MCQ ON ACCOUNTING

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 MCQ ON ACCOUNTING


1. Which one of the following is an ingredient of the entity convention of accounting ?

(A) The owner of a unit and the unit itself is one and the same

(B) The owner and the unit are treated separately

(C) No separate accounts for the unit is required

(D) The unit is a private affairs of the owner, hence no accounting is required

Answer: The owner and the unit are treated separately


2. Which one of the following accounting equations is correct ?

(A) Assets = Owner’s Equity

(B) Assets = Liabilities + Owner’s Equity

(C) Assets = Liabilities – Owner’s Equity

(D) Assets + Liabilities = Owner’s Equity

Answer: Assets = Liabilities + Owner’s Equity


3. Which one of the following accounting conventions stipulates that contingent assets appear as a footnote in the balance sheet ?

(A) Materiality (B) Consistency

(C) Disclosure (D) Conservation.

Answer: Disclosure 


4. Which one of the following is not related to the convention of conservatism ?

(A) Making provision for doubtful debts and discount on debts in anticipation of actual bad debtors and discount

(B) Valuation of stock at Market Price or Cost Price whichever is higher

(C) Charging of small capital items as Revenue

(D) Adopting Written-down Value Method of depreciation as against Straight-line Method

Answer: Valuation of stock at Market Price or Cost Price whichever is higher


5. On 31st March, 2013, the closing stock of X Ltd. was Rs. 3,45,000. On April 1, 2013, stock of Rs. 2,25,000 was destroyed by fire. The company closes its account on 31st March. If the balance sheet of the company on 31st March, 2013 was finalized on 25th April, 2013, then the balance sheet will show the closing stock at–

(A) Rs. 3,45,000 with no mention of fire

(B) Rs. 1,20,000 with no mention of fire

(C) Rs. 3,45,000 showing loss by fire in footnote

(D) Rs. 1,20,000 showing loss by fire in footnote

Answer: Rs. 3,45,000 with no mention of fire


6. Greater mechanization of offices, results in–

(A) better house keeping (B) greater accuracy in the work

(C) making employees cogs of the machines (D) higher cost of running office

Answer: greater accuracy in the work


7. O & M can be strengthened chiefly through–

(A) wage incentive plans (B) good store-keeping

(C) improved office layout (D) better work measurement

Answer: better work measurement


8. Informal organization is as necessary as formal organization chiefly for the reason that it–

(A) resists change 

(B) builds morale

(C) has close association with decision making 

(D) fulfils separate goals and standards

Answer: builds morale


9. After the commencement of the Companies Act, 1956 no person, save as otherwise provided in Section 276, shall hold office as director at the same time in more than–

(A) 5 Companies (B) 10 Companies

(C) 15 Companies (D) 20 Companies

Answer: 20 Companies


10. A director having direct or indirect, interest or concern in a transaction of the company, has to disclose his interest in a meeting to the–

(A) Board of Directors (B) Shareholders

(C) Company Secretary (D) Registrar of Companies

Answer: Board of Directors 


11. Analytical review by an auditor mainly includes–

(A) examining vouchers and other documents

(B) physical verification of assets

(C) examining day books with ledgers

(D) study of ratios and trends

Answer: study of ratios and trends


12. Which one of the following pairs is not correctly matched ?

(A) Suppression of invoices– Window dressing

(B) Overcharging depreciation– Secret reserves

(C) Omission of cash receipts from debtors– Understatement of sales

(D) Omission of credit sale– Understatement of debtors

Answer: Omission of cash receipts from debtors– Understatement of sales


13. The main purpose of auditing is to–

(A) detect accounting offences and to punish the offender

(B) prepare and authenticate the accounts

(C) prepare the accounts and authenticate their true and fair view

(D) certify the financial position of the business

Answer: certify the financial position of the business


14. Statements on Standard Auditing Practices (SAPs) are important while discharging the auditing function by a member of the ICAI in case of a company, because SAPs are–

(A) prescribed by the ICAI

(B) contained in the Companies Act, 1956

(C) approved by the Department of Company Affairs

(D) approved by the Central Government in consultation with Comptroller and Auditor-General

Answer: prescribed by the ICAI


15. The selection of items, to be included in the audit on a subjective basis without consideration of sample size or method of selection, is–

(A) probability sampling (B) systematic sampling

(C) random sampling (D) judgement sampling

Answer: random sampling 


16. Under Section 25 of the Companies Act, 1956 there is a power to dispense with the word ‘Limited’ in name to certain associated that may be registered as a company with limited liability. Who has the power of this dispensation ?

(A) National Company Law Tribunal (B) Central Government

(C) SEBI (D) Registrar of Companies.

Answer: Central Government


17. Which one of the following is not a valid observation with reference to the declaration or payment of dividend for any financial year ?

(A) Depreciation for the current financial year must be provided

(B) Arrears of depreciation must be provided

(C) Losses incurred in previous year(s) must be set off

(D) 10% of the profits must be transferred to the reserves in all cases.

Answer: 10% of the profits must be transferred to the reserves in all cases.


18. The auditor must ensure that the amount of premium on the issue of shares is not utilised for–

(A) issue of bonus shares

(B) writing off commission paid on the issue of shares

(C) providing for premium payable on redemption of preference shares

(D) transfer to capital redemption reserve

Answer: transfer to capital redemption reserve


19. According to the Companies Act, 1956 every registered company shall have to prepare which of the following accounts and statements at the end of the financial year for approval of the shareholders and submission to the Registrar of Companies ?

(A) Profit and Loss Account and Balance Sheet after making adjustments for inflation

(B) Profit and Loss Account. Balance Sheet and Funds Flow statement

(C) Profit and Loss Account ‘Balance Sheet’ and Cash Flow statement

(D) Profit and Loss Account and Balance Sheet.

Answer: Profit and Loss Account and Balance Sheet.


20. The system of internal check ensures that–

(A) work is distributed among the employees according to their merit and qualifications

(B) work is completed as per the prescribed time schedule

(C) work performed by one employ is automatically checked by another employee

(D) work performed by one employee is checked by internal audit staff

Answer: work performed by one employ is automatically checked by another employee

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