Accounting Practice MCQs Competitive Exams Set 21

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18. Identify which items are subtracted from the list amount and not recorded when computing purchase price:

a. Freight in

b. Trade discount

c. Purchase discount

d. Purchase return

Answer. b.

19. Bonus payable only on the maturity of the policy is termed as:

a. Cash bonus

b. Reversionary bonus

c. Interim bonus

d. Bonus is reduction of premium

Answer.

20. Rebate on bill discounted (unearned discount) is:

a. An expense

b. An income

c. A liability

d. An asset

(i) Which of the following transactions represent an expense?

(a) The owner withdrew Rs. 1,600 from the business for personal use

(b) Purchased a photocopying machine for Rs. 2,750 cash

(c) Purchased medical supplies for cash from Healthcare Labs. Rs. 1,630

(d) Received a telephone bill amounting to Rs. 550 to be paid within ten days.

Answer. (d)

(ii) Which of the following statements about accounting procedures is not correct?

(a) The journal shows in one place all the information about specific transections arranged in chronological order.

(b) A ledger account shows in one place all the information about changes in a specific asset or liability or owner’s equity.

(c) Posting is the process of transferring information from ledger accounts to the journal.

(d) The product of the accounting cycle is the formal financial statements such as balance sheet and income statement.

Answer. (c)

(iii) Which of the following financial statements reflects the overall financial position of the business?

(a) Statement of cash flows

(b) Income Statement

(c) Balance Sheet

(d) Statement of owner’s equity

Answer. (c)

(iv) Trial Balance is prepared:

(a) To ensure arithmetical accuracy of accounting records.

(b) To establish complete accuracy of accounting records.

(c) To determine the amounts payable to suppliers for purchase of goods on credit.

(d) To ensure efficient use of resources of the business.

Answer. (a)

(v) The net sales of Fresh Foods were Rs. 200,000 for the current month. If the cost of goods available for sale was Rs. 180,000 and the gross profit rate was 35%, the ending inventory must have been:

(a) Rs. 70,000

(b) Rs. 1,30,000

(c) Rs. 50,000

(d) Rs. 63,000 (200,000 – 180, 000 – X = 70, 000( 0.35* 200,000 = 70,000 )) = X= 50, 000

Answer. (c)

(vi) In the accounting cycle:

(a) Closing entries are made before adjusting entries.

(b) Closing entries are made after the adjusting entries.

(c) Adjusting entries are made after financial statements are prepared.

(d) Financial statements are prepared after closing trial balance.

Answer. (b)

(vii) Which of the following is an intangible asset?

(a) An investment in marketable securities .

(b) Leasehold land.

(c) Loose tools.

(d) Copy rights.

Answer. (a)

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