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 84 of 99
- A. Any future business expense
- B. The obligation for which it was recognized
- C. Dividend payments to shareholders
- D. General expansion activities
Explanation: A provision is linked to a particular present obligation and is not a general pool of funds.
Correct answer: The obligation for which it was recognized- A. Recognize a full provision
- B. Recognize an accrued expense
- C. Make no provision or disclosure
- D. Capitalize the expected outflow
Explanation: A remote outflow does not normally require recognition of a provision or disclosure as a contingent liability.
Correct answer: Make no provision or disclosure- A. Rs 66,000
- B. Rs 70,000
- C. Rs 74,000
- D. Rs 90,000
Explanation: Expense equals cash paid plus the closing accrual minus the opening accrual. Therefore, Rs 70,000 + Rs 12,000 - Rs 8,000 gives Rs 74,000.
Correct answer: Rs 74,000- A. Rs 14,000
- B. Rs 26,000
- C. Rs 30,000
- D. Rs 46,000
Explanation: Expense equals the opening prepaid balance plus payments made, less the closing prepaid balance.
Correct answer: Rs 26,0001665. At each reporting date, an entity should review an existing provision and adjust it to reflect the:
- A. Original amount estimated
- B. Current best estimate of the obligation
- C. Amount paid in the previous year
- D. Total amount of related revenue
Explanation: IAS 37 requires provisions to be reviewed at each reporting date and adjusted to the current best estimate.
Correct answer: Current best estimate of the obligation- A. Possible
- B. Probable
- C. Virtually certain
- D. Legally demanded
Explanation: A contingent asset is not recognized while an inflow is merely possible or probable.
Correct answer: Virtually certain- A. To compare cash sales with credit sales
- B. To explain differences between the cash book and bank statement
- C. To calculate the total profit earned by the business
- D. To record all transactions in the purchases journal
Explanation: A bank reconciliation statement explains why the bank balance in the cash book differs from the balance shown by the bank statement.
Correct answer: To explain differences between the cash book and bank statement- A. The bank statement balance is lower than the cash book balance
- B. The cash book balance is lower than the bank statement balance
- C. Both balances are reduced by the same amount
- D. Neither balance includes the cheque amount
Explanation: The business records the cheque in its cash book when it is issued, but the bank records it only when the cheque is presented.
Correct answer: The cash book balance is lower than the bank statement balance- A. The bank statement balance is higher than the cash book balance
- B. The cash book balance is higher than the bank statement balance
- C. Both balances are increased immediately
- D. The cash book balance becomes a bank overdraft
Explanation: The cash book records the deposit when the business receives it, while the bank statement records it after the bank processes it.
Correct answer: The cash book balance is higher than the bank statement balance- A. Debit the bank column and credit bank charges
- B. Credit the bank column and debit bank charges
- C. Debit the bank column and credit sales
- D. Credit the bank column and debit purchases
Explanation: Bank charges reduce the business bank balance and are an expense. The cash book therefore credits the bank column and debits the bank…
Correct answer: Credit the bank column and debit bank charges- A. Credit the bank column and debit the customer account
- B. Debit the bank column and credit the customer account
- C. Debit the bank column and credit the purchases account
- D. Credit the bank column and debit the sales account
Explanation: A direct deposit increases the bank balance and reduces the customer's receivable.
Correct answer: Debit the bank column and credit the customer account- A. To replace the need for a trial balance
- B. To summarize transactions recorded in a subsidiary ledger
- C. To record only cash transactions of the business
- D. To calculate the depreciation of fixed assets
Explanation: A control account summarizes the total entries from a subsidiary ledger, such as the sales ledger or purchases ledger.
Correct answer: To summarize transactions recorded in a subsidiary ledger- A. Credit sales
- B. Sales returns
- C. Opening balance of trade receivables
- D. Interest charged to customers
Explanation: Sales returns reduce the amount owed by customers, so they are credited to the sales ledger control account.
Correct answer: Sales returns- A. Credit purchases
- B. Returns outward
- C. Discount received from suppliers
- D. Closing balance of trade payables
Explanation: Discount received reduces the amount payable to suppliers, so it is entered on the debit side of the purchases ledger control account.
Correct answer: Discount received from suppliers- A. Rs. 97,000
- B. Rs. 107,000
- C. Rs. 117,000
- D. Rs. 127,000
Explanation: Closing receivables equal opening receivables plus credit sales less receipts, returns, discounts, and bad debts. The calculation is Rs.
Correct answer: Rs. 107,000- A. A credit sale recorded in both ledgers
- B. A cash receipt recorded in both ledgers
- C. A discount allowed recorded only in the control account
- D. A balance brought forward recorded in both ledgers
Explanation: If discount allowed is entered in the control account but omitted from the relevant customer account, the two totals will differ.
Correct answer: A discount allowed recorded only in the control account- A. Add Rs. 12,000 to the bank statement balance and notify the bank
- B. Add Rs. 12,000 to the cash book balance and notify the bank
- C. Subtract Rs. 12,000 from the cash book balance as bank charges
- D. Record Rs. 12,000 as a credit sale in the cash book
Explanation: The bank has reduced the statement balance incorrectly, so the amount is added back when reconciling the statement.
Correct answer: Add Rs. 12,000 to the bank statement balance and notify the bank- A. Rs. 18,000 favourable
- B. Rs. 22,000 favourable
- C. Rs. 28,000 favourable
- D. Rs. 36,000 favourable
Explanation: The bank balance is increased by unpresented cheques and reduced by deposits not yet credited. Therefore, Rs. 25,000 plus Rs.
Correct answer: Rs. 28,000 favourable- A. Rs. 10,000
- B. Rs. 16,000
- C. Rs. 20,000
- D. Rs. 26,000
Explanation: Starting with a cash book overdraft of Rs. 18,000, unpresented cheques reduce the overdraft by Rs.
Correct answer: Rs. 16,000- A. Debit bank and credit the customer
- B. Debit the customer and credit bank
- C. Debit sales and credit the customer
- D. Debit bank charges and credit sales
Explanation: Dishonour cancels the earlier receipt and restores the customer's liability.
Correct answer: Debit the customer and credit bank