Financial Accounting - MCQs

1. The customer’s account with the bank is called as ___.

Ans: Bank Statement/Pass book

2. In the bank column of the cash, the cheques deposited are entered on the ___ book.
Ans: Debit side

3. Bank Reconciliation statement is prepared to ___ the bank balance as shown by the cash book and the bank
statement.
Ans: Reconcile

4. Cheques issued are posted on the ___ side of the bank column of Cash Book.
Ans: Credit

5. The credit column of pass book should be equal to ____ column of cash book and debit column of pass book
should equal to ___ column of cash book, if there are no differences.
Ans: Debit, Credit

6. Bank credits firm’s account as soon as it receives cheques from the firm. (True / False)
Ans: False

7. Bank charges are entered in the pass book first. (True / False)
Ans: True

8. Banks make certain payments on behalf of the customer under his standing instructions.
(True / False)
Ans: True

9. In case of cheques issued but not encashed, the balance of pass book will be less than the balance of Cash
Book. (True / False)
Ans: False

10. Direct deposits in the bank by a customer would increase the balance shown by the Pass Book. (True /
False)
Ans: True

From the following transactions, please specify which transactions are to be added or deducted to the
cash book balance given: Mention “A” if to be added and “D” if to be deducted:

11. Interest allowed by Bank ( )

Ans: A

12. Cheques deposited with bank and dishonoured ( )

Ans: D

13. Cheques issued but not encashed ( )

Ans: A

14. Bank charges ( )

Ans: D

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15. Insurance premium paid by bank ( )
Ans: D

16. Dividends on share collected by bank ( )

Ans: A

17. Overdraft means ___ balance.

Ans: Negative

18. The balance of cash book is ___ in case of overdraft.

Ans: Negative

19. Bank charges will ___ in case of overdraft as per Cash Book
Ans: Increase

20. Cheques issued but not encashed will ___ the overdraft as per Pass Book.
Ans: Decrease

21. A bill of exchange is an instrument, in writing, containing an ___ signed by maker.

Ans: Unconditional Order

22. The person who draws the bill is called as ___ and the person who accepts the bill is called as ___.
Ans: Drawer; Drawee

23. The person to whom the bill is endorsed is called as ____.

Ans: Endorsee

24. The person who endorses the bill is called as ___.

Ans: Endorsor

25. State whether the following statements are true or false.

a. A bill of exchange is a negotiable instrument.
Ans: True

b. A bill of exchange provides easy financial assistance to the creditor.

Ans: True

c. A bill of exchange is not discountable.

Ans: False

d. Bill of exchange is drawn by debtor and duly accepted by creditor.

Ans: False

26. Fill in the blanks:

i. ____ sends the bill to ___ for acceptance.
Ans: drawer, drawee

ii. A bill of exchange before its acceptance is known as ____.

Ans: Draft

iii. ___ acceptance is a bill that is accepted without any conditions.

Ans: General
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27. Qualified acceptance is abill that has some conditions laid by the drawer. (True or False)
Ans: False. Drawee add conditionsto the bill before acceptance

28. Fill in the blanks with suitable word:

i. ___ is the date on which a bill becomes payable.
Ans: due date

ii. The ____ extra days given for the bill is known as grace days.
Ans: Three

iii. For a bill drawn on 1st Oct 2008 at 3 months, what will be the maturity date?
Ans: 4th Jan 2009

29. Fill in the blanks with a suitable word/sentence:

i. A bill duly met on due date is called as ___.
Ans: Honouring/Payment/Discharge of Bill

ii. A bill which is not paid by drawee on due date is called as ___.
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?
Ans: C

iv. What is the process of collecting money from bank after surrendering the bill by the drawer for a less
amount?
Ans: Discounting

v. In case of discounting of bill, which account needs to be credited in the books of drawer?
Ans: Bank Account

30. Interest allowed by bank will be ___ in case of the favourable balance of cash book.
Ans: Added to

31. The number of persons required to form the partnership firms is ___
Ans: Two

32. Partnership firm will be formed by ___

Ans: Agreement

33. All agreements of partnership firm are either ___ or ____

Ans: Written, Oral

34. The written form of agreement of a partnership is called ___

Ans: Partnership Deed

35. The sacrificing ratio will be calculated by subtracting ____ share from ___ share of profits of the existing
partners.
Ans: New, Old

36. Whenever a new partner is joined, the partnership firm will be ___
Ans: Reconstituted
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37. The ratio in which partners surrender their profits is known as ___
Ans: Sacrifice

38. When the new partner share is given, the sacrificing ratio of old partners will be generally ___ ratio.
Ans: Existing

39. 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?
Ans: 5:3

40. What entry to be made when goodwill is paid privately?

Ans: No entry

41. The amount of goodwill brought by the new partner will be ____ to the goodwill account.
Ans: Credited

42. Amount of goodwill brought by the new partner will be transferred to the existing partners in ____ ratio.
Ans: Sacrificing

43. If the new partner is unable to bring his share of goodwill, his account will be ___ and the existing partners’
capital accounts will be ___.
Ans: Debited and credited

44. Whenever assets are increased due to reassessment, Revaluation account will be ___.
Ans: Credited

45. Whenever the liabilities are decreased, Revaluation account will be ___.
Ans: Credited

46. Revaluation account will be debited for the decrease in the value of ___.
Ans: Assets

47. Unrecorded assets will be ____ to Revaluation account.

Ans: Credited

48. Unrecorded liabilities will be____ to Revaluation account.

Ans: Debited

49. Revaluation account is debited for an increase in the value of ___.

Ans: Liabilities

50. Profit on revaluation is transferred to the ___ of the partners’ capital account.
Ans: Existing partners

51. Reserve should be distributed amongst the existing partners in ___.

Ans: Existing ratio.

52. Accumulated Losses are ___ in the existing partner’s capital account in the existing profit sharing ratio.
Ans: Debited

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53. The ratio gained by the existing partners due to the retirement of a partner is called as ___
Ans: Gaining ratio

54. 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?
Ans: 1:3

55. The share of the goodwill of the retiring partner will be debited to his capital account in case of retirement.
(True / False)
Ans: False

56. Goodwill is recorded in the books only when it is paid in money. (True / False)
Ans: True

57. The account of remaining partners will be debited and the retiring partner account is credited with the share
of goodwill in the gaining ratio. (True / False)
Ans: True

58. In case goodwill account is written off the capital account of all partners is credited. (True / False)
Ans: True

59. The revaluation account credit balance indicates.___.

Ans: Profit

60. Reserve shown in the Balance sheet is transferred to the ____ side of retiring partner.
Ans: Credit

61. When the assets value is decreased, which account needs to be debited and which accounts needs to be
credited?
Ans: Revaluation account to be debited and assets account to be credited.

62. The diminution in the cost of an asset during a particular period due to wear and tear and obsolescence is
known as ____.
Ans: Depreciation

63. Depreciation is treated as a/an ____ in the Profit & Loss account.
Ans: Expense

64. Due to new inventions the assets become useless and this increases the value of the asset.
Ans: False

65. In the case of Patents the reason for decrease in the value of asset is
a. Obsolescence b. Physical Wear & Tear
c. Expiry of Legal rights d. Accident
Ans: (c) Expiry of Legal rights

66. ___ must be considered as a part of the cost of production of goods, as goods are produced with the help of
fixed assets.
Ans: Depreciation

67. ___ is the value which the asset will fetch when discarded as useless.
Ans: Scrap value
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68. Under ____ method the asset is depreciated at fixed percentage calculated on the debit balance of the asset
which is diminished year after year on account of depreciation.
Ans: Written down value method

69. In Annuity method, the amount of ___ remains the same during the life time of the asset.
Ans: Depreciation

70. ____ is also known as sinking fund method or amortization fund method.
Ans: Depreciation fund method

71. In straight line method the amount of depreciation decreases year after year. (True / False)
Ans: False

72. In Depreciation fund method, the asset appears in the balance sheet year after year at its original cost while
depreciation fund account appears on the liability side. (True / False)
Ans: True

73. 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.
Ans: Useful life

74. Depreciation is considered as a ___.

a. source of funds b. working capital
c. source of funds for replacement of assets d. All the above
Ans: d. All the above

75. In case of death of the partner, accounting treatment will be similar to that of retiring partner. (True / False)
Ans: True