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 91 of 99
1801. A credit purchase of stationery for office use is normally recorded in which book of prime entry?
- A. Purchases day book
- B. Cash book
- C. Journal proper
- D. Purchases returns book
Explanation: The purchases day book is reserved for credit purchases of goods intended for resale.
Correct answer: Journal proper- A. Rs. 80,000
- B. Rs. 90,000
- C. Rs. 100,000
- D. Rs. 110,000
Explanation: Cost of goods sold is Rs. 40,000 + Rs. 140,000 + Rs. 10,000 − Rs. 30,000 = Rs. 160,000. Gross profit is net sales of Rs. 250,000 less Rs.
Correct answer: Rs. 90,000- A. It is added to purchases and shown as a liability
- B. It is deducted from sales and shown as an expense
- C. It is deducted in calculating cost of sales and shown as a current asset
- D. It is added to expenses and shown as non-current asset
Explanation: Closing inventory reduces the cost of goods sold because it has not yet been sold.
Correct answer: It is deducted in calculating cost of sales and shown as a current asset- A. Deduct Rs. 12,000 from electricity expense and show it as an asset
- B. Add Rs. 12,000 to electricity expense and show it as a liability
- C. Ignore Rs. 12,000 until it is paid in cash
- D. Add Rs. 12,000 to capital and show it as income
Explanation: An accrued expense relates to the current accounting period, even though it remains unpaid.
Correct answer: Add Rs. 12,000 to electricity expense and show it as a liability- A. Add Rs. 5,000 to insurance expense and record a liability
- B. Deduct Rs. 5,000 from insurance expense and record a current asset
- C. Transfer Rs. 5,000 to drawings and reduce capital
- D. Record Rs. 5,000 as income in the current year
Explanation: The amount relating to the next year is prepaid and is not a current-year expense.
Correct answer: Deduct Rs. 5,000 from insurance expense and record a current asset1806. Which statement correctly describes depreciation in the financial statements of a sole trader?
- A. It is a cash payment shown only in the cash book
- B. It is an expense in the income statement and reduces the asset value
- C. It is a liability that increases the owner's capital
- D. It is income recorded when a fixed asset is used
Explanation: Depreciation allocates the cost of a non-current asset over its useful life.
Correct answer: It is an expense in the income statement and reduces the asset value1807. Which item is normally included in the income statement rather than treated as a business expense?
- A. Rent of the business premises
- B. Wages paid to shop employees
- C. Drawings made by the owner
- D. Carriage outward on goods sold
Explanation: Drawings are withdrawals of business resources by the owner for personal use.
Correct answer: Drawings made by the owner- A. Cash and capital both increase by Rs. 50,000
- B. Cash increases and liabilities increase by Rs. 50,000
- C. Cash decreases and capital increases by Rs. 50,000
- D. Profit increases by Rs. 50,000 without changing capital
Explanation: Additional capital is an investment by the owner, not business revenue.
Correct answer: Cash and capital both increase by Rs. 50,000- A. Assets = Capital + Liabilities
- B. Assets = Revenue + Expenses
- C. Capital = Assets + Liabilities
- D. Liabilities = Assets + Drawings
Explanation: The accounting equation states that business assets are financed by the owner's capital and liabilities.
Correct answer: Assets = Capital + Liabilities- A. Debit purchases and credit cash
- B. Debit motor vehicles and credit the supplier
- C. Debit expense and credit sales
- D. Debit drawings and credit the supplier
Explanation: A delivery van is a non-current asset, so the motor vehicles account is debited.
Correct answer: Debit motor vehicles and credit the supplier- A. Rs. 315,000
- B. Rs. 355,000
- C. Rs. 395,000
- D. Rs. 445,000
Explanation: Closing capital equals opening capital plus profit and additional capital less drawings. Thus, Rs. 300,000 + Rs. 80,000 + Rs. 40,000 − Rs.
Correct answer: Rs. 395,000- A. Statement of financial position
- B. Income statement
- C. Statement of cash flows
- D. Capital account
Explanation: The income statement measures financial performance over a period by matching income with related expenses.
Correct answer: Income statement- A. Rs. 168,000
- B. Rs. 180,000
- C. Rs. 192,000
- D. Rs. 12,000
Explanation: Net sales equal gross sales less sales returns, so Rs. 180,000 minus Rs. 12,000 gives Rs. 168,000.
Correct answer: Rs. 168,000- A. Purchases account
- B. Cash account
- C. Capital account
- D. Trade payables account
Explanation: A credit purchase increases the amount owed to the supplier, so Trade Payables is credited.
Correct answer: Trade payables account- A. Trade receivables
- B. Long-term bank loan
- C. Owner's capital
- D. Accumulated depreciation
Explanation: Trade receivables are amounts due from customers and are normally expected to be collected in the operating cycle.
Correct answer: Trade receivables- A. It is added to sales revenue
- B. It is deducted from purchases
- C. It is recorded as an expense
- D. It is deducted from capital
Explanation: Discount allowed is a cost incurred to obtain prompt payment from a customer, so it is charged as an expense in the income statement.
Correct answer: It is recorded as an expense- A. Other income in the income statement
- B. Current liabilities in the statement of financial position
- C. Cost of sales in the income statement
- D. Owner's drawings in the capital section
Explanation: Rent received from using part of the premises is income earned by the business and is normally shown as other income.
Correct answer: Other income in the income statement- A. Rs. 95,000
- B. Rs. 100,000
- C. Rs. 105,000
- D. Rs. 5,000
Explanation: Five percent of Rs. 100,000 is Rs. 5,000, so the reported net receivables are Rs. 95,000.
Correct answer: Rs. 95,000- A. Rs. 6,000
- B. Rs. 8,000
- C. Rs. 18,000
- D. Rs. 24,000
Explanation: Three months of the contract fall within the year, from October through December. The current year's expense is therefore Rs.
Correct answer: Rs. 6,000- A. Rs. 455,000
- B. Rs. 825,000
- C. Rs. 185,000
- D. Rs. 640,000
Explanation: Capital is calculated as assets minus liabilities under the accounting equation. Thus, Rs. 640,000 minus Rs. 185,000 equals Rs. 455,000.
Correct answer: Rs. 455,000