MCQ CA CPT Fundamentals of Accounting Questions with Answers

Fundamentals of Accounting – Practice Test:

Ques. Which of the following are of capital nature?

(a) Purchase of a goods

(b) Cost of repair

(c) Wages paid for installation of machinery

(d) Rent of a factory

Ans. (c)

Ques. Contra entries are passed only when

(a) Double column cash book is prepared

(b) Three-column cash book is prepared

(c) Simple cash book is prepared

(d) None of these

Ans. (b)

Ques. While finalizing the current year’s profit, the company realized that there was an error in the valuation of closing stock of the previous year. In the previous year, closing stock was valued more by Rs.50,000. As a result

(a) Previous year’s profit is overstated and current year’s profit is also overstated

(b) Previous year’s profit is understated and current year’s profit is overstated

(c) Previous year’s profit is understated and current year’s profit is also understated

(d) Previous year’s profit is overstated and current year’s profit is understated

Ans. (d)

Ques. The portion of the acquisition cost of the asset, yet to be allocated is known as ___

(a) Written down value

(b) Accumulated value

(c) Realisable value

(d) Salvage value

Ans. (a)

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Ques. At the time of death of a partner, firm gets ________ from the insurance company against the Joint Life Policy taken jointly for all the partners.

(a) Policy Amount

(b) Surrender Value

(c) Policy Value for the dead partner and Surrender Value for the rest

(d) Surrender Value for all the partners

Ans. (a)

Ques. As per Section 37 of the Indian Partnership Act, 1932, the executors would be entitled at their choice to the interest calculated from the date of death till the date of payment on the final amount due to the dead partner at ________ percentage per annum.

(a) 7

(b) 4

(c) 6

(d) 12

Ans. (c)

Ques. Which of the following statement is not true:

(a) If del-creder’s commission is allowed, bad debt will not be recorded in the books of consignor

(b) If del-creder’s commission is allowed, bad debt will be debited in consignment account

(c) Del-creder’s commission is allowed by consignor to consignee

(d) Del-creder’s commission is generally relevant for credit sales

Ans. (b)

Ques. The preparation of a trial balance is for:

(a) Locating errors of commission

(b) Locating errors of principle

(c) Locating clerical errors

(d) All of these

Ans. (c)

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Ques. The owner of the consignment stock is ________

(a) Consignor

(b) Consignee

(c) Debtors

(d) Debtors

Ans. (a)

Ques. If a concern proposes to discontinue its business from March 2023 and decides to dispose off all its assets within a period of 4 months, the Balance Sheet as on March 31, 2023 should indicate the assets at their ___

(a) Historical cost

(b) Net realizable value

(c) Cost less depreciation

(d) Cost price or market value, whichever is lower

Ans. (b)

Ques. Change in accounting estimate means

(a) Differences arising between certain parameters estimated earlier and reestimated during the current period.

(b) Differences arising between certain parameters estimated earlier and actual results achieved during the current period.

(c) Both

(d) None

Ans. (c)

Ques. RPC Ltd. follows the written down value method of depreciating machinery year after year due to

(a) Comparability

(b) Convenience

(c) Consistency

(d) All of these

Ans. (c)

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Ques. Which of the following is not a sub-field of accounting?

(a) Management accounting

(b) Cost accounting

(c) Financial accounting

(d) Book-keeping

Ans. (d)

Ques. A change in accounting policy is justified

(a) To comply with accounting standard

(b) To ensure more appropriate presentation of the financial statement of the enterprise

(c) To comply with law

(d) All of these

Ans. (d)

Ques. Which account is the odd one out?

(a) Office Furniture & Equipment

(b) Freehold Land and Buildings

(c) Stock of raw materials

(d) Plant and Machinery

Ans. (c)

Ques. The balance of the petty cash is ____

(a) an expense

(b) income

(c) an asset

(d) liability

Ans. (c)

Ques. In Double Entry System of Book-keeping every business transaction affects:

(a) Two accounts

(b) Two sides of the same account

(c) The same account on two different dates

(d) All of these

Ans. (a)

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Ques. Purchases book records:

(a) All cash purchases

(b) All credit purchases

(c) None of these

(d) Credit purchases of goods in trade

Ans. (d)

Ques. Interest on capital will be paid to the partners if provided for in the agreement but only from____

(a) Profits

(b) Reserves

(c) Accumulated Profits

(d) Goodwill

Ans. (a)

Ques. If a venturer draws a bill on his co-venturer and if the drawer discounts the bill with same sets of books maintained, the discounting charges will be borne by__

(a) The discounting charges will be recorded in memorandum account

(b) The drawer of the bill

(c) The drawer of the bill

(d) The discounting charges will be borne by bank

Ans. (a)

Ques. Discount on issue of debentures is a _____

(a) Revenue loss to be charged in the year of issue

(b) Capital loss to be written off over the tenure of the debentures

(c) Capital loss to be shown as goodwill

(d) Capital loss to be written off from capital reserve

Ans. (b)

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Ques. Sales for the year ended 31st March, 2022 amounted to Rs. 10,00,000. Sales included goods sold to Mr. A for Rs. 50,000 at a profit of 20% on cost. Such goods are still lying in the warehouse at the buyer’s risk. Therefore, such goods should be treated as part of

(a) Sales

(b) Closing stock

(c) Goods in transit

(d) liability

Ans. (a)

Ques. Which of the following types of information are found in subsidiary ledgers, but not in the general ledger?

(a) Total cost of goods sold for the period

(b) The quantity of a particular product sold during the period

(c) The amount owed to a particular creditor

(d) The portion of total current assets that consist of cash

Ans. (b)

Ques. In the absence of any provision in the partnership agreement, profits and losses are shared

(a) In the ratio of capitals

(b) Equally

(c) In the ratio of loans given by them to the partnership firm

(d) None of these

Ans. (b)

Ques. Revenue from sale of products, is generally, realized in the period in which

(a) Cash is collected

(b) Sale is made

(c) Products are manufactured

(d) None of these

Ans. (b)

Ques. A Bank Reconciliation Statement is prepared to know the causes for the difference between:

(a) the balance as per bank column of Cash Book and the Pass Book

(b) the balances as per cash column of Cash Book and the Pass Book

(c) the balance as per bank column of Cash Book and balances as per cash column of Cash Book

(d) None of these

Ans. (a)

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Ques. Under inflationary conditions, ________ method will show highest value of closing stock?

(a) FIFO

(b) LIFO

(c) Weighted Average

(d) None of these

Ans. (a)

Ques. Fundamental accounting assumptions are

(a) Materiality

(b) Going concern

(c) Dual aspect

(d) Business entity

Ans. (b)

Ques. In the case of downward revaluation of an asset, which is for the first time revalued, _______ account is debited.

(a) Fixed Asset

(b) Revaluation Reserve

(c) Profit & Loss account

(d) General Reserve

Ans. (c)

Ques. The determination of expenses for an accounting period is based on the principle of

(a) Objectivity

(b) Materiality

(c) Matching

(d) Periodicity

Ans. (c)

Ques. Present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation, is termed as ___

(a) Provision

(b) Liability

(c) Contingent liability

(d) None of these

Ans. (a)

Ques. It is essential to standardize the accounting principles and policies in order to ensure

(a) Transparency

(b) Consistency

(c) Comparability

(d) All of these

Ans. (d)

Ques. When preparing a Bank Reconciliation Statement, if you start with a debit balance as per the Cash Book, then cheques issued but not presented within the period are _____

(a) Added

(b) Deducted

(c) Not required to be adjusted

(d) None of these

Ans. (a)

Ques. Which of the following errors are not revealed by the Trial Balance:

(a) compensating errors

(b) errors of commission

(c) wrong balancing of an account

(d) wrong totaling of an account

Ans. (a)

Ques. The number of production or similar units expected to be obtained from the use of an asset by an enterprise is called as ____

(a) Unit life

(b) Useful life

(c) Production life

(d) Expected life

Ans. (b)

Ques. Loss on issue of debentures is treated as ___

(a) Intangible asset

(b) Current asset

(c) Current liability

(d) Miscellaneous expenditure

Ans. (d)

Ques. In the books of manufacturing concern, opening stock consists of

(a) Raw materials

(b) Work-in-progress

(c) Finished goods

(d) All of these

Ans. (d)

Ques. Dividends are usually paid as a percentage of ______

(a) Authorized share capital

(b) Net profit

(c) Paid-up capital

(d) Called-up capital

Ans. (c)

Ques. Which statement is not correct in context to inflation accounting?

(a) It is not acceptable by the tax authority

(b) It may sometimes result in arbitrary profits

(c) Financial statements lose their credibility as the objectivity concept is violated

(d) Comparison of figures over a period of time cannot be done easily

Ans. (d)

Ques. According to _______personal expenses paid by owner from his own pocket should not be recorded in accounting books.

(a) Going concern Concept

(b) Cost Concept

(c) Business Entity Concept

(d) Conservatism

Ans. (c)

Ques. Which of the following is not a feature of current cost accounting method?

(a) Stocks are shown at their replacement value

(b) Depreciation is calculated at the current value of assets

(c) Inventory consumed is valued at the price at the date of consumption

(d) Fixed assets are shown at their depreciated original cost

Ans. (d)

Ques. Overcastting of sales books could be rectified by

(a) Debiting suspense account and crediting sales account

(b) Debiting sales account and crediting suspense account

(c) Debiting cash account and crediting sales account

(d) Debiting sales account and crediting cash account

Ans. (b)

Ques. Which of the following comes first in accounting cycle?

(a) Recording in subsidiary books

(b) Preparing trading account

(c) Posting in ledger accounts

(d) Entering in trial balance

Ans. (a)

Ques. Goods withdrawn by owner for his personal use will be

(a) Debited to goods account

(b) Debited to drawing account

(c) Debited to capital account

(d) Debited to cash account

Ans. (b)