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 94 of 99
- A. The debtor’s account is credited by Rs. 30,000
- B. The debtor’s account is debited by Rs. 30,000
- C. Sales are credited by Rs. 30,000
- D. Drawings are debited by Rs. 30,000
Explanation: Acceptance of a bill replaces the debtor’s ordinary receivable with a bills receivable asset.
Correct answer: The debtor’s account is credited by Rs. 30,0001862. In a statement of affairs, an omitted business liability will usually cause closing capital to be:
- A. Overstated
- B. Understated
- C. Unaffected
- D. Converted into revenue
Explanation: Capital is calculated as assets minus liabilities. If a liability is omitted, total liabilities appear lower and calculated capital…
Correct answer: Overstated- A. A statement of affairs may include estimated figures
- B. A statement of affairs always includes a trial balance
- C. A balance sheet excludes all liabilities
- D. A balance sheet records only cash transactions
Explanation: A statement of affairs is prepared from incomplete information and may contain estimates of assets and liabilities.
Correct answer: A statement of affairs may include estimated figures- A. Rs. 375,000
- B. Rs. 400,000
- C. Rs. 125,000
- D. Rs. 475,000
Explanation: Gross profit is 25% of Rs. 500,000, giving Rs. 125,000. Cost of goods sold is sales minus gross profit, so it is Rs. 375,000.
Correct answer: Rs. 375,000- A. Opening and closing net capital
- B. Only the closing cash balance
- C. Only the year’s credit purchases
- D. Only the owner’s personal expenses
Explanation: The capital comparison method begins with opening capital and compares it with closing capital after adjusting for drawings and additional…
Correct answer: Opening and closing net capital- A. Credit sales
- B. Returns inward
- C. Bad debts
- D. Cash sales
Explanation: A total debtors account records transactions involving credit customers, including credit sales, returns, receipts and bad debts.
Correct answer: Cash sales- A. Asset increases and capital increases
- B. Asset increases and sales increase
- C. Expense increases and capital decreases
- D. Liability increases and sales increase
Explanation: An asset brought into the business by the owner is treated as additional capital.
Correct answer: Asset increases and capital increases- A. Gross profit is understated
- B. Gross profit is overstated
- C. Net profit remains unchanged
- D. Closing capital is overstated only
Explanation: Opening stock is included in the cost of goods sold calculation. If it is understated, cost of goods sold is understated and the resulting…
Correct answer: Gross profit is overstated- A. Adding it to trade debtors
- B. Deducting it from trade debtors
- C. Adding it to trade creditors
- D. Deducting it from business liabilities
Explanation: A provision for doubtful debts reduces the estimated recoverable value of trade debtors.
Correct answer: Deducting it from trade debtors- A. Cost or net realisable value, whichever is lower
- B. Cost or market value, whichever is higher
- C. Selling price or cost, whichever is higher
- D. Net realisable value or profit, whichever is lower
Explanation: IAS 2 applies the prudence principle by carrying inventory at the lower of cost and net realisable value.
Correct answer: Cost or net realisable value, whichever is lower- A. Weighted average method
- B. Specific identification method
- C. First-in, first-out method
- D. Last-in, first-out method
Explanation: The first-in, first-out method assumes the earliest purchases are issued or sold before later purchases.
Correct answer: First-in, first-out method- A. First-in, first-out method
- B. Weighted average cost method
- C. Specific identification method
- D. Last-in, first-out method
Explanation: IAS 2 permits methods such as FIFO and weighted average for ordinarily interchangeable items, but it does not permit LIFO.
Correct answer: Last-in, first-out method- A. First-in, first-out method
- B. Last-in, first-out method
- C. Simple average method
- D. Retail inventory method
Explanation: When prices rise, FIFO leaves the latest and usually more expensive purchases in closing inventory.
Correct answer: First-in, first-out method- A. Rs. 11.00
- B. Rs. 11.50
- C. Rs. 12.00
- D. Rs. 12.33
Explanation: Total cost is Rs. 3,600, calculated as Rs. 1,000 plus Rs. 2,600. Dividing Rs. 3,600 by 300 units gives a weighted average cost of Rs.
Correct answer: Rs. 12.00- A. Historical cost plus expected profit
- B. Estimated selling price less completion and selling costs
- C. Selling price less the original purchase cost
- D. Replacement cost less accumulated depreciation
Explanation: NRV represents the estimated amount expected from selling inventory in the ordinary course of business.
Correct answer: Estimated selling price less completion and selling costs- A. Rs. 8,000
- B. Rs. 8,800
- C. Rs. 9,200
- D. Rs. 9,600
Explanation: FIFO charges the first 400 units at the earliest cost of Rs. 20 each. Thus, cost of goods sold is 400 multiplied by Rs. 20, or Rs. 8,000.
Correct answer: Rs. 8,000- A. Import duties on purchased goods
- B. Direct labour used in production
- C. Abnormal amounts of wasted materials
- D. Freight costs incurred to bring goods to the warehouse
Explanation: Abnormal waste of materials, labour or other production costs is recognised as an expense rather than included in inventory cost.
Correct answer: Abnormal amounts of wasted materials- A. Profit is overstated by Rs. 10,000
- B. Profit is understated by Rs. 10,000
- C. Profit is unaffected in the current year
- D. Profit is understated by Rs. 20,000
Explanation: Cost of goods sold equals opening inventory plus purchases less ending inventory.
Correct answer: Profit is understated by Rs. 10,000- A. Large quantities of identical low-value items
- B. Interchangeable units purchased throughout the year
- C. Unique items held for particular customer contracts
- D. Routine office supplies with frequent usage
Explanation: Specific identification assigns the actual cost to each identifiable item, making it suitable for unique or separately designated goods.
Correct answer: Unique items held for particular customer contracts- A. Recoverable sales tax on purchases
- B. Freight and handling charges on purchases
- C. General administrative office salaries
- D. Advertising costs for finished goods
Explanation: Freight and handling charges are directly attributable to bringing inventory to its present location and condition.
Correct answer: Freight and handling charges on purchases