FINANCIAL ACCOUNTING-I

II B.Sc Computer Science

MULTIPLE CHOICE QUESTIONS AND ANSWERS

1. Recording of transactions and events as & when they occur and classifying
them into suitable account heading is the subject matter of

(a) Book-keeping

(b) Management Accounting

(c) Cost Accounting

(d) Financial Accounting

Answer (a) Book-keeping

2. Book-keeping is mainly concerned with the recording of financial data relating

to the in significant and orderly manner.

(a) Company

(b) Business

(c) Monetary

(d) Personal

Answer (b) Business

3. Basic function of accounting is to

(a) Summarise the data

(b) Assist the management in performing functions effectively

(c) Interpret the financial data

(d) Record all business transactions of monetary nature

Answer (d) Record all business transactions of monetary nature

4. There are two systems of accounting i.e. cash basis system of accounting and
basis system of accounting

(a) Dual Aspect

(b) Accrual

(c) Single Entry

(d) Double entry

Answer (b) Accrual

5. The alternative to cash basis of accounting is called ……… basis of

accounting

(a) Accrual

(b) Due

(c) Receipt

(d) Credit

Answer (a) Accrual

6. The system of recording transactions based on dual aspect concept is called

(a) Double Entry System

(b) Single Entry System

(c) Accrual Basis of Accounting

(d) Double Account System

Answer (a) Double Entry System

7. As per dual aspect concept

(a) Assets + Capital Liabilities

(b) Assets + Liabilities = Capital

(c) Assets = Liabilities + Capital

(d) Assets = Liabilities-Capital

Answer (c) Assets = Liabilities + Capital

8. Liabilities of a firm are 8,00,000 and capital of the proprietor is 7,00,000. Then
total

assets are:

(a) 2,00,000

(b) 15,00,000

(c) 4,00,000.

(d) 6,00,000

Answer (b) 15,00,000

9. Assets are 14,00,000 and liabilities are 6,00,000. His capital would be

(a) 12,00,000

(b) 10,00,000

(c) 2,00,000.

(d) 8,00,000

Answer (d) 8,00,000

10. Capital + Liabilities =

(a) Fixed Assets

(b) Current Assets

(c) Losses

(d) Total Assets

Answer (d) Total Assets

11. Which of the following will be goods for a business run by a footwear
merchant?

(a) Tables and Chairs

(b) Pens and Pencils

(c) Shoes

(d) Electrical Appliances

Answer (c) Shoes

12. Which of the following is not a business transaction?

(a) Goods purchased from 1000

(b) Placed an order for purchasing the goods for 2000

(c) Received interest from Bank 5000

(d) Rent paid to Landlord 3000

Answer (b) Placed an order for purchasing the goods for 2000

13. Which of the following item is not financial in nature :

(a) Purchase of machine for cash

(b) Withdrawal of cash by proprietor for his domestic use

(c) Dismissing an employee from job

(d) Purchase of a bike on credit

Answer (c) Dismissing an employee from job

14. Total assets of a trader are 7,25,000 and outside liabilities are 4,25,000;
owner’s equity will be:

(a) 2,50,000

(b) 3,00,000

(c) None of the above

(d) 6,00,000

Answer (b) 3,00,000

15. Maintaining of systematic records of all the business transactions is termed

as

(a) Recording

(b) Accounting

(c) Classification of Records

(d) None of the above

Answer (c) Classification of Records

16. Accounting in the modern time is treated as

(a) The source of business information

(b) The language of business

(c) An art of recording, classifying and summarizing transactions in monetary

units

(d) All of the above

Answer (d) All of the above

17.External users of accounting information may involve

(a) Purchase Manager

(b) Sales Manager

(c) Customer

(d) Board of Directors

Answer (c) Customer

18. Which is not dependent on accounting?

(a) Book keeping

(b) Cost accounting

(c) Financial accounting

(d) Management decision making

Answer (a) Book keeping

19. Accounting is treated as both science and an

(a) Economics

(b) Commerce
(c) Science

(d) Art

Answer (d) Art

20. Book Keeping is made to maintain a detail record of

(a) None of the above

(b) College transaction

(c) Business transaction

(d) Selling transaction

Answer (c) Business transaction

21. The primary objective of accounting is to.

(a) Abnormal records

(b) Normal records

(c) Unsystematic record

(d) Systematic record

Answer (d) Systematic record

22. Users of accounting informations are classified in to two parts i.e. External
Users and

(a) Share holder

(b) Customer

(c) Internal users

(d) External users

Answer (c) Internal users

23. Book Keeping is regarded as the step of accounting.

(a) Fourth

(b) Secondary

(c) Third

(d) Primary

Answer (d) Primary

24.The actual record making phase (l.e. accounting is usually called. recording,
classifying and summarising) of accounting is called

(a) Trail balance

(b) Ledger

(c) Book keeping

(d) Accounting

Answer (c) Book keeping

25. Accounting is both

(a) None of the above

(b) History and geography

(c) Commerce and management

(d) Arts and science

Answer (d) Arts and science

26. There are three approaches to accounting which are widely accepted: (a)
Cash basis (b)

(a) Book keeping

(b) Accrual basis and Accounting basic

(c) Mixed or hybrid

(d) None of the above

Answer (c) Mixed or hybrid

27. Under which basis of accounting actual cash receipts and actual cash
payments are

Recorded.

(a) Noncash

(b) Cash

(c) Accrual

(d) All of the above

Answer (b) Cash

28. The alternative to cash basis of accounting is called basis of accounting

(a) Hybrid

(b) Accrual

(c) Cash

(d) None of the above

Answer (b) Accrual

29. The system of accounting in which only personal accounts with or without
subsidiary books are maintained is known as

(a) Double

(b) Triple

(c) Single entry

(d) None

Answer (c) Single entry

30. This method of writing every transaction in two accounts is known as

(a) Double entry

(b) Triple

(c) Single entry

(d) None

Answer (a) Double entry

31. Under which basis of accounting both cash basis and accrual basis are
followed

(a) Accrual basis

(b) Cash basis

(c) Mixed or hybrid

(d) None of the above

Answer (c) Mixed or hybrid

32. Any exchange of money or money’s worth between two parties is called

(a) Business transaction

(b) Non business transaction

(c) Register transaction

(d) None of the above

Answer (a) Business transaction

33. In accounting, transactions of similar nature are added or subtracted at a

particular place.

known as

(a) Khata

(b) Account

(c) Register

(d) Book

Answer (b) Account

34. A person to whom money is owing or payable is called a

(a) Creditor

(b) Debtor

(c) Owner

(d) None of the above

Answer (a) Creditor

35. owner’s financial interest or holding in the business and is represented by the
value of net assets (L.e., total assets less liabilities.) is termed as

(a) None of the above

(b) Liability

(c) Assets

(d) Capital

Answer (d) Capital

36. Any physical thing or right owned that has a money value is an

(a) Assets

(b) Liabilities

(c) Money

(d) All of the above

Answer (a) Assets

37. A claim which can be enforced against the assets of the firm is called

(a) Debenture

(b) Money

(c) Equity

(d) None of the above

Answer (c) Equity

38. An inflow of assets which results in an increase in the owner’s equity is

termed as
(a) Liability

(b) Expenses

(c) Income

(d) None of the above

Answer (c) Income

39. Any amount or goods withdrawn by the owner of a business for personal use
is called

(a) Drawing

(b) Liability

(c) Expenses

(d) Income

Answer (a) Drawing

40. Any written document in support of a business transaction is called a

(a) Voucher

(b) Bill

(c) Account

(d) Register

Answer (a) Voucher

MCQ on GAAP(Generally Accepted Accounting

Principles)
Financial Accounting MCQ – 2
PDF
1. According to the going concern concept, a business entity should assumed to
have

(a) a very short life

(b) an indefinite life

(c) a long life

(d) None of the above

Answer (c) a long life

2. In the balance sheet, Contingent liability is shown because of

(a) Convention of disclosure

(b) Convention of materiality

(c) Convention of consistency

(d) None of the above

Answer (a) Convention of disclosure

3. Revenue is considered as earning, when

(a) Sale is effected

(b) Production is done

(c) Cash is received

(d) None of the above

Answer (a) Sale is effected

4. Accounting does not record non-financial transactions because of which

accounting principle
(a) Accrual concept

(b) Entity concept

(c) Measurement concept

(d) None of the above

Answer (c) Measurement concept

5. Which concepts states that even the owner of the capital may be treated as a
creditor of the business?

(a) Money measurement concept

(b) Cost concept

(c) Business Entity concept

(d) None of the above

Answer (c) Business Entity concept

6. Appending notes to the financial statements as per …… convention

(a) Convertism

(b) Disclosure

(c) Consistency

(d) Materiality

Answer (b) Disclosure

7. Accounting of a pen as an expense and not as an asset is due to

Convention

(a) Materiality
(b) Conservatism

(c) Consistency

(d) Disclosure

Answer (a) Materiality

8. Following the written down value method of depreciation on particular is

because of ……… convention

(a) Conservatism

(b) Consistency

(c) Materiality

(d) Disclosure

Answer (b) Consistency

9. Valuation of stock is done at lower of cost or market value because

(a) Consistency

(b) Conservatism

(c) Disclosure

(d) Materiality

Answer (b) Conservatism

10. Making provision for doubtful debts is as per …… convention

(a) Consistency

(b) Disclosure

(c) Conservatism
(d) Materiality

Answer (c) Conservatism

11. Contingent liability shown in the balance sheet, arises

(a) Consistency

(b) Materiality

(c) Conservatism

(d) Disclosure

Answer (d) Disclosure

12. Accounting principles are generally based on

(a) Subjectivity

(b) Practicability

(c) Objectivity

(d) Convenience in Recording

Answer (b) Practicability

13. According to money measurement concept the following will be recorded in

the books

accounts of the business:

(a) Value of Plant and Machinery

(b) Quality of Company Goods

(c) Utility of Managers

(d) Health of Director

Answer (a) Value of Plant and Machinery

14. The convention of Prudence when applied to the balance sheet results

(a) Overstatement of Assets

(b) Understatement of Liability

(c) Understatement of Assets

(d) Overstatement of Liabilities

Answer (c) Understatement of Assets

15. Accounting concepts include those assumptions upon which the science of
………… is based.

(a) Book-keeping

(b) Accounting

(c) Double Entry System

(d) Recording

Answer (b) Accounting

16. A firm follows the straight line method of depreciating fixed assets year after
year due to:

(a) Objectivity

(b) Convenience

(c) Consistency

(d) Prudence

Answer (c) Consistency

17. A change in accounting policy is justified:

(a) To comply with accounting standard

(b) To ensure better presentation of the financial statements of the firm

(c) To comply with law

(d) All of the above

Answer (d) All of the above

18. Which of the following is fundamental accounting assumption?

(a) Accounting period

(b) Materiality

(c) Going Concern

(d) Full disclosure

Answer (c) Going Concern

19. Revenue Should be recognised at the point of sale. Which principle is applied
here ?

(a) Consistency

(b) Cost Realization

(c) Marketing

(d) Realization

Answer (d) Realization

20. Which assumption says a business entity will not be sold or liquidated in the
near future
(a) Conservatism

(b) Going Concern

(c) Periodic

(d) Separate Entity

Answer (b) Going Concern

21. Corporate must prepare financial statements by time to time due to

(a) Accrual concept

(b) Going Concern concept

(c) Period Concept

(d) Business Entity concept

Answer (c) Period concept

22. Which principle states that same accounting methods should be used from
one

accounting period to the next.

(a) Consistency

(b) Accounting period

(c) Conservatism

(d) Materiality

Answer (a) Consistency

23. Expenses not yet paid still recorded in accounting according which concept ?

(a) Realisation
(b) Conservatism

(c) Money Measurement

(d) Accrual

Answer(d) Accrual

24. Classification of assets as current assets and fixed assets is as per…

(a) Going Concern concept

(b) Dual aspect

(c) Cost

(d) Money Measurement

Answer (a) Going Concern concept

25. The convention that sates that the accounting practice should be followed
consistently over

(a) Consistency

(b) Full disclosure

(c) Conservatism

(d) Materiality

Answer (a) Consistency

26. Which Accounting Principles says personal expenses should be debited to

Drawings Account.

(a) Money measurement concept

(b) Going Concern Concept

(c) Business entity concept

(d) Accounting Period Concept

Answer (c) Business entity concept

27. which principle says quality should not recorded in the book of accounts?

(a) Business entity concept

(b) Money measurement concept

(c) Going Concern Concept

(d) Dual aspect concept

Answer (b) Money measurement concept

28. Which concept assumes that a business entity will not be liquidated in the
near future?

(a) Money measurement concept

(b) Business entity concept

(c) Dual aspect concept

(d) Going Concern Concept

Answer (d) Going Concern Concept

29. Which accounting concept requires that the life of a business be divided into
smaller parts?

(a) Business entity concept

(b) Dual aspect concept

(c) Accounting Period Concept

(d) Matching Concept

Answer (c) Accounting Period Concept

30. Under which concept assets is recorded at cost, even if the market price is
more or less?

(a) Accounting Period Concept

(b) Matching Concept

(c) Matching Concept

(d) Cost Concept

Answer (d) Cost Concept

31. Under which concept advance received against sale of goods is recorded as
‘Advance

against Sale’ and not Sales ?

(a) Dual aspect concept

(b) Cost Concept

(c) Revenue Recognition Concept

(d) Matching Concept

Answer (c) Revenue Recognition Concept

32. Which Accounting Principle is Applied for “Closing stock is valued at lower of
cost or market price”

(a) Matching Concept

(b) Prudence Concept

(c) Matching Concept

(d) Money measurement concept

Answer (b) Prudence Concept

33. General Reserve is created on the basis of convention of

(a) Materiality

(b) Uniformity

(c) Prudence

(d) Account Period

Answer (c) Prudence

MCQ on Accounting Standards

Financial Accounting MCQ – 3

PDF
1. IASC Stands for

(a) International accounting standard committee

(b) Indian accounting standard committee

(c) International accounting standard company

(d) Indian accounting standard company

Answer (a) International accounting standard committee

2. IASC established in the year

(a) 1963

(b) 1973

(c) 1983
(d) 1993

Answer (b) 1973

3. IASB Stands for

(a) International accounting standard Board

(b) International accounting standard Board

(c) Indian accounting standard Board

(d) None of the above

Answer (a) International accounting standard Board

4. IASB established in the year

(a) 2000

(b) 2001

(c) 2003

(d) 2004

Answer (b) 2001

5. ICAI established under

(a) Chartered accountant act 1949

(b) Company act 1956

(c) Partnership act 1930

(d) Company act 2013

Answer (a) Chartered accountant act 1949

6. When accounting standard board has been constitute

(a) 21 Feb 1977

(b) 21 March 1977

(c) 21 April 1977

(d) 21 May 1977

Answer (c) 21 April 1977

7. National advisory committee on accounting standard (NACAS) established in

the year

(a) August 2001

(b) August 2002

(c) August 2003

(d) August 2004

Answer (a) August 2001

8. IAS in accounting stands for

(a) Indian administrative services

(b) International accounting standard

(c) Indian accounting standard

(d) None of the above

Answer (b) International accounting standard

9. How many Ind AS are there in India

(a) 39
(b) 38

(c) 42

(d) 41

Answer (d) 41

10. Income taxes Comes under

(a) Ind AS 11

(b) Ind AS 12

(c) Ind AS 13

(d) Ind AS 14

Answer (b) Ind AS 12

11. Intangible assets come under

(a) AS 22

(b) AS 23

(c) AS 24

(d) AS 26

Answer (d) AS 26

12. Intangible assets come under

(a) Ind AS 37

(b) Ind AS 23

(c) Ind AS 26
(d) Ind AS 38

Answer (d) Ind AS 38

13. XBRL stands for

(a) Extensible Business Reporting league

(b) Extensible Boards Reporting language

(c) Extensible Business Reporting language

(d) Estimated Business Reporting language

Answer (c) Extensible Business Reporting language

14. The main aim of accounting standard is

(a) Standardize diverse accounting policies

(b) Lower the accounting dissimilarities

(c) Ensuring the comparability of financial statement

(d) All of the above

Answer (d) All of the above

15. GAAP of India has been established by

(a) MCA

(b) ICAI

(c) Ministry of Finance

(d) ICSI

Answer (b) ICAI

16. How many number of accounting standard have been issued by ICAI

(a) 38

(b) 41

(c) 32

(d) 12

Answer (c) 32

17. The global recognized set of standard for the preparation of financial
statement by business entity used in multiple countries is termed as

(a) IFRS

(b) ICAI

(c) ASB

(d) IAS

Answer (a) IFRS

18. The board which was constitute by ICAI to formulate accounting standard is
known as

(a) IFRS

(b) ICAI

(c) ASB

(d) IAS

Answer (c) ASB

19. A language used for the electronic communication of business and financial
data which revolutionizing business reporting around the world is known as
(a) XBRL

(b) ASB

(c) IAS

(d) IFRS

Answer (a) XBRL

20. Interim financial reporting comes under

(a) Ind AS 31

(b) Ind AS 32

(c) Ind AS 33

(d) Ind AS 34

Answer (d) Ind AS 34

MCQ on Depreciation
Financial Accounting MCQ – 4

PDF
1. Erosion, rust, rot, and decay cause of depreciation is an example of

(a) Physical deterioration

(b) Economic factor

(c) Time factors

(d) None of the above

Answer (a) Physical deterioration

2. Lease, patents and copy right related to which cause of depreciation

(a) Physical deterioration

(b) Economic factor

(c) Time factors

(d) None of the above

Answer (c) Time factors

3. Obsolescence means is

(a) Update

(b) Out of date

(c) Up to date

(d) None of the above

Answer (b) Out of date

4. Decrease in the value of natural assets is

(a) Depreciation

(b) Depletion

(c) Amortization

(d) None of the above

Answer (b) Depletion

5. Decrease in the value of fixed assets is

(a) Depletion

(b) Amortization
(c) Depreciation

(d) None of the above

Answer (c) Depreciation

6. Decrease in the value of intangible assets is

(a) Amortization

(b) Depreciation

(c) Depletion

(d) None of the above

Answer (a) Amortization

7. Depreciation is a process of

(a) Allocation

(b) Valuation

(c) Both

(d) None of the above

Answer (a) Allocation

8. Depreciation arise because due to

(a) Physical wear and tear

(b) Fall in money value

(c) Fall in market price

(d) None of the above

Answer (a) Physical wear and tear

9. Under straight line methods of charging depreciation, value of depreciation

(a) Increase every year

(b) Decrease every year

(c) Constant every year

(d) None of the above

Answer (c) Constant every year

10. Under Diminishing Balance methods of charging depreciation, value of

depreciation

(a) Constant every year

(b) Decrease every year

(c) Increase every year

(d) None of the above

Answer (b) Decrease every year

11. Under straight line methods of charging depreciation, value of depreciation

charge on

(a) Original cost

(b) Written down value

(c) Scrap value

(d) None of the above

Answer (a) Original cost

12. Under Diminishing Balance methods of charging depreciation, value of
depreciation charge on

(a) Originalcost

(b) Scrap value

(c) Written down value

(d) None of the above

Answer (c) Written down value

13. Value of assets may be reduce to zero in which methods, if depreciation

charge throughout the life of the assets

(a) Fixed installment methods

(b) Written down value methods

(c) Insurance policy methods

(d) None of the above

Answer (a) Fixed installment methods

14. The amount of depreciation charge on machinery will be debited to

(a) Machinery account

(b) Cash account

(c) Depreciation account

(d) None of the above

Answer (c) Depreciation account

15. Loss on sale of machinery should be written off against

(a) Assets account

(b) Depreciation fund account

(c) Sale account

(d) Loss account

Answer (b) Depreciation fund account

16. Depreciation is ……..of cost of fixed assets

(a) Apportionment

(b) Allocation

(c) Expenses

(d) None of the above

Answer (a) Apportionment

17. Mines assets related to

(a) Depreciation

(b) Amortization

(c) Depletion

(d) None of the above

Answer (c) Depletion

18. The term refer to the damage done to a building or other property during
tenancy is called as

(a) Dilapidation

(b) Depreciation
(c) Depletion

(d) All of the above

Answer (a) Dilapidation

19. Why depreciation is charged

(a) To know the true profit

(b) To make provision for replacement

(c) To show true financial position

(d) All of the above

Answer (d) All of the above

20. What is the cause of depreciation?

(a) Rot & Rust

(b) Out of date

(c) Extraction of oil from oil well

(d) All of the above

Answer (d) All of the above

MCQ on Financial Statements

Financial Accounting MCQ – 5

PDF
1. The balance of the petty cash is

(a) An expense

(b) An asset.
(c) An income

(d)None of the above

Answer (b) An asset

2. Fixed assets are:

(a) kept in the business for use over a long time for earning income

(b) meant for conversion into cash as quickly as possible.

(c) meant for resale

(d) None of the above

Answer (a) kept in the business for use over a long time for earning income

3. Goodwill is :

(a) tangible asset

(b) Intangible asset

(c) A current asset

(d) None of the above

Answer (b) Intangible asset

4. Stock is:

(a) Part of current assets

(b) Intangible.

(c) Included in the category of fixed assets

(d) None of the above

Answer (a) Part of current assets

5. The profit and loss account shows:

(a) The gross profit earned.

(b) Net profit earned

(c) Financial position of the concern

(d) None of the above

Answer (b) Net profit earned

6. Closing stock is valued at

(a) Cost or market prices whichever is lower

(b) Cost

(c) Market value,

(d) None of the above

Answer (a) Cost or market prices whichever is lower

7. The manufacturing account is prepared

(a) To ascertain the cost of the manufactured goods

(b) To show the sale proceeds from the goods produced during the year.

(c) To ascertain the profit or loss on the goods purchased

(d) None of the above

Answer (a) To ascertain the cost of the manufactured goods

8. Unearned Income Account is

(a) Expense

(b) Liability

(c) Asset

(d) None of the above

Answer (b) Liability

9. Assets are held for the purpose of:

(a) Resale

(b) Conversion into cash.

(c) Earning revenue

(d) None of the above

Answer (c) Earning revenue

10. Stock is valued at:

(a) Market price

(b) Cost or market prices whichever is lower

(c) Cost price,

(d) None of the above

Answer (b) Cost or market prices whichever is lower

11. Depreciation is provided on

(a) Fixed assets

(b) Outward charges,

(c) Current assets

(d) Intangible assets.

Answer (a) Fixed assets

12. Heavy advertising to launch a new product is a:

(a) Deferred revenue expenditure

(b) Capital expenditure

(c) Revenue expenditure

(d) None of the above

Answer (a) Deferred revenue expenditure

13……………… shown on the debit side of Trading Account

(a) Sales

(b) Closing stock

(c) Opening stock

(d) Gross Profit b/d

Answer (c) Opening stock

14………….is arrived at by deducting cost of goods sold from sales

(a) Cost of Production

(b) Gross Profit

(c) Net Profit

(d) None of the above

Answer (b) Gross Profit

15. In………. excess of debit over credit is known as…………

(a) Trading A/c, Gross Profit

(b) Profit & Loss A/c, Gross Profit

(c) Profit & Loss A/c, Net Loss

(d) Profit & Loss A/c, Net Profit.

Answer (c) Profit & Loss A/c, Net Loss

16. Closing stock balance given in the debit side of the trial balance will be
written in financial statement in………

(a) Trading A/c Credit Side

(b) Liabilities

(c) Asset Side

(d) None of the above

Answer (c) Asset Side

17. The properties owned by the business are

(a) Capital

(b) Assets

(c) Accounting Equation.

(d) None of the above

Answer (b) Assets

18. A debit means

(a) Decrease in Assets

(b) Increase in Liability

(c) An increase in Asset

(d) Increase in Liability.

Answer (c) An increase in Asset

19. A debit balance in which of the following accounts would indicate a likely
error

(a) Fees Earned

(b) Cash

(c) Accounts Receivable

(d) Miscellaneous Expenses.

Answer (a) Fees Earned

ALL THE BEST