. The departmental accounting enables a business firm to maximize _________.
a. profit.
b. losses.
c. cash.
d. assets .
Answer: A
71. Branch which does not maintain its own set of books is ______________.
a. dependent branch.
b. independent branch.
c. foreign branch.
d. local branch .
Answer: A
72. The business policies and the administration of a branch are wholly controlled by the
head office the type of branch is __________.
a. independent branch.
b. dependent branch.
c. local branch .
d. foreign branch.
Answer: B
73. A branch set up merely for booking orders which are executed by head office is ____.
a. dependent branch.
b. independent branch.
c. foreign branch.
d. local branch.
Answer: A
74. Branches not keeping full system of accounting are ________.
a. independent branch.
b. dependent branch.
c. local branch .
d. foreign branch.
Answer: B
75. All branch expenses such as rent, salary, are paid by the head office in case of _____.
a. independent branch.
b. local branch.
c. local branch.
d. dependent branch.
Answer: D
76. Dependent branch make _______.
a. only cash sales.
b. only credit sales.
c. cash and credit sales.
d. installment sales.
Answer: C
77. Under stock and debtors system the head office opens _________.
a. branch adjustment account.
b. branch debtors account.
c. branch creditors account .
d. branch cash account.
Answer: A
78. In branch account, goods sent by branch X to branch Y, will be debited to _______.
a. branch k.
b. branch x.
c. branch z .
d. branch y.
Answer: D
79. Under branch accounts debtors system, the depreciation of an asset is _______.
a. show in debtors account.
b. shown in debit side of branch account.
c. not shown in branch account .
d. shown in credit side of branch account.
Answer: C
80. Under branch accounts debtors system, opening balance of assets are recorded in
____.
a. credit side.
b. debit side.
c. first credit and debit side.
d. first debit and credit side.
Answer: A
81. Under branch accounts debtors system, closing balance of assets are recorded in
________.
a. credit side.
b. debit side.
c. first credit and debit side.
d. first debit and credit side.
Answer: A
82. Under branch accounts debtors system, opening balance of liabilities are recorded in
___________.
a. first credit and debit side.
b. first debit and credit side.
c. credit side.
d. debit side.
Answer: C
83. Under branch accounts debtors system, closing balance of liabilities are recorded in
_________.
a. first credit and debit side.
b. first debit and credit side.
c. credit side.
d. debit side.
Answer: D
84. Under branch accounts debtors system, goods sent to branch account is recorded in
_________.
a. debit side.
b. credit side.
c. asset side .
d. liabilities side.
Answer: A
85. Under branch accounts debtors system, loading on goods sent to branch adjusted in
________.
a. debit side.
b. credit side.
c. asset side .
d. liabilities side.
Answer: B
86. Under branch accounts debtors system, bad debts, discount allowed to debtors is
________.
a. shown in debit side.
b. shown in credit side.
c. shown in asset side .
d. not shown.
Answer: D
87. Under branch accounts debtors system, both cash and credit sales are _______.
a. shown in debit side.
b. shown in credit side.
c. shown in asset side .
d. not shown.
Answer: D
88. The difference between goods sent by head office and received by the branch is
known as ___________.
a. goods in transit.
b. goods in godown.
c. goods in production.
d. goods in warehouse.
Answer: A
89. Under stock and debtors system of branch account, branch adjustment account is
opened when goods sent to branch is at ________.
a. cost price.
b. invoice price.
c. market price.
d. normal price.
Answer: B
90. Under stock and debtors system of branch account, the account prepared to record all
the transactions relating to branch debtors is recorded in ________.
a. branch expenses account.
b. branch adjustment account.
c. branch debtors account.
d. branch creditors account.
Answer: C
91. In pure single entry which account is recorded?
a. Personal.
b. Real.
c. Nominal.
d. Asset.
Answer: A
92. All personal, real and nominal accounts are opened in ________.
a. single entry system.
b. double entry system.
c. accrual system.
d. mercantile system.
Answer: B
93. Only personal account and cash account are opened in ________.
a. single entry system.
b. double entry system.
c. accrual system .
d. mercantile system.
Answer: A
94. Trial balance can be prepared in _________.
a. single entry system.
b. double entry system.
c. accrual system.
d. mercantile system.
Answer: A
95. Trial balance cannot be prepared in_____.
a. single entry system.
b. double entry system.
c. accrual system .
d. mercantile system.
Answer: A
96. Balance sheet can be prepared ________.
a. in single entry system.
b. in double entry system.
c. with the help of cash book.
d. with the help of bank account.
Answer: A
97. Balance sheet cannot be prepared ________.
a. in single entry system.
b. in double entry system.
c. with the help of cash book.
d. with the help of bank account.
Answer: A
98. In single entry system, net worth method is also called ________.
a. double entry system .
b. mercantile system.
c. statement of affairs method.
d. accrual system.
Answer: C
99. Difference between net worth at the beginning of the year and at the end of the year
represents _________.
a. capital balance.
b. cash balance.
c. pass book balance.
d. profit or loss.
Answer: D
100. Opening capital can be found by preparing ________.
a. cash book.
b. bank account.
c. statement of affairs.
d. statement of bank pass book.
Answer: C
101. A statement of affairs is just like a _________.
a. balance sheet.
b. profit and loss account.
c. cash account.
d. trading account.
Answer: A
102. In statement of affairs assets are shown on the __________.
a. right hand side.
b. left hand side.
c. left hand side top.
d. left hand side bottom.
Answer: A
103. In statement of affairs liabilities are shown on the __________.
a. right hand side.
b. left hand side.
c. right hand side top.
d. right hand side bottom.
Answer: B
104. Under single entry system, closing capital can be found by preparing a statement of
affairs ____________.
a. at the end of the year.
b. at the beginning of the year.
c. at the end of every month.
d. at the end of every quarter.
Answer: A
105. Under single entry system, opening capital can be found by preparing a statement of
affairs ____________.
a. at the end of the year.
b. at the beginning of the year.
c. at the end of every month.
d. at the end of every quarter.
Answer: B
106. Under single entry system in net worth method, drawings is added with _______.
a. opening capital.
b. closing capital.
c. additional capital.
d. drawings.
Answer: B
107. Under single entry system in net worth method, additional capital is deducted with
__________.
a. opening capital.
b. closing capital.
c. additional capital.
d. drawings.
Answer: B
108. Under single entry system in net worth method, opening capital is subtracted from
_________.
a. opening capital.
b. closing capital.
c. additional capital.
d. drawings.
Answer: B
109. Under single entry system in conversion method, a total debtors account is prepared
to find out ___________.
a. credit sales.
b. cash sales.
c. credit purchases.
d. cash purchases.
Answer: A
110. Under single entry system in conversion method, a total debtors account is prepared
to find out __________.
a. credit purchases.
b. cash purchases.
c. purchase returns.
d. closing balance of debtors.
Answer: D
111. Debtors account is a __________.
a. personal account.
b. real account.
c. nominal account.
d. cash account.
Answer: A
112. Total creditors account is prepared to find out ___________.
a. credit sales.
b. cash sales.
c. credit purchases.
d. cash purchases.
Answer: C
113. Total creditors account is prepared to find out _______.
a. opening balance of debtors .
b. closing balance of debtors.
c. opening balance of creditors.
d. closing balance of creditors.
Answer: D
114. A bills receivable account is prepared to ascertain bills _______.
a. accepted.
b. received.
c. drawn.
d. endorsed.
Answer: B
115. A bills payable account is prepared to ascertain bills __________.
a. accepted.
b. received.
c. drawn.
d. endorsed.
Answer: A
116. Bills receivable dishonoured will be posted to _______ side of debtors account.
a. debit.
b. credit.
c. outside.
d. inside.
Answer: A
117. Bills receivable dishonoured will be posted in ___________.
a. debit.
b. credit.
c. outside .
d. inside.
Answer: B
118. Transfer to creditors account will be posted in which side of debtors account?
a. Debit.
b. Credit.
c. Outside.
d. Inside.
Answer: B
119. Transfer to creditors account will be posted in which side of creditors account?
a. Debit.
b. Credit.
c. Outside.
d. Inside.
Answer: A
120. Bills payable dishonoured will be posted in which side of creditors account?
a. Debit.
b. Credit.
c. Outside.
d. Inside.
Answer: D
121. Bills payable dishonoured will be posted in which side of bills payable account?
a. Debit.
b. Credit.
c. Outside.
d. Inside.
Answer: C
122. Opening balance of debtors will be posted in which side of debtors account?
a. Debit.
b. Credit.
c. Outside.
d. Inside.
Answer: C
123. Closing balance of debtors will be posted in which side of debtors account?
a. Debit.
b. Credit.
c. Outside.
d. Inside.
Answer: D
124. Closing balance of creditors will be posted in which side of creditors account?
a. Debit.
b. Credit.
c. Outside.
d. Inside.
Answer: A
125. Opening balance of creditors will be posted in which side of creditors account?
a. Debit.
b. Credit.
c. Outside.
d. Inside.
Answer: D
126. Cash account opening balance will appear in _______.
a. debit.
b. credit.
c. outside.
d. inside.
Answer: A
127. Cash account closing balance will appear in __________.
a. debit.
b. credit.
c. outside.
d. inside.
Answer: B
128. Bills payable account opening balance will appear in ____________.
a. debit.
b. credit.
c. outside.
d. inside.
Answer: D
129. Bills payable account closing balance will appear in ____________.
a. debit.
b. credit.
c. outside.
d. inside.
Answer: C
130. Bills receivable account opening balance will appear in _________.
a. debit.
b. credit.
c. outside.
d. inside.
Answer: A
131. An agreement of hiring with option to buy is ____________.
a. installment system.
b. credit system.
c. hire purchase system.
d. cash system.
Answer: C
132. An agreement of sale is made under ________.
a. installment system.
b. credit system.
c. hire purchase system.
d. cash system.
Answer: A
133. Under which system, ownership is transferred on payment of final installment?
a. Installment system.
b. Credit system.
c. Hire purchase system.
d. Cash system.
Answer: C
134. Under which system ownership is transferred on signing of the agreement?
a. Installment system.
b. Credit system.
c. Hire purchase system.
d. Cash system.
Answer: A
135. Under hire purchase system the buyer is called _________.
a. buyer.
b. hirer.
c. hire vendor.
d. debtor.
Answer: B
136. Under hire purchase system the seller is called _________.
a. buyer.
b. hirer.
c. hire vendor.
d. debtor.
Answer: C
137. Under hire purchase system the relationship of hirer and hire vendor is ______.
a. buyer and seller.
b. bailor and bailee.
c. pawner and pawnee.
d. debtor and creditor.
Answer: B
138. Under installment system the relationship between the buyer and seller is that of a
_________.
a. buyer and seller.
b. bailor and bailee.
c. pawner and pawnee.
d. debtor and creditor.
Answer: D
139. Under hire purchase system, the risk of loss is borne by ____________.
a. buyer.
b. hirer.
c. hire vendor.
d. debtor.
Answer: C
140. Under installment system the risk of loss is borne by ________.
a. buyer.
b. hirer.
c. hire vendor.
d. debtor.
Answer: A
141. Under hire purchase system who has the right of sell __________.
a. buyer.
b. hirer.
c. hire vendor.
d. debtor.
Answer: C
142. Under hire purchase system, if installment is not paid the hire vendor have right to
___________.
a. sell the goods.
b. repossession of goods.
c. repair the goods.
d. purchase the goods.
Answer: B
143. Under hire purchase system, the agreement cab be _________.
a. renewed.
b. registered.
c. terminated.
d. endorsed.
Answer: C
144. Hire purchase system is governed by ___________.
a. Hire Purchase Act 1972 .
b. Hire Purchase Act 1973.
c. Hire Purchase Act 1974.
d. Hire Purchase Act 1975.
Answer: A
145. Installment system is governed by __________.
a. Hire Purchase Act.
b. Sale of Goods Act.
c. Installment Act.
d. Properties Registration Act.
Answer: B
146. Under hire purchase system, the retail price of the articles is called ________.
a. mrp.
b. wholesale price.
c. retail price.
d. cash price.
Answer: C
147. Cash price plus interest is _________.
a. installment price.
b. hire purchase price.
c. maximum retail price.
d. retail price.
Answer: B
148. The advance amount under hire purchase system is called __________.
a. cash price.
b. retail price.
c. interest.
d. down payment.
Answer: D
149. Under hire purchase system, each installment is treated as __________.
a. interest.
b. cash price.
c. hire charges.
d. advance.
Answer: C
150. Under hire purchase system, interest is calculated on _______.
a. cash price.
b. hire purchase price.
c. MRP.
d. outstanding balance.
Answer: D
151. If the hire purchaser fails to make payment of any installment, it is called _______.
a. default.
b. repossession.
c. sale.
d. purchase.
Answer: A
152. If the hire vendor may take away all the goods on which there is default of
installment it is called ____________.
a. repossession .
b. partial repossession.
c. complete repossession.
d. purchase.
Answer: C
153. The hire vendor take away only a portion of the goods on which there is default of
installments it is called _________.
a. repossession .
b. partial repossession.
c. complete repossession.
d. purchase.
Answer: B
154. In the books of hirer, for payment of down payment, hire vendor account will be
_______.
a. debited .
b. credited.
c. rectified.
d. reversed.
Answer: A
155. In the books of hirer, for payment of installment hire vendor account will be
___________.
a. debited.
b. credited.
c. rectified.
d. reversed.
Answer: A
156. In the books of hirer, for interest due at the end of the year hire vendor account will
be _______.
a. debited.
b. credited.
c. rectified.
d. reversed.
Answer: B
157. In the books of Hirer, the interest and depreciation account will be transferred to
______.
a. Trading account.
b. P & L account.
c. P & L appropriation account.
d. Balance sheet.
Answer: B
158. In the books of hirer, when the asset is repossessed hire vendor account will be
______.
a. debited.
b. credited.
c. rectified.
d. reversed.
Answer: A
159. In the books of hirer, when the asset is repossessed, asset account will be ______.
a. debited.
b. credited.
c. rectified.
d. reversed.
Answer: B
160. In the books of hire vendor, which account will be debited for hire sales _______.
a. buyer.
b. hirer.
c. hire vendor.
d. debtor.
Answer: B
161. In the books of hire vendor, when down payment is received, the hirer account will
be _________.
a. debited.
b. credited.
c. rectified.
d. reversed.
Answer: B
162. Fire insurance provides cover for _________.

a. Tangible assets.

b. Intangible assets.

c. Fictitious assets.

d. None of the above.

Answer: A

163. The average clause in a loss of profits policy protects by _______.

a. Insured

b. Insurer

c. Workers

d. None of the above

Answer: A

164. Debtor ledger is meant for keeping _________.

a. personal a/c of trade debtors.

b. real a/c.

c. nominal a/c.
d. impersonal/c.

Answer: A

165. Creditors ledger is meant for keeping __________.

a. real a/c.

b. nominal a/c.

c. personal a/c of creditors.

d. impersonal a/c.

Answer: C

166. Errors can be easily found out if ____________ system is maintained.

a. single ledger.

b. self balancing ledger.

c. single entry.

d. double entry.

Answer: B

167. The amount set aside from P&L a/c is called as _____________.

a. reserve.

b. provision.

c. depreciation.

d. fund.

Answer: B

168. The amount set aside for meeting future losses is __________.

a. reserve.

b. provision.

c. depreciation.

d. fund.
Answer: B

169. The amount which is appropriated out of profit is ________.

a. reserve.

b. provision.

c. depreciation.

d. fund.

Answer: A

170. Which one of the following is an example of reserve?

a. P&L a/c.

b. Provision for depreciation.

c. Provision for bad debts.

d. Provision for income tax.

Answer: A

171. Which one of the following is an example of provision?

a. Securities premium.

b. Revaluation reserve.

c. Capital reserve.

d. Provision for bad debts.

Answer: D

172. Which of the following item gives tax benefit?

a. Creation of secret reserve.

b. Creation of capital reserve.

c. Creation of general reserve.

d. Creation of provision.

Answer: D
173. Reserve is debited to _______.

a. Trading a/c.

b. P&L a/c.

c. P&L appropriation a/c.

d. Manufacturing a/c.

Answer: C

174. Provision is debited to _______.

a. Trading a/c.

b. P&L a/c.

c. P&L appropriation a/c.

d. Manufacturing a/c.

Answer: B

175. Which one of the following is utilized for distribution of dividend?

a. Capital Redemption Reserve.

b. Securities premium.

c. Revaluation reserve.

d. General reserve.

Answer: D

176. Reserve which is created out of capital profit is __________.

a. revenue reserve.

b. capital reserve.

c. provision.

d. general reserve.

Answer: A

177. Reserve which is created out of capital profit is __________.

a. revenue reserve.

b. capital reserve.

c. provision.

d. general reserve.

Answer: B

178. Which one of the following is not a specific reserve?

A. Debenture Redemption Reserve.

b. Dividend Equalization Reserve.

c. General reserve.

d. Investment Fluctuation Fund.

Answer: C

179. Reserve whose existence is not disclosed in balance sheet is________.

a. P&L a/c.

b. specific reserve.

c. general reserve.

d. secret reserve.

Answer: D

180. Secret reserve can be created by __________.

a. debiting P&L a/c.

b. undervaluing assets.

c. crediting P&L a/c.

d. crediting P&L appropriation a/c.

Answer: B

181. When provision is made for repairs and renewals ___________ a/c is to be debited.

a. P&L a/c.
b. P&L appropriation a/c.

c. cash a/c.

d. repairs and renewals a/c.

Answer: A

182. Fire insurance policy can be taken for _________.

a. loss of stock.

b. loss of profit.

c. life of a partner.

d. loss of stock or/and loss of profit.

Answer: D

183. The stock which is rescued from fir is ______.

a. scrap.

b. defectives.

c. salvaged stock.

d. claim.

Answer: C

184. Closing stock on the date of fire is Rs. 50,000 and the stock salvaged is Rs. 23,000.
The claim is _____.

a. Rs. 23,000.

b. Rs. 27,000.

c. Rs. 50,000.

d. Rs. 73,000.

Answer: B

185. Sales – R. 2,00,000; Gross profit – Rs.40,000. What is the GP ratio?

a. 10%.
b.20%.

c.30%.

d.35%.

Answer: B

186. Memorandum trading a/c is prepared to know the _______.

a. claim.

b. closing stock.

c. gross profit.

d. purchase.

Answer: B

187. Value of closing stock on the date of fire is Rs.30,000. Value of policy is Rs. 25,000
and stock salvaged is Rs. 7,500. Find out the claim.

a. Rs. 18,750.

b. Rs. 25,000.

c. Rs. 30,000.

d. Rs. 50,000

Answer: A

188. The period for which insurance policy is taken against the risk of fire is
__________.

a. accounting period.

b. calendar period.

c. indemnity period.

d. standard period.

Answer: C

189. The difference between standard turnover and affected period turnover is ______.

a. short sales.
b. annual turnover.

c. accounting year turnover.

d. saved turnover.

Answer: A

190. Sales – Rs. 1,20,000 and gross profit ratio is 20% on cost. What is the profit?

a. Rs. 12,000.

b. Rs. 20,000.

c. Rs. 24,000.

d. Rs. 48,000

Answer: B

191. Memorandum trading a/c is prepared for period from __________.

a. 1st Jan. to 31st Dec.

b. 1st Apr. to 31st Mar.

c. opening date of accounting period to date of fire.

d. opening date of accounting period to closing date of accounting.

Answer: C

192. For calculation of loss of profit, GP ratio is calculated by _______.

a. Gross profit

= -------------------------------- X 100.

Accounting period turnover

b. Gross profit

= -------------------------------- X 100.

Standard turnover

c. Net profit + insured standing charges

= -------------------------------- -------------X 100.

 Accounting period turnover

d. . Net profit + insured standing charges

= -------------------------------- -----------X 100.

Standard turnover

Answer: D

193. Average clause cannot be applied in the following case.

a. Total claim is more than the gross profit of annual turnover.

b. Total claim is less than the gross profit of annual turnover.

c. Total claim is more than the policy amount.

d. Total claim is less than the policy amount.

Answer: A

194. In order to calculate value of closing stock, which a/c is to be prepared?

a. P&L a/c.

b. P&L appropriation a/c.

c. Memorandum trading a/c.

d. Memorandum P&L a/c.

Answer: C

195. Stock on the date of valuation is Rs. 2,70,000.It had been undervalued by 10%.
Actual value is ________.

a. Rs. 2,77,000.

b. Rs. 2,97,000.

c. Rs. 3,00,000.

d. Rs. 3,07,000.

Answer: C

196. Stock on the date of valuation is Rs. 88,000 but it had been overvalued by 10%.
Actual value is _______.
a. Rs. 80,000.

b. Rs. 84,000.

c. Rs. 86,000.

d. Rs. 96,000.

Answer: A

197. How many ledgers are generally prepared in self balancing system?

a. 2.

b. 3.

c. 4.

d. 5.

Answer: B

198. In debtor ledger a/c, only ________ is prepared.

a. trade creditors a/c.

b. all creditors a/c.

c. cash purchase a/c.

d. cash sales a/c.

Answer: A

199. In creditor ledger a/c only ____________ is prepared.

a. trade creditors a/c.

b. all creditors a/c.

c. cash purchase a/c.

d. cash sales a/c.

Answer: B

200. Which of the following item is omitted while preparing adjustments a/c?

a. Provision for bad debts.

b. Credit sales.

c. Credit purchase.

d. Cash paid to creditors.

201. Debtors ledger adjustment a/c normally shows the opening balance in _______.

a. debit.

b. credit.

c. either debit or credit

d. debit and credit.

Answer: A

202. Creditors ledger adjustment a/c normally shows the opening balance in _______.

a. debit.

b. credit.

c. either debit or credit

d. debit and credit.

Answer: B

203. General ledger adjustment a/c in debtor ledger shows __________ balance.

a. debit.

b. credit.

c. either debit or credit

d. debit and credit.

Answer: B

204. General ledger adjustment a/c in creditor ledger shows __________ balance.

a. debit.

b. credit.

c. either debit or credit

d. debit and credit.

Answer: A

205. Under sectional balancing system ____________ a/cs are prepared.

a. total debtors and total creditors.

b. creditor ledger and debtors ledger.

c. creditor ledger and general ledger.

d. debtor ledger and general ledger.

Answer: A

206. An account which contains all the real, nominal and personal (except trade Drs and
Crs) is _________.

a. purchase ledger.

b. sales ledger.

c. general ledger.

d. subordinate ledger.

Answer: C

207. An account which contains all the trade debtors is __________.

a. purchase ledger.

b. sales ledger.

c. general ledger.

d. subordinate ledger.

Answer: B

208. An account which contains all the trade creditors is __________.

a. purchase ledger.

b. sales ledger.

c. general ledger.
d. subordinate ledger.

Answer: A

209. Types of branches are ______.

a. 2.

b. 3/

c. 4.

d. 5.

Answer: B

210. The principal place of business is called ____________.

a. branch.

b. head office.

c. wholesale business.

d. foreign branch.

Answer: B

211. The branch which does not maintain its own set of books is _________.

a. dependent branch.

b. independent branch.

c. foreign branch.

d. local branch.

Answer: A

212. Single entry system is otherwise called __________.

a. complete records.

b. incomplete records.

c. pure system of accounting.

d. uniform accounting.
Answer: B

213. Which of the following method is used to ascertain profit in singlr entry system?

a. net worth method.

b. lump sum method.

c. net asset method.

d. double accounting system.

Answer: A

214. Total debtors a/c reveals (as a balancing figure) ____________.

a. cash collected from debtors.

b. credit purchase.

c. cash paid o creditors.

d. closing stock.

Answer: A

215. Total debtors a/c does not reveal ____________.

a. credit sales.

b. opening debtors.

c. closing debtors.

d. closing creditors.

Answer: D

216. Total creditors a/c reveals (as a balancing figure) ___________.

a. credit purchases.

b. credit sales.

c. closing stock.

d. closing debtors.

Answer: A
217. Total creditors a/c does not reveal _______________.

a. Memorandum trading reveals (if gross profit is known) _________.

a. closing stock.

b. closing debtors.

c. closing creditors.

d. credit purchases.

Answer: A

218. Bills receivables a/c reveals ____________ as a balancing figure.

a. opening B/R.

b. opening stock.

c. opening debtors.

d. opening creditors.

Answer: A

219. Bills payables a/c reveals ____________ as a balancing figure.

a. opening B/P.

b. opening stock.

c. opening debtors.

d. opening creditors.

Answer: A

220. Capital at the beginning – Rs. 8,00,000; drawings Rs. 1,80,000; capital at the end
Rs. 9,00,000. Capital introduced during the period Rs. 50,000. Net profit is _________.

a. Rs. 2,00,000.

b. Rs. 2,30,000.

c. Rs. 2,40,000.

d. Rs. 2,45,000.
Answer: B

221. Cash at bank Rs. 3,000; debtors Rs. 4,000; stock Rs. 16,000; furniture Rs. 2,000 and
creditors Rs. 5,000. Find out capital.

a. Rs. 12,000

b. Rs. 15,000.

c. Rs. 20,000

d. Rs. 22,000.

Answer: C
222. Statement of affairs is prepared _________.
a. to find out trade discount.
b. to calculate profit.
c. to calculate sales.
d. to ascertain capital.
Answer: D
223. Depreciation is the process of _______.
a. valuation of assets.
b. apportionment of the cost of the asset over its useful life.
c. maintenance of assets.
d. purchasing the assets.
Answer: B
224. Creating a reserve is ____________.
a. optional.
b. compulsory.
c. essential.
d. statutory.
Answer: A
225. Under Debtors system, the cash sales are _________.
a. debited to the branch a/c.
b. credited to the branch a/c.
c. debited to debtors a/c.
d. credited to creditors a/c.
Answer: B
226. Depreciation in the books of buyer is charged on __________.
a. hire purchase price.
b. cash price.
c. installment amount .
d. down payment.
Answer: B
227. Balance in asset a/c will be reduced to zero in _______.
a. annuity method.
b. depreciation fund method.
c. insurance policy method.
d. straight line method.
Answer: D
228. Under annuity method, the amount of depreciation is __________.
a. increasing every year.
b. decreasing every year.
c. fixed for all the years.
d. change every year.
Answer: C
229. Profit from depreciation policy is transferred to _________.
a. depreciation fund a/c.
b. asset a/c.
c. p & l a/c.
d. liability side.
Answer: A
230. Interest is debited to asset a/c in ________.
a. annuity method.
b. sinking fund method.
c. insurance policy method.
d. straight line method.
Answer: A
231. Sundry creditors means a person who supplies goods on ________.
a. cash basis.
b. credit basis.
c. installment basis.
d. cash and credit basis.
Answer: B
232. Sundry debtors means a person who purchases goods on __________.
a. cash basis.
b. credit basis.
c. installment basis.
d. cash and credit basis.
Answer: B
233. General Ledger Adjustment a/c(s) are opened in ________.
a. debtors ledger.
b. creditor ledger.
c. debtors and creditors ledger.
d. bills receivable ledger.
Answer: C
234. Cash paid to creditors can be calculated from ____________.
a. debtors a/c.
b. creditors a/c.
c. balance sheet.
d. p & l a/c.
Answer: B
235. The figure for capital in the beginning is ascertained from ________.
a. creditors a/c.
b. debtors a/c.
c. statement of affairs.
d. balance sheet.
Answer: C
236. Branch account is a ________.
a. personal account.
b. real account.
c. nominal account.
d. cash account.
Answer: C
237. Hire purchase price is _______.
a. cash price + down payment.
b. down payment + interest.
c. cash price + interest.
d. cash price + interest.
Answer: C
238. Cash price is __________.
a. hire purchase price – interest.
b. hire purchase price + interest.
c. down payment – interest.
d. down payment + interest.
Answer: A
239. Under hire purchase system is interest is calculated on _______.
a. outstanding balance.
b. hire purchase price.
c. cash price.
d. down payment.
Answer: C
240. Under hire purchase system a buyer becomes the owner of the goods ______.
a. when first installment is paid.
b. when last installment is paid.
c. when down payment is made.
d. when second installment is paid.
Answer: b
241. The reserve which is not disclosed by the balance sheet ________.
a. general reserve.
b. specific reserve.
c. secret reserve.
d. capital reserve.
Answer: C
242. Provision for depreciation a/c has a _________.
a. credit balance.
b. debit balance.
c. closing balance.
d. opening balance.
Answer: A
243. In each department, depreciation is to apportioned on the basis of _________.
a. value of machinery.
b. life time of machinery.
c. production capacity of machinery.
d. power consumed by the machinery.
Answer: A
244. An estimate of assets and liabilities as on a date is called ___________.
a. balance sheet.
b. statement of affairs.
c. statement of capital.
d. valuation balance sheet.
Answer: B
245. Single entry system is ___________.
a. not a systematic account.
b. correct method of accounting.
c. scientific method of account.
d. mathematical method of accounting.
Answer: A
246. Stock Reserve in relation to closing stock appears ________.
a. debit side of debtors a/c.
b. credit side of branch a/c.
c. credit side of debtors a/c.
d. debit side of branch a/c.
Answer: D
247. Stock Reserve in relation to opening stock appears ___________.
a. debit side of debtors a/c.
b. credit side of branch a/c.
c. credit side of debtors a/c.
d. debit side of branch a/c.
Answer: B
248. Rent and Rates are apportioned on the basis of___________.
a. turnover.
b. sales.
c. purchases.
d. floor area.
Answer: D
249. Nature of hire purchase agreement is __________.
a. agreement of sale.
b. option to transfer.
c. option to buy.
d. option to sell.
Answer: C
250. Debtors ledger is known as __________.
a. sales ledger.
b. purchase ledger.
c. general ledger.
d. nominal ledger.
Answer: A