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• Introduction to Financial Accounting and

its terms.
• •Accounting equation and Journal.
• •Voucher Approach in Accounting.
• •Bank reconciliation Statement.
• •Financial Management/Statements.
• •Partnership Accounts.
• •Ledger Accounts.
• •Cash Book, Financial Audit.
• •Elements of Double entry Book Keeping.
• •Rules for journalizing.
• •Trial Balance.
• •Trading Account.
• •Profit Loss Account and Balance Sheet.
• •Concept of Social Accounting, Social Audit
and cash based single entry system of
accounting.
• •Public Financial Management System
(PFMS)
 Basic Accounting Terms
1. Accounting provides data or information on
A) Income and cost for the managers
B) Financial conditions of the institutions
C) Company’s tax liability for a particular year
D) All the above
Answer: D
2. Long term assets without any physical existence but, possessing a
value are called
A) Intangible assets
B) Fixed assets
C) Current assets
D) Investments
Answer: A
3. Generally the duration of an Accounting period is of-
(a) 6 months
(b) 3 months
(c) 12 months
(d) 1 month
Answer c
4. In India, the accounting standard board was set up in the year-
(a) 1972
(b) 1977
(c) 1956
(d) 1932.
Ans b
5. Meaning of credibility of going concern is:
(a) Closing of business
(b) Opening of business
(c) Continuing of business
(d) None of these.
Ans C
6) Which of these best explains fixed assets?
A) Are bought to be used in the business
B) Are expensive items bought for the business
C) Are items which will not wear out quickly
D) Are of long life and are not purchased specifically for resale
Answer: D
7. The revenues and expenses of a company are displayed in which
statement?
A. Balance Sheet
B. Cash Flow Statement
C. Income Statement
D. None of the above
Answer: C) Income Statement
8. The kind of debts which are needed to be repaid in a short term is
known as?
A. Fixed Liabilities
B. Current Liabilities
C. Depreciating Assets
D. Intangible Assets
Answer: B) Current Liabilities
9. What is the supporting evidence in a business transaction called?
a. Journal
b. Ledger
c. Voucher
d. Contra Voucher
Answer: C) Voucher
10) Which person owes an amount to a business organisation for
buying goods and services on a credit basis?
A. Creditors
B. Debtors
C. Owner
D. None of the above
Answer: B) Debtors
11) What is Current Liability?
A. Assets of a company that are expected to be sold or used as a result
of standard business operations over the next year.
B. A potential liability that may occur in the future.
C. Company's short-term financial obligations that are due within one
year or within a normal operating cycle.
D. Obligations listed on the balance sheet not due for more than a
year.
Answer: C) Company's short-term financial obligations that are due
within one year or within a normal operating cycle
12) What are Outstanding Expenses?
A. Expenses which are not paid off in the current balance sheet.
B. The necessary purchases that keep a business going from day-to-
day.
C. Type of expense that is due but has not been paid.
D. None of the above.
Answer: C) Type of expense that is due but has not been paid
13 What is Bank Overdraft?
A. A document used by a company's accounts payable department
containing the supporting documents for an invoice.
B. A negotiable instrument where payment is guaranteed by the
issuing bank.
C. A negotiable instrument similar to a bill of exchange.
D. A line of credit that covers your transactions if your bank account
balance drops below zero.
Answer: D) A line of credit that covers your transactions if your bank
account balance drops below zero
14) Transaction is referred as which event in accounting?
A. Political Event
B. Economic Event
C. Dividend
D. Cash Transaction
Answer: B) Economic Event
15 Examining of financial information refers to?
a. Analysis
b. Auditing
c. Recording
d. Balance Sheet
Answer: B) Auditing
16) Who is an external user of financial statements?
a. Shareholders
b. CEO
c. Manager
d. Creditor
Answer: D) Creditor
17) Identifying an economic transaction is which phase of accounting
cycle?
A. First
B. Second
C. Third
D. Last
Answer: A) First
18) What are Liabilities?
A. Resources of a Company
B. Expenses of a Company
C. Obligations of a Company
D. None of the above
Answer: C) Obligations of a Company
19) What is the common characteristic of all the assets owned by a
company?
A. Intangible
B. Long Life
C. Future Economic Benefits
D. None of the above
Answer: C) Future Economic Benefits
20) How many accounts are affected by a business transaction?
A. One
B. Two
C. Three
D. Several
Answer: B) Two

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 Accounting Principles and
Concepts
Q.1 GAAP stands for:
(a) Generally Accepted Accounting Provisions
(b) Generally Accepted Accounting Policies
(c) Generally Accepted Accounting Principles
(d) None of these
Answer: c
Q.2 Which accounting principle states that companies and owners
should be treated as separate entities.
(a) Monetary Unit Assumption
(b) Business Entity Concept
(c) Periodicity Assumption
(d) Going Concern Concept
Answer: b
Q.3 Cost or expenses must be recorded at the same time as the
revenue to which they correspond is specified by which principle?
(a) Matching Principle
(b) Going Concern Principle
(c) Consistency Principle
(d) Prudence Principle
Answer: a
Q4. Using 'lower of cost and net realisable value' for the purpose of
inventory valuation is the implementation of which of the following
concepts?
A. The going concern concept
B. The separate entity concept
C. The prudence concept
D. Matching concept
Ans C
Q5 The revenue recognition principle dictates that all types of incomes
should be recorded or recognized when
A.Cash is received
B.At the end of accounting period
C.When they are earned
D.When interest is paid

Ans C
Q6 Which of the following is time spann into which the total life of a
business is divided for the purpose of preparing financial statements?
A.Fiscal year
B.Calendar year
C.Accounting period
D.Accrual period

Ans C
Q7 Depreciation is charged on fixed assets to comply with which of
the following accounting principle?
A.Matching concept
B.Prudence concept
C.Timeliness concept
D.Reliability concept

Ans A
Q8 Office equipment is a ______ asset for a computer manufacturer
and the same office equipment is a ____ asset for a company that
deals in these equipments
A.Current, fixed
B.Fixed, intangible
C.Tangible, intangible
D.Fixed, current

Ans D
Q.9 As per revenue recognition principle, sales revenues should be
recognized at the time when?
(a) Order is taken for merchandise
(b) Ownership of goods gets transferred from the seller to the buyer
(c) Cash is received
(d) All of the above

Answer: b
Q.10 Due to which concept, accounting does not record non-financial
transactions?
(a) Going concern concept
(b) Money measurement concept
(c) Accrual concept
(d) Cost concept

Answer: b
Q.11 The owner of the business is treated as a creditor of the business
according to which of the following concept?
(a) Entity concept
(b) Materiality concept
(c) Consistency concept
(d) Periodicity concept

Answer: a
Q12 The purchase price of a software that will be used for more than
12 months should be regarded as
A.a revenue expenditure
B.a capital expenditure
C.a long term expense
D.an accounting period expense

Answer B
13. Who is the profounder of Double Entry System?
(a) Henry Fayol
(b) Lucas Pacilio
(c) Henry Ford
(d) Adam Smith

Double entry system is developed by Lucas Pacioli of Italy So, option (b)
is correct.
14 Accounting rules, practices and conventions should remain same
from one year to another as per the —————-
(a) Convention of consistency
(b) Convention of full disclosure
(c) Convention of conservatism
(d) All of the above.

(a) is correct option.

15 Accounting of a pen as an expense and not as an asset is due to
Convention
(a) Materiality
(b) Conservatism
(c) Consistency
(d) Disclosure

Answer (a) Materiality

16 Making provision for doubtful debts is as per …… convention
(a) Consistency
(b) Disclosure
(c) Conservatism
(d) Materiality

Answer (c) Conservatism

17 According to money measurement concept the following will be
recorded in the books accounts of the business:
(a) Value of Plant and Machinery
(b) Quality of Company Goods
(c) Utility of Managers
(d) Health of Director

Answer (a) Value of Plant and Machinery

18. The convention of Prudence when applied to the balance sheet
results
(a) Overstatement of Assets
(b) Understatement of Liability
(c) Understatement of Assets
(d) Overstatement of Liabilities

Answer (c) Understatement of Assets

19. Revenue Should be recognised at the point of sale. Which principle
is applied here ?
(a) Consistency
(b) Cost Realization
(c) Marketing
(d) Realization

Answer (d) Realization

20. Which assumption says a business entity will not be sold or
liquidated in the near future
(a) Conservatism
(b) Going Concern
(c) Periodic
(d) Separate Entity
Answer (b) Going Concern
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 Accounting Equation
1. Which of the following statements is incorrect?
(a) Liabilities + Assets = Capital
(b) Assets – Liabilities = Capital
(c) Liabilities + Capital = Assets
(d) Assets - Capital = Liabilities
Ans A
2. Which of the following statements is true about the accounting
equation?
A. The accounting equation represents that the sources in a
business are not equal to the resources of that business
B. The accounting equation represents that the sources in a
business are equal to the resources of that business
C. The accounting equation represents that the resources are
allocated to the business at cost price
D. None of the above
Answer: b
3. Which of the following accounts will be affected by a transaction
where the company receives from a debtor?
A. Owner’s equity and cash
B. Owner’s equity and debtors
C. Debtors and cash
D. None of the above
Answer: c
4. On January 1st, 2009 an entity's balance sheet showed total assets
of Rs. 750 and liabilities of Rs. 250. Owners' equity at January 1st was?
(a) Rs. 750
(b) Rs. 1,000
(c) Rs. 500
(d) Rs. 250
Ans C
5. During a reporting period, a company’s assets increase by Rs.
80,000,000. Liabilities decrease by Rs. 20,000,000. Equity must
therefore?
(a) Decrease by Rs. 100,000,000
(b) Increase by Rs. 100,000,000
(c) Decrease by Rs. 60,00,000
(d) Increase by Rs. 60,000,000

Ans B
6. Which one of the following equations correctly expresses the
relationship between assets (A), liabilities (L), revenues (R), expenses
(E) and capital (C)?
(a) A = L + R + E + C
(b) A = C + L + (R-E)
(c) A = C - (R - E) + L
(d) A = (L - C) + (R - E)

Ans B
7. Which of the following account is affected from the drawings of
cash in sole-proprietorship business?
(a) Shareholder account
(b) Capital account
(c) Liability account
(d) Expense account

Ans B
8. The favorable balance of profit and loss account should be?
(a) Added in liabilities
(b) Subtracted from current assets
(c) Subtracted from liabilities
(d) Added in capital

Ans D
9) Which of the following transactions would have no impact on
stockholders' equity?
(a) Purchase of land on credit
(b) Dividends to stockholders
(c) Net loss
(d) Investment in cash by stockholders

Ans A
10. ‘Cash withdrawn by the proprietor from the business for his
personal use’ causes
(a) Decrease in assets and decrease in owner’s capital
(b) Increase in one asset and decrease in another asset
(c) Increase in one asset and increase in liabilities
(d) Increase in asset and decrease in capital

Ans A
11. A firm has assets of ` 1,00,000 and the external liabilities of `
60,000. Its capital would be
(a) ` 1,60,000 (b) ` 60,000
(c) ` 1,00,000 (d) ` 40,000

Ans D
12. 6. Assets increased by
a) Selling goods for cash b) Selling goods on credit
c) Purchasing machinery for cash d) Purchasing machinery on
credit
Ans D
13. Capital increased by
a) Interest on capital b) Selling goods on profit
c) Additional capital introduced d) All of these
Ans D
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14. What is the effect of Interest on Capital
(A) Increases assets and decreases capital
(B) Increases expense and decreases liability
(C) Increases and Decreases Capital
(D) Increases liability and decreases capital.

Ans C
15. . Recovery of bad debts previously written off:
(A) Increases Assets and Revenue
(B) Decreases Assets and Expenses
(C) Increases Assets and Capital
(D) Increases Expenses and Assets.

Ans C
16 Capital of business is 230000, liabilities are 50000, loss 80000, then
asset will be
a) 400000 b) 320000
c) 360000 D ) 200000

Ans D
17. Profit on sale of goods will be
a) Deducted from capital b) Added to capital
c) Added in liabilities d) None of these

Ans B
18) accounting equation is the base of
A Single Entry System b going concern Concept
c Double Entry System d Costing Measurement System

Ans c

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19)) car purchased for business purpose for cash will effect
A increase of current asset and decrease of fixed asset
B increase of fixed asset and decrease of current asset
C increase of current asset and increase of capital
D none

Ans B
20 expenses paid shows effects
A increase of current asset and increase of capital
B decrease of current asset and decrease of capital
C decrease of current asset and decrease of external liability
D no effect
Ans B

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 Journal Entries
1. Journal lists transactions in which order?
(a) Decreasing
(b) Chronological
(c) Alphabetical
(d) Increasing

Answer: b
Q2. Among these statements which one is incorrect regarding journal
entry?
(a) The debited account titles are listed first
(b) Journal entries show the effects of transactions
(c) Each journal entry should begin with a date
(d) Journal entries provide account balances

Answer: d
Q.3 Cash withdrawal from business by the proprietor should be
credited to
(a) Cash account
(b) Purchase account
(c) Capital account
(d) Drawings account

Answer: a
Q4. ________ A/c is credited and ____ A/c is debited in case wages
are paid for construction of business premises
(a) Cash, Wages
(b) Cash, Premises
(c) Premises, Cash
(d) Wages, Cash

Answer: b
5. Goods returned by customer will be debited to which account?
(a) Purchases A/C
(b) Return outward
(c) Customer’s A/C
(d) Return inward
Answer: d
6. Sales to Mohsin on account should be debited to
a) Cash A/c
b) Sales A/c
c) Mohsin A/c
d) Account Receivable

Ans C
7. Interest paid to Ali should be debited to
a) Ali Account
b) Interest Account
c) Cash Account
d) Account payable Account

Ans B
8. Good returned to supplies should be debited to
a) Sales return
b) Return outward
c) Return inward
d) Supplies account

Ans D
9. A journal entry that require more than two account is called
a) Double entry
b) Compound entry
c) Combined entry
d) Single entry
Ans B
10 Loss of goods by fire should be credited to
a) Loss by fire
b) Sale account
c) Capital
d) Purchase account

Ans D
13. David account is related to
a) Personal account
b) Real account
c) Nominal account
d) All of these

Ans A
14 When a liability is reduced or decreased, it is recorded on the
a) Left or credit side of account
b) Right or debit side of account
c) Right or credit side of account
d) None of these

Ans D
15 Which accounts normally have credit balances?
a. Revenues, liabilities, and Machinery
b. Revenues, liabilities, and assets
c. Revenues, liabilities, and retained earnings
d. Revenues, liabilities, and expenses

Ans C

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16 When a company performs a service but has not yet received
payment, it
a. debits Service Revenue and credits Accounts Receivable.
b. debits Accounts Receivable and credits Service Revenue.
c. debits Service Revenue and credits Accounts Payable.
d. makes no entry until cash is received.

Ans B
17 While passing an opening entry, all the assets are______while all
the liabilities are_____
a) Debited , credited
b) Credited, Credited
c) None of the options
d) Credited, Debited\

Ans A
18 Name the transaction that is recorded in both sides of Cash book
simultaneously.
a) Contra Entry
b) Dual entry
c) Double entry
d) Single entry

Ans A
19 Journal proper includes entries related to______
a) Sale of asset on credit
b) Sale of asset for cash
c) Sale of goods for cash
d) Sale of goods on credit

Ans A
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20) Purchase of machinery on credit is recorded in_______
a) Journal proper
b) Sales Book
c) Cash book
d) Purchase book

Ans A

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 Journal Enteries
Q.1. Journal is called
(a) a book of primary entry.
(b) a book of secondary entry.
(c) a book of final entry.
(d) both secondary entry and final entry

Ans A
Q.2. Recording of transaction in a Journal is called
(a) Posting.
(b) Journalising.
(c) Transfer.
(d) Ruling

Ans B
Q.3. Which of the following accounts will be credited on giving cash
donation? .
(a) Cash A/c.
(b) Donation A/c
(c) Purchases A/c.
(d) Discount Received A/c.

Ans A
Q.4. Sale of goods to Ram for cash is debited to
(a) Ram.
(b) Cash A/c.
(c) Sales A/c.
(d) Stock A/c.

Ans B
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5. Anil purchased 1,000 Add Gel Roller Pens @ Rs 50 each less Trade
Discount of 20%. Purchases Account will be debited by
(a) Rs 50,000.
(b) Rs 40,000.
(c) Rs 45,000.
(d) Rs 60,000.

Ans B
Q.6. Anil purchased, 1,000 Add Gell Roller Pens @ Rs 50 each less 20%.
Trade Discount and 3% Cash Discount if payment is made within 30
days. Anil paid after 30 days period. Purchases Account will be debited
and Discount Received Account will be credited respectively with
(a) Rs 40,000, Nil.
(b) Rs 40,000, Rs 300.
(c) Rs 40,000, Rs 1,200.
(d) Rs 40,000, Rs 900.

Ans A
Q.7. Which of the following is correct entry to record cash purchase of
Rs 3,000 from Amar?
(a) Dr. Purchases A/c and Cr. Amar by Rs 3,000.
(b) Dr. Amar and Cr. Purchases A/c by Rs 3,000.
(c) Dr. Cash A/c and Cr. Purchase A/c by Rs 3,000.
(d) Dr. Purchases A/c and Cr. Cash A/c by Rs 3,000.
Ans D
Q8. Bad Debts earlier written off and now received are credited to
(a) Bad Debts A/c.
(b) Bad Debts Recovered A/c,
(c) Miscellaneous Income A/c.
(d) Debtors A/c.
Ans B
9) Mr. X is a dealer in electronic goods (refrigerator, washing
machine, air conditioners, televisions, etc.) He purchased
two air conditioners and installed in his showroom. In the
books of X the cost two air conditioners will be debited to
A] Drawing account B] Capital Account
C] Fixed assets D] Purchases account

Ans C
10) A machine (cost $5,000) is bought on credit. Subsequently, $1,000
of the debt is paid by cheque. Which of the following correctly records
the transaction?
A)Debit payables $5,000, credit machine $5,000. Debit bank $1,000,
credit payables $1,000
b)Debit payables $5,000, credit machine $5,000. Debit payables $1,000,
credit bank $1,000
c)Debit machine $5,000, credit payables $5,000. Debit bank $1,000,
credit payables $1,000
d)Debit machine $5,000, credit payables $5,000. Debit payables $1,000,
credit bank $1,000

Ans D
11 A business buys a machine for $500 (cash) and pays machinery
insurance $50 (Cash). Which of the following shows the correct double
entry for this transaction?
A) Debit machinery $550, credit cash $550
B )Debit cash $550, credit machinery $550
C )Debit machinery $500 , credit cash $550, debit insurance expense
$50
D )Debit cash $550 , credit machinery $500, credit insurance expense
$50

ANS A
12. The Page number of the ledger account is mentioned in which
coloumn of Journal
a. Ledger formula
b. Ledger point
c. Ledger folio
d. Ledger page

Ans C

13

Ans C
14
15. A shop makes all its sales for cash. Where does the sales account
appear?
A cash book
B nominal (general) ledger
C sales journal
D sales ledger

Ans A
16 Rent is paid to J. Perigo in cash.
How is this recorded?
account to be debited account to be credited
A cash rent
B J. Perigo rent
C rent cash
D rent J. Perigo

Ans C
17 Which of the following should not be recorded in the books of
account?
A canteen costs
B maintenance of office buildings
C wages of staff
D workers' skills

Ans D
18 Out of the following which is a feature of Journal:
(A) Journal is a book in which all the transactions are recorded, as and
when they take place.
(B) In Journal, all the transactions are recorded in a chronological order.
(C) A Journal has record of daily transactions.
(D) All of the above
Ans D
19) WHEN CHEQUE ISSUED TO RAM HAS BEEN DISHONOURED DUE TO
SOME CIRCUMSTANCES THEN THE A/C TO BE DEBITED WILL BE :
A RAM A/C B BANK A/C
C PURCHASE A/C D CASH A/C

Ans B
20) GOODS DESTROYED IN FIRE . THE JOURNAL ENTRY WILL BE
A PURCHASE DR.
TO LOSS ON FIRE A/C
B LOSS IN FIRE A/C DR.
TO PURCHASE A/C
C LOSS IN FIRE A/C
TO SALES A/C
D LOSS IN FIRE A/C
TO GOODS A/C
Ans B

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 Ledger A/c
Q.1. Posting of transaction means
(a) entering transactions in Journal
(b) entering transactions in Ledger
(c) entering transactions in Trial Balance,
(d) entering transactions in Financial Statements
Ans B
Q.2. Ledger Account is prepared from
(a) Vouchers.
(b) Trial Balance
(c) Journal
(d) Financial Statements
Ans C

Q.3. Bank A/c is generally maintained in the ____

a) General ledger
b) Debtors’ ledger
c) Cash book
d) Creditors ledger
Ans C

Q.4. Ledger is a book in which

(a) Real and Nominal Accounts are maintained.
(b) Real and Personal Accounts are maintained.
(c) Real, Personal and Nominal Accounts are maintained.
(d) Personal and Nominal Accounts are maintained.
Ans C

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Q.5. The process of transferring the transactions from the Journal to
the ledger is called
(a) Journalising.
(b) Posting.
(c) Balancing.
(d) Costing.

Ans B
Q6. Which of the following expense is not a revenue expense?
(a) Salary
(b) Electricity
(c) Water
(d) Repair of second-hand machinery purchased

Ans D
Q7. When goods are lost by fire then Loss of Goods by Fire Account is
debited with
(a) Cost of goods sold.
(b) Cost of goods sold plus Gross Profit.
(c) Cost of goods sold less Gross Profit.
(d) Cost of goods purchased.

Ans D
Q8. The ledger column that links the entry with the journal is called
as.
(a) J.F column
(b) L.F column
(c) Credit column
(d) Debit column
Answer: a
Q9) Accounts that have credit balance are closed by using the
statement.
(a) By balance b/d
(b) By balance c/d
(c) To balance b/d
(d) To balance c/d
Answer: d

Q10) An account is having debit balance is established when.

(a) The last entry of the accounting period was posted on the debit side
(b) The amount of debit exceeds the amount of the credits
(c) There are more entries on the debit side than on the credit side
(d) None of above
Answer: b

Q11 Which of the following item will be appearing on the credit side
of the ledger account?
(a) Discount received
(b) Cash received
(c) Rent Expenses
(d) Purchases
Answer: a

Q12 Among these, which item is used as the base for preparing trial
balance?
(a) Cash account
(b) Balance sheet
(c) Journal
(d) Ledger account
Answer: d

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13) If debit side of bank account is greater than credit side it
represents?
(a) Cash at Bank
(b) Bank Loan
(c) Bank Overdraft
(d) None of them

Ans A
14) Which of the following item is not included in the Cash account?
(a) Purchases of Rs. 10,000
(b) Sales of Rs.5,000
(c) Received cash for Salman Rs. 2,000
(d) Credit sales of Rs. 22,000

Ans D
15) When a Liability is reduced or decreased, it is recorded on the?
(a) Right or debit side of the account
(b) Left or debit side of the account
(c) Left or credit side of the account
(d) Right or credit side of the account

Ans B
16) The respective normal account balances of Sales, Sales Returns
and Allowances, and Sales Discounts are?
(a) Credit, Credit, Credit
(b) Debit, credit, debit
(c) Credit, Debit, Debit
(d) Credit, Debit, Credit

Ans C

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17) X sells goods on credit to Y. He receives 10% trade discount from X
and a further 5% cash discount if paid within 15 days. Y bought goods
with a list price of Rs. 2,00,000 from X.
Which of the following Journal entry would correctly record the sale in
the books of X?
(a) Dr. y and Cr. Sales A/c by Rs. 1,70,000.
(b) Dr. Y and Cr. Sales A/c by Rs. 1,80,000.
(c) Dr. X and Cr. Sales A/c by Rs. 1,90,000.
(d) Dr. X by Rs. 2,00,000; Cr. Sales A/c by Rs. 1,70,000 and Discount
A/c by Rs. 30,000.

Ans B
18) Which of the following correctly represents the sequence of
accounting cycle?
a.Journal entry > transaction analysis > ledger account
b.Transaction analysis > journal entry > ledger account
c.Transaction analysis > journal entry > trial balance
d.Transaction analysis > trial balance > ledger account
Ans B
19) Debit Means
(a) an increase in asset
(b) a decrease in asset
(c) an increase in liability
(d) an increase in capital

Ans A
20) When the total of debit and credit are equal, it represents
a) Debit balance b) Credit balance
c) Nil balance d) Current balance

Ans C
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 Trial Balance
1. Trial balance is used to check the accuracy of
A) Balance sheet balances
B) Ledger accounts balances
C) Cash flow statement balances
D) Income statement balances

Answer: B
2. In the books of account if a transaction is completely deleted, will it
affect the trial balance?
A) No
B) Yes
C) A transaction cannot be omitted

Answer: A
3. What is used in preparing trial balance?
A) Specialised Journals
B) Balance Sheet
C) Ledger Accounts
D) General Journal

Answer: C
4. What is the trial balance used for?
A) It is a financial statement
B) It records balances of a balance sheet
C) It doesn’t contribute to the accounting cycle
D) It records balances of accounts

Answer: D
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5. The error which can be disclosed by Trial balance-
(a) Error of ommission
(b) Error of principal
(c) Compensatory error
(d) None of these.

Ans D
6) If the trial balance does not tally after many efforts then following
Account is opened –
(a) Purchase account
(b) Suspense account
(c) Sales account
(d) None of these.

Ans B
7) Errors committed due to lack of basis principle of Accounting are
called –
(a) Compensating errors
(b) Error of principle
(c) Single sided error
(d) None of these.

Ans B
8) Cash and bank balances normally appeared on which side of the
trial balance:
a)Credit side
b) Debit side
c) Do not appear on either side

Ans B

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9) When is trial balance prepared?
A) At the end of an accounting period
B) At the end of a year
C) Frequently during the year
D) At the end of a month

Answer: A
10) Which items influence the trial balance agreement?
A) Deposit in transit
B) Compensating errors
C) Complete omission of a transaction
D) Partial omission of a transaction

Answer: D
11) When credit balances = debit balances, the trial balance check and
shows ____________ . It also indicates that there were no errors
made during posting and recording and posting.
A) Understatements of Balances
B) Errors of Commission
C) Arithmetic Accuracy
D) Omissions of Economic Events

Answer: C
12) In trial balance, which accounts with normal balance is recorded at
the credit side?
A) Bank account
B) Equipment account
C) Cash account
D) Accrued expenses account

Ans D
13) Trial Balance is prepared
(a) before Journal is written.
(b) after Journal is written.
(c) after Journal is posted into ledger accounts.
(d) after financial statements have been prepared.

Ans C
14 If Closing Stock appears in the Trial Balance, it means
(a) purchases are adjusted against opening and closing stocks.
(b) purchases are adjusted against closing stock.
(c) Both (a) and (b).
(d) None of the above.

Ans A
15) Sale of Rs.50,000 to ‘A’ was entered as a sale to ‘B’. This is an
example of –
(A) Error of omission
(B) Error of commission
(C) Compensating error
(D) Error of Principle.

Ans. : (B) Error of commission.

16) A Suspense Account will give the
(i) Debit or Credit balance
(ii) Debit balance
(iii) Credit balance
(iv) None of the options

Ans A

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17) Trial balance is:
(i) an account.
(ii) a statement.
(iii) a subsidiary book.
(iv) a principal book.

Ans A
18) Errors of complete omission permit
(i) Correct totalling of Trial Balance
(ii) Correct totalling of B/S
(iii) The Trial balance to agree
(iv) All the above

Ans D
19) Preparation of a Trial Balance is
(i) compulsory.
(ii) optional.
(iii) compulsory or optional.
(iv) None of these.

Ans B
20) Purchase return is shown on -------- side
A Debit
B Credit
C Both
D None

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 Rectification of Errors
1) If wages paid for the installation of new machinery is debited to the
wages account, it is ___________.
(a) An error of commission
(b) An error of principle
(c) A compensating error
(d) An error of omission
Answer: (b) An error of principle
2) Which of the following is not an error of principle?
(a) Purchase of furniture debited to purchase account
(b) Repairs on the overhauling of second-hand machinery purchased
debited to repairs account
(c) Cash received from XYZ posted to ABC
(d) Sale of old car credited to sales account
Answer: (c) Cash received from XYZ posted to ABC
3) Which of the following errors will be rectified through a suspense
account?
(a) Sales return book undercast by Rs. 10,000
(b) Sales return by XYZ of Rs. 10,000 is not recorded
(c) Sales return by XYZ of Rs. 10,000 is recorded as Rs. 1,000.
(d) Sales return by XYZ of Rs. 10,000 recorded through purchase return
book
Answer: (a) Sales return book undercast by Rs. 10,000
4) Compensating errors are of a _ nature.
a) Neutralizing
b) Consistent
c) Concealing
d) Accommodating
Ans a
5) Under casting of Sales book is corrected by______Sales Account
a) Crediting
b) Debiting
c) Balancing
d) Ignoring
Ans A
6) Purchase of office furniture worth Rs. 5,000 has been debited to
General expenses account. Identify the error.
a) Error of Principle
b) Clerical error
c) Error of omission
d) None of the options
Ans A
7) If suspense account does not balance off even after rectification of
errors it implies that:
(a) there are some one sided errors only in the books yet to be located.
(b) there are no more errors yet to be located.
(c) there are some two sided errors only yet to be located.
(d) there may be both one sided errors and two sided errors yet to be
located.

Ans A
8) Which of the following has debit balance?
A furniture a/c B cash a/c
C salary paid a/c D all of these
Ans D
9) A trial balance is a
A real account B nominal account
C list of balances D none of these
Ans C

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10) While preparing the trial balance, the accountant finds that the
total of the credit column is short by 200. This difference will be
(a) Debited to suspense account
(b) Credited to suspense account
(c) Adjusted to any of the debit balance
(d) Adjusted to any of the credit balance

Ans B
11) The account which has a debit balance and is shown in the debit
column of the trial balance is
(a) Sundry creditors account (b) Bills payable account
(c) Drawings account (d) Capital account

Ans C
12) When closing stock is given in trial balance, then it will effect:
A) Trading and Profit & Loss account only B) Balance sheet only
C) Owner's equity only
D) Trading and Profit & Loss account and Balance sheet

Ans B
13) Which one of the following is not considered the permanent part
of the accounting record
(A) Journal (B) Trial Balance
(C) Balance sheet (D) Final accounts

Ans B
14) Which of the following shown on the credit side of the trial
balance?
a) Wages paid b) Sales returns
c) Drawings d) Provision for bad debts

Ans D
15). In a trial balance the debit balance should be _______the credit
balance
A more B less
C equal D none

Ans C
16 . In a trial balance income received in advance has _________
balance
A debit balance B Credit balance
C depend in circumstances D None

Ans B
17. Accrued income has_____________ balance
A debit b credit
C both D none

Ans A
18) Which one of the following represents correct sequence of
accounting cycle?
a Journal > Trial balance > Ledger > Transaction analysis
b Transaction analysis > Journal > Ledger > Trial balance
c Purchases > Journal > Ledger > Trial balance
d None of the above

Ans B
19) Two methods of preparing a trial balance are:
a Financial method and total method
b Total method and normal method
c Balance method and financial method
d Balance method and total method

Ans D
20) Trial Balance might match in spite of presence of:
(i) Errors of complete omission, Errors of principle
(ii) Errors of complete omission
(iii) Errors of commission
(iv) Errors of Principle

Ans A

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 CASH BOOK
1. Which of the following statements is true about the balance in the
petty cash account?
A. It is a liability
B. It is an asset
C. It is an expense
D. None of the above

Answer: b
2. What is the primary purpose of a cashbook?
A. It records receipts and payments of cash
B. It records payments of cash
C. It records receipts of cash
D. It helps to compute the profit and loss of a business

Answer: a
3. Which of the following is not a part of ‘cash and cash equivalents’ in
a cashbook?
A. Special investments
B. Cheques
C. Money orders
D. Coins
Answer: a
4. A cashbook serves the following purpose:
A. It works as a ledger account
B. It works as a book of original entry as well as a ledger account
C. It works as a book of original entry
D. None of the above
Answer: b
8) How do we record the overdrawn balance of a cashbook?
A. It is credited if the balance is mentioned as an overdrawn
balance
B. If debit or credit balance is not mentioned, then it will be an
overdrawn balance
C. If an overdraft balance is mentioned, then it will be debited on
the debit side of the cashbook
D. None of the above
Answer: a

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9) The credit side of a cashbook is ________:
A. The loss side
B. The receipt side
C. The profit side
D. The payment side

Answer: d
10) Once you add a bank column to both sides of a single cashbook, it
becomes a _______:
A. Petty cashbook
B. Double column cashbook
C. Triple column cashbook
D. None of the above

Answer: b
11) In a three column cashbook, the ______ column is not balanced:
a. Discount column
b. Cash column
c. Bank column
d. None of the above

Answer: a
12) In a cashbook, a contra entry involves __________:
A. A cash account and a bank account
B. A cash account and a sales account
C. A cash account and a discount account
D. A bank account and a discount account

Answer: a

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13) The transaction that does not affect a cashbook is ___________:
A. Cheque received from Mr B and deposited in the bank
B. Depreciation expense recorded for the year
C. Mobile charges paid from the online company’s bank account
D. Cash paid to creditors for goods purchased from them

Answer: b
14) Which one of the following transactions will be recorded in the
cashbook as a contra entry?
A. Cash is withdrawn from the bank for office use
B. Cash is deposited in a company’s bank account
C. A cheque that was received earlier is deposited into the
company’s bank account
D. All of the above

Answer: d
15) A cashbook that records minor expenses of a business on a day-to-
day basis is a ________:
A. Petty cashbook
B. General cashbook
C. Extra cashbook
D. Additional cashbook

Answer: a
16) A cheque is received from a creditor and paid into the bank on the
same day. How will this transaction be recorded in the cashbook?
A. It will be recorded in the cash column of the cashbook
B. It will be recorded both in the cash and bank column of the
cashbook
C. It will be recorded in the bank column of the cashbook
D. None of the above
Answer: c
17) Which of the following transactions will not be included in the
cashbook?
A. Cash receipt from Anil for Rs. 40000
B. Purchases worth Rs. 30000
C. Credit sales worth Rs. 20000
D. Cash sales worth Rs. 40000
Answer: c

18) The total of the discount column on the debit side of a cashbook is
posted to the:
A. Debit side of the discount allowed account in the ledger
B. Credit side of the discount allowed account in the ledger
C. Debit side of the discount received account in the ledger
D. Credit side of the discount received account in the ledger

Answer: a
19) A firm that properly maintains its cashbook does not need to
maintain:
A. Cash payment journal
B. Cash account in the ledger
C. Cash receipt journal
D. All of the above

Answer: d
20) Another name for the debit side of a cashbook is ________:
A. Receipts side
B. Income side
C. Expense side
D. Payment side
Answer: a
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 Cash Book
1. Small payments are sometimes recorded in a separate book called
(a) Cash Book.
(b) Bank Book.
(c) Small Payment Book.
(d) Petty Cash Book.

So, option (d) is correct answer.

2. The balance of cash book shows
(a) Net income.
(b) Cash in hand.
(c) Net expenditure.
(d) Net bank balance.

So, option (b) is correct

3. Imprest amount 􀳦 Rs. 500. What will be the amount of re-
imbursement if following expenses were incurred by the petty cashier
during the month-Telephone =Rs. 150, Tiffin = Rs. 50, small Repairs =
Rs. 30 general expenses = Rs. 100.
A) 300 B) 170
C) 330 D) 270

So, option (c) is correct answer.

4. The main advantage(s) of the petty cash book is / are
(a) Control over small payment.
(b) Saving of time of the chief-cashier.
(c) Saving of labour in writing up the Cash Book and posting into
ledger.
(d) All of them.

So, option (d) is correct answer.

5. In a Three Column Cash Book
(a) Trade Discount allowed is recorded on the debit side of Cash Book.
(b) Cash Discount received is recorded on the Credit side of Cash
Book.
(c) Discount Column are balanced.
(d) Bank Column is always debit balance.

So, option (b) is correct answer.

6. In a Three Column Cash Book.
(a) Only Cash Column and Bank Columns are balanced.
(b) Only Cash Column and Discount Column are Balanced.
(c) Cash Column, Bank Columns and discount Columns are balanced.
(d) None of the above.

. So, option (a) is correct answer.

7. Which is not Contra entry is three column Cash Book.
(a) Cash Deposited into Bank.
(b) Cash withdrawn from Bank.
(c) Cash withdrawn from Bank for Personal use.
(d) None of the above.

So, option (c) is correct answer.

8. WHICH OF THE FOLLOWING TRANSACTION IS NOT TO BE ENTERED
IN CASH BOOK?
1 GOODS SOLD FOR CASH 2 GOODS PURCHASED FROM RAM
3 STATIONERY EXPENSE PAID 4 DEPRECIATION CHARGED ON
MACHINE

OPTIONS A 1 AND 2 B 2 AND 3

C 3 AND 4 D 2 AND 4

So, option (d) is correct answer

9) At the end of the year, Petty Cash Book’s balance is shown in the
balance sheet.
(a) As a part of cash balance.
(b) Separately as current asset.
(c) As a part of fixed asset.
(d) None of the above.

So, option (a) is correct answer.

10. Petty cash is normally used to pay
(a) Expenses relating to small expenses, like postage conveyance, etc
(b) Salaries and wages to Employees.
(c) For purchase of Furniture and Machinery.
(d) All of the above.

So, option (a) is right answer.

11. The term “Imprest System” is used in relation to
(a) Sales book
(b) Purchase book
(c) Ledger book
(d) Petty cash book

So, option (d) is correct answer.

12. Discount column in the Cash book are——-and their totals entered
in the——–in the ledger.
(a) Balanced; Cash A/c
(b) Balanced; discount A/c
(c) Not balanced; discount A/c
(d) Not balanced; Cash A/c

So, option (c) is correct answer.

13. In Three column Cash book—–columns are memorandum columns
:
(a) Cash
(b) Bank
(c) Discount
(d) Overdraft

So, option (c) is correct answer.

14. The balance of Bank column of Cash Book is ———-balance :
(a) Debit
(b) Credit
(c) Either Debit or Credit
(d) None

So, option (c) may be considered as correct answer.

15. Bank overdraft is shown on the———side of the Trial Balance
(a) Debit
(b) Credit
(c) Either Debit or Credit
(d) None

So, option (b) is correct answer.

16. Interest received of Rs. 100 was recorded as interest paid. What
will be the effect on cash balance?
A) Cash will reduce by 100. B) Cash will increase by 200.
C) Cash will reduce by 200. D) No effect on cash balance.

So, option (C) is correct answer.

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17) Which of the following is entered in cash – book-
(a) Only cash transactions
(b) Only credit transactions
(c) Both cash and credit transactions
(d) None of these.

So, option (a) is correct answer.

18. Cash withdrawn from bank for office use will be entered in which
columns of Cash / Bank Book
(a) Cash column in Debit side only
(b) Cash column in Credit side only
(c) Cash column in Debit side and Bank Column in Credit side.
(d) Bank column in Debit side & Cash column in Credit side.

So, option (c) is correct answer.

19. A 3 column cash book contains
(a) Cash, bank & petty cash column on both sides
(b) Cash, Bank & Discount columns on both sides.
(c) Cash & bank in Credit side and Discount Column in Debit side
(d) Cash & bank in Debit side and Discount Column in credit side

The three column cash book contains cash, bank and discount columns
on both sides. So, option (b) is right answer.

20) In cash book, the favourable balance indicates

A) Credit Balance
B) Debit Balance
C) Bank Overdraft
D) Adjusted Balance

Ans B
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 VOUCHER APPROACH
1) Which of the following is documentary evidence that records the
details of a transaction and is prepared in a specific format?
A. Journal
B. Ledger
C. Voucher
D. All of the above

Answer: c
2) Which of the following transactions is a voucher prepared for?
A. Cash or credit purchase
B. Cash or credit sale
C. Cash received and paid
D. All of the above

Answer: d
3) A voucher is prepared on the basis of ________.
A. The journal entries
B. The ledger entries
C. The documentary evidence
D. All of the above

Answer: c
4) Which of the following details are included in a voucher?
A. The transaction amount (in both figures and words)
B. Signature of the manager or an authorised person
C. The particulars column (it records a brief description of the
transaction)
D. All of the above

Answer: d
5) Cash memo is a source voucher for purchaser of goods
(a) for cash purchases.
(b) for credit purchases.
(c) for credit sales.
(d) for cash sales.

Ans A
6) . Invoice is a source voucher for seller of goods
(a) for cash sales.
(b) for credit purchases.
(c) for credit sales.
(d) for cash purchases.

Ans C
7) If purchaser of goods returns them, he will prepare
(a) Credit Note.
(b) Debit Note.
(c) Both (a) and (b).
(d) None of these

Ans B
8) Transfer vouchers are prepared to record
(a) cash transactions.
(b) non-cash transactions.
(c) (a) and (b).
(d) None of these.
Ans B
Q.9). Credit purchase of furniture is recorded through
(a) Transfer voucher.
(b) Cash voucher.
(c) Debit voucher.
(d) Credit voucher.
Ans A
10) Which of the following procedures should an accountant follow
while preparing a voucher?
A. Verify the date, amount, signature and transaction details on
the supporting documents
B. Confirm if an authorised signatory has approved the
supporting documents
C. Select the type of voucher that will be used for the transaction
D. All of the above

Answer: d
11) Which of the following are types of accounting vouchers?
A. Payment voucher
B. Receipt voucher
C. Supporting voucher
D. All of the above

Answer: d
12) Which of the following documents are issued at the time of
purchase return?
A. Banknote
B. Credit note
C. Debit note
D. None of the above

Answer: c
13) A debit voucher is prepared when _______.
A. The goods are purchased in exchange for cash
B. The goods are sold on credit
C. A machine is sold on credit
D. All of the above

Answer: a
14) Which of the following statements is not true about a source
document?
A. A petty cash voucher is a source document
B. A voucher is a source document
C. An invoice is a source document
D. A credit note is a source document

Answer: b
15) Which of the following statements is correct about an invoice?
A. An invoice is prepared when the goods are sold on credit
B. An invoice is prepared when the goods are sold both in cash
and credit
C. An invoice is prepared when the goods are sold in cash
D. None of the above
Answer: a
16) Which of the following statements is correct?
A. A credit note is prepared when the goods are returned by the
customer
B. A voucher is prepared when the goods are returned by the
customer
C. A debit note is prepared when the goods are returned by the
customer
D. None of the above
Answer: a
17) Raman purchases goods worth sixty thousand rupees from Suresh
on credit. But some of those goods are damaged. Which of the
following documents would Raman return to Suresh along with the
damaged goods?
A. Debit note
B. Purchase invoice
C. Sales invoice
D. Sales returns invoice
Answer: a
18) Accounting voucher is prepared from
(a) source voucher.
(b) Journal entry.
(c) Both (a) and (b).
(d) None of these.

Ans A
19) in which of the following debit voucher is prepared ?
A goods sold b machine sold
C income received d goods purchased

Ans D
20) Identify the transaction for which transfer voucher is prepared?
a) A payment of 10 towards rent
b) A receipt of 15 towards professional fee
c) A credit sale of 50 to Gopal
d) None of the above

Ans C

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