All Free Accounting MCQs with Answers
Every Accounting question in the bank, across all chapters, each with the correct answer and a written explanation. Free and unlimited, with no account needed.
1,971 questions · page 81 of 99
1601. At the time of preparation of financial accounts, bad debt recovered account will be transferred to?
- A. Debtors A/c
- B. Profit & Loss A/c
- C. Profit & Loss Adjustment A/c
- D. Profit & Loss Appropriation A/c
Explanation: Bad debts recovered are income because an amount previously written off as irrecoverable has been collected.
Correct answer: Profit & Loss A/c- A. Debit Profit and Loss Account and deduct the provision from debtors
- B. Credit Profit & Loss Account and deduct the provision from debtors
- C. Credit Profit and Loss Account and add the provision to debtors
- D. Debit Profit & Loss Account and add the provision to debtorsExplore Sci-Fi Shows
Explanation: Creating a doubtful-debt provision recognizes an expense by debiting Profit and Loss Account and reduces the expected collectible amount…
Correct answer: Debit Profit and Loss Account and deduct the provision from debtors- A. Finished goods
- B. Work-in-process
- C. Stores and spares
- D. Advance payments made to suppliers for raw materials
Explanation: Finished goods, work-in-process, and stores and spares are inventory items held for production or sale.
Correct answer: Advance payments made to suppliers for raw materials- A. Written down to zero or its scrap value
- B. Shown in the Balance Sheet at its replacement cost
- C. Shown in the Balance Sheet at cost, but classified as a non-current asset
- D. Carried in the accounting records at cost until it is soldAccounting & Auditing
Explanation: Obsolete inventory cannot continue to be reported at its original cost when it is no longer saleable at that amount.
Correct answer: Written down to zero or its scrap value- A. Balance Sheet
- B. Directors' report
- C. Notes on account to Balance Sheet
- D. Chairman's report
Explanation: Contingent liabilities are not normally recognized as actual liabilities because their existence or amount depends on an uncertain future…
Correct answer: Notes on account to Balance Sheet- A. Shown as a deduction from contract work-in-progress on asset side
- B. Shown as a liability
- C. Credited to P&L A/c
- D. Either A or B above
Explanation: An advance received before contract work is performed represents an obligation to provide goods or services, so it may be presented as a…
Correct answer: Either A or B above- A. Current assets and current liabilities
- B. Profit and loss A/C and Balance sheet
- C. Current assets and non-current liabilities
- D. Current liabilities and non-current liabilities
Explanation: In funds-flow analysis, “fund” generally means net working capital, calculated as current assets minus current liabilities.
Correct answer: Current assets and current liabilities- A. No flow
- B. Sources
- C. Uses
- D. Gain
Explanation: Cash collected from debtors changes one current asset, receivables, into another, cash.
Correct answer: No flow- A. Balance Sheet
- B. Profit and Loss appropriation A/c
- C. Manufacturing A/c
- D. Trading and Profit and Loss A/c
Explanation: Revenue receipts arise from the ordinary operating activities or recurring income of the business, so they are transferred to the Trading…
Correct answer: Trading and Profit and Loss A/c- A. Balance Sheet
- B. Profit and Loss A/c
- C. Trading A/c
- D. None of these
Explanation: Capital expenditure provides a benefit beyond the current period, so it is recorded as an asset in the balance sheet and allocated later…
Correct answer: Balance Sheet- A. Added, Reduced
- B. Added, Added
- C. Deducted, Added
- D. Deducted, Deducted
Explanation: Funds from operations removes non-operating items from accounting profit: a gain on sale of a non-current asset is deducted, while a loss…
Correct answer: Deducted, Added- A. All the significant events after the Balance Sheet date
- B. The events after Balance Sheet date but before submitting it to the Registrar of Companies
- C. The events after Balance Sheet date but before its approval by the board
- D. All changes after Balance Sheet date before its approval
Explanation: Events after the reporting date are considered up to the date on which the financial statements are authorised for issue, normally when…
Correct answer: The events after Balance Sheet date but before its approval by the board- A. Sales
- B. Purchases
- C. Inward returns
- D. Closing stock
Explanation: Sales, purchases and inward returns are transferred to the Trading Account and their balances close at year-end.
Correct answer: Closing stock- A. 17,000 (overstated.
- B. 12,000 (understated.
- C. 7,000 (overstated.
- D. 7,000 (understated.
Explanation: An overstated opening inventory increases cost of goods sold and understates profit by 5,000, while an overstated closing inventory…
Correct answer: 7,000 (overstated.- A. Previous year's profit is overstated and current year's profit is also overstated.
- B. Previous year's profit is understated and current year's profit is overstated.
- C. Previous year's profit is overstated and current year's profit is understated.
- D. There will be no impact on the profit of either the previous year or the current year.
Explanation: Overstating closing inventory increases the previous year’s profit by 50,000.
Correct answer: Previous year's profit is overstated and current year's profit is understated.- A. Add income received in advance to respective income and show it as a liability
- B. Deduct income received in advance from respective income and show it as a liability
- C. Add income received in advance to respective income and show it as asset
- D. Deduct income received in advance from respective income and show it as an asset in the Balance Sheet
Explanation: Income received in advance has not yet been earned, so it is deducted from the recorded income and shown as a liability until the related…
Correct answer: Deduct income received in advance from respective income and show it as a liability- A. The cost of goods sold was overstated during 2011-2012 and income will be understated during 2012-2013
- B. The income was overstated during 2011-12 and closing inventory will be overstated during 2012-2013
- C. The retained earnings was overstated during 2011-2012 and retained earnings will be understated during 2012-2013
- D. The cost of goods sold was understated during 2011-2012 but retained earnings will not be affected during 2012-2013
Explanation: Overstated closing inventory makes cost of goods sold lower and current-year income and retained earnings higher by 25,000.
Correct answer: The retained earnings was overstated during 2011-2012 and retained earnings will be understated during 2012-2013- A. Delivery method
- B. Percentage-of-completion method
- C. Production method
- D. Moving average method
Explanation: Delivery, production, and percentage-of-completion methods are revenue-recognition approaches in appropriate circumstances.
Correct answer: Moving average method1619. Which of the following assets is/are to be valued at the lower of cost and net realizable value?
- A. Goodwill
- B. Inventories
- C. Investments
- D. Both B. and C. above.
Explanation: Inventories are generally measured at the lower of cost and net realisable value to prevent unrealised gains from being reported.
Correct answer: Inventories- A. Cost Price
- B. Market Price
- C. Cost price or Market price whichever is higher
- D. Cost price or Market price whichever is lower
Explanation: Closing inventory is traditionally valued at cost or net realisable value, whichever is lower, so that expected losses are recognised but…
Correct answer: Cost price or Market price whichever is lower