Financial Accounting

1. Which one is the right Accounting Equation?
a) Assets – Liabilities = Capital

b) Assets + Liabilities = Capital
c) Assets + Capital = Liabilities
d) none of these
Answer: (a)
2. Balance Sheet is prepared

a) to check the accuracy of books
b) to know the financial position
c) to know the net profit or loss
d) to find out the value of assets
Answer: (b)
3. Liquid ratio comprises

a) CA to CL
b) CA – Stock to CL – Bank overdraft
c) CA to Liquid Liabilities
d) None of these
Answer: (b)
4. The ideal standard of Current Ratio is

a) 1:1 b) 2:1
c) 1:2 d) none of these
Answer: (b)
5. Current Ratio: - 2.5, Current Liabilities: - Rs.50000, Acid test Ratio: 1.5
The value of current Assets is –
a) Rs. 100000 b) Rs. 125000
c) Rs.150000 d) Rs. 175000
Answer: (b)
6. Overhead is the other name of

a) all direct cost b) sunk cost
c) opportunity cost d) indirect cost
Answer: (d)
7. To test the liquidity of a concern which of the following ratios is useful?

a) Acid test ratio b) Capital turnover ratio [
c) Bad debt to sales ratio d) Inventory turnover
Answer: (a)
8. Current ration equals to

Current assets Liquid assets
a) Current liabilities b)
Liquid liabilities
Quick assets
c) Current liabilities d) None of these
Answer: (a)
9. Return of shareholders’ fund is determined by which of the following formula?
a) net profit after tax / shareholders’ fund
b) net profit after tax / shareholders’ equity
c) net profit before / shareholders’ fund
d) net profit before tax / shareholders’ equity
Answer: (a)
10. Patent is an example of

a) current asset b) fixed asset
c) fictitious assets d) intangible assets
Answer: (d)
11. Current Ratio is the ratio of

a) Current Assent by Current Liabilities
b) Current Liabilities by Current Asset
c) Current Capital by Current Asset
d) Current Capital by Current Liabilities
Answer: (a)
12. In Double Entry System of Book Keeping every business transaction affects
a) two accounts b) two sides of same account
c) the same account on two different dates
d) all of these
Answer: (a)
13. Which of the following balance appears on the debit side of the Trial Balance?
a) A loss b) An expenditure c) An Asset d) All of these

Answer: (d)
13. Which of the following is not a step in accounting process?

a. Recording b. Classifying c. Verification d. Summarizing e. Communication
14. Business is considered as a separate entity and the capital invested by the owners is shown as a
“liability” in the books of the business. Which accounting principle implies that there is a distinction
between the economic activities of the enterprise and owners of the business?
a. Double entry b. Going concern c. Separate entity d. Materiality e. Consistency
15. Most of the concerns have a practice of reporting the closing inventories at the lower of the cost or
market value, undermining the concern’s revenue and incomes as well. Based on which accounting
concept or principle is this justified?
a. Historical cost concept b. Consistency concept c. Conservatism concept d. Full disclosure concept e.
Matching concept
16. Journal is a
a. Book of original entry b. Classified summary of specific transactions c. Temporary record d.
Book of secondary entry e. Book of final entry
17. The process of transferring the corresponding debit and credit items recorded in journal to its
corresponding individual accounts is known by which term?
a. Journalizing b. Posting c. Accounting d. Finalizing e. Adjusting
18. While observing a company’s balance sheet it was found that certain additions were made to
the block of assets. How will it affect the flow of funds in the Balance sheet of the company?
a. Increase in Owner’s Equity b. Decrease in Outsider’s Liability c. Increase in Outsider’s
Liability d. Increase in Assets e. Decrease in Owner’s Liability
19. A manufacturing company has paid a duty fee of ` 750 to its suppliers for the goods
purchased. The supplier company was situated within the same limits of the manufacturer
concern. Under what term is the above item mentioned in Manufacturing A/c. a. Excise Duty b.
Custom duty c. Octroi Charges d. Freight Inwards e. Carriage Outwards
20. Depreciation appearing in the trial balance should be

a. Debited to P&L a/c b. Shown as liability in balance sheet c. Reduced from related asset in
balance sheet d. Debited to P&L a/c and shown as liability in balance sheet e. Debited to P&L
a/c and reduced from related asset in balance sheet
21. An amount due from the debtor which is not collectible is referred to as
a. Sundry debtors b. Doubtful debts c. Good debts d. Bad debts e. Bad and doubtful debts
22. Which of the following does not form a part of manufacturing account?
a. Raw material consumed b. Net sales c. Direct labour d. Direct expenses e. Factory overheads
23. Which of the following is an asset which does not have a physical existence, and is held
through acquisition, production process or for use in supply of goods and services?
a. Fixed asset b. Intangible assets c. Current assets d. Fictitious assets e. Wasting assets

Financial Accounting

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1. Which one is the right Accounting Equation?

a) Assets – Liabilities = Capital

2. Balance Sheet is prepared

3. Liquid ratio comprises

4. The ideal standard of Current Ratio is

6. Overhead is the other name of

7. To test the liquidity of a concern which of the following ratios is useful?

8. Current ration equals to

10. Patent is an example of

11. Current Ratio is the ratio of

a) A loss b) An expenditure c) An Asset d) All of these

13. Which of the following is not a step in accounting process?

20. Depreciation appearing in the trial balance should be

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