1. The amount of Owners‘ equity in a business is not affected by
Correct : A. The percentage of Total Assets held in cash
2. When a Fixed Asset is obtained as a gift, the account to be credited is
Correct : B. Capital Reserve A/c
3. Which of the following is/are fixed asset(s)?
Correct : C. Patents
4. Bank Overdraft is shown as a
Correct : A. Current Liability ;
5. Which of the following is NOT a characteristic of Cash Book?
Correct : D. It always shows debit balance. It can never show credit balance
6. If Machinery Account is debited with the amount of repairs incurred on the machine, this is an
example of
Correct : B. Error of principle
7. Which of the following is true?
Correct : A. Bank Account is a Personal Account
8. Which of the following is a liability of a firm?
Correct : D. Credit balance of Bank column of Cash Book
9. Which of the following errors is an error of principle?
Correct : C. Legal charges for acquisition of building for ` 500 was entered in the Legal Expenses Account
10. The book which all accounts of the firm are maintained is known as
Correct : B. Ledger ;
11. ` 500 paid as cartage on new Plant and Machinery, this was debited to Carriage Inward A/c. This is an error of-
Correct : A. Principle ;
12. ` 4,500 paid to Madan as salary for the month of December‘12, this was debited to his A/c, this is a/an ……………………… error.
Correct : C. Commission ;
13. While checking the accounts of ABC the following discrepancies were noticed, even though the Trial
Balance was made to balance by putting the difference to Suspense A/c.
(i) Sales day book for the month of June‘12 was found overcast by ` 7,000.
(ii) A credit purchase of ` 3,000 was omitted to be recorded in the days book.
(iii) ` 4,300. Received from A credited to A A/c ` 3,400.
(iv) Purchase of Office Equipment worth ` 5,000 included in trading purchases.
From the above details what would have been the difference in Trial Balance which was made to balance by opening Suspense A/c.
Correct : D. Credit side more by ` 6,100
14. Cash Account is a –
Correct : C. Real A/c ;
15. Rent outstanding for the month of December‘12 will appear on-
Correct : D. Nowhere
16. Goods worth ` 5,000 purchased from A on credit will be recorded on-
Correct : C. Nowhere in the Cash Book ;
17. Which column of Cash Book is never balanced.
Correct : A. Discount Column ;
18. The total of debit side of discount column of Cash Book is-
Correct : B. Posted to Discount Allowed A/c;
19. Prepaid rent is a –
Correct : B. Representative Personal A/c ;
20. Which of the following assets is a fictitious asset
Correct : D. Preliminary expenses A/c
21. Nominal A/c represents-
Correct : D. Both (a) and (b)
22. SBI A/c is a –
Correct : B. Artificial Personal A/c ;
23. Liability A/c has……………. Balance
Correct : B. Credit ;
24. The Sales Returns Day Book would include:
Correct : C. Stock that customers have returned ;
25. An Investment in one asset A/c may lead to –
Correct : C. Each a or b ;
26. The process of recording business transaction in a book of original entry is known as-
Correct : A. Journals ;
27. The type of A/c with a named credit balance is-
Correct : C. Revenue A/c ;
28. Overcasting of purchases journal would affect
Correct : B. Purchase account ;
29. Any income or profit derived by carrying on the business or during the course of business is called-
Correct : B. Revenue Receipt ;
30. Amount received from the proprietors as capital or loan receipt is treated as-
Correct : A. Capital Receipt ;
31. When the benefits of revenue expenditure is available for a period of two or three years, the
expenditure is known as-
Correct : B. Deferred Revenue Expenditure ;
32. Endowment fund receipt is traded as-
Correct : A. Casual Receipt ;
33. Legacy are generally-
Correct : A. Capitalized ;
34. Interest Account will have-
Correct : C. Debit or Credit balance ;
35. Purchase A/c will have-
Correct : B. Debit balance ;
36. Which of the following voucher is used to record transactions that do not affect bank & cash?
Correct : A. Journal Voucher ;
37. Opening entries are generally passed through-
Correct : A. General Journal ;
38. Purchases made on credit not recorded at all would affect
Correct : C. Purchases account and supplier's account
39. Which of the following is the example of contingencies?
Correct : D. All of (a), (b) and (c) above.
40. Which of the following is not a contingent liability?
Correct : B. Debts included on debtors which are doubtful in nature
41. In an account if debit side > credit side, the balance is known as the:
Correct : B. Debit balance ;
42. Total depreciation of an asset cannot exceed its:
Correct : A. Scrap value ;
43. Amount paid to Gagan posted to the credit side of his account would affect
Correct : A. Gagan's account ;
44. Which of the following statements is/are true ?
Correct : D. Cash Book is a subsidiary book as well as a ledger
45. Which of the following is true regarding closing entries?
Correct : D. They must be made after the adjusting entries but before the reversing entries
46. Closing stock is generally valued at
Correct : D. Cost price or Market price whichever is lower
47. Which of the following assets is/are to be valued at the lower of cost and net realizable value?
Correct : B. Inventories
48. A few errors committed in Ahhiwalia's books of account are given below. State which errors would
affect the Trial Balance. (a) Sales of `950 to Ram completely omitted from books of account (b) Purchases of `720 from Shyam entered in the purchases journal as `700 (c) Purchases Journal is overcast by `1,000 (d) Sales returns journal is undercast by `200 (e) Amount paid to Agarwal wrongly posted to the debit to Mittal's account (f) Bank overdraft shown under debit column in the Trial Balance (g) Sales of `500 to Sadiq entered in sales journal as sales to Mushtaq (h) Wages paid for installation of machinery debited to wages account
Correct : B. c, d and f
49. Which of the following methods is not a practical way of realizing revenue?
Correct : D. Moving average method
50. The amount payable to a person as consideration for the use of rights vested in him is
Correct : B. Royalty
51. During the year 2011-2012, the value of closing inventory was overstated by ` 25,000. Which of the following is true?
Correct : C. The retained earnings was overstated during 2011-2012 and retained earnings will be understated during 2012-2013
52. Which of the following is true?
Correct : D. Error of principle involves an incorrect allocation of expenditure or receipt between capital and revenue
53. Journal proper is meant for recording
Correct : C. All such transactions for which no special journal has been kept by the business
54. The adjustment to be made for income received in advance is:
Correct : B. Deduct income received in advance from respective income and show it as a liability
55. Which of the following statements is correct?
Correct : D. The Trial Balance has no statutory importance from the point of view of law
56. While finalizing the current year‘s accounts, the company realized that an error was made in the calculation of closing stock of the previous year. In the previous year, closing stock was valued more by ` 50,000. As a result
Correct : C. Previous year‘s profit is overstated and current year‘s profit is understated.
57. Which of the following is not correct?
Correct : D. Errors of commission arise when any transaction is recorded in a fundamentally incorrect manner
58. Which of the following errors is an error of omission?
Correct : C. The total of purchase journal has not been posted to the Purchase Account
59. If goods worth ` 1,750 returned to a supplier is wrongly entered in sales return book as ` 1,570 , then
Correct : D. Gross Profit will decrease by ` 3,320
60. For the past 3 years, DK Ltd. has failed to accrue unpaid wages earned by workers during the last week of the year. The amounts omitted, which were considered material, were as follows: March 31,2010 - ` 56,000 March 31, 2011 - ` 51,000 March 31, 2012 - ` 64,000 The entry on March 31, 2012 to rectify these omissions would include a
Correct : D. Debit to wage expense for ` 13,000
61. Purchase journal is kept to record
Correct : B. All credit purchases of goods ;
62. The beginnings inventory of the current year is overstated by ` 5,000 and closing inventory is
overstated by ` 12,000. These errors will cause the net income for the current year by
Correct : C. 7,000 (overstated)
63. Which of the following errors affects the agreement of a Trial Balance?
Correct : A. Mistake in balancing an account
64. Which of the following statements is/are true?
(i) An error in casting the subsidiary books is an error of commission
(ii) An error in wrong casting of the sales day book will not affect the personal accounts of debtors
(iii) Mistake in transferring the balance of an account to the Trial Balance will not affect the agreement of the Trial Balance
(iv) The mistake of treating a liability as an income or vice versa will not affect the agreement of a Trial Balance
Correct : D. (i),(ii) and (iv) above
65. Which of the following should not be treated as revenue expenditure?
Correct : C. Sales tax paid in connection with the purchase of office equipment
66. Capital expenditure is an expenditure which
Correct : C. Results in the acquisition of a permanent asset
67. Which of the following is not a deferred revenue expenditure?
Correct : D. Legal expenses incurred in defending a suit for breach of contract to supply goods
68. Any donation received for a specific purpose is a
Correct : D. Capital receipts
69. Which of the following is an item of capital expenditure?
Correct : C. Installation charges paid in conjunction with the purchase of Office Equipment
70. Which of the following statements is true?
Correct : B. The distinction between capital and revenue items is important because it is of fundamental importance to the determination of profits
71. The balance of which of the following accounts do not disappear, once they are debited/credited to
Trading Account.
Correct : D. Closing stock
72. Which one of the following should be considered a revenue expenditure?
Correct : C. Damage paid on account of breach of a contract to supply certain goods
73. Which of the following statements are / is true? ―Events after Balance Sheet‖ are
Correct : C. The events after Balance Sheet date but before its approval by the board
74. Which one of the following is a capital expenditure?
Correct : A. Compensation paid to Directors on termination of their services
75. Which of the following enhances the earning capacity of an asset?
Correct : D. Both (a) and (c) above
76. Which of the following items should not be capitalized relating to fixed assets?
Correct : D. Administration and general expenses
77. Which of these errors affect only one account
Correct : D. All the three
78. Which of these errors affect two or more accounts
Correct : D. All the three
79. Which of the following error is an error of principle
Correct : B. 5,000 incurred on installation of new plant debited to travelling expenses A/c
80. Which of the following is an one sided error
Correct : B. 500 being expense on travelling expense credited to travelling expenses;
81. Any gain on the sale of non-current assets should be _________ from the net profit and the loss must
be _________to the net profit in determining fund from operation
Correct : C. Deducted, Added ;
82. Cash book records—
Correct : B. All types of cash receipts and payments ;
83. In a three column cash book ---------- does not exist
Correct : C. Petty cash column ;
84. Which of these transactions will not be recorded in cash book—
Correct : C. Salary remained outstanding
85. The closing balance of a petty cash book is a / an —
Correct : C. Assets ;
86. Which column of a cash book will not have credit balance —
Correct : C. Cash column ;
87. Petty cash balance is a/an —
Correct : A. Assets ;
88. Which of these is a Part of cash in hand
Correct : A. Postage stamps ;
89. Which of the following is a Real A/c
Correct : C. Building A/c ;
90. Which of the following is a Personal A/c
Correct : C. SBI A/c ;
91. Which of the following is a representative Personal A/c
Correct : A. Outstanding Salary A/c ;
92. Which of the following is a Nominal A/c
Correct : B. Rent A/c ;
93. Goodwill A/c is a/an —
Correct : C. Intangible Asset ;
94. Posting is the process of —
Correct : C. Entering in the ledger the information contained in the ledger ;
95. A book wherein various accounts are opened is called—
Correct : C. Ledger ;
96. Which of these is not a special purpose journal
Correct : C. Debtors journal ;
97. The periodic total of sales day book is posted to —
Correct : A. Sales A/c ;
98. The periodic total of purchase day book is posted to —