All Free Accounting MCQs with Answers

• A. In Trading A/c
• B. In Profit and Loss Appropriation A/c
• C. Profit and Loss A/c
• D. Being a non operating item ignored

Explanation: The profit is a capital profit arising from disposal of a fixed asset, but it is transferred to the Profit and Loss Account for reporting.

• A. Profit and Loss A/c
• B. Trading A/c
• C. Deducted from the concerned assets A/c
• D. Shown on the liability side

Explanation: A depreciation account with a debit balance represents an expense for the accounting period, so it is charged to the Profit and Loss…

• A. Trading A/c and Balance Sheet
• B. Profit and Loss A/c
• C. Balance Sheet only
• D. Trading A/c only

Explanation: When closing stock appears inside the Trial Balance, its adjustment has already been recorded, so it is shown only as a current asset in…

• A. Results of operations for a particular period
• B. Financial position during a particular period
• C. Profit earning capacity for a particular period
• D. Financial position as on a particular date

Explanation: A balance sheet is a point-in-time statement, so it reports assets, liabilities and capital as on a specific date.

• A. Balance Sheet discloses financial position of the business
• B. A person who owes to the business is called Debtor
• C. Decrease in the value of the asset could decrease the value of a liability
• D. Assets are to be shown in the Balance Sheet at the realizable value

Explanation: Under the usual historical-cost convention, assets are recorded at cost less applicable depreciation, not at their realizable value.

• A. On the assets side under current assets
• B. On the assets side under loans and advances
• C. On the liabilities side under current liabilities
• D. On the liabilities side under provisionsAccounting & Auditing

Explanation: Tax deducted at source is collected from payees and remains payable to the tax authority until deposited, so it is shown as a current…

• A. Sundry Debtors
• B. Stock
• C. Prepaid insurance
• D. All of A. B. and C. aboveFinance

Explanation: Sundry debtors, stock and prepaid insurance are all expected to be realized, sold or consumed within the normal operating cycle or short…

• A. Stock
• B. Vehicle
• C. Fixed deposit in bank
• D. Both A. and C. above

Explanation: Stock is a current asset, while a bank fixed deposit is an investment rather than a fixed asset used in operations.

• A. Credited to the Profit & Loss Account
• B. Debited to the Profit & Loss Account
• C. Shown on the liabilities side of the Balance Sheet
• D. Shown on the assets side of the Balance Sheet

Explanation: Unexpired insurance represents a future benefit because coverage remains available after the accounting date.

• A. Profit and Loss Account
• B. Balance Sheet
• C. Funds Flow Statement
• D. Trial BalanceAccounting & Auditing

Explanation: A trial balance is an internal listing used to check the equality of debit and credit balances, not a financial statement.

• A. Drawings
• B. Bad debts
• C. Accrued expenses
• D. Reserve for discount on Sundry Creditors

Explanation: Drawings are withdrawals of capital by the proprietor and are adjusted against capital, not treated as a business expense in the Profit…

• A. Financial results of the concern for a period
• B. Financial position of the concern on a particular date
• C. Financial results of the concern on a particular date
• D. Cost of goods sold during the periodFinance

Explanation: The Profit and Loss Account matches revenue with expenses for an accounting period to determine profit or loss.

• A. Replacement cost
• B. Current cost
• C. Cost to acquire less accumulated amortization
• D. Cost less expired portion

Explanation: A prepaid expense represents a future benefit, so the unexpired portion remains as an asset.

• A. Add prepaid expenses to respective expenses and show it as an asset
• B. Deduct prepaid expenses from respective expenses and show it as an asset
• C. Add prepaid expenses to respective expenses and show it as a liability
• D. Deduct prepaid expenses from respective expenses and show it as a liability

Explanation: A prepaid expense has not yet been consumed, so it must be removed from the current period's expense and shown as a current asset.

• A. Current Asset
• B. Current Liability
• C. Fixed Asset
• D. Income

Explanation: Prepaid insurance represents a benefit that will be received in a future period, so it is recorded as a current asset until it expires or…

• A. An Asset in the Balance Sheet
• B. A Liability
• C. By adjusting it in the P & L A/c
• D. Both B. and C. above

Explanation: Outstanding salaries are an unpaid present obligation, so they appear as a liability.

• A. Replacement cost - Accumulated Depreciation
• B. Historical cost - Salvage Value
• C. Historical cost - Depreciation portion thereof
• D. Original cost adjusted for general price-level changes

Explanation: PPE is normally reported at historical cost less accumulated depreciation, which gives its carrying or net book value.

• A. Return outwords
• B. Return inwards
• C. cost of goods sold
• D. carriage on sales

Explanation: Net sales are calculated after deducting sales returns, also called returns inward, from gross sales.

• A. Current Assets
• B. Fixed Assets
• C. Current Assets& current liabilities
• D. All of the above

Explanation: Current assets are short-term resources expected to be realised, sold or consumed within the normal operating cycle or generally within…

• A. Balance sheet
• B. income statement
• C. common size income statement
• D. All of the Above

Explanation: A common-size income statement expresses every income-statement item as a percentage of sales, making comparison between periods or…