Accounting

Objective questions
1. Which of the following jobs check accounting in ledgers and financial
statements?
(A) Financial
(B) Audit
(C) Management
(D) Budget Analysis
2. The process of accounting is needed to
I. take a holiday
II. assist in decision making
III. invest in start up of a business
IV. track money spent
(A) I, II and III
(B) I, II and IV
(C)I, III and IV
(D)II, III and IV
3. Which of the following describes the practical framework of bookkeeping?
(A) Classifying, recording and summarizing
(B) Reporting, analyzing and interpreting
(C)Classifying, analyzing and interpreting
(D)Recording, summarizing and reporting

4. Which of the following principles assumes that a business will continue for a long
time?
(A) Historical cost
(B) Periodicity
(C)Objectivity
(D)Going concern
5. Which of the following users assesses the attractiveness of investing in a
business?
(A) Tax authorities
(B) Financial analysts
(C) Bank
(D) Employees
6. Accountants use Generally Accepted Accounting Principles (GAAP) to make the
financial information communicated
I. relevant
II. reliable
III. comparable
IV profitable

(A)

I, II and III

(B) I, II and IV
(C)I, III and IV
(d)II, III and IV
7. One of the detailed rules used to record business transaction is
(A) Objectivity
(B) Accruals
(C) Double entry book keeping
(D)Going Concern
8. Which of the following highlights the correct order of the stages in the accounting
cycle?
(A) Journalizing, final accounts, posting to the ledger and trial balance
(B) Journalizing, posting to the ledger, trial balance and final accounts
(C)Posting to the ledger, trial balance, final accounts and journalizing
(D)Posting to the ledger, journalizing, final accounts and trial balance
9. Dividends are paid by
I. Sole trading businesses
II. Partnership companies
III. Limited Liability companies
IV. Co-operatives
(A) I and II
(B)I and III
(C)II and III
(D)III and IV
10. Which of the following companies has to pay corporation tax?
(A) Co-operative society
(B)Limited liability Company
(C)Partnership Company
(D) Sole trading company
11. Which of the following companies has unlimited liability?
(A) Sole trading company
(B)Co-operative society
(C)Limited liability Company
(D)Partnership Company
12. The Trading and Profit and Loss account is also called
(A)Balance Sheet
(B)Cash Flow Statement
(C)Income Statement
(D)Trial Balance
13. The elements of the accounting equation are
I. Assets
II. Liabilities

III. Trial Balance

IV. Capital
(A) I, II and III
(B)I, II and IV
(C) I, III and IV
(D)II, III and IV
14. Which of the following are assets?
I. Cash and cash at bank
II. Land and fixtures
III. Loans and creditors
IV. Mortgage loans and debtors
(A) I and II
(B)I and III
(C)I and IV
(D) II and III
The following balances refer to Item
3 T. Singhs Assets and Liabilities
Machinery 20 000
Cash in hand 2 000
Land and buildings 200 000
Bank loan 50 000
Creditors 5 000
Debtors 10 000
15.What is P. Stevens total current asset?
(A) $60 000
(B) $80 000
(C)$120 000
(D)$200 000
16. What is P. Stevens total liability?
(A) $5 000
(B) $95 000
(C)$100 000
(D)$200 000
17. Which of the following items are used to prepare a balance sheet?
I. The name of the firm
II. The name of the financial statement
III. The date it is being prepared
IV. The style use for the preparation of the statement
(A) I and II
(B) I and IV
(C)I, II and III
(D)I, III and IV

18. An item is subject to a 20% trade discount. Its list price is $1 000. What is the
sale price?
(A) $200
(B) $800
(C) $1 000
(D)$1 200
19. A debit note is a document made out when goods are
(A) returned
(B) overcharged
(C)sold
(D) undercharged
20. Which of the following books of original entry should be used to record credit
sales?
(A) Sales journal
(B) Sales returns journal
(C)Purchases journal
(D)Purchases returns journal
21. Credit notes issued for goods returned to a supplier will be entered firstly in the
(A) General journal
(B) Returns inwards journal
(C)Returns outwards journal
(D)Petty cash journal

22. Which of the following entries will be entered in the General journal?
(A) Sold goods on credit
(B) Goods purchased and paid by cash
(C)Investment made by the owner
(D) Purchase goods on credit

Question 1
WRONG
What is the relationship between book keeping and accounting?

. Both are concerned with recording economic data

Accounting stops, book keeping starts

Book keeping is concerned with recording transactions while

accounting is measuring, analyzing and communicating the financial
data
They are synonymous.
Question 2
WRONG
Identify financial transaction in the following list.

Formulating a bonus policy

Discussion on discontinuation of production of a product
Receiving royalty for the minerals extracted
A wordy warfare between employees and management about wages
Question 3
WRONG
The object of financial Accounting is not

To prepare future financial plans

To prepare and communicate final accounts
To record all transactions and interpret the financial data
To take into consideration the historical data
Question 4
WRONG
What is a credit transaction?

Transaction to transfer goods from one to another

Transaction with a promise to pay for the goods at a future date
Transaction, where customers has already paid the price and the

goods are due to be sent

Transaction where goods are promised to be transferred and the price
promised to be paid
Question 5
WRONG
What do you mean by a concept?

Reasonable assumption
A willful prediction
Universal characteristic
A regulated condition
Question 6
WRONG
A convention is different from a concept because

Convention represents meaningless customs

. Convention is a presumption
Convention is subjective and convenient principle
Convention is a time tested principle
Question 7
WRONG
A manufacturing Company has produced 50000 units of a product during 2006. What accounting concept is missing
in the above statement?

Separate business unit

Accrual concept
Going concern concept

Money measurement concept

Question 8
WRONG
A manufacturing Company has produced 50000 units of a product costing Rs.2,50,000. What accounting concept is
missing in the above statement?

Separate business unit

Accrual concept
Periodicity concept
Money measurement concept
Question 9
WRONG
The principle of full disclosure means

Giving all business information to all parties

Giving all business information to a few parties
Giving part of business information to all parties
Giving relevant business information to relevant parties
Question 10
WRONG
Capital is invested in the business. How does it impact the accounting equation?

Capital of the business increases

Cash is received into the business as asset
Cash increases the liability and capital increases asset of the business
Capital appears as a liability and cash appears as asset of the business

Question 11
WRONG
What is Accounting Trail?

Process of preparing all accounts

Process of commencing from recording to preparation of final
accounts
Process of preparing a trial balance
Process of finding out P & L Account
Question 12
WRONG
What is the purpose of preparing a voucher?

To safeguard all cash disbursements

To have some supportive document
A mere formality
Helpful for finalizing final accounts
Question 13
WRONG
What does an accounting equation indicate?

Sources of funds are equal to application of funds

Assets and liabilities to outsiders are equal
Owners equity only is equal to assets
Assets and liabilities put together are equal to owners equity
Question 14
WRONG

What is journalizing ?

. Writing a transaction in a book

Systematic recording of journal entries in journal
A career of journalism
Process of making a record
Question 15
WRONG
State the rule of journalizing with regard to personal accounts

Debit the given and credit the receiver

Debit the receiver and credit the giver
Debit what comes in and credit what goes out
Debit all assets and credit all liabilities
Question 16
WRONG
Debit all assets and credit all liabilities. This principle hold good because, they belong to

Personal accounts
Real accounts
Nominal accounts
Personal and real a/s accounts
Question 17
WRONG
Credit sales create

Tr. Debtors

Tr. Creditors
Supplier
Agents
Question 18
WRONG
What is Journal Proper?

Journal , properly being maintained

Journal containing proper accounts
Journal containing all such transactions not covered by General
ledger, Journal or subsidiary books
Journal of all uncovered accounts
Question 19
WRONG
What is opening journal entry?

Entry made on the opening date of accounting year

Entry of assets and liabilities and capital as on the opening date of
the accounting period
Journal entry found on opening the Journal
Entry made at the beginning of the journal
Question 20
WRONG
To close Rent Received Account at the end of the year, what closing entry is drawn in Journal proper?

Rent Received account Dr To P & L account

P&L Account Dr To Rent Received Account

Rent Received Account Dr To Total rent account

Trading Account Dr To Rent Received account
Question 21
WRONG
How do you adjust closing stock in journal proper?

Closing stock is debited and P&L a/c is credited

Stock a/c is taken to the debit side of Trading a/c
Cl.Stock a/c is debited and Trading a/c is credited
Closing stock account is taken to balance sheet
Question 22
WRONG
The two methods of preparing trial balance are

Journalizing & ledger

Total method & balance method
Debit method & credit method
Horizontal & vertical methods
Question 23
WRONG
If assets accounts and expenses accounts are shown on debit side of TB, what accounts are shown an credit side of
TB

Income accounts
Income & capital accounts
Liabilities and capital accounts

Liabilities, capital and income accounts

Question 24
WRONG
Which of the following contains error of commission?

Ravis account is debited by Rs 2000 but posted to the credit side of

his a/c
Ramanans account is debited instead of ramanas a/c
An invoice of Rs 1200 is taken as Rs 1020 in the journal
Plant purchased is transferred to purchases a/c
Question 25
WRONG
State the type of error involved in the following transaction, If a sale of goods to kannan for Rs 960 is entered as Rs
690 in the sales book

Error of omission
Error of principle
Error of commission
Compensating error
Question 26
WRONG
Final accounts are prepared recognizing the concept of

Separate entity concept

Income recognition concept
Accrual concept
Money measurement concept

Question 27
WRONG
What do you mean by depreciation? .

Depreciation is a loss of an asset

Depreciation is a loss as a result of wear and tear
Depreciation is an expenditure to business
Depreciation is fall in the price of an asset.
Question 28
WRONG
Budgetary control is

Planning in advance
Action in advance
Reaction in advance
No action in advance
Question 29
WRONG
Financial Accounting needs to be audited but Management Accounting

Voluntary
Compulsory
Fiduciary
Territory
Question 30
WRONG
Current ratio is

current assets current liability

current assets + current liability
current assets * current liability
current asset / current liabilities

Answers
1-c
2-c
3-a
4-b
5-a
6-d
7-d
8-c
9-d
10d
11--b
12-a
13-d
14-b
15-b
16-d
17-a
18-c

19-b
20-a
21-c
22-b
23-d
24-a
25-c
26-c
27-b
28-a
29-a
30-d

DESCRIPTIVE QUESTIONS
Accounting

Q1.Define management accounting and explain role of accounting in the context of decision
making.
Q2.Discuss the application of ratio analysis in the interpretation of financial statements and in
financial analysis. What are its limitations?
Q3.What is budgetary control? State the main objectives of budgetary control. What are the main

steps in budgetary control?

Q4.What is funds flow statement? Explain its use and significance for management.
Q5.What is meant by Zero based budgeting? What are different steps involved in it and how it is
used to the business?
Q6.Responsibility accounting consists of accumulation and reporting of costs by levels of
responsibility with in a organization. Comment
Q7.What are the essential characteristics of budgetary control? How do you classify budgets.
Q8.Describe various characteristics of Ideal Financial Statements.
Q9.Discuss in detail the functions of Management Accounting? Explain the nature and scope of
management accounting.
Q10. What do you understand by Budgetary Control? What are the advantages of this system?