Principals of Accounting MCQs Chapter 2

Bank Reconciliation statement is

A. ledger account.
B. part of the cash book.
C. separate statement.
D. a sub division of the journal.

ANSWER: C


A Cheque received and paid into the bank on the same day id recorded in the ________.

A. a. cash column of the cash book.
B. a. bank column of the cash book.
C. a. both the cash and bank columns of the book.
D. a. the credit balance as per pass book.

ANSWER: B


Revenue expenditure is intended to benefit _________.

A. current period.
B. future period.
C. past period.
D. both (1) and (2).

ANSWER: A


The distinction between capital and revenue is necessary for the preparation of ______.

A. fund flow statement.
B. receipts and payment account.
C. final accounts.
D. cash flow statement.

ANSWER: B


Any expenditure incurred in order to reduce the operating expenses is ________.

A. capital expenditure.
B. revenue expenditure.
C. deferred revenue expenditure.
D. promotional expenditure.

ANSWER: A


Wages paid for erection of machinery are debited to __________.

A. Wages account.
B. Machinery account.
C. Profit and loss account.
D. Deferred wages account.

ANSWER: B


Premium received on issue of shares is a ____________.

A. capital receipt.
B. revenue receipt.
C. deferred capital receipt.
D. deferred revenue receipt.

ANSWER: A


Amount paid for acquiring goodwill is __________.

A. revenue expenditure.
B. deferred revenue expenditure.
C. capital expenditure.
D. deferred capital expenditure. ANSWER: D


The person to whom the bill is endorsed is called

A. Endorser
B. Endorsee
C. Drawer
D. Drawee

ANSWER: B


The method of account current usually employed by the banker is known as _________.

A. Daily balance method.
B. Red ink interest.
C. Current account.
D. Product method.

ANSWER: A


If payment is made on the average due date it results in ___________

A. loss of interest to the creditor.
B. loss of interest to the debtor.
C. no loss of interest to either of them.
D. loss of interest to both the creditor and debtor.

ANSWER: C


Purchases made on credit not recorded at all would affect ___________.

A. Purchases account.
B. Suppliers account.
C. Purchases account and suppliers account.
D. Wages account.

ANSWER: C


Purchase journal is kept to record ________.

A. cash sales.
B. credit sales of assets.
C. credit sales of goods.
D. credit purchases

ANSWER: C


A credit sale of goods to Shiva should be debited to _________.

A. Sales account.
B. Goods account.
C. Shiva account
D. Purchase account.

ANSWER: C


A sale of goods to vidhya for cash should be debited to _________.

A. Vidhya account.
B. Cash account.
C. Sale of goods account
D. Purchases account.

ANSWER: B


The preparation of a Trial balance helps in ____________.

A. locating errors in principle.
B. locating errors of omission.
C. locating clerical errors.
D. locating compensatory errors. ANSWER: C


A Cheque received and deposited in the bank on the same day is recorded in the _______.

A. cash column of the cash book.
B. bank column of the cash book.
C. credited in the cash book.
D. debited in the cash book

ANSWER: B


Petty cash may be used to pay _________.

A. the expenses relating to postage and conveyance.

B. salaries and wages to the final staff.
C. for the purchase of furniture and fittings.

D. other recurring expenses

ANSWER: A


Which item is shown on the debit side of a trial balance

A. Rent outstanding.
B. Prepaid expenses.
C. Purchases returns.
D. Excess of income over expenses by the firm.

ANSWER: B


Purchases for office furniture on account is recorded in _________.

A. general journal.
B. cash book.
C. purchases book.
D. sales book.

ANSWER: B


Any donation received for a specific purpose is a ________.

A. Liability.
B. Assets.
C. revenue receipts
D. capital receipts.

ANSWER: D


Expenditure incurred by a publisher for acquiring copyrights is a _________.

A. capital expenditure.
B. reserve expenditure.
C. deferred reserve expenditure
D. capital receipts.

ANSWER: A


Which one of the following is capital expenditure

A. Cost of advertisement.
B. Purchase of a delivery van.
C. Purchase of raw material.
D. Purchase of machine oil.

ANSWER: B


Expenditure incurred on research is an example of _______.

A. capital expenditure.
B. revenue expenditure.
C. deferred revenue expenditure.
D. partly capital expenditure ANSWER: C


Payment of compensation to a worker who has been discharged from service is a ____.

A. capital expenditure.
B. revenue expenditure.

C. deferred revenue expenditure.
D. partly capital expenditure. ANSWER: B


The _________ in a ledger helps in locating the accounts contained in it.

A. Folio.
B. Pages.
C. serial numbers

D. part numbers
ANSWER: A


Ledger is also called ________.

A. principal book of accounts.

B. cash books
C. subsidiary books.
D. petty cash book

ANSWER: A


Purchase of Typewriter would result in __________ of fund.

A. Change.
B. application.
C. Service.
D. no flow.

ANSWER: C


The following items are shown in profit and loss appropriation account _____________

A. Dividend declared.
B. Discount on issue of shares.
C. Non-operating expenses.
D. Current assets.

ANSWER: A


The assets of a business can be classified as _______.

A. only fixed assets.
B. only current assets.
C. fixed and current assets.
D. fictitious assets.

ANSWER: C


A gross profit is transferred to the __________side of the profit and loss account.

A. Debit.
B. Credit.

C. Current.

D. Asset.
ANSWER: B


Rs. 500 spent on servicing office typewriter should be debited to _________.

A. Miscellaneous expenses account.

B. Typewriter account.

C. Repairs account.
D. Services account.
ANSWER: C


Wages paid to workers must be debited to _________ account

A. Wages .
B. Machinery.
C. Factory expenses.
D. Offices expenses.

ANSWER: A


Interest on capital is credited to __________ account.

A. Expenses account.
B. Income account.
C. Capital account.
D. Asset account.

ANSWER: C


Depreciation deducted from the concerned _________.

A. Liability.
B. Asset.
C. Expenses.
D. Incomes.

ANSWER: B


Receipts and payments account is a ______________.

A. Personal account.
B. Nominal account.
C. Real account.
D. Representative account.

ANSWER: B


Receipts and payment account record receipt and payments of ___________.

A. revenue nature only.
B. capital nature only.
C. both revenue and capital nature.
D. capital receipts.

ANSWER: C


The receipts and payments account begins with ________.

A. debit balance.
B. credit balance.
C. no balance.
D. normal balance.

ANSWER: A


Non-trading institutions prepare __________.

A. Income and expenditure account.

B. Trading and profit and loss account. C. Only trading account.
D. Only revenue account
ANSWER: A


Subscription received in advance by a club is shown on the _____ side of the balance sheet

A. Liabilities.
B. Assets.
C. credit .
D. debit.

ANSWER: A


Excess of income over expenditure in shown on the ______ side of income and expenditure account.

A. Credit.
B. Debit.

C. Upper.

D. Lower.
ANSWER: B


In a receipts and payments account the payments are recorded on the ____ side.

A. credit .
B. debit.

C. Upper.

D. Lower.
ANSWER: A


A debit balance in the income and expenditure account denotes excess of _____over______.

A. income, expenditure.
B. assets, liabilities.
C. liabilities, assets.
D. expenditure, incomes

ANSWER: D


Any amount received towards endowment fund is a ______receipt.

A. Ordinary.
B. Special.
C. Revenue.
D. Capital

ANSWER: D


Interest received on special fund investments will be added to ______ fund in the balance sheet.

A. investment fund.
B. bank fund.
C. General.
D. special

ANSWER: D


Subscriptions received in advance will figure in the _________.

A. balance sheet.
B. receipts and payment account.
C. income and expenditure account.
D. revenue account.

ANSWER: A

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