UNIT – I

1) A business firm is separate and distinct from its owners is the assumption under which of the following
accounting concepts:
1) Business Entity 2) Going Concern Entity 3) Money Measuring Entity 4) Accounting Period concept
5) None of the above

2) Assumption of accounting entity or business entity concept is applicable for which of the following
business organizations.
1) Societies 2) Joint Stock Companies 3) Corporations 4) Partnership Firms 5) All the above

3) Under which of the following kinds of business concepts it is assumed that the organization will last for a
long time.
1) Accounting Entity 2) Going Concern Entity 3) Money Measuring Entity 4) Accounting Period
5) None of the above

4) Distinction between an expenditure whose benefit will be for a long period and whose benefit for a short
period of say up to one year, is made under which of the following.
1) Accounting Entity 2) Going concern Entity 3) Money Measuring Entity 4) Accounting Period
5) None of the above

5) A firm is expected not to curtail its present scale and continue at the operate at least at the existing level
under, which of the following:
1) Accounting Entity 2) Going Concern Entity 3) Money Measuring Entity 4) Accounting Period
5) None of the above

6) It is assumed that only those transactions that could be expressed in monetary terms, under which of the
following concepts:
1) Dual Aspect Principle 2) Going Concern Entity 3) Money Measurement Entity 4) Cost Principle
5) Accounting Principle

7) Entire life of a business entity is divided into shorter time intervals, say of one year, under which of the
following
1) Dual Aspect Principle 2) Going Concern Entity 3) Money Measuring Principle 4) Cost Principle
5) Accounting Principle

8) General rules that are used as a guide in accounting and as a basis of accounting practices are called
1) Generally Accepted Accounting Practices 2) Basic Accounting Conventions 3) Accounting and
Financing Principles 4) Accounting Principles 5) All the above

9) Every transactions has two aspects i.e., debit and credit, under which of the following accounting
principles:
1) Cash Accrual Principle 2) Revenue Accrual Principle 3) Dual Aspect Principle
4) Double Entry Book-keeping System 5) C and D both

10) Anticipate no profits and provide for all possible losses. This is essence of which of the following
accounting principles:
1) Dual Aspect Principle 2) Materiality Principle 3) Timeliness Principle 4) Consistency Principle
5) Conservatism Principle
11) Accounting procedures and accounting practices should remain same from year to year under which of
the following accounting principles:
1) Dual Aspect Principle 2) Materiality Principle 3) Timeliness Principle 4) Consistency Principle
5) Conservatism Principle

12) An ink-stand has been purchased by a firm for a nominal amount that is to last for 4 year. It should not be
classified as a fixed asset under which of the following accounting principles:
1) Dual Aspect Principle 2) Materiality Principle 3) Timeliness Principle 4) Consistency Principle
5) Conservatism Principle

13) When a machinery is purchased for cash, the cash balance is reduced and to that extent, the amount of
machinery as an asset is recorded. This is done to follow which of the following accounting principles:
1) Dual Aspect Principle 2) Materiality Principle 3) Timeliness Principle 4) Consistency Principle
5) Conservatism Principle

14) Rules of revenue recognition determine that earning process should be either complete or near completion
under:
1) Realization Concept 2) Materiality Concept 3) Historical Record Concept 4) Accounting Period Concept
5) Dual Aspect Concept

15) The business transactions are recorded date wise to create proper record for all transactions. This is part of
which of the following
1) Realization Concept 2) Materiality Concept 3) Historical Record Concept 4) Accounting Period Concept
5) Dual Aspect Concept

16) Profit is a liability for a firm and the loss is an asset under which of the following concepts
1) Business Entity Concept 2) Materiality Concept 3) Historical Record Concept 4) Accounting Period
Concept 5) Dual Aspect Concept

17) The accounting equation ‘asset = capital + liability is part of which of the following concepts
1) Realization Concept 2) Materiality Concept 3) Historical Record Concept 4) Accounting Period Concept 5)
Dual Aspect Concept

18) Under which conventions of accounting, the contingent liabilities are shown as a footnote or explanatory
notes in the balance sheet of a firm:
1) Convention Of Full Disclosure 2) Convention Of Materiality 3) Convention Of Conservatism
4) Convention Of Consistency 5) None Of The Above

19) A business firm creates provisions against doubtful debt under which of the following conventions
1) Convention Of Full Disclosure 2) Convection Of Materiality 3) Convention Of Conservatism
4) Convention Of Consistency 5) None Of The Above

20) Valuation of stocks is done by a business firm at cost price or market price, whichever is lower basis,
under
1) Convention Of Full Disclosure 2) Convention Of Materiality 3) Convention Of Conservatism
4) Convection Of Consistency 5) None Of The Above

21) The concept that recognizes the distinction between the receipt of cash and the right to receive the cash is
called
1) Accrual Concept 2) Cash Concept 3) Materiality Concept 4) Full Disclosure Concept
5) None Of The Above
22). Trial balance is prepared to check accuracy of
A) Ledger accounts balances B) Balance sheet balances C) Income statement balances
D) Cash flow statement balances

23) If a transaction is completely omitted from the books of accounts, will it affect the agreement of a trial
balance?
A) Yes B) No C) Transactions can't be omitted

24) ________ is the common base for preparing a trial balance

A) Ledger accounts B) General Journal C) Specialized journals D) Balance sheet

25) Which of the following is true about a trial balance?

A) It lists down the balances of accounts B) It lists down the balances of a balance sheet
C) It is a kind of financial statement D) It is not a part of accounting cycle

26) Debit balance = Credit balance in a trial balance indicates that

A) No error in recording transactions B) No error in posting entries to ledger accounts
C) Account balances are correct D) Mathematically Capital+Liabilities=Assets

27) Trial balance is commonly prepared

A) Frequently during the year B) At the end of an accounting period C) At the end of a month
D) At the end of a year

28) Which of the following will affect the agreement of a trial balance?
A) Complete omission of a transaction B) Partial omission of a transaction C) Error of principle
D) Compensating errors

29) If debit balances = credit balances, trial balance only shows or check the ____________ and it does not
indicate that no errors were made during recording and posting
A) Arithmetic accuracy B) Errors of commission C) Omissions of economic events
D) Understatements of balances

30) Which of the following account with normal balance is shown at the debit side of a trial balance?
A) Rent income account B) Creditors account C) Unearned income account
D) Cash account

31) Which of the following account with normal balance is shown at the credit side of a trial balance?
A) Cash account B) Bank account C) Equipment account D) Accrued expenses account

32) The process of recording is done

A) Two times a year B) once a year C) Frequently during the accounting period
D) At the end of a accounting period

33) General journal is a book of _______ entries

A) First B) Original C) Secondary D) Generic
34) The process of recording transactions in different journals is called
A) Posting B) Entry making C) Adjusting D) Journalizing

35) Every business transaction affects at least ________ accounts

A) One B) Two C) Three D) Infinite

36) Discount allowed is a kind of deduction from

A) Account payable B) Account receivable C) Cash account D) Discount account

37) The other name of journal is

A) Ledger B) T account C) Day book D) Cash book

38) A journal entry in which two or more account is debited or credited is referred as
A) Journal entry B) Multi entry C) Additional entry D) Compound entry

39) The term 2/10-n/30 implies that ______ % discount will be given if the payment is made within _____
days or full amount is receivable within 30 days
A) 2,10 B) 10,2 C) 10,30 D) 3,15

40) Goods returned by customer should be debited to which of the following accounts?
A) Sales income account B) Sales account C) Return inward account
D) Expenses account

41) Discount allowed is

A) Expense of business B) Income of business C) Loss of business
D) Abnormal loss of business

42) _________ is the evidence that a transaction took place

A) Source documents B) Ledger C) Bonds D) Journals

43) Which of the following will be debited if a business purchases goods on credit?
A) Cash B) Debtor C) Creditor D) Purchases

44) Which of the following accounts will be debited if the business's owner withdraws cash from business for
his personal use?
A) Drawings B) Cash C) Business D) Stock

45) Journals are also referred as

A) Book of entries B) Book of original entries C) T account D) Books of economic event

46) The standard format of journal does not include which of the following?
A) Assets column B) Date column C) Description column D) Amount column

47) In which of the following orders data is entered in journal?

A) Alphabetical order B) Numeric order C) Bullets order D) Chronological order

48) Which of the following accounts will be credited if a company purchases building for cash?
A) Capital account B) Fixed assets account C) Building account D) Cash account
49) Discount for quick repayment of debt is normally referred as
A) Trade discount B) Prompt payment discount C) Cash discount D) Bulk discount

50) The first step in accounting process is

A) Recording the transaction B) Identifying the transaction C) Posting the transaction
D) Preparing the source documents

51) A chart of accounts generally start with which of the following types of accounts?
A) Assets accounts B) liability accounts C) Cash accounts D) Revenue accounts

52) Transferring entries from journal to ledger account is commonly known as

A) Recording B) Transferring C) Posting D) Entry making

53) An account records the ___________ in the balance of an item

A) Increase B) Decrease C) Increase or decrease D) Appreciation

54) If credit side of a bank account is greater than the debit side, it indicates which of the following?
A) Bank overdraft B) Cash at bank C) Bank balance D) Current Asset

55) If debit side of a bank account is greater than credit side it indicates which of the following?
A) Cash at bank B) Bank understatement C) Bank overdraft
D) Balance overstatement

56) _________ will be credited if goods are given as charity

A) Cash B) Charity C) Purchases D) Sales

57) Which of the following is known as the base for preparing trial balance?
A) Journal B) Cash account C) Ledger account D) Balance sheet

58) If debit balance is greater than credit balance then the account balance will be:
A) Credit balance B) Debit and credit balance C) Cash balance D) Debit balance

59)The normal balance of capital account is

A) Credit balance B) Debit balance C) Cash balance
D) Neither debit nor credit balance

60) The normal balance of asset account is

A) Credit balance B) Debit balance C) Cash balance
D) Neither debit nor credit balance

61) The normal balance of liability account is

A) Debit balance B) Credit balance C) Cash balance D) Neither debit nor credit balance

62) Which of the following statements is incorrect regarding capital account?

A) Debit increases the capital account balance B) Credit increases the capital account balance
C) Fresh capital increases the capital account balance D) Net income increases the capital account balance

63) Which of the following is the normal balance of a rent expense account?
A) Credit balance B) Cash balance C) Overdraft D) Debit balance
64) Revenue and expense accounts are referred as
A) Nominal accounts B) Real account C) Cash accounts D) Banks account

65) The real accounts are accounts of Assets, liabilities and ________
A) Expenses B) Revenues C) Capital D) Drawing

66) Building account is classified as _________ account

A) Nominal B) Real C) Cash D) Capital

67) Office equipment’s account is classified as _________ account

A) Nominal B) Real C) Cash D) Capital

68)___________ helps business to classify transactions according to their nature

A) General journal B) Real accounts C) Ledger accounts D) Cash accounts

69) Which of the following is a real account?

A) Office equipment B) Rent expenses C) Rent income D) Insurance expense

70) Which of the following accounts are closed at the end of an accounting period?
A) Nominal accounts B) Balance sheet accounts C) Real accounts D) None of them

71)Which of the following is the closing balance of a ledger account?

A) Balance c/d B) Balance b/d C) Balance e/d D) Balance f/c

72)The closing balance of petty cash book is considered as

A) Liability `B) Asset C) Expenses D) Income

73) Payment of rent expenses is recorded on which side of cash book?

A) Receipts B) Payments C) Income D) Expense

74) An entry which is made on both sides of a cash book is called

A) Cash entry B) Contra entry C) Payment entry D) Compound entry

75) A cash book with cash, bank and discount column is commonly referred as
A) Cash book B) Two columns cash book C) Three columns cash book D) Petty cash book

76) Cash book records

A) Cash payments B) Cash receipts C) Cash payments and cash receipts
D) Neither cash payments nor cash receipts

77) Cash discount is allowed on _______ repayment of debt

A) Lump sum B) Prompt C) Actual D) None of them

78) Cash book is prepared by

A) Bank B) Accountant of business C) Manager of a company D) Bank's cashier

79) The most common imprest system is the ________ system

A) petty cash B) Cash book C) Cash receipt D) Discount

80) Discount received is recorded on which of the following side of a cash book?
A) Receipts B) Payments C) Incomes D) Expenditures
81) Drawings by owner of business are generally recorded on which of the following side of a cash book?
A) Receipts B) Payments C) Incomes D) Expenditures

82) Introduction capital by owner of business is recorded on which side of a cash book?
A) Receipts B) Payments C) Incomes D) Expenditures

83) Cash book with cash and discount column is mostly referred as
A) Simple cash book B) Two column cash book C) Three column cash book D) Petty cash book

84) A cash book that is used to record the small payments of cash is generally referred as
A) Simple cash book B) Two column cash book C) Three column cash book
D) Petty cash book

85) A simple or one column cash book usually has which of the following main columns?
A) Bank B) Payments C) Discount D) Cash

86) Purchase of office equipment for cash will be recorded on which of the following sides of a cash book?
A) Receipts B) Payments C) Incomes D) Expenditures

87) Postdated checks are considered as

A) Cash B) Bank balance C) Accounts receivable D) Cash reserve

88) Postage stamps on hand are considered as

A) Bank B) Prepaid expenses C) Accounts receivable D) Creditor

89) Petty cash fund is supposed to be replenished

A) Every day B) Every half year C) Every year D) At the end of every accounting period

90) Which of the following is generally not the party to a check?

A) Payee B) Payer C) Bank D) Seller

91) A credit balance in cash book indicates

A) Bank balance B) Cash at bank C) Bank overdraft D) Bank under draft

UNIT – II

1) Accrued expenses are considered as

A) Asset B) Liability C) Gain D) Income

2) Prepaid expenses are regarded as

A) Asset B) Liability C) Loss D) Capital

3) Which of the following adjusting double entries is correct for Unearned income?
A) DEBIT= Income, CREDIT= Unearned income
B) DEBIT= Unearned income, CREDIT= Income
C) DEBIT= Cash, CREDIT= Unearned income
D) DEBIT= Income, CREDIT= Cash

4) Earned but not yet received income is treated as

A) Asset B) Liability C) Loss D) Capital
5)Which of the following adjusting double entries is correct for accrued expenses?
A) DEBIT= Expenses, CREDIT= Accrued expenses B) DEBIT= Accrued expenses, CREDIT= Expenses
C) DEBIT= Cash, CREDIT= Accrued expenses D) DEBIT= Expenses, CREDIT= Cash

6)Which of the following adjusting double entries is correct for Prepaid expenses?
A) DEBIT= Expenses, CREDIT= Prepaid expenses
B) DEBIT= Prepaid expenses, CREDIT= Expenses
C) DEBIT= Cash, CREDIT= Prepaid expenses D) DEBIT= Expenses, CREDIT= Cash

7) Unearned income is classified as

A) Asset B) Liability C) Loss D) Capital

8)Which of the following adjusting double entries is correct for earned income?
A) DEBIT= Income, CREDIT= Earned income B) DEBIT= Earned income, CREDIT= Income
C) DEBIT= Cash, CREDIT= Earned income D) DEBIT= Income, CREDIT= Cash

9) Failure to make adjusting entries for accrued income results in

A) Overstatement of expenses B) Understatement of expenses
C) Understatement of capital D) Overstatement of income

10)Identify the consequences of not making adjustment entry for accrued expense
A) Overstatement of liabilities B) Understatement of liabilities C) Overstatement of expenses
D) Understatement of capital

11) An adjusting entry for prepaid expenses affects

A) Assets and expenses B) Assets and income C) Liabilities and expenses
D) Liabilities and assets

12) Adjusting entries convert cash based account into _________ based accounting
A) Capital B) Asset C) Accrual D) Prepaid

13) An unearned income adjusting entry affects

A) Asset and liabilities B) Cash and income C) Income and liabilities
D) Cash and liabilities

14) A business paid 3 month rent amounting to $3000 out of this amount one month rent pertains to the next
accounting period. Identify the correct amount prepaid expense
A) $3000 B) $1000 C) $2000 D) $4000

15) Adjusting entries help allocating incomes and expenses to their ________
A) Cash balances B) Appropriate accounting periods C) Credit balances
D) Received or paid cash balances

16)A customer paid you $100,000 for some construction work. However, at the end of your accounting period
only 1/4 of work was completed. What amount of income should be shown in income statement?
A) 100,000 B) 50,000 C) 10,000 D) 25,000

17)A business paid $5000 for technical services but used up the services for only $2000 until the end of its
accounting period. The remaining $3000 would be referred as
A) Accrued expenses B) Accrued income C) Prepaid income D) Prepaid expenses
18) Revenue earned but not yet received by the business is known as
A) Contra asset revenue B) Accrued expenses C) Accrued revenue D) Unearned revenue

19) Another name of accrued revenue is

A) Outstanding asset B) Earned asset C) Unearned revenue D) Earned revenue

20) If Rent expenses=$5000, Insurance expenses=$4000, Prepaid rent expenses=$3000. What amount of
total expenses will be shown in income statement?
A) $9000 B) $12000 C) $8000 D) $6000

FINAL ACCOUNTS:
1) We can say that the business is in profit, when:

A) Assets exceed Expenditure B) Income exceeds Liabilities

C) Income exceeds Expenditure D) Income exceeds Liabilities

2)

According to the double entry system of accounting, an account that obtains benefit is:

A) Credit

B) Debit

C) Income

D) No need to show as accounting record

3)

Term "Credit" means_______ by the business.

A) Receiving of benefits

B) It has no effect on business

C) Providing of benefits

D) It depends upon items

4)

When a Liability is reduced or decreased, it is recorded on the:

A) Left or credit side of the account

B) Right or debit side of the account

C) Right or credit side of the account

D) Left or debit side of the account

5)

When Capital is increased by an amount, it is recorded on the:

A) Right or debit side of the account

B) Left or credit side of the account

C) Left or debit side of the account

D) Right or credit side of the account

6)

What type of expenses are paid out of Gross Profit?

A) General Expenses

B) Financial Expenses

C) Selling Expenses

D) All of the given options

7)

Which of the following shows summary of a company's financial position at a specific date?

A) Profit & Loss Account

B) Cash Flow Statement

C) Balance Sheet

D) Income & Expenditure Account

8)

Which of the following is NOT an example of intangible assets?

A) Franchise rights

B) Goodwill

C) Patents

D) Land

9)
Which of the following is an example of business liability?

A) Land

B) Building

C) Cash

D) Creditors

10)

The unfavorable balance of Profit and Loss account should be:

A) Added in liabilities

B) Subtracted from current assets

C) Subtracted from capital

D) Subtracted from liabilities

Depreciation

1.Reduction in the book value of an asset over a period of time is called-

A). Appreciation B).Depreciation c).Proportion d).Depletion

2. Which among the following is not a reason for depreciation

1. Use of asset
2. Passage of time
3. Obsolescence
4. Repair of an asset

3. Depreciation is charged on
1. Current asset
2. Fixed asset
3. Intangible asset
4. Current liability

4. Depreciation helps in determining

1. Accurate level of profit
2. Increases the value of asset
3. Revenue generation
4. increase the burden of tax

5. The asset which is an exception from depreciation is

1. Computer
2. Furniture
3. Land
 4. ATM Machine

6. Which of the following is true about the straight-line method?

1. Complex method
2. Cost of depreciation remains constant
3. Cost of depreciation changes every year
4. P&L account debited with different amount every year

7. Bank purchased a computer on 1.03.2015 at a cost Rs. 50000, estimated life is 8 years, cost of
depreciation under straight-line method will be-
1. 6250
2. 7430
3. 5000
4. 4590

8. Annual depreciation of machine is 40000, cost of machine is 500000, rate of depreciation according
to straight-line method will be-
1. 9%
2. 18%
3. 16%
4. 8%

9. Value of an asset is 9 lakh, scrap value is 125000, estimated life is 10 years the cost of depreciation under
straight-line method will be-

1. 65000
2. 89000
3. 77500
4. 67880

10. Depreciation is a process of

1. Valuation of asset
2. Allocation of cost
3. Both A& B
4. Only A

11. Cost of the asset minus scrap value/ Life of the asset is the formula of
1. Diminishing balance method
2. Annuity method
3. Straight line method
4. Sum of digits method

14. The Diminishing balance method means a method by which-

1. The rate of depreciation falls year by year
2. The amount on which depreciation is calculated falls year by year
3. The rate and amount which is applied falls year by year
4. None of the above
15. Which among the following is false about Diminishing balance method-
1. the amount of depreciation is high in the initial years
2. Depreciation is calculated on the original cost of the asset
 3. the value of the asset cannot be reduced to zero
4. Cost of depreciation remains constant
16. Which of the following accounting concepts or principles require the calculation of depreciation of
the fixed assets?
A) Prudence concept
B) Accrual concept
C) Consistency concept
D) Matching concept
17. Depreciation is an
1. Income
2. Expense
3. Asset
4. Liability
18. The cost of the asset is 60000 and depreciated at 12% p.a. using the written down method. at the end
of three years, it will have a net book value of –
1. 40888.32
2. 43888.90
3. 45322
4. 40000

17. The vehicle costs Rs. 150000; it charges 20% depreciation according to written down value method
estimate the value of the vehicle after depreciation at the end of three years.
1. 68000
2. 56000
3. 78000
4. 76800

18. The loss on sale of an asset is debited to

1. Reserves
2. Depreciation fund
3. Profit & Loss account
4. Asset’s account

19. Under the diminishing balance method, depreciation is calculated on

1. Scrap value
2. Book value
3. Original value
4. All of these

20. A boiler was purchased from abroad for Rs. 10000. Shipping and forward charges Rs. 2000 and
expenses of installation amounts to Rs. 8000. Find the balance after three years @10% on
diminishing balance method.
1. 12400
2. 14580
3. 13800
4. 11800

21. The amount of depreciation charged on machinery is debited to

1. Depreciation account
2. Machinery account
3. Provision for depreciation account
4. Expense account