This is Financial Accounting and Analysis MCQ 10th practice set and memorize for your exam. These multiple choice question based on MBA Financial Accounting and Analysis books and term end exam. After practice all mcq of finance, you must try DistPub MCQ Exam Quiz, so that you can assess your preparation.
Q1. Keeping a systematic record of business transactions is known as —–.
Answer
Ans: Bookkeeping
Q2. Accounting is the process of identifying, measuring and communicating economic information to permit —– and —– by the users of the information.
Answer
Ans: Informed Judgments, decisions.
Q3. Accountancy explains ‘why and how to prepare the books of accounts and how to summarize the accounting information and communicate it to the interested parties. (True / False)
Answer
Ans: True
Q4. Identification of transactions, measurement, recording, classification, summarizing and analysing is done using software packages in the present-day environment. (True / False)
Answer
Ans: True
Q5. —– deals with explaining the significance of those data in a manner that the end-users of the financial statement can make a meaningful judgement about the profitability and financial position of the business
Answer
Ans: (a) Interpreting
Q6. Accountants need not explain various factors on what has happened, why it happened, and what is likely to happen under specific conditions. (True / False)
Answer
Ans: False
Q7. Interested users of accounting information are broadly classified into —– and —–.
Answer
Ans: Internal and External
Q8. Expand SEBI —–.
Answer
Ans: Securities Exchange Board of India
Q9. Write against the following statements the terms for which these are made in reference to accounting information
i. —— is a common language used to communicate financial information.
ii. Managing Director, Functional Managers, shareholders, etc., using the accounting information are —–
iii. Ability of the firm to meet all its short term or current obligations as and when they fall due—-
Answer
Ans: (i) Accounting, (ii) Users, (iii) Liquidity
Q10. The maximum percentage of discount that can be allowed by a company without obtaining permission from Central Government is ——.
Answer
Ans: 10%
Q11. They have evolved over years and are accepted as universal rules.
(a) Concepts (b) Conventions (c) Principles (d) Policy
Answer
Ans: Concepts
Q12. Accounting policies are law or rule of conduct. (True / False)
Answer
Ans: False
Q13. Accounting conventions are —– or —–.
Answer
Ans: Customs, traditions
Q14. Choose the correct answer from the following:
i. Accounting concept helps to explain —– of accounting.
(a) What (b) Why (c) How
ii. Which concepts form the basis for the distinction between the expenditure of short term and long term?
(a) Going concern (b) Money measurement (c) Business entity
Answer
Ans: i. (a) why, ii. (b) going concerned
Q15. State true or false
a. The Companies Act 1956 has set a maximum limit of 15 months for the accounting period.
b. An increase in liability (including owner’s equity) and reduction in assets represent uses of funds.
Answer
Ans: (a) True, (b) False
Q16. Fill in the blanks:
a. Earning revenue leads to —– in owner’s equity.
b. The alternative of accrual basis of accounting is —–.
Answer
Ans: (a) increase, (b) cash basis of accounting
Q17. Name the concept for the following applications:
a. Classification of assets as a current asset, fixed assets and fictitious assets
b. Assets –Liabilities = Capital
c. The insurance premium paid in advance
d. Indian Air Force has placed an order for 126 fighter jets to be procured by 2015
Answer
Ans: (a)going concern concept, (b)Dual Aspect concept, (c)Accrual concept, (d)Realization concept
Q18. ‘Relevance’ relates to:
(a) Giving meaningful information (b) not influenced by personal bias
(c) Implementing without much complexity or cost.
Answer
Ans: (a) Giving meaningful information
Q19. Expand GAAP —–.
Answer
Ans: Generally Accepted Accounting Practices
Q20. —– means that the same accounting principles should be used for preparing financial statements year after year.
Answer
Ans: Convention of consistency
Q21. If all units in the same industry follow the same accounting policies it is termed as —– consistency. Choose the right choice –
(a) Vertical (b) Horizontal (c) Three dimensional
Answer
Ans: (c) Three dimensional
Q22. The convention of full disclosure requires that there should be full, —– and —– disclosure of accounting information.
Answer
Ans: Fair and adequate disclosure
Q23. Convention of Materiality is an exception to the Convention of —–.
Answer
Ans: Full disclosure
Give your decision in the following situations:
QN24. A business has unsold stock at the end of the year. The cost price is Rs. 200000 and the market price is Rs. 250000. At which price the unsold stock is recorded?
Answer
Ans: Cost price
Q24. What will be your decision if the cost price in the above case is Rs. 210000?
Answer
Ans: Cost price
Q25. There are at present —– accounting standards.
Answer
Ans: 32
Q26. Simplified Schedule VI is for —– and —– Schedule VI is for SMCs.
Answer
Ans: Non-SMCs and Saral
Q27. The difference between the issue price and face value or nominal value of a share is called —–.
Answer
Ans: Premium
Q28. Securities premium is a —– to the company.
Answer
Ans: Capital gain
Q29. A company issues its shares of Rs.100 each at a discount of 10%, money receivable on each share is —–.
Answer
Ans: Rs. 90
Q30. Assets include —–, —- and —–.
Answer
Ans: Tangible assets, intangible assets, debts
Q31. —– is the residual interest in the assets after deducting liabilities.
Answer
Ans: Capital
Q32. The liabilities of a firm are Rs.60,000 and the capital is Rs.50,000. The total assets are:
(a) 1,10,000 (b) 60,000 (c) 10,000 (d) 50,000
Answer
Ans: (a ) 1,10,000
Q33. The resources (i.e., the assets) are acquired through the finances or funds provided by two sources, viz., owners (i.e., owners’ capital) and —– (i.e., liabilities).
Answer
Ans: Creditors
Q34. Resources = —–.
Answer
Ans: Source of Finance
Q35. The left side of the ‘T’ account is known as the —– side.
Answer
Ans: Debit
Q36. Find the value of the following:
a) If the total assets are Rs. 87,000 and the liabilities are Rs. 47,000, find out the amount of capital.
b) If the capital of the proprietor is Rs.4,00,000 and the total assets are Rs.6,00,000, what is the amount of liabilities to outsiders?
c) If creditors are Rs. 56,000, bank overdraft is Rs.1,00,000 and outstanding expenses are Rs.8,000, what is the total amount of assets?
d) Fixed assets are Rs.70,000 and current assets are Rs.1,00,000 and the creditors are Rs.30,000. What is capital?
Answer
Ans: (a) 40,000 (b) 2,00,000 (c) 1,64,000 (d) 1,40,000
Q37. Classify the following accounts –
a) Insurance premium paid a/c
b) Prepaid rent a/c
c) Furniture and Fixtures a/c
d) Bank overdraft a/c
e) Capital a/c
f) Sales promotion expenses a/c
g) Discount received a/c
h) Trade creditors a/c
Answer
Ans: a) Insurance premium paid a/c – expenses a/c, b) Prepaid rent a/c – asset a/c,
c) Furniture and Fixtures a/c – asset a/c, d) Bank overdraft a/c – liability a/c,
e) Capital a/c – capital a/c, f) Sales promotion expenses a/c – expenses a/c,
g) Discount received a/c – revenue a/c, h) Trade creditors a/c – liability a/c
Q38. Fill in the blanks:
a) —– deals with the financial obligations of the firm on outsiders. b) Patents, trademarks are —– assets.
Answer
Ans: (a) liability, (b) intangible
Q39. Debit means:
(a) An increase in the asset (b) an increase in liability
(c) A decrease in the asset (d) an increase in owner’s equity
Answer
Ans: increase in asset
Q40. Bank charges are entered in the passbook first. (True / False)
Answer
Ans: True
Q41. Banks make certain payments on behalf of the customer under his standing instructions.
(True / False)
Answer
Ans: True
Q42. In the case of cheques issued but not encashed, the balance of the passbook will be less than the balance of the Cash Book. (True / False)
Answer
Ans: False
Q43. Direct deposits in the bank by a customer would increase the balance shown by the Pass Book. (True / False)
Answer
Ans: True
Q44. Overdraft means —– balance.
Answer
Ans: Negative
Q45. The balance of the cash book is —– in case of an overdraft.
Answer
Ans: Negative
Q46. Bank charges will —– in case of overdraft as per Cash Book
Answer
Ans: Increase
Q47. Cheques issued but not encashed will —– the overdraft as per Pass Book.
Answer
Ans: Decrease
Q48. A bill of exchange is an instrument, in writing, containing an —– signed by the maker.
Answer
Ans: Unconditional Order
Q49. The person who draws the bill is called —– and the person who accepts the bill is called —–.
Answer
Ans: Drawer; Drawee
Q50. The person to whom the bill is endorsed is called —–.
Answer
Ans: Endorsee
Q51. The person who endorses the bill is called —–.
Answer
Ans: Endorser
Q52. State whether the following statements are true or false.
a. A bill of exchange is a negotiable instrument.
Answer
Ans: True
b. A bill of exchange provides easy financial assistance to the creditor.
Answer
Ans: True
c. A bill of exchange is not discountable.
Answer
Ans: False
d. Bill of exchange is drawn by the debtor and duly accepted by the creditor.
Answer
Ans: False
Q53. Fill in the blanks:
i. —– sends the bill to —– for acceptance.
Answer
Ans: drawer, drawee
ii. A bill of exchange before its acceptance is known as —–.
Answer
Ans: Draft
iii. —– acceptance is a bill that is accepted without any conditions.
Answer
Ans: General
Q54. Qualified acceptance is a bill that has some conditions laid by the drawer. (True or False)
Answer
Ans: False. Drawee add conditions to the bill before acceptance
Q55. Fill in the blanks with a suitable word:
i. —– is the date on which a bill becomes payable.
Answer
Ans: due date
ii. The —– extra days given for the bill is known as grace days.
Answer
Ans: Three
iii. For a bill drawn on 1st Oct 2008 at 3 months, what will be the maturity date?
Answer
Ans: 4th Jan 2009
Q56. Fill in the blanks with a suitable word/sentence:
i. A bill duly met on the due date is called —–.
Answer
Ans: Honouring/Payment/Discharge of Bill
ii. A bill which is not paid by drawee on the due date is called —–.
Answer
Ans: Dishonour of Bill
iii. A draws a bill on B and later on endorses the bill to C. On the due date, to whom B has to pay the money?
Answer
Ans: C
iv. What is the process of collecting money from the bank after surrendering the bill by the drawer for a less amount?
Answer
Ans: Discounting
v. In case of discounting of the bill, which account needs to be credited in the books of the drawer?
Answer
Ans: Bank Account
Q57. Interest allowed by the bank will be —– in case of the favourable balance of cash book.
Answer
Ans: Added to
Q58. The number of persons required to form the partnership firms is —–
Answer
Ans: Two
Q59. Partnership firm will be formed by —–
Answer
Ans: Agreement
Q60. All agreements of partnership firm are either —– or —–
Answer
Ans: Written, Oral
Q61. The written form of agreement of a partnership is called —–
Answer
Ans: Partnership Deed
Q62. The sacrificing ratio will be calculated by subtracting —– share from —– share of profits of the existing partners.
Answer
Ans: New, Old
Q63. Whenever a new partner is joined, the partnership firm will be —–
Answer
Ans: Reconstituted
Q64. The ratio in which partners surrender their profits is known as —–
Answer
Ans: Sacrifice
Q65. When the new partner share is given, the sacrificing ratio of old partners will be generally —– ratio.
Answer
Ans: Existing
Q66. If Veer and Trisha are partners sharing profits in the ratio of 5:3. What will be their sacrificing ratio if Rahul is admitted for 1/8 share of profit in the firm?
Answer
Ans: 5:3
Q67. What entry to be made when goodwill is paid privately?
Answer
Ans: No entry
Q68. The amount of goodwill brought by the new partner will be —– to the goodwill account.
Answer
Ans: Credited
Q69. Amount of goodwill brought by the new partner will be transferred to the existing partners in —– ratio.
Answer
Ans: Sacrificing
Q70. If the new partner is unable to bring his share of goodwill, his account will be —– and the existing partners’ capital accounts will be —–.
Answer
Ans: Debited and credited
Q71. Whenever assets are increased due to reassessment, the Revaluation account will be —–.
Answer
Ans: Credited
Q72. Whenever the liabilities are decreased, the Revaluation account will be —–.
Answer
Ans: Credited
Q73. Revaluation account will be debited for the decrease in the value of —–.
Answer
Ans: Assets
Q74. Unrecorded assets will be —– to the Revaluation account.
Answer
Ans: Credited
Q75. Unrecorded liabilities will be —– to Revaluation account.
Answer
Ans: Debited
Q76. Revaluation account is debited for an increase in the value of —–.
Answer
Ans: Liabilities
Q77. Profit on revaluation is transferred to the —– of the partners’ capital account.
Answer
Ans: Existing partners
Q78. Reserve should be distributed amongst the existing partners in —–.
Answer
Ans: Existing ratio.
Q79. Accumulated Losses are —– in the existing partner’s capital account in the existing profit sharing ratio.
Answer
Ans: Debited
Q80. The ratio gained by the existing partners due to the retirement of a partner is called as —–
Answer
Ans: Gaining ratio
Q81. A, B and C are partners sharing profits and losses in the ratio of 1:2:3. If B retires what could the new profit sharing ratio between A and C?
Answer
Ans: 1:3
Q82. The share of the goodwill of the retiring partner will be debited to his capital account in case of retirement. (True / False)
Answer
Ans: False
Q83. Goodwill is recorded in the books only when it is paid in money. (True / False)
Answer
Ans: True
Q84. The account of the remaining partners will be debited and the retiring partner account is credited with the share of goodwill in the gaining ratio. (True / False)
Answer
Ans: True
Q85. In case the goodwill account is written off the capital account of all partners is credited. (True / False)
Answer
Ans: True
Q86. The revaluation account credit balance indicates —–.
Answer
Ans: Profit
Q87. Reserve shown in the Balance sheet is transferred to the —– side of the retiring partner.
Answer
Ans: Credit
Q88. When the value of the assets is decreased, which account needs to be debited and which accounts needs to be credited?
Answer
Ans: Revaluation account to be debited and assets account to be credited.
Q89. The diminution in the cost of an asset during a particular period due to wear and tear and obsolescence is known as —–.
Answer
Ans: Depreciation
Q90. Depreciation is treated as a/an —– in the Profit & Loss account.
Answer
Ans: Expense
Q91. Due to new inventions the assets become useless and this increases the value of the asset.
Answer
Ans: False
Q92. In the case of Patents the reason for the decrease in the value of the asset is
a. Obsolescence
b. Physical Wear & Tear
c. Expiry of Legal rights
d. Accident
Answer
Ans: (c) Expiry of Legal rights
Q93. —– must be considered as a part of the cost of production of goods, as goods are produced with the help of fixed assets.
Answer
Ans: Depreciation
Q94. —– is the value which the asset will fetch when discarded as useless.
Answer
Ans: Scrap value
Q95. Under the —– method the asset is depreciated at a fixed percentage calculated on the debit balance of the asset which is diminished year after year on account of depreciation.
Answer
Ans: Written down value method
Q96. In the Annuity method, the amount of —– remains the same during the lifetime of the asset.
Answer
Ans: Depreciation
Q97. —– is also known as the sinking fund method or amortization fund method.
Answer
Ans: Depreciation fund method
Q98. In the straight-line method the amount of depreciation decreases year after year. (True / False)
Answer
Ans: False
Q99. In the Depreciation fund method, the asset appears in the balance sheet year after year at its original cost while the depreciation fund account appears on the liability side. (True / False)
Answer
Ans: True
Q100. The —– of a depreciable asset should be estimated after considering the expected physical wear and tear, obsolescence & legal or other limits on the use of the asset.
Answer
Ans: Useful life
Q101. Depreciation is considered as a —–.
a. source of funds
b. working capital
c. source of funds for replacement of assets
d. All the above
Answer
Ans: d. All the above
Q102. In the case of the death of the partner, accounting treatment will be similar to that of a retiring partner. (True / False)
Answer
Ans: True
