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Under the written down value method of depreciation, the amount of depreciation is
1. Decreasing every year
2. None of the above
3. Uniform in all the years
4. Increasing every year
The root of financial accounting system is
1. Social accounting
2. Responsibility accounting
3. Stewardship accounting
4. Management accounting
Balance as per cash book is ` 2, 000. Bank charge of ` 50 debited by the bank is not yet shown in the cash book. What is the bank statement balance now?
1. 1,950 credit balance
2. 1,950 debit balance
3. 2,050 debit balance
4. 2,050 credit balance
Which one of the following is not a branch of accounting?
1. Financial accounting
2. Management accounting
3. Human resources accounting
4. None of the above
When money is withdrawn from bank, the bank
1. Credits customer’s account
2. Debits and credits customer’s account
3. None of these
4. Debits customer’s account
A bank reconciliation statement is prepared with the help of
1. Cash book
2. Petty cash book
3. Bank statement
4. Bank statement and bank column of the cash book
An example of output device is
1. Keyboard
2. Scanner
3. Printer
4. Mouse
Which one of the following is not a main objective of accounting?
1. Solving tax disputes with tax authorities
2. Ascertainment of the profitability of the business
3. Systematic recording of transactions
4. Ascertainment of the financial position of the business
The business is liable to the proprietor of the business in respect of capital introduced by the person according to
1. Business entity concept
2. Cost concept
3. Money measurement concept
4. Dual aspect concept
Which one is not a component of computer system?
1. Output unit
2. Input unit
3. Data
4. Central Processing Unit
The rule of stock valuation ‘cost price or realisable value’ whichever is lower is based on the accounting principle of:
1. Materiality
2. Conservatism
3. Accrual
4. Money measurement
GAAPs are:
1. Generally Accepted Accounting Provisions
2. None of these
3. Generally Accepted Accounting Principles
4. Generally Accepted Accounting Policies
The difference of totals of both debit and credit side of trial balance is transferred to:
1. Trading account
2. Difference account
3. Suspense accoun
4. Miscellaneous account
One of the limitations of computerised accounting system is
1. Accuracy
2. Storage
3. System failure
4. Versatility
In India, Accounting Standards are issued by
1. Supreme Court of India
2. The Institute of Chartered Accountants of India
3. The Cost and Management Accountants of India
4. Reserve Bank of India
Depreciation is to be calculated from the date when
1. Purchase order is made
2. Invoice of assets is received
3. Asset is put to use
4. Asset is received at business premises
A firm has assets of ` 1,00,000 and the external liabilities of ` 60,000. Its capital would be
1. 60,000
2. 1,00,000
3. 40,000
4. 1,60,000
A bank statement is a copy of
1. A customer’s account in the bank’s book
2. Bank column of the cash book
3. Cheques issued by the business
4. Cash column of the cash book
Residual value of an asset means the amount that it can fetch on sale at the ____of its useful life.
1. End
2. Middle
3. None
4. Beginning
Cash withdrawn by the proprietor from the business for his personal use’ causes
1. Increase in one asset and increase in liabilities
2. Decrease in assets and decrease in owner’s capital
3. Increase in one asset and decrease in another asset
4. Increase in asset and decrease in capital
The incorrect accounting equation is
1. Assets = Capital + Liabilities
2. Capital = Assets – Liabilities
3. Assets = Liabilities + Capital
4. Liabilities = Assets + Capital
The process of transferring the debit and credit items from journal to ledger accounts is called
1. Casting
2. Posting
3. Journalising
4. Balancing
Real account deals with
1. Incomes and gains
2. Expenses and losses
3. Assets
4. Individual persons
Purchase returns book is used to record
1. returns of goods to the supplier for which cash is not received immediately
2. None of the above
3. returns of assets to the supplier for which cash is received immediately
4. returns of assets to the supplier for which cash is not received immediately
Amount spent on increasing the seating capacity in a cinema hall is
1. Deferred revenue expenditure
2. Capital expenditure
3. None of the above.
4. Revenue expenditure
The cash book records
1. All cash payments
2. All cash receipts
3. All cash receipts and All cash payments
4. All credit transactions
Net profit of the business increases the
1. Drawings
2. Debts
3. Capital
4. Receivables
Accrued interest on investment will be shown
1. On the assets side of balance sheet
2. None of these
3. On the credit side of profit and loss account and On the assets side of balance sheet
4. On the credit side of profit and loss account
Withdrawal of cash from business by the proprietor should be credited to
1. Drawings A/c
2. Cash A/c
3. Purchases A/c
4. Capital A/c
Net profit is
1. Credited to capital account
2. Debited to drawings account
3. Debited to capital account
4. Credited to drawings account
Prepaid rent is a
1. Nominal A/c
2. Real A/c
3. Personal A/c
4. Representative personal A/c
Main objective of preparing ledger account is to
1. Ascertain the financial position
2. Ascertain the profit or loss
3. Know the balance of each ledger account
4. Ascertain the profit or loss and the financial position
The process of finding the net amount from the totals of debit and credit columns in a ledger is known as
1. Posting
2. Casting
3. Journalising
4. Balancing
Debit balance in the bank column of the cash book means
1. None of the above
2. Credit balance as per bank statement
3. Debit balance as per bank statement
4. Overdraft as per cash book
In double entry system of book keeping, every business transaction affects
1. Same account on two different dates
2. Minimum of two accounts
3. Two sides of the same account
4. Minimum three accounts
Who is considered to be the internal user of the financial information?
1. Government
2. Employee
3. Customer
4. Creditor
Bank overdraft should be shown
1. Profit and loss account
2. On the liabilities side
3. On the assets side
4. In the trading account
Trial balance is a
1. Statement
2. Ledger
3. Journal
4. Account
Accounting equation is formed based on the accounting principle of
1. Accrual
2. Going concern
3. Dual aspect
4. Consistency
Closing stock is valued at
1. Market price
2. Cost price or market price whichever is higher
3. Cost price
4. Cost price or net realisable value whichever is lower
In accounting, computer is commonly used in the following areas:
1. Stores accounting
2. All the above
3. Payroll accounting
4. Recording of business transactions
Drawings appearing in the trial balance is
1. Added to the capital
2. Subtracted from the purchases
3. Added to the purchases
4. Subtracted from the capital
The trial balance contains the balances of
1. Only real accounts
2. Only personal accounts
3. All accounts
4. Only nominal accounts
Goods returned by Senguttuvan were taken into stock, but no entry was passed in the books. While rectifying this error, which of the following accounts should be debited?
1. Senguttuvan account
2. Returns outward account
3. Sales returns account
4. Purchases returns account
Small payments are recorded in a book called
1. Purchase book
2. Petty cash book
3. Bills payable book
4. Cash book
A list which contains balances of accounts to know whether the debit and credit balances are matched is
1. Day book
2. Trial balance
3. Balance sheet
4. Journal
Accounting equation signifies
1. Liabilities of a business are equal to assets
2. Capital of a business is equal to assets
3. Assets of a business are equal to the total of capital and liabilities
4. Capital of a business is equal to liabilities
Under straight line method, the amount of depreciation is
1. Decreasing every year
2. Increasing every year
3. Constant for all the years
4. Fluctuating every year
A transaction not recorded at all is known as an error of
1. Duplication
2. Principle
3. Partial omission
4. Complete omission
While preparing the trial balance, the accountant finds that the total of the credit column is short by ` 200. This difference will be
1. Adjusted to any of the credit balance
2. Debited to suspense account
3. Adjusted to any of the debit balance
4. Credited to suspense account
A depreciable asset may suffer obsolescence due to____
1. Passage of time
2. Wear and tear
3. None of the above
4. Technological changes
The source document or voucher used for recording entries in sales book is
1. Cash receipt
2. Credit note
3. Invoice
4. Debit note
The account which has a debit balance and is shown in the debit column of the trial balance is
1. Bills payable account
2. Drawings account
3. Capital account
4. Sundry creditors account
Trial balance is prepared:
1. On a particular date
2. At the end of the year
3. For a year
4. None of the above
Which of the following method(s) can be used for preparing trial balance?
1. Balance method
2. Total and Balance method
3. All the above
4. Total method
A periodic total of the purchases book is posted to the
1. debit side of the purchases account
2. credit side of the sales account
3. debit side of the sales account
4. credit side of the purchases account
The total of the sales book is posted periodically to the credit of
1. Purchases account
2. Cash account
3. Journal proper
4. Sales account
If the total of the debit side of an account exceeds the total of its creditside,itmeans
1. Nil balance
2. Debit balance
3. Debit and credit balance
4. Credit balance
Wages paid for installation of machinery wrongly debited to wages account is an error of
1. Principle
2. Duplication
3. Complete omission
4. Partial omission
Purchases of fixed assets on credit basis is recorded in
1. Purchases book
2. Sales book
3. Purchases returns book
4. Journal proper
In Triple column cash book, the balance of bank overdraft brought forward will appear in
1. Bank column credit side
2. Cash column credit side
3. Bank column debit side
4. Cash column debit side
Which of the following statements is not true?
1. Assets purchased on credit are recorded in journal proper
2. Cash discount is recorded in the books of accounts
3. Trade discount is recorded in the books of accounts
4. 3 grace days are added while determining the due date of the bill
Closing entries are recorded in
1. Journal proper
2. Cash book
3. Ledger
4. Purchases book
Pre-operative expenses are
1. Prepaid revenue expenditure
2. Deferred revenue expenditure
3. Revenue expenditure
4. Capital expenditure
Cash book is a
1. Subsidiary book
2. Principal book
3. Journal proper
4. Both subsidiary book and principal book
Sales book is used to record
1. all credit sales of assets
2. all sales of assets and goods
3. all credit sales of goods
4. all sales of goods
When a firm maintains a simple cash book, it need not maintain
1. Purchases account in the ledger
2. Sales account in the ledger
3. Cash account in the ledger
4. Capital account in the ledger
A cash book with discount, cash and bank column is called
1. Three column cash book
2. Petty cash book
3. Simple cash book
4. Double column cash book
After the preparation of ledger, the next step is the preparation of
1. Journal
2. Trial balance
3. Profit and loss account
4. Trading account
Which of the following is recorded as contra entry?
1. Withdrew cash from bank for personal use
2. When bank charges interest
3. Withdrew cash from bank for office use
4. Direct payment by the customer in the bank account of the business
If there is no existing provision for doubtful debts, provision created for doubtful debts is
1. Debited to sundry debtors account
2. Credited to bad debts account
3. Debited to profit and loss account
4. Debited to bad debts account
If the debit and credit aspects of a transaction are recorded in the cash book, it is
1. Compound entry
2. Simple entry
3. Contra entry
4. Single entry
Petty cash may be used to pay
1. The expenses relating to postage and conveyance
2. Purchase of raw materials
3. Purchase of furniture and fixtures
4. Salary to the Manager
A bank reconciliation statement is prepared by
1. Creditor to the business
2. Debtor to the business
3. Business
4. Bank
A bank reconciliation statement is prepared to know the causes for the difference between:
1. The balance as per the bank column of the cash book and the bank statement
2. The balance as per petty cash book and the cash book
3. The balance as per the cash column of the cash book and bank statement
4. The balance as per the cash column of the cash book and bank column of the cash book
Sales return book is used to record
1. Returns of goods by the customer for which cash is not paid immediately
2. Returns of assets by the customer for which cash is paid immediately
3. Returns of goods by the customer for which cash is paid immediately
4. Returns of assets by the customer for which cash is not paid immediately
TALLY is an example of
1. Tailor-made accounting software
2. Ready-made accounting software
3. In-built accounting software
4. Customised accounting software
Which one of the following is not a timing difference?
1. Cheque issued but not yet presented for payment
2. Amount directly paid into the bank
3. Cheque deposited but not yet credited
4. Wrong debit in the cash book
Error of principle arises when
1. There are wrong postings and wrong castings
2. There is complete omission of a transaction
3. Distinction is not made between capital and revenue items
4. There is partial omission of a transaction
The difference in trial balance is taken to
1. The trading account
2. The profit and loss account
3. The suspense account
4. The capital account
Which one of the following is representative personal account?
1. Building A/c
2. Balan & Co
3. Outstanding salary A/c
4. Mahesh A/c
The balance in the petty cash book is
1. A profit
2. An expense
3. An asset
4. A liability
The amount brought into the business by the proprietor should be credited to
1. Cash account
2. Capital account
3. Drawings account
4. Suspense account
Goodwill is classified as
1. A liquid asset
2. An intangible asset
3. A tangible asset
4. A current asset
Which of the following errors will not affect the trial balance?
1. Posting an amount in the wrong account but on the correct side
2. Wrong balancing of an account
3. Carried forward wrong amount in a ledger account
4. Wrong totalling of an account
A credit purchase of furniture from Athiyaman was debited to purchases account. Which of the following accounts should be debited while rectifying this error?
1. Athiyaman account
2. Furniture account
3. Purchases account
4. None of these
Which of the following errors will be rectified using suspense account?
1. Goods returned by Narendran was not recorded in the books
2. Goods returned by Akila ` 900 was recorded in the sales returns book as ` 90
3. Purchases returns book was undercast by ` 100
4. A credit sale of goods to Ravivarman was not entered in the sales book.
The concept which assumes that a business will last indefinitely is
1. Going concern
2. Periodicity
3. Business Entity
4. Conservatism
If the total charge of depreciation and maintenance cost are considered, the method that provides a uniform charge is
1. Annuity method
2. Straight line method
3. Insurance policy method
4. Diminishing balance method
Expenditure incurred ` 20,000 for trial run of a newly installed machinery will be
1. Revenue expenditure
2. Deferred revenue expenditure
3. Preliminary expense
4. Capital expenditure
People who write codes and programes are called as
1. System analysts
2. System designers
3. System programmers
4. System operators
Depreciation is caused by
1. Lapse of time,Usage and Obsolescence
2. Usage
3. Lapse of time
4. Obsolescence
For which of the following assets, the depletion method is adopted for writing off cost of the asset?
1. Mines and quarries
2. Trademark
3. Buildings
4. Plant and machinery
Which of the following is not the salient feature of bank reconciliation statement?
1. Any undue delay in the clearance of cheques will be shown up by the reconciliation
2. It helps in finding the actual position of the bank balance
3. Reconciliation statement will discourage the accountant of the bank from embezzlement
4. Reconciliation statement is prepared only at the end of the accounting period
If the rate of depreciation is same, then the amount of depreciation under straight line method vis-à-vis written down value method will be
1. Equal in all years
2. Equal in the first year but higher in subsequent years
3. Lower in the first year but equal in subsequent years
4. Equal in the first year but lower in subsequent years
Salaries appearing in the trial balance is shown on the
1. Debit side of trading account
2. Liabilities side of the balance sheet
3. Debit side of profit and loss account
4. Assets side of the balance sheet
The total of purchases book was overcast. Which of the following accounts should be debited in the rectifying journal entry?
1. Suspense account
2. Creditor account
3. Purchases account
4. None of the above
Accounting software is an example of
1. Application software
2. Utility software
3. Operating software
4. System software
Amount received from IDBI as a medium term loan for augmenting working capital
1. Capital expenditures
2. Revenue expenditures
3. Capital receipt
4. Revenue receipts
Balance as per bank statement is ` 1, 000. Cheque deposited, but not yet credited by the bank is ` 2, 000. What is the balance as per bank column of the cash book?
1. 3,000 favourable
2. 1,000 overdraft
3. 3,000 overdraft
4. 1,000 favourable
Customised accounting software is suitable for
1. Large, medium business
2. None of the above
3. Small, conventional business
4. Large, typical business
Current assets does not include
1. Furniture
2. Prepaid expenses
3. Cash
4. Stock
Purchases book is used to record
1. all credit purchases of assets
2. all credit purchases of goods
3. all purchases of goods
4. all purchases of assets
Which one of the following is not a method of codification of accounts?
1. Access codes
2. Block codes
3. Sequential codes
4. Mnemonic codes
Interest on bank deposits is
1. Revenue receipt
2. Capital expenditures
3. Revenue expenditures
4. Capital receipt
Revenue expenditure is intended to benefit
1. Current period
2. Any period
3. Past period
4. Future period
Balance sheet is
1. None of the above
2. Neither a statement nor an account
3. An account
4. A statement
Which of the following is/are the objective(s) of preparing trial balance?
1. Helping in the preparation of final accounts
2. Serving as the summary of all the ledger accounts
3. Examining arithmetical accuracy of accounts
4. All the above
Which method shall be efficient, if repairs and maintenance cost of an asset increases as it grows older.
1. Annuity method
2. Sinking fund method
3. Straight line method
4. Reducing balance method
Carriage inwards will be shown
1. In the profit and loss account
2. In the trading account
3. On the liabilities side
4. On the assets side
Balance sheet shows the of the business.
1. Profitability
2. Purchases
3. Sales
4. Financial position
Closing stock is an item of .
1. Intangible asset
2. Current asset
3. Fictitious asset
4. Fixed asset
Errors not affecting the agreement of trial balance are
1. Errors of partial omission
2. Errors of principle
3. Errors of overcasting
4. Errors of undercasting
J.F means
1. Journal page number
2. Voucher number
3. Order number
4. Ledger page number
Financial position of a business is ascertained on the basis of
1. Management accounting
2. Human resources accounting
3. None of the above
4. Journal
A prepayment of insurance premium will appear in
1. The balance sheet on the assets side
2. The balance sheet on the liabilities side
3. The profit and loss account on the credit side
4. The trading account on the debit side

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Lesson 1 - 14