All Free Accounting MCQs with Answers

• A. Rs. 85,000
• B. Rs. 90,000
• C. Rs. 95,000
• D. Rs. 115,000

Explanation: Cost of goods sold equals opening inventory plus purchases minus closing inventory. Thus, Rs. 30,000 + Rs. 90,000 - Rs. 25,000 gives Rs.

• A. The entire business as one group
• B. Each individual item or similar group
• C. Only items purchased during the year
• D. Only finished goods held for sale

Explanation: IAS 2 generally compares cost with net realisable value for individual inventory items or suitable groups of similar items.

• A. The period when the inventory is purchased
• B. The period when the inventory is manufactured
• C. The period when the related revenue is recognized
• D. The period when cash is collected from customers

Explanation: The carrying amount of inventory becomes an expense when the related revenue is recognized, applying the matching principle.

• A. To classify transactions into individual accounts
• B. To record transactions only in date order
• C. To calculate cash collections for the period
• D. To prepare invoices for credit customers

Explanation: A ledger classifies recorded transactions into separate accounts, such as cash, sales, purchases, and capital.

• A. The debtor's personal account
• B. The cash account
• C. The sales account
• D. The capital account

Explanation: Cash is an asset, so an increase in cash is recorded on the debit side of the Cash Account.

• A. Debit Cash Account and credit Furniture Account
• B. Debit Furniture Account and credit Cash Account
• C. Debit Purchases Account and credit Cash Account
• D. Debit Expense Account and credit Furniture Account

Explanation: Furniture is an asset that increases, so the Furniture Account is debited.

• A. To prove that every transaction is completely correct
• B. To check the arithmetical equality of ledger balances
• C. To calculate the exact profit before adjustments
• D. To replace the preparation of final accounts

Explanation: A trial balance checks whether the total debit balances equal the total credit balances.

• A. A debit entry posted without any credit entry
• B. A transaction completely omitted from the books
• C. A debit total added more than the credit total
• D. A ledger balance transferred to the wrong side

Explanation: If a transaction is completely omitted, neither its debit nor its credit is recorded, so the trial balance can still agree.

• A. The Statement of Financial Position
• B. The Trading or Profit and Loss Account
• C. The Cash Book only
• D. The Capital Account directly

Explanation: Expense accounts are nominal accounts, and their balances are transferred to the relevant income statement account.

• A. The person or entity owes money to the business
• B. The business owes money to the person or entity
• C. The person has introduced permanent capital
• D. The account represents an income earned by the business

Explanation: A debit balance in a personal account usually means the account holder is a debtor and owes money to the business.

• A. Sales revenue
• B. Accounts payable
• C. Owner's capital
• D. Rent expense

Explanation: Rent is an expense and normally has a debit balance, so it appears on the debit side of the trial balance.

• A. Cash Account
• B. Purchases Account
• C. Customer's Account
• D. Sales Account

Explanation: A return from a customer reduces the amount receivable from that customer, so the customer's account is credited.

• A. To close the account permanently
• B. To bring the balancing amount to the next period
• C. To record a new transaction in the account
• D. To transfer every balance to the trial balance

Explanation: Balance c/d means balance carried down. It is entered to make both sides of the account equal and is then brought down as balance b/d in…

• A. Ledger, journal, trial balance
• B. Journal, ledger, trial balance
• C. Trial balance, journal, ledger
• D. Journal, trial balance, ledger

Explanation: Transactions are first recorded in the journal and then posted to their respective ledger accounts.

• A. Debit Hamid, credit Purchases
• B. Debit Purchases, credit Hamid
• C. Debit Cash, credit Hamid
• D. Debit Hamid, credit Sales

Explanation: Purchases of goods increase the purchases account, so it is debited. Hamid becomes a creditor, so his personal account is credited.

• A. On the debit side
• B. On the credit side
• C. In the journal only
• D. In the trial balance only

Explanation: The balance c/d is placed on the side with the smaller total to make both sides equal.

• A. Personal account
• B. Real account
• C. Nominal account
• D. Valuation account

Explanation: The owner’s capital account is a personal account because it represents the owner’s claim against the business.

• A. The value of closing stock
• B. The page reference of the ledger posting
• C. The date of the next transaction
• D. The total of the trial balance

Explanation: The ledger folio column provides a cross-reference to the page or account location where the journal entry is posted.

• A. Salary Account
• B. Cash Account
• C. Capital Account
• D. Drawings Account

Explanation: Salary is an expense and is debited when incurred or paid. Cash decreases because of the payment, so Cash Account is credited.

• A. A debit balance of an asset
• B. A credit balance of a liability
• C. A debit balance of an expense
• D. A transaction recorded in the journal but not posted

Explanation: A trial balance contains balances extracted from ledger accounts, not unposted journal transactions.