Financial Accounting MCQ Questions and Answers Part – 1

Financial Accounting MCQ Questions and Answers Part – 1

Financial Accounting MCQ Questions and Answers Part – 2

Financial Accounting MCQ Questions and Answers Part – 3

1. Depreciation is a process of _________.
A. valuation.
B. reduction.
C. allocation.
D. appreciation.
ANSWER: C
2. The main objective of providing depreciation is _______.
A. to calculate true profit.
B. to calculate financial position.
C. to reduce tax burden.
D. to reduce profit.
ANSWER: A
3. Depreciation arises because of_____.
A. fall in the market value of an asset.
B. physical wear and tear.
C. fall in the value of money.
D. rise in the value of money.
ANSWER: B
4. Under the straight line method of charging depreciation, depreciation ____.
A. increases every year.
B. decreases every year.
C. is constant.
D. fluctuate every year.
ANSWER: C
5. Under the diminishing balance method depreciation is calculated on____.
A. original value.
B. written down value.
C. scrap value.
D. market value.
ANSWER: B
6. The amount of depreciation charged on machinery will be debited to_____.
A. machinery account.
B. depreciation account.
C. cash account.
D. bank account.
ANSWER: B
7. Examples of non-trading concerns are ________.
A. Commercial banks
B. Civil hospital
C. Joint stock company
D. Private educational institutions
ANSWER: B
8. The accounts of non-trading concerns are generally maintained according to _______.
A. Mercantile accounting system
B. Cash accounting system
C. Double entry book keeping system
D. Single entry system
ANSWER: C
9. Depreciation is provided on ________.
A. current asset .
B. fixed assets.
C. fictitious assets.
D. investment.
ANSWER: B
10. The permanent, continuing and gradual shrinkage in the book value of a fixed asset is called _______.
A. depreciation .
B. appreciation.
C. reduction.
D. computation.
ANSWER: A
11. Depreciation is charged on the_________.
A. market value.
B. Depreciable value.
C. purchase value.
D. sale value.
ANSWER: B
12. Depreciation is charged on_________.
A. continuous basis.
B. temporary basis.
C. daily basis.
D. monthly basis.
ANSWER: A
13. Loss of usefulness occasioned by improved production methods is known as_______.
A. physical deterioration.
B. obsolescence.
C. disuse.
D. inadequacy.
ANSWER: B
14. Mines, quarries, oilfields and forest are example of _______.
A. fixed assets.
B. current assets.
C. wasting assets.
D. intangible assets.
ANSWER: C
15. Depreciation applies to________.
A. current assets.
B. wasting assets.
C. intangible assets.
D. fixed assets.
ANSWER: D
16. The main source of income for non-trading concern is _________.
A. Subscription
B. Sales
C. Dividend on investment
D. entrance fee
ANSWER: A
17. The control of non-trading concern rest in the hand of
A. Directors
B. Managing agents
C. Governing body
D. Promoters
ANSWER: C
18. Estimated sale value of the asset at the end of its economic life is known as _____.
A. purchase value.
B. market value.
C. written down value.
D. residual value.
ANSWER: D
19. Provision for depreciation account appears on the _______.
A. Asset side.
B. Liability side.
C. P & L account debit side.
D. P & L account credit side.
ANSWER: B
20. If the asset is sold, the provision for depreciation relating to the asset sold is transferred to _______.
A. asset account.
B. liability account.
C. P & L account.
D. trading account.
ANSWER: A
21. The asset account appears in the books at original cost when a ______.
A. P & L account is maintained.
B. balance sheet is maintained.
C. provision for depreciation account is maintained.
D. provision for depreciation account is not maintained.
ANSWER: C
22. The value of asset can be reduced to zero under this method _____.
A. straight line method .
B. written down value method.
C. annuity method.
D. depreciation fund method.
ANSWER: A
23. The balance in the asset account will not be reduced to zero under this method _____.
A. straight line method .
B. written down value method.
C. annuity method.
D. depreciation fund method.
ANSWER: B
24. Income tax authorities recognize this method ______.
A. straight line method .
B. written down value method.
C. annuity method.
D. depreciation fund method.
ANSWER: B
25. Under which method of depreciation, the earlier year of the life of the asset, profits are more _____.
A. straight line method.
B. written down value method.
C. annuity method.
D. depreciation fund method.
ANSWER: A
26. If debit side of receipt and payment account exceeds credit, it represents __________.
A. Cash at bank
B. Bank overdraft
C. Deficit balance
D. Surplus balance
ANSWER: A
27. Diminishing balance method is also called _________.
A. written down value method .
B. annuity method.
C. depreciation fund method.
D. Fixed installment method.
ANSWER: A
28. Deficit balance can be shown in balance sheet as
A. Liability
B. Assets
C. Owner’s equity
D. None of above
ANSWER: B
29. If debit side of income and expenditure account is greater it is termed as
A. Excess of income over expenditure
B. Net income
C. Surplus balance
D. Deficit balance
ANSWER: D
30. Under annuity method the amount of depreciation is found out from _____.
A. log tables.
B. sinking fund tables.
C. annuity tables.
D. present value tables.
ANSWER: C
31. Depreciation fund is also called ______.
A. reserve fund.
B. compensation fund.
C. workers fund.
D. sinking fund.
ANSWER: D
32. Under depreciation fund method, the amount of depreciation is calculated with reference to ________.
A. log tables
B. sinking fund tables
C. annuity tables
D. present value tables
ANSWER: B
33. Under depreciation fund method depreciation is charged to ______.
A. profit and loss account.
B. trading account.
C. balance sheet.
D. p & l appropriation account.
ANSWER: A
34. Reciept and payment account includes _________.
A. Revenue items
B. Capital items
C. Both capital and revenue items
D. None of above
ANSWER: C
35. The receipts and payments account of a non-profit organization is a __________.
A. Nominal account
B. Real account
C. Income statement account
D. Financial statement
ANSWER: B
36. The difference between the book value at the beginning and at the end (revaluation amount) is __________.
A. depreciation.
B. appreciation.
C. reduction.
D. computation.
ANSWER: A
37. An advance receipt of subscription from a member of the non-profit organization is considered as an __________.
A. Expense
B. Liability
C. Equity
D. Asset
ANSWER: B
38. Income and expenditure account is based on _________.
A. Cash accounting
B. Accrual accounting
C. Government accounting
D. Management accounting
ANSWER: B
39. Expenses which can be directly identified with or incurred for particular department are called __________.
A. direct expenses. .
B. indirect expenses.
C. monthly expenses.
D. weekly expenses.
ANSWER: A
40. Expenses which cannot be identified with a particular department are called_______.
A. direct expenses.
B. indirect expenses.
C. monthly expenses.
D. weekly expenses.
ANSWER: B
41. Selling expenses should be divided among the different department on the basis of _______.
A. light points.
B. H.P of machine.
C. sales ratio.
D. floor area.
ANSWER: C
42. Rent and rates should be divided among the different departments on the basis of ____.
A. light points.
B. H.P of machine.
C. sales ratio .
D. floor area.
ANSWER: C
43. Fire insurance and repairs on assets should be divided among the different departments on the basis of _________.
A. light points.
B. H.P of machine.
C. value of each assets.
D. floor area.
ANSWER: C
44. Repairs to buildings, maintenance of premises should be divided among the different departments on the basis of _________.
A. light points.
B. H.P of machine.
C. sales ratio.
D. floor area.
ANSWER: D
45. Lighting expenses should be divided among the different departments on the basis of _________.
A. light points.
B. H.P of machine.
C. sales ratio.
D. floor area.
ANSWER: A
46. Carriage inward expenses should be divided among the different departments on the basis of ___________.
A. light points.
B. purchase value.
C. sales ratio.
D. floor area.
ANSWER: B
47. Power expenses should be divided among the different departments on the basis of _____.
A. light points.
B. H.P of machine.
C. sales ratio .
D. floor area.
ANSWER: B
48. Workmen’s amenities and welfare expenses should be divided among the different departments on the basis of ____________.
A. number of worker in each department.
B. number of machines in each department.
C. wages of each department.
D. floor area occupied by each department.
ANSWER: A
49. ESI, PF payable by employer should be divided among the different departments on the basis of ________.
A. number of worker in each department.
B. number of machines in each department.
C. wages of each department.
D. floor area occupied by each department.
ANSWER: C
50. Factory manger’s salary should be divided among the different departments on the basis of _____________.
A. time devoted to each department.
B. time spent in each department.
C. time assigned to each department.
D. time wasted in each department.
ANSWER: A