MCQ For Class 12 Accountancy CBSE -Set 4

Q 1. What type of expenses are paid out of Gross Profit?

A) General expenses
B) Financial expenses
C) Selling expenses
D) All of the above

Show Answer

Answer: Option D
Solution: General expenses, Financial expenses and Selling expenses are paid out of Gross Profit.


Q 2. Which of the following is NOT an example of intangible assets?

A) Franchise rights
B) Goodwill
C) Patents
D) Land
Show Answer

Answer: Option D
Solution: Land is NOT an example of intangible assets. An intangible asset is an asset that is not physical in nature.


Q 3. Which of the following is an example of business liability?

A) Land
B) Building
C) Cash D) Creditors
Show Answer

Answer: Option D
Solution: Creditors is an example of business liability. A liability is defined as a company’s legal financial debts or obligations that arise during the course of business operations.


Q 4. The unfavorable balance of Profit and Loss account should be

A) Added to liabilities
B) Subtracted from current assets
C) Subtracted from capital
D) Subtracted from liabilities
Show Answer

Answer: Option C
Solution: Loss is subtracted from capital account and profit is added to capital account.


Q 5. Which of the following account will be credited, if business bought goods on credit from Mr. Z?

A) Purchases account
B) Mr. Z account
C) Cash account
D) Sales account
Show Answer

Answer: Option B
Solution: Mr. Z account account will be credited, if business bought goods on credit from Mr. Z.


Q 6. Interest on loan paid by business is an example of

A) Revenue expense
B) Income
C) Asset
D) Return outward
Show Answer

Answer: Option A
Solution: Interest on loan paid by business is an example of Revenue expense. A revenue expenditure is a cost that is charged to expense as soon as the cost is incurred.


Q 7. Which of the following account will be credited when a typewriter is sold that has been used in the office?

A) Office equipment account
B) Cash account
C) Sales account
D) Purchase account
Show Answer

Answer: Option A
Solution: Office equipment account will be credited when a typewriter is sold that has been used in the office.


Q 8. The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the asset, is termed as

A) Appreciation
B) Depreciation
C) Fluctuation
D) None of the above
Show Answer

Answer: Option B
Solution: The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the as set, is termed as Depreciation. Depreciation is any method of allocating such net cost to those periods in which the organization is expected to benefit from use of the asset. The asset is referred to as a depreciable asset.


Q 9. Which of the following item will be shown on debit side of debtors account?

A) Discount received
B) Return inwards
C) Discount allowed
D) Credit sales
Show Answer

Answer: Option D
Solution: Credit sales will be shown on debit side of debtors account. Credit sales means allowances of goods to customers in order to pay in advance.


Q 10. When one or both aspects of a transaction are recorded in the wrong class or category of account, it is called

A) Error of principle
B) Error of omission
C) Error of commission
D) Error of original entry
Show Answer

Answer: Option A
Solution: When one or both aspects of a transaction are recorded in the wrong class or category of account, it is called Error of principle. An error of principle is an accounting mistake in which an entry is recorded in the incorrect account, violating the fundamental principles of accounting.


Q 1. What type of expenses are paid out of Gross Profit?

A) General expenses
B) Financial expenses
C) Selling expenses
D) All of the above
Show Answer

Answer: Option D
Solution: General expenses, Financial expenses and Selling expenses are paid out of Gross Profit.


Q 2. Which of the following is NOT an example of intangible assets?

A) Franchise rights
B) Goodwill
C) Patents
D) Land
Show Answer

Answer: Option D
Solution: Land is NOT an example of intangible assets. An intangible asset is an asset that is not physical in nature.


Q 3. Which of the following is an example of business liability?

A) Land
B) Building
C) Cash D) Creditors
Show Answer

Answer: Option D
Solution: Creditors is an example of business liability. A liability is defined as a company’s legal financial debts or obligations that arise during the course of business operations.


Q 4. The unfavorable balance of Profit and Loss account should be

A) Added to liabilities
B) Subtracted from current assets
C) Subtracted from capital
D) Subtracted from liabilities
Show Answer

Answer: Option C
Solution: Loss is subtracted from capital account and profit is added to capital account.


Q 5. Which of the following account will be credited, if business bought goods on credit from Mr. Z?

A) Purchases account
B) Mr. Z account
C) Cash account
D) Sales account
Show Answer

Answer: Option B
Solution: Mr. Z account account will be credited, if business bought goods on credit from Mr. Z.


Q 6. Interest on loan paid by business is an example of

A) Revenue expense
B) Income
C) Asset
D) Return outward
Show Answer

Answer: Option A
Solution: Interest on loan paid by business is an example of Revenue expense. A revenue expenditure is a cost that is charged to expense as soon as the cost is incurred.


Q 7. Which of the following account will be credited when a typewriter is sold that has been used in the office?

A) Office equipment account
B) Cash account
C) Sales account
D) Purchase account
Show Answer

Answer: Option A
Solution: Office equipment account will be credited when a typewriter is sold that has been used in the office.


Q 8. The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the asset, is termed as

A) Appreciation
B) Depreciation
C) Fluctuation
D) None of the above
Show Answer

Answer: Option B
Solution: The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the as set, is termed as Depreciation. Depreciation is any method of allocating such net cost to those periods in which the organization is expected to benefit from use of the asset. The asset is referred to as a depreciable asset.


Q 9. Which of the following item will be shown on debit side of debtors account?

A) Discount received
B) Return inwards
C) Discount allowed
D) Credit sales
Show Answer

Answer: Option D
Solution: Credit sales will be shown on debit side of debtors account. Credit sales means allowances of goods to customers in order to pay in advance.


Q 10. When one or both aspects of a transaction are recorded in the wrong class or category of account, it is called

A) Error of principle
B) Error of omission
C) Error of commission
D) Error of original entry
Show Answer

Answer: Option A
Solution: When one or both aspects of a transaction are recorded in the wrong class or category of account, it is called Error of principle. An error of principle is an accounting mistake in which an entry is recorded in the incorrect account, violating the fundamental principles of accounting.


Q 11. Which of the following would NOT be considered as a component of ‘cost’ of stock?

A) Transportation inward costs
B) Import duties
C) Salaries of selling staff
D) Purchase price
Show Answer

Answer: Option C
Solution: Salaries of selling staff would NOT be considered as a component of ‘cost’ of stock. When investors purchase shares of stock, the price paid includes two components: the price of the stock and the fee charged by the brokerage firm, called commission.


Q 12. Which of the following is TRUE about the treatment of insurance premium paid in advance

A) Current asset
B) Current liability
C) Short term liability
D) Fixed asset
Show Answer

Answer: Option A
Solution: Current asset is TRUE about the treatment of insurance premium paid in advance. Current assets represent all the assets of a company that are expected to be conveniently sold, consumed, utilized or exhausted through the standard business operations, which can lead to their conversion to a cash value over the next one year period.


Q 13. Which of the following is (are) type(s) of Public Limited Companies?

A) Listed companies
B) Non listed companies
C) Private limited companies
D) Both listed and non listed companies
Show Answer

Answer: Option D
Solution: Both listed and non listed companies are types of Public Limited Companies.


Q 14. The charter of a company which defines the limitations and powers of the company is called

A) The memorandum of association
B) Articles of association
C) Statutory report
D) Certificate of commencement
Show Answer

Answer: Option B
Solution: The charter of a company which defines the limitations and powers of the company is called Articles of association. Articles of association are a document that specifies the regulations for a company’s operations and defines the company’s purpose. The document lays out how tasks are to be accomplished within the organization, including the process for appointing directors and the handling of financial records.


Q 15. Merchandise on hand at either the beginning or end of the accounting period is called

A) Raw material
B) Cost of goods sold
C) Work in progress
D) Inventory
Show Answer

Answer: Option D
Solution: Merchandise on hand at either the beginning or end of the accounting period is called Inventory. Inventory is the array of finished goods or goods used in production held by a company. Inventory is classified as a current asset on a company’s balance sheet, and it serves as a buffer between manufacturing and order fulfillment.


Q 16. Which of the following capital is taken up by the general public?

A) Issued capital
B) Subscribed capital
C) Authorized capital
D) Reserve capital
Show Answer

Answer: Option A
Solution: Issued capital is taken up by the general public. Such capital can be offered to the public at a later date. It is that part of subscribed capital, which is called by the company to pay on shares allotted. It is not necessary for the company to call for the entire amount on shares subscribed for by shareholders.


Q 17. Which of the following items of balance sheet are useful in evaluating a company’s liquidity?

A) Current assets and other assets
B) Current liabilities and current assets
C) Current liabilities and plant and equipment
D) In current liabilities and other assets
Show Answer

Answer: Option B
Solution: Current liabilities and current assets items of balance sheet are useful in evaluating a company’s liquidity.


Q 18. Which of the following can be distributed among the shareholders?

A) Capital reserve
B) General reserve
C) Revaluation reserve
D) All of the above
Show Answer

Answer: Option B
Solution: General reserve can be distributed among the shareholders. General reserve can be used for distribution of dividend among shareholders when profit is insufficient. Reserves and surpluses are shown in liabilities side of balance sheet.


Q 19. Shares for which amount is paid by public are called ____ shares

A) Authorized
B) Paid up
C) Bonus shares
D) All of the above
Show Answer

Answer: Option B
Solution: Shares for which amount is paid by public are called Paid up shares. Paid-Up Share Capital All paid-up capital is listed under the shareholders’ equity section of the issuing company’s balance sheet. Share capital can fall into four categories; paid-up share capital, called-up share capital, authorized share capital, and issued share capital.


Q 20. Which of the following is non-profit organization?

A) Sole proprietorship
B) Partnership
C) Limited company
D) Trust
Show Answer

Answer: Option D
Solution: Trust is non-profit organization. A nonprofit organization is a business that has been granted tax-exempt status by the Internal Revenue Service (IRS) because it furthers a social cause and provides a public benefit.


Q 21. Commercial accounting is based on

A) Single entry book keeping
B) Double entry book keeping
C) Both single and double entry book keeping
D) Cash basis of book keeping
Show Answer

Answer: Option B
Solution: Commercial accounting is based on Double entry book keeping. Commercial accounting is something about providing right informatin to right people on right time. In commercial accounting, the system is maintained by the business organizations. The main objective of commercial accounting is to know the profit or loss and the financial position of any business.


Q 22. An asset that is NOT physical in nature is called

A) Intangible asset
B) Liquid asset
C) Current asset
D) Fixed asset
Show Answer

Answer: Option A
Solution: An asset that is NOT physical in nature is called Intangible asset. An intangible asset is an asset that is not physical in nature. Goodwill, brand recognition and intellectual property, such as patents, trademarks, and copyrights, are all intangible assets.


Q 23. In which of the following interim dividend is treated?

A) In profit and loss account
B) In profit and loss appropriation account
C) On the asset side of the Balance sheet
D) In trading account
Show Answer

Answer: Option B
Solution: In profit and loss appropriation account interim dividend is treated. An interim dividend is a dividend payment made before a company’s annual general meeting (AGM) and the release of final financial statements.


Q 24. Which of the following documents contains rules and regulations for internal management of the business?

A) Memorandum of association
B) Articles of association
C) Prospectus
D) Statutory Declaration
Show Answer

Answer: Option B
Solution: Articles of association contains rules and regulations for internal management of the business. Articles of Association is a document which prescribes the rules and bye-laws for the general management of the company and for the attainment of its object as given in the memorandum.


Q 25. Which of the following is NOT a cash inflow?

A) Sale of fixed asset
B) Issue of debentures
C) Cash from business operation
D) Purchase of fixed asset
Show Answer

Answer: Option D
Solution: Purchase of fixed asset is NOT a cash inflow. Cash inflow is the money received by an organization as a result of its operating activities, investment activities, and financing activities.


Q 26. Which of the following is quoted company?

A) Private limited company
B) Public limited company
C) Listed company
D) Non listed company
Show Answer

Answer: Option C
Solution: Listed company is quoted company. The CA 2006 definition of ‘quoted company’ in s. 385 refers to companies listed on ‘regulated markets’ including the Main Market, but not AIM.


Q 27. Which of the following capital is required for the registration of the company?

A) Issued capital
B) Subscribed capital
C) Authorized capital
D) Reserve capital
Show Answer

Answer: Option C
Solution: Authorized capital is required for the registration of the company. The authorized capital of a company (sometimes referred to as the authorized share capital, registered capital or nominal capital, particularly in the United States) is the maximum amount of share capital that the company is authorized by its constitutional documents to issue (allocate) to shareholders.


Q 28. Accounts receivable & inventory are the examples of

A) Current assets
B) Liquid asset
C) Fixed asset
D) Capital asset
Show Answer

Answer: Option A
Solution: Accounts receivable & inventory are the examples of Current assets. Current assets include cash, cash equivalents, accounts receivable, stock inventory, marketable securities, pre-paid liabilities, and other liquid assets. Current assets are important to businesses because they can be used to fund day-to-day business operations and to pay for the ongoing operating expenses.


Q 29. Which of the following account will be credited in the books of XYZ Co. Ltd, if the business purchases a vehicle thriugh cheque?

A) Vehicle account
B) Business account
C) Bank account
D) Debtors account
Show Answer

Answer: Option C
Solution: Bank account will be credited in the books of XYZ Co. Ltd, if the business purchases a vehicle thriugh cheque.


Q 30. In which of the following condition, a company will have positive working capital?

A) If current assets>current liabilities
B) If current assets
C) If current assets = current liabilities
Show Answer

Answer: Option A
Solution: If current assets>current liabilities, a company will have positive working capital. When a company has more current assets than current liabilities, it has positive working capital.


Q 31. Debenture is also named as

A) Share
B) Bond
C) Reserve
D) Equity
Show Answer

Answer: Option B
Solution: Debenture is also named as Bond. In a sense, all debentures are bonds , but not all bonds are debentures. Whenever a bond is unsecured, it can be referred to as a debenture.


Q 32. Which of the following is the most important document of the company?

A) Memorandum of association
B) Articles of association
C) Annual report
D) Prospectus
Show Answer

Answer: Option A
Solution: Memorandum of association is the most important document of the company. It is the charter of the company, which defines the objects of the company’s formation and the utmost possible scope of its operations beyond which its actions cannot go.


Q 33. Authorized share capital is also known as

A) Registered capital
B) Issued capital
C) Paid up capital
D) Called up capital
Show Answer

Answer: Option A
Solution: Authorized share capital is also known as Registered capital. The authorized capital of a company is the maximum amount of share capital that the company is authorized by its constitutional documents to issue to shareholders.


Q 34. The maximum amount with which a company is registered is called

A) Authorized capital
B) Issued capital
C) Paid up capital
D) Called up capital
Show Answer

Answer: Option A
Solution: The maximum amount with which a company is registered is called Authorized capital.


Q 35. Which one of the following is NOT true about revenue expenditure?

A) These are the running expenses of the business
B) They improve the financial position of the business
C) They reduce the profit of the concern
D) They do not appear in the balance sheet
Show Answer

Answer: Option B
Solution: Revenue expenditure does not improve the financial position of the business. Revenue expenditures are typically referred to as ongoing operating expenses.


Q 36. Which one of the following statement is CORRECT about long term liabilities?

A) These are due within one year
B) These consist of all debts, payabke after 12 months
C) In working capital, these are deducted from current assets
D) All of the above
Show Answer

Answer: Option B
Solution: Long term liabilities consist of all debts, payabke after 12 months. Long-term liabilities are obligations not due within the next 12 months or within the company’s operating cycle if it is longer than one year.


Q 37. Which one of the following can offer its share to public at large?

A) Private limited company
B) Listed company
C) Partnership firm
D) Trust
Show Answer

Answer: Option B
Solution: Listed company can offer its share to public at large. Listed company is a corporation whose ownership is dispersed among the general public in many shares of stock which are freely traded on a stock exchange or in over-the-counter markets.


Q 38. The persons who sign Articles and Memorandum of the company and contribute in the initial share capital of the company are called

A) Subscribers
B) Shareholders
C) Managers
D) Directors
Show Answer

Answer: Option A
Solution: The persons who sign Articles and Memorandum of the company and contribute in the initial share capital of the company are called Subscribers. They are called subscribers because, as part of the company formation.


Q 39. Which of the following are the owners of a company?

A) Proprietors
B) Partners
C) Shareholders
D) Managers
Show Answer

Answer: Option C
Solution: Shareholders are the owners of a company. A shareholder, also referred to as a stockholder, is any person, company, or institution that owns at least one share of a company’s stock.


Q 40. General office expenses are charged to which of the following head?

A) Administrative expenses
B) Marketing expenses
C) Selling expenses
D) Financial expenses
Show Answer

Answer: Option A
Solution: General office expenses are charged to Administrative expenses head because we know that all types of official expenses are known as administrative expense.


Q 41. Stock of a Trading concern consists of

A) Raw material
B) Work in progress
C) Merchandise inventory
D) All of the above
Show Answer

Answer: Option C
Solution: Stock of a Trading concern consists of Merchandise inventory. Merchandise inventory is the cost of goods on hand and available for sale at any given time. Merchandise inventory (also called Inventory) is a current asset with a normal debit balance meaning a debit will increase and a credit will decrease.


Q 42. Expenditure incurred annually on renewal of patent is a

A) Revenue expenditure
B) Capital expenditure
C) Financial expenditure
D) Operating expenditure
Show Answer

Answer: Option A
Solution: Expenditure incurred annually on renewal of patent is a Revenue expenditure. A revenue expenditure is a cost that will be an expense in the accounting period when the expenditure takes place.


Q 43. Which of the following account will be credited when the goods are purchased on cash?

A) Stock account
B) Cash account
C) Supplier account
D) Work in progress account
Show Answer

Answer: Option B
Solution: Cash account will be credited when the goods are purchased on cash.


Q 44. Which of the following account will be credited when the goods are purchased on credit from Mr. Ali?

A) Purchases account
B) Mr. Ali account
C) Cash account
D) Sales account
Show Answer

Answer: Option B
Solution: Mr. Ali account will be credited when the goods are purchased on credit from Mr. Ali.


Q 45. An informal accounting statement that lists the ledger account balances at a point of time and compares the total of debit balances with the total of credit balances is known as

A) Income statement
B) Balance sheet
C) Trial balance
D) Cash Book
Show Answer

Answer: Option C
Solution: An informal accounting statement that lists the ledger account balances at a point of time and compares the total of debit balances with the total of credit balances is known as Trial balance. A trial balance is a bookkeeping worksheet in which the balance of all ledgers are compiled into debit and credit account column totals that are equal.


Q 46. Documentary evidence, in a specific format used to record the details of a transaction is known as

A) Account
B) Voucher
C) Journal
D) Ledger
Show Answer

Answer: Option B
Solution: Documentary evidence, in a specific format used to record the details of a transaction is known as Voucher. Voucher is documentary evidence in a specific format that records the details of a transaction. It is accompanied by the evidence of transaction.


Q 47. Cost incurred for the maintenance of shop is considered as

A) Deffered expense
B) Capital expenditure
C) Revenue expenditure
D) Preliminary expense
Show Answer

Answer: Option C
Solution: Cost incurred for the maintenance of shop is considered as Revenue expenditure. A revenue expenditure is a cost that will be an expense in the accounting period when the expenditure takes place.


Q 48. Double entry accounting system includes

A) Accrual accounting only
B) Cash accounting only
C) Both cash and accrual accounting
D) None of the above
Show Answer

Answer: Option C
Solution: Double entry accounting system includes both cash and accrual accounting. Double entry, a fundamental concept underlying present-day bookkeeping and accounting, states that every financial transaction has equal and opposite effects in at least two different accounts.


Q 49. Which of the following financial statements show the financial health of an organisation at a stated point of time?

A) Balance sheet
B) Trading and Profit & Loss account
C) Cash flow statement
D) Statement of retained earnings
Show Answer

Answer: Option A
Solution: Balance sheet financial statements show the financial health of an organisation at a stated point of time. A balance sheet is a financial statement that reports a company’s assets, liabilities and shareholders’ equity at a specific point in time, and provides a basis for computing rates of return and evaluating its capital structure.


Q 50. The estimated value at which an asset is expected to be sold after the end of its useful life is called

A) Residual value
B) Salvage value
C) Scrap value
D) All of the above
Show Answer

Answer: Option D
Solution: The estimated value at which an asset is expected to be sold after the end of its useful life is called Residual value, Salvage value and Scrap value.


Q 51. Which of the following is a selling expense?

A) Any tax/freight is paid on purchases
B) General salaries paid to laborers
C) Tax & freight paid on sale
D) Interest on deposits
Show Answer

Answer: Option C
Solution: Tax & freight paid on sale is a selling expense. Selling expense (or sales expense) includes any costs incurred by the sales department.


Q 52. A debit balance in the bank statement indicates

A) Cash at bank
B) Bank overdraft
C) Over payment to creditors
D) Cash in hand
Show Answer

Answer: Option B
Solution: A debit balance in the bank statement indicates Bank overdraft. Overdrafts are where the bank account becomes negative and the businesses in effect have borrowed from the bank.


Q 53. Which one of the following is NOT true about capital expenditure?

A) Creates future benefits
B) Incurred to acquire fixed assets
C) Incurred to increase the economic life of existing fixed assets
D) Reduce the profit of the concern
Show Answer

Answer: Option D
Solution: Capital expenditure does not reduce the profit of the concern. Capital expenditures refer to funds that are used by a company for the purchase, improvement, or maintenance of long-term assets to improve the efficiency or capacity of the company.


Q 54. Which of the following is not an item of Balance Sheet?

A) Accounts receivable
B) Accounts payable
C) Sales revenue
D) Marketable securities
Show Answer

Answer: Option C
Solution: Sales revenue is not an item of Balance Sheet. Sales revenue is the amount realized by a business from the sale of goods or services.


Q 55. In an account, when credit side total < debit side total, then, the balance is known as
A) Negative balance
B) Debit balance
C) Positive balance
D) Credit balance
Show Answer

Answer: Option B
Solution: In an account, when credit side total < debit side total, then, the balance is known as Debit balance. It is the positive balance in the left side of the account. [/show_answer] Q 56. Which of the following is used to record financial transactions in chronological (day-to-day) order?

A) Voucher
B) General Journal
C) General Ledger
D) Trial Balance
[show_answer]Answer: Option B
Solution: General Journal is used to record financial transactions in chronological (day-to-day) order.


Q 57. Net Profit = Gross Profit minus

A) Operating expenses
B) Product cost
C) Deferred expenses
D) Direct cost
Show Answer

Answer: Option A
Solution: Net Profit = Gross Profit minus Operating expenses.


Q 58. Money spent to acquire or upgrade physical assets is known as

A) Revenue expense
B) Capital expense
C) Administrative expense
D) Operating expense
Show Answer

Answer: Option B
Solution: Money spent to acquire or upgrade physical assets is known as Capital expense, as the asset is expected to be utilised in a long run.


Q 59. Salaries paid in advance should be shown on

A) Asset side of the Balance sheet
B) Liability side of the Balance sheet
C) Credit side of the Trading account
D) All of the above
Show Answer

Answer: Option A
Solution: Salaries paid in advance should be shown on Asset side of the Balance sheet. An advance paid is recorded as a current asset in the company’s balance sheet.


Q 60. Which of the following assets are shown at written down value in Balance sheet?

A) Current assets
B) Liquid asset
C) Floating assets
D) Fixed asset
Show Answer

Answer: Option D
Solution: Fixed asset are shown at written down value in Balance sheet. If the asset is not impaired and the company operates under GAAP, then the cost model must be used.


Q 61. Which one of the following is INCORRECT about closing stock?

A) It is added into current assets
B) It is deducted from Material available for use
C) It becomes opening stock of next year
D) It reduces the resources of business
Show Answer

Answer: Option D
Solution: Closing stock does not reduce the resources of business. Closing stock is the amount of inventory that a business still has on hand at the end of a reporting period.


Q 62. What is the next step to Journalizing in accounting cycle?

A) Recording
B) Posting
C) Balancing
D) Analyzing
Show Answer

Answer: Option B
Solution: Posting is the next step to Journalizing in accounting cycle. 10 Steps of Accounting Cycle are; Analyzing and Classify Data about an Economic Event. Journalizing the transaction. Posting from the Journals to General Ledger. Preparing the Unadjusted Trial Balance. Recording Adjusting Entries. Preparing the Adjusted Trial Balance. Preparing Financial Statements.


Q 63. Outsider’s claim against the assets of the business is called

A) Liability
B) Expense
C) Income
D) Capital
Show Answer

Answer: Option A
Solution: Outsider’s claim against the assets of the business is called Liability. Liabilities are defined as a company’s legal financial debts or obligations that arise during the course of business operations.


Q 64. An expenditure whose benefit is finished or enjoyed immediately is called

A) Expense
B) Liability
C) Cost
D) Income
Show Answer

Answer: Option A
Solution: An expenditure whose benefit is finished or enjoyed immediately is called Expense. An expense is the cost of operations that a company incurs to generate revenue.


Q 65. A company’s merchandise, raw materials, finished and unfinished products which have not yet been sold is known as

A) Sales
B) Purchases
C) Inventory
D) Work in progress
Show Answer

Answer: Option C
Solution: A company’s merchandise, raw materials, finished and unfinished products which have not yet been sold is known as Inventory.


Q 66. What is nature of Capital account?

A) Debit
B) Credit
C) Expenses
D) Loss
Show Answer

Answer: Option B
Solution: Credit is nature of Capital account. Asset accounts normally have debit balances, while liabilities and capital normally have credit balances.


Q 67. The assets which have a limited useful life are termed as

A) Limited assets
B) Depreciable assets
C) Unlimited assets
D) None of the above
Show Answer

Answer: Option B
Solution: The assets which have a limited useful life are termed as Depreciable assets. The assets which are held by a business for the production and supply of goods and services, expected to be used for more than an accounting year and have a limited useful life are known as Depreciable Assets.


Q 68. A decrease in value of a fixed asset due to age, wear and tear is known as

A) Depreciation
B) Accumulated depreciation
C) Appreciation
D) Written Down Value (WDV)
Show Answer

Answer: Option A
Solution: A decrease in value of a fixed asset due to age, wear and tear is known as Depreciation. Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account for declines in value. Businesses depreciate long-term assets for both tax and accounting purposes.


Q 69. In balance sheet, fixed assets are shown at

A) Cost price
B) Market value
C) Fair value
D) Written Down Value (WDV)
Show Answer

Answer: Option D
Solution: In balance sheet, fixed assets are shown at Written Down Value (WDV). If the asset is not impaired and the company operates under GAAP, then the cost model must be used.


Q 70. The accrual basis of accounting records revenues when they are

A) Collected
B) Earned
C) Contracted
D) Readily available for use
Show Answer

Answer: Option B
Solution: The accrual basis of accounting records revenues when they are earned. In other words, under the accrual basis of accounting, the receipt of cash and the payment of cash are not the focus of reporting revenues and expenses.

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