Q 1. Errors are _____ mistakes

A) Intentional
B) Undetected
C) Unintentional
D) None of the above

Answer: Option C
Solution: Errors are Unintentional mistakes. Some unintentional act, omission, or error arising from ignorance, surprise, imposition, or misplaced confidence. A state of mind not in accord with reality.

Q 2. Which error cannot be revealed on the preparation of trial balance?

A) Wrong totalling of account
B) Compensatory errors
C) Error of commission
D) Wrong balancing of an account

Answer: Option B
Solution: Compensatory errors cannot be revealed on the preparation of trial balance. Compensating Errors are error on the debit side and is compensated by an error of equal amount on the credit side.

Q 3. Parties to a bill of exchange are

A) Drawer
B) Drawee
C) Payee
D) All of the above

Answer: Option D
Solution: Parties to a bill of exchange are Drawer, Drawee and Payee.

Q 4. Accommodation bill is drawn
A) To finance actual purchase or sale of goods
B) To facilitate trade transmission
C) To cater the fund requirements of both the parties
D) None of the above

Answer: Option C
Solution: Accommodation bill is drawn to cater the fund requirements of both the parties. A bill, draft, or note made, drawn, accepted, or endorsed by one person for another without consideration to enable that other to raise money or obtain credit thereby.

Q 5. Rs.5000 spent on maintenance of computer is

A) Deferred capital expenditure
B) Capital expenditure
C) Revenue expenditure
D) None of the above

Answer: Option C
Solution: Rs.5000 spent on maintenance of computer is Revenue expenditure. A revenue expenditure is a cost that will be an expense in the accounting period when the expenditure takes place.

Q 6. The assumption underlying the fixed installment method of depreciation is that of ____ of the asset over its useful life

A) Equal usage
B) Usage
C) Charge
D) None of the above

Answer: Option A
Solution: The assumption underlying the fixed installment method of depreciation is that of Equal usage of the asset over its useful life.

Q 7. _____ will generally show a debit balance

A) Bank loan
B) Bad debts recovered
C) Drawings
D) Salary payable

Answer: Option C
Solution: Drawings will generally show a debit balance. A drawing account is an accounting record maintained to track money withdrawn from a business by its owners. A drawing account is used primarily for businesses that are taxed as sole proprietorships or partnerships.

Q 8. Profit & Loss account is prepared for a period of one year by following

A) Periodicity concept
B) Business entity concept
C) Accrual concept
D) None of the above

Answer: Option A
Solution: Profit & Loss account is prepared for a period of one year by following Periodicity concept. It is the concept that each accounting period has an economic activity associated with it, and that the activity can be measured, accounted for, and reported upon.

Q 9. Which of the following enhances the earning capacity of an asset?

A) Reduction in operating costs
B) Increase in working capacity of an asset
C) Replacing damage parts of an asset
D) Both ‘b’ and ‘c’

Answer: Option D
Solution: Increase in working capacity of an asset and Replacing damage parts of an asset enhances the earning capacity of an asset.

Q 10. Gross profit is equal to

A) Opening stock + purchases – closing stock
B) Net profit – expenses
C) Sales – Closing stock + purchases
D) Sales – Cost of goods sold

Answer: Option D
Solution: Gross profit is equal to Sales – Cost of goods sold.