Accounting Mcqs – MCQs

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1.Identify the incorrect statement from the options below:

The Balance Sheet presents the financial status of a company.An individual who owes money to the company is referred to as a Debtor.A reduction in an asset's value can result in a decrease in a related liability.Assets must be recorded in the Balance Sheet at their realizable value.None of the above.

2.Where is Tax Deducted at Source (TDS) recorded in the Balance Sheet?

As a current asset under assetsListed under loans and advances in assetsClassified under current liabilities on the liabilities sideShown as a provision under liabilitiesNone of the above

4.Identify which of the following items is not classified as a fixed asset.

5.When unexpired insurance is recorded in the Trial Balance, where should it be reported in the financial statements?

Charged to the Profit and Loss AccountAdded as an expense in the Profit and Loss AccountListed under liabilities in the Balance SheetPresented as an asset in the Balance SheetNot reported anywhere

6.Which one of the following is not considered a formal financial statement?

7.Which of the following items does not get recorded in the Profit and Loss Account of a company?

8.What information does the Profit and Loss Account primarily present?

The financial performance of the business over a specific time frameThe financial condition of the business at a specific point in timeThe earnings status of the business on a given dateThe total cost of merchandise sold within the timeframeNone of the above

9.Which statement about the preparation of the Profit & Loss Account is incorrect?

The Profit & Loss Account is prepared for a specific timeframe, making it a periodic report.This account excludes any impacts arising from non-financial factors.Net profit figures are determined using current cost values.The net profit shown in the Profit & Loss Account is not an exact figure.None of the above.

10.Identify the correct equation from the following options:

Opening stock equals gross profit plus sales, direct expenses, purchases, and closing stock combined.Opening stock equals gross profit plus sales, direct expenses, purchases, minus closing stock.Sales amount equals gross profit added to opening stock, direct expenses, and purchases, less closing stock.Sales amount equals gross profit minus opening stock plus direct expenses, purchases, and closing stock.None of the above.

11.Which of the following items should be excluded from deductions when determining managerial remuneration from net profit?

Loss incurred from selling a business segmentWrite-off of uncollectible debtsObligations resulting from contract violationsPayment made to directors as remunerationNone of the above

12.How is Gross Profit calculated?

Revenue minus the cost of goods soldRevenue minus closing inventory plus purchasesBeginning inventory plus purchases minus ending inventoryNone of theseNot applicable

13.Identify the incorrect statement(s) regarding profit and cost calculations from the options below:

Net Profit equals Gross Profit minus administrative and other expenses.Net Profit equals Gross Profit plus administrative and other expenses.Cost of sales is calculated as Opening Stock plus Purchases minus Closing Stock.Both statements B and C are incorrect.None of the above.

14.How are prepaid expenses reported on the Balance Sheet?

At their replacement valueAt the current market priceAcquisition cost minus accumulated amortizationOriginal cost minus the portion that has been used upNot reported on the Balance Sheet

15.Stock valued at 800 is destroyed by fire, and the Insurance Company approves a claim of 600. How should the accounting entries be adjusted?

Debit Trading Account with 800; credit Insurance Company with 600 and Profit and Loss Account with 200Subtract 800 from the closing stock in the Trading AccountCredit the Insurance Company for 600 onlyDebit Insurance Company with 600 and Profit and Loss Account with 200; credit Trading Account with 800No entry required

16.The Trial Balance shows Sundry Debtors amounting to 43,000, which includes 2,200 owed by 'H' for goods sent on approval. The cost price of these goods is 1,800. How should the accounts be adjusted to reflect this correctly?

Increase closing inventory by 2,200Reduce closing stock by 1,800 and subtract 2,200 from both debtors and salesAdd 1,800 to closing inventory and reduce debtors and sales by 2,200 eachSubtract 1,800 from debtors balanceNo adjustment required

17.Which journal entry correctly reflects the treatment of the reserve for discounts on accounts payable?

Profit & Loss Account Dr. and Reserve for Discount on Accounts Payable Cr.Accounts Payable Dr. and Profit & Loss Account Cr.Reserve for Discount on Accounts Payable Dr. and Profit & Loss Account Cr.Reserve for Discount on Accounts Payable Dr. and Accounts Payable Cr.None of the above

18.Upon reviewing the company’s financial records, it was found that certain errors from previous years remain uncorrected. Considering these, what is the effect on the net income reported for the year ending March 31, 2013? Details: i. Depreciation for 2011-2012 was understated by 7,000. ii. Accrued expenses as of March 31, 2013 were understated by 10,000.

Net income is overstated by 7,000Net income is overstated by 10,000Net income is understated by 17,000Net income is overstated by 17,000No impact on net income

19.How should prepaid expenses be adjusted in the financial statements?

Include prepaid expenses in the expense account and classify them as assetsSubtract prepaid expenses from the related expense account and report them as assetsAdd prepaid expenses to the expense account and record them as liabilitiesSubtract prepaid expenses from the expense account and list them as liabilitiesNone of the above

20.How should a recovery of previously written-off bad debts be recorded in accounting?

Recorded as a credit entry in the Profit and Loss AccountRecorded as a debit entry in the Profit and Loss AccountSubtracted from the debtors' balance on the Balance SheetAdded to the debtors' balance on the Balance SheetNo entry is made