MCQ For Class 12 Accountancy CBSE -Set 5

Q 1. The standard format of Journal does not include which of the following?

A) Assets column
B) Date column
C) Description column
D) Amount column

Show Answer

Answer: Option A
Solution: The standard format of Journal does not include Assets column. An asset purchased on account is not recorded in the purchase journal. But many are of opinion to record all credit transactions in multi-column purchase journal.


Q 2. In which of the following order, data is entered into the Journal?

A) Alphabetical order
B) Numeric order
C) Bullets order
D) Chronological order
Show Answer

Answer: Option D
Solution: In Chronological order, data is entered into the Journal. Journal entries are typically entered in chronological order and debits are entered before credits � debits are entered in a column to the left, and credits are entered to the right.


Q 3. Which of the following accounts will be credited if a company purchases building for cash?

A) Capital account
B) Fixed assets account
C) Building account
D) Cash account
Show Answer

Answer: Option D
Solution: Cash account will be credited if a company purchases building for cash. Cash is credited because cash is an asset account that decreased because cash was used to pay the bill.


Q 4. Discount for quick repayment of debt is normally referred to as

A) Trade discount
B) Prompt payment discount
C) Cash discount
D) Bulk discount
Show Answer

Answer: Option C
Solution: Discount for quick repayment of debt is normally referred to as Cash discount. It is called cash discount which might be offered or received.


Q 5. Which of the following specialized journal records “goods returned by customers”?

A) Purchase journal
B) Sales journal
C) Purchase return journal
D) Sales return journal
Show Answer

Answer: Option D
Solution: Sales return journal records “goods returned by customers”. Sales Return (Journal) Book Sales return books are used to record the goods returned by customers to them on credit.


Q 6. Sales on credit is recorded in which of the following journal?

A) Purchase journal
B) Sales journal
C) Purchase return journal
D) Sales return journal
Show Answer

Answer: Option B
Solution: The sales journal is used to record all of the company sales on credit. Most often these sales are made up of inventory sales or other merchandise sales.


Q 7. Transactions that a business does not record in any specialized journal are recorded in which of the following books?

A) Cash payment journal
B) Cash receipt journal
C) Purchases return journal
D) General journal
Show Answer

Answer: Option D
Solution: Transactions that a business does not record in any specialized journal are recorded in General journal.


Q 8. Which of the following specialized journal records “goods returned by the business”?

A) Purchase journal
B) Sales journal
C) Purchase return journal
D) Sales return journal
Show Answer

Answer: Option C
Solution: Purchase return journal records “goods returned by the business”. The Purchases Returns Book is written up from the credit notes received from the suppliers.


Q 9. Sales and purchase journal doesn’t record

A) Credit sales
B) Credit purchases
C) Credit sales and purchases
D) Cash sales and purchases
Show Answer

Answer: Option D
Solution: Sales and purchase journal doesn’t record Cash sales and purchases.


Q 10. Cash received from debtor is recorded in which of the following specialized journals?

A) Purchase Journal
B) Sales Journal
C) Cash receipts journal
D) Cash payments journal
Show Answer

Answer: Option C
Solution: Cash received from debtor is recorded in Cash receipts journal. The cash receipts journal is a special journal used to record cash received by a business.


Q 11. Which of the following is a type of cash receipt journal + cash payment journal?

A) Bank statement
B) Statement of cash flow
C) Cash book
D) Cash documents
Show Answer

Answer: Option C
Solution: Cash book is a type of cash receipt journal + cash payment journal. A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals.


Q 12. Cash purchases is recorded in which of the following specialized journals?

A) Purchase Journal
B) Sales Journal
C) Purchase return journal
D) Cash payments journal
Show Answer

Answer: Option D
Solution: Cash purchases is recorded in Cash payments journal. Cash payment journal or cash disbursement journal is used to record all cash payments made by the business.


Q 13. A brief explanation recorded below every entry in General Journal is commonly known as

A) Narration
B) Explanation
C) Summary
D) Other Information
Show Answer

Answer: Option A
Solution: A brief explanation recorded below every entry in General Journal is commonly known as Narration. A short explanation of each transaction is written under each entry which is called narration.


Q 14. Debit note is the basis for recording a transaction in which of the following journals?

A) General journal
B) Cash journal
C) Purchase journal
D) Purchase return journal
Show Answer

Answer: Option D
Solution: Debit note is the basis for recording a transaction in Purchase return journal. The source document for recording entries in the purchases return journal is generally a debit note.


Q 15. Credit note is the basis for recording a transaction in which of the following journals?

A) Purchase Journal
B) Sales return journal
C) General journal
D) Cash receipt journal
Show Answer

Answer: Option B
Solution: Credit note is the basis for recording a transaction in Sales return journal. A credit note or credit memo is a commercial document issued by a seller to a buyer.


Q 16. Specialized journals are more adequate for which type of businesses?

A) Small businesses
B) Big businesses
C) Sole proprietorship
D) Partnership
Show Answer

Answer: Option B
Solution: Specialized journals are more adequate for Big businesses.


Q 17. Transferring entries from journal to ledger account is commonly known as

A) Recording B) Transferring
C) Posting
D) Entry making
Show Answer

Answer: Option C
Solution: Transferring entries from journal to ledger account is commonly known as Posting. Posting refers to the process of transferring entries in the journal into the accounts in the ledger. Posting to the ledger is the classifying phase of accounting.


Q 18. An ‘account’ records the ______ in the balance of an item

A) Increase
B) Decrease
C) Increase or decrease
D) Appreciation
Show Answer

Answer: Option C
Solution: An ‘account’ records the Increase or decrease in the balance of an item. An account is an individual accounting record of increase and decrease in a specific asset, liability or stockholders equity item.


Q 19. _____ will be credited if goods are given as charity

A) Cash B) Charity
C) Purchases
D) Sales
Show Answer

Answer: Option C
Solution: Purchases will be credited if goods are given as charity. When accounting for goods given as charity, purchases are reduced with the exact cost of goods contributed. The amount is reduced from purchases in the trading account. It is shown as an expense on the debit side of the income statement.


Q 20. Which of the following is known as the base for preparing trial balance?

A) Journal
B) Cash account
C) Ledger account
D) Balance Sheet
Show Answer

Answer: Option C
Solution: Ledger account is known as the base for preparing trial balance. The trial balance can then be prepared by listing each closing balance from the general ledger accounts as either a debit or a credit balance.


Q 21. The normal balance of capital account is

A) Credit balance
B) Debit balance
C) Cash balance
D) Neither debit nor credit balance
Show Answer

Answer: Option A
Solution: The normal balance of capital account is Credit balance. Normal balance is the side where the balance of the account is normally found. Asset accounts normally have debit balances, while liabilities and capital normally have credit balances. Income has a normal credit balance since it increases capital .


Q 22. The normal balance of asset account is

A) Credit balance
B) Debit balance
C) Cash balance
D) Neither debit nor credit balance
Show Answer

Answer: Option B
Solution: The normal balance of asset account is Debit balance. Normal balance is the side where the balance of the account is normally found.


Q 23. The normal balance of liability account is

A) Credit balance
B) Debit balance
C) Cash balance
D) Neither debit nor credit balance
Show Answer

Answer: Option A
Solution: The normal balance of liability account is Credit balance. Normal balance is the side where the balance of the account is normally found. Asset accounts normally have debit balances, while liabilities and capital normally have credit balances. Income has a normal credit balance since it increases capital .


Q 24. Which of the following statements is incorrect regarding capital account?

A) Debit increases the capital account balance
B) Credit increases the capital account balance
C) Fresh capital increases the capital account balance
D) Net income increases the capital account balance
Show Answer

Answer: Option A
Solution: Debit increases the capital account balance statements is incorrect regarding capital account. It decreases the capital account balance.


Q 25. Which of the following is the normal balance of a rent expense account?

A) Credit balance
B) Cash balance
C) Overdraft
D) Debit balance
Show Answer

Answer: Option D
Solution: Debit balance is the normal balance of a rent expense account. Asset accounts normally have debit balances.


Q 26. Revenue and expense accounts are referred to as

A) Nominal accounts
B) Real account
C) Cash account
D) Bank account
Show Answer

Answer: Option A
Solution: Revenue and expense accounts are referred to as Nominal accounts because each period they are closed out to Income Summary in the closing process.


Q 27. Office equipment’s account is classified as

A) Nominal accounts
B) Real account
C) Cash account
D) Capital account
Show Answer

Answer: Option B
Solution: Office equipment’s account is classified as Real account.


Q 28. Which of the following are closed at the end of an accounting period?

A) Nominal accounts
B) Personal accounts
C) Real accounts
D) None of them
Show Answer

Answer: Option A
Solution: Nominal accounts in accounting are the temporary accounts, Revenue or Expense are transferred to profit and loss account and closed at the end of each accounting year.


Q 29. Which of the following is the closing balance of a ledger account?

A) Balance c/d
B) Balance b/d
C) Balance e/d
D) Balance f/c
Show Answer

Answer: Option A
Solution: Balance c/d is the closing balance of a ledger account.


Q 30. Trial Balance is prepared to check accuracy of

A) Ledger account balances
B) Balance sheet balances
C) Income statement balances
D) Cash flow statement balances
Show Answer

Answer: Option A
Solution: A Trial Balance is a statement that shows the total of debit and credit balances of accounts. The total of debit amounts shall be equal to the credit amounts for the trial balance to tally. Hence, it verifies the arithmetical accuracy of the postings in the ledger accounts.


Q 31. The real accounts are accounts of Assets, Liabilities and
A) Expenses
B) Revenues
C) Capital
D) Drawing
Show Answer

Answer: Option C
Solution: The real accounts are accounts of Assets, Liabilities and Capital. The accounting formula essentially shows that what the firm owns (its assets) is purchased by either what it owes (its liabilities) or by what its owners invest (its shareholders equity or capital).


Q 32. If a transaction is completely omitted from the books of accounts, will it effect the agreement of Trial Balance?

A) Yes
B) No
C) Transactions can
Show Answer

Answer: Option B
Solution: If a transaction is completely omitted from the books of accounts, No it wont effect the agreement of Trial Balance.


Q 33. _______ is the common base for preparing a trial balance

A) Ledger accounts
B) General Journal
C) Specialized journals
D) Balance sheet
Show Answer

Answer: Option A
Solution: Ledger accounts is the common base for preparing a trial balance. This process is known as ‘balancing off’ the general ledger accounts. The trial balance can then be prepared by listing each closing balance from the general ledger accounts as either a debit or a credit balance.


Q 34. Which of the following is true about a trial balance?

A) It lists down the balances of accounts
B) It lists down the balances of a balance sheet
C) It is a kind of financial statement
D) It is not a part of accounting cycle
Show Answer

Answer: Option A
Solution: Trial balance It lists down the balances of accounts. The debit balance values will be listed in the debit column of the trial balance and the credit value balance will be listed in the credit column.


Q 35. Debit balance = Credit balance in a trial balance indicates that

A) No error in recording transactions
B) No error in posting entries to ledger accounts
C) Account balances are correct
D) Mathematically Capital + Liabilities = Assets
Show Answer

Answer: Option D
Solution: Debit balance = Credit balance in a trial balance indicates that Mathematically Capital + Liabilities = Assets.


Q 36. Trial Balance is commonly prepared

A) Frequently during the year
B) At the end of an accounting period
C) At the end of a month
D) At the end of a year
Show Answer

Answer: Option B
Solution: Trial Balance is commonly prepared at the end of an accounting period. It is usually prepared at the end of an accounting period to assist in the drafting of financial statements.


Q 37. Which of the following will affect the agreement of a trial balance?

A) Complete omission of a transaction
B) Partial omission of a transaction
C) Error of principle
D) Compensating errors
Show Answer

Answer: Option B
Solution: Partial omission of a transaction will affect the agreement of a trial balance. When only one aspect of a transaction is posted to the ledger, it is called as error of partial omission.


Q 38. If debit balances = credit balances, trial balance only shows or checks the _________ and it does not indicate that no errors were made during recording and posting.

A) Arithmetic accuracy
B) Errors of commission
C) Omissions of economic events
D) Understatements of balances
Show Answer

Answer: Option A
Solution: If debit balances = credit balances, trial balance only shows or checks the Arithmetic accuracy and it does not indicate that no errors were made during recording and posting.


Q 39. Which of the following account with normal balance is shown at the debit side of a trial balance?

A) Rent income account
B) Creditors account
C) Unearned income account
D) Cash account
Show Answer

Answer: Option D
Solution: Cash account with normal balance is shown at the debit side of a trial balance.


Q 40. Which of the following account with normal balance is shown at the credit side of a trial balance?

A) Cash account
B) Bank account
C) Equipment account
D) Accrued expenses account
Show Answer

Answer: Option D
Solution: Accrued expenses account with normal balance is shown at the credit side of a trial balance.


Q 41. The closing balance of petty cash book is considered as

A) Liability
B) Asset
C) Expenses
D) Income
Show Answer

Answer: Option B
Solution: The closing balance of petty cash book is considered as Asset. Petty Cash is a current asset account; it is part of a company’s cash.


Q 42. Payment of rent expenses is recorded on which side of cash book?

A) Receipts
B) Payments
C) Income
D) Expense
Show Answer

Answer: Option B
Solution: Payment of rent expenses is recorded on Payments side of cash book. All cash payments are recorded by date on the right-hand side.


Q 43. An entry which is made on both sides of a cash book is called

A) Cash entry B) Contra entry
C) Payment entry
D) Compound entry
Show Answer

Answer: Option B
Solution: An entry which is made on both sides of a cash book is called Contra entry. In the dual entry accounting system, a Contra Entry is an entry which is recorded to reverse or offset an entry on the other side of an account. If a debit entry is recorded in an account, it will be recorded on the credit side and vice-versa.


Q 44. A cash book with cash, bank and discount column is commonly referrred to as

A) Cash book
B) Two columns cash book
C) Three columns cash book
D) Petty cash book
Show Answer

Answer: Option C
Solution: A cash book with cash, bank and discount column is commonly referrred to as Three columns cash book. The three column cash book (also known as triple column cash book) has three money columns on both debit and credit side � one on each side for recording discount, cash and bank amounts.


Q 45. Cash book records

A) Cash payments
B) Cash Receipts
C) Cash payments and cash receipts
D) Neither cash payments nor cash receipts
Show Answer

Answer: Option C
Solution: Cash book records Cash payments and cash receipts. A Cash Book is a type of subsidiary book where cash (or) bank receipts and cash (or) bank payments made during a period are recorded in a chronological order.


Q 46. Cash discount is allowed on ______ repayment of debt

A) Lump sum
B) Prompt
C) Actual
D) None of them
Show Answer

Answer: Option B
Solution: Cash discount is allowed on Prompt repayment of debt. It is cash discount it may be allowed or received. In case of discount allowed It is an Expense and in case of received it is an income.


Q 47. Cash book is prepared by
A) Bank B) Accountant of business
C) Manager of a company
D) Bank’s cashier
Show Answer

Answer: Option B
Solution: Cash book is prepared by Accountant of business. A cash book is set up as a ledger in which all cash transactions are recorded according to date. It is a book of original entry and final entry.


Q 48. The most common imprest system is the ______ system

A) Petty cash
B) Cash book
C) Cash receipts journal
D) Discount
Show Answer

Answer: Option A
Solution: The most common imprest system is the Petty cash system. The base characteristic of an imprest system is that a fixed amount is reserved, which after a certain period of time or when circumstances require, because money was spent, it will be replenished.


Q 49. Discount received is recorded on which of the following side of a cash book?

A) Receipts
B) Payments
C) Income
D) Expenditure
Show Answer

Answer: Option B
Solution: Discount Received is a column found on the credit side of the Cash Book.
When a creditor is paid and the business receives a discount the discount received and is recorded in the discount received column and the corresponding entry appears as a debit in the creditor�s account.


Q 50. Drawings by owner of business are generally recorded on which of the following side of a cash book?

A) Receipts
B) Payments
C) Incomes
D) Expenditures
Show Answer

Answer: Option B
Solution: Drawings by owner of business are generally recorded on Payments side of a cash book. Drawings are money or assets that are withdrawn from a company by its owners for personal use.


Q 51. Introduction of capital by owner of business is recorded on which side of a cash book?

A) Receipts
B) Payments
C) Incomes
D) Expenditures
Show Answer

Answer: Option A
Solution: Introduction of capital by owner of business is recorded on Receipts side of a cash book.


Q 52. Cash book with cash and discount column is mostly referred to as

A) Simple cash book
B) Two columns cash book
C) Three columns cash book
D) Petty cash book
Show Answer

Answer: Option C
Solution: Cash book with cash and discount column is mostly referred to as Three columns cash book. The triple column cash book (also referred to as three column cash book) is the most exhaustive form of cash book which has three money columns on both receipt (Dr) and payment (Cr) sides to record transactions involving cash, bank and discounts.


Q 53. A cash book that is used to record the small payments of cash is generally referred to as

A) Simple cash book
B) Two columns cash book
C) Three columns cash book
D) Petty cash book
Show Answer

Answer: Option D
Solution: A cash book that is used to record the small payments of cash is generally referred to as Petty cash book. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the day-to-day normal expenditures of the business which is not related to the direct line of the business.


Q 54. Purchase of office equipment for cash will be recorded on which side of a cash book?

A) Receipts
B) Payments
C) Incomes
D) Expenditures
Show Answer

Answer: Option B
Solution: Purchase of office equipment for cash will be recorded on Payments side of a cash book. All transactions in the cash book have two sides: debit and credit. All cash receipts are recorded on the left-hand side, and all cash payments are recorded by date on the right-hand side.


Q 55. Postdated cheques are considered as

A) Cash B) Bank balance
C) Accounts receivable
D) Cash reserve
Show Answer

Answer: Option C
Solution: Postdated cheques are considered as Accounts receivable. If the postdated check was received as payment on accounts receivable, the accounts receivable balance is not reduced until the date of the check.


Q 56. Postage stamps on hand are considered as

A) Bank balance
B) Prepaid expenses
C) Accounts receivable
D) Creditors
Show Answer

Answer: Option B
Solution: Postage stamps on hand are considered as Prepaid expenses. Prepaids are any expense the business pays for in advance, such as rent, insurance, office supplies, postage, travel expense, or advances to employees.


Q 57. Petty cash fund is supposed to be replenished
A) Every year
B) Every half year
C) Every year
D) At the end of every accounting period
Show Answer

Answer: Option D
Solution: Petty cash fund is supposed to be replenished at the end of every accounting period. Replenish means to return the amount of actual cash in the petty cash box back to the amount appearing in the general ledger account Petty Cash. This is done whenever the amount of actual cash in the petty cash box is low and at the end of each accounting period.


Q 58. A credit balance in cash book indicates

A) Bank balance
B) Cash at bank
C) Bank overdraft
D) Bank underdraft
Show Answer

Answer: Option C
Solution: A credit balance in cash book indicates Bank overdraft. Overdrafts are where the bank account becomes negative and the businesses in effect have borrowed from the bank. This is shown in the cash book as a credit balance.


Q 59. Favourable balance of cash book implies

A) Credit balance of cash book
B) Debit balance of cash book
C) Bank overdraft
D) Adjusted balance of cash book
Show Answer

Answer: Option B
Solution: Favourable balance of cash book implies Bank overdraft. The credit balance as per the cash book indicates bank overdraft.


Q 60. A cash deposit made by business appears on the bank statement as ____ balance

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

Answer: Option B
Solution: A cash deposit made by business appears on the bank statement as Credit balance.


Q 61. Bank Reconciliation statement is the comparision of a bank statement (sent by bank) with the

A) Cash receipt journal
B) Cash payment journal
C) Cash book
D) Financial statements
Show Answer

Answer: Option C
Solution: Bank Reconciliation statement is the comparision of a bank statement (sent by bank) with the Cash book. In other words, the balance shown in the Pass Book given by the bank should tally with the balance of Bank Account Kept in his ledger or Cash Book (Bank Column).


Q 62. A cheque returned by bank marked “NSF” means that

A) Bank can’t verify your identity
B) There are not sufficient funds in your account
C) Cheque has been forged
D) Cheque can’t be cashed being illegal
Show Answer

Answer: Option B
Solution: A cheque returned by bank marked “NSF” means that There are not sufficient funds in your account. Non-sufficient funds (NSF) is a term used in the banking industry to indicate that a cheque cannot be honored because insufficient funds are available in the account on which the instrument was drawn.


Q 63. Bank Reconciliation statement is prepared by
A) Accountant of business
B) Manager of business
C) Controller of business
D) Accountant of the bank
Show Answer

Answer: Option A
Solution: Bank Reconciliation statement is prepared by Accountant of business. Bank reconciliation statement is generally prepared by the company accountant or the bookkeeper with the purpose to compare the bank’s records with your own company records. It is done on monthly basis whenever bank statement arrives.


Q 64. Unpresented cheques are also referred to as

A) Uncollected cheques
B) Uncredited cheques
C) Outstanding cheques
D) Bounced cheques
Show Answer

Answer: Option C
Solution: Unpresented cheques are also referred to as Outstanding cheques. An unpresented check is a check written by a company and entered in its records, but the check has not yet cleared the company’s checking account. In other words, the check has not yet been paid by the bank on which the check is drawn. An unpresented check is also known as an outstanding check.


Q 65. _______ are cheques that are issued by the business but not yet presented to bank for payment

A) Uncollected cheques
B) Uncredited cheques
C) Outstanding cheques
D) Bounced cheques
Show Answer

Answer: Option C
Solution: Outstanding cheques are cheques that are issued by the business but not yet presented to bank for payment.


Q 66. Accrued expenses are considered as

A) Asset
B) Liability
C) Gain
D) Income
Show Answer

Answer: Option B
Solution: Accrued expenses are considered as Liability. Accrued expenses are typically periodic, and are documented on a company’s balance sheet as current liabilities.


Q 67. Prepaid expenses are considered as

A) Asset
B) Liability
C) Loss
D) Capital
Show Answer

Answer: Option A
Solution: Prepaid expenses are considered as Asset. Prepaid expenses are future expenses that have been paid in advance. You can think of prepaid expenses as costs that have been paid but have not yet been used up or have not yet expired. The amount of prepaid expenses that have not yet expired are reported on a company’s balance sheet as an asset.


Q 68. Earned but not yet received income is treated as

A) Asset
B) Liability
C) Loss
D) Capital
Show Answer

Answer: Option A
Solution: Earned but not yet received income is treated as Asset. It is income earned during a particular accounting period but not received until the end of that period. It is treated as an asset for the business.


Q 69. Revenue earned but not yet received by the business is known as

A) Contra asset revenue
B) Accrued expenses
C) Accrued revenue
D) Unearned revenue
Show Answer

Answer: Option C
Solution: Revenue earned but not yet received by the business is known as Accrued revenue. Accrued income is very important in accounting because companies receive advances for their goods or services all the time. To prevent overstating certain accounts, companies need to differentiate between the revenue that they have earned versus revenue that they have not earned yet.


Q 70. Which of the following is not regarded as the fundamental concept that is identified by IAS-1?

A) The going concern concept
B) The separate entity concept
C) The prudence concept
D) Correction concept
Show Answer

Answer: Option D
Solution: Correction concept is not regarded as the fundamental concept that is identified by IAS-1.

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