Advancer accountancy -2 Subject:

Auditing Multiple Choice Questions:

1) Audit Note Book contains: - (A) Various dates of reference. (B) Details of work done.
(C) Notes regarding item requiring clarification, explanations, etc. (D) All of the above.
Ans. : (D) All of the above.
2) Which of the following has a broader scope? (A) Internal Control. (B) Internal Audit.
(C) Internal Checking. (D) None of the above. Ans. : (D) None of the above.
3) An internal auditor is : (A) Temporary Employee. (B) Permanent Employee. (C) Daily
Wager. (D) None of the above. Ans.: (B) Permanent Employee.
4) The main object of vouching is : (A) To prepare trial balance. (B) Conduct routine
checking. (C) Verify authenticity & authority of transactions. (D) Checking of vouchers
Ans.: (D) Checking of vouchers
5) Valuation is the base of: (A) Verification. (B) Marketing. (C) Internal checking. (D)
Vouching. Ans. : (A) Verification. 6) The first auditor or auditors are appointed by : (A)
Central Government. (B) Company Law Board. (C) Board of Directors. (D) Shareholders.
Ans. : (C) Board of Directors.
7) A number of checks & controls exercised in a business to ensure its efficient working is
known as : (A) Internal check. (B) Internal control. (C) Internal audit. (D) Interim check.
Ans. : (A) Internal check 8) Voucher relates to : (A) Cash receipt. (B) Cash payment. (C)
Credit transactions. (D) All the above. Ans. : (D) All the above.
9) Internal check is meant for : (A) Prevention of frauds. (B) Detection of frauds. (C)
Helping audit in depth. (D) Detection of errors. Ans. : (C) Helping audit in depth.
10) Internal auditor is appointed by : (A) The management. (B) The shareholders. (C)
The government. (D) The statutory body. Ans. : (A) The management. 11) Auditing
begins where -------- ends. (A) Selling. (B) Inventory valuation. (C) Accounting. (D)
Purchases.
12) A good audit report must at least meet one of the following qualifications: (A) It
should offer constructive and timely suggestions to the management. (B) It should not
point out mistakes. (C) It should not be based on factual information. (D) It should not be
based on balance sheet. Ans. : (A) It should offer constructive and timely suggestions to
the management.
13) The work of one clerk is automatically check by another clerk is called : (A) Internal
control. (B) Internal check. (C) Internal audit. (D) None of the above. Ans.: (B) Internal
check.
14) The owners of the company are called: (A) Debenture holders. (B) Debtors. (C)
Shareholders. (D) None of the above. Ans. : (C) Shareholders.
15) Verification is : (A) The art of recording the business transactions. (B) An
examination of the books of accounts. (C) The act of establishing the accuracy of entries
in the books of accounts. Ans. : (C) The act of establishing the accuracy of entries in the
books of accounts.
16) The main object of investigation is : (A) To discover errors and frauds. (B) To prevent
errors and frauds. (C) To verify statements. (D) All the above. Ans. :(D) All the above.
17) Internal controls and internal check are : (A) One and the same. (B) Different. (C)
Internal control includes internal check. (D) None of the above. Ans. : (C) Internal control
includes internal check.
18) An auditor is like a : (A) Watchman. (B) Foolish dog. (C) Mad dog. (D) Watch dog.
Ans. : . (D) Watch dog.
19) Special audit is necessary for: (A) Inefficient concern. (B) Processing concern. (C)
Trading concern. (D) Manufacturing concern. Ans.: (A) Inefficient concern.
20) The company’s auditor is expected to give: (A) His expert opinion about the
accounts. (B) A factual position about the accounts. (C) A critical review of the accounts.
(D) Financial assistance. Ans.: (B) A factual position about the accounts.
21) Auditors of a joint stock company are appointed by : (A) Directors of the company.
(B) Annual general meeting. (C) Election at the annual general meeting. (D) Debenture
holders. Ans.: (C) Election at the annual general meeting.
22) A company auditor can be removed by : (A) Board of directors. (B) Managing
director. (C) Any director. (D) General Meeting. Ans. : (D) General Meeting.
23) A vacancy caused by resignation of an auditor is filled by : (A) Board of directors. (B)
Managing director. (C) General meeting. (D) Central government. Ans. : (C) General
meeting
24) Audit in depth means : (A) Audit of each and every item. (B) Intensive audit of each
and every item. (C) Intensive audit of few items. (D) Audit of a few selected items. Ans. :
(B) Intensive audit of each and every item.
25) Concurrent audit is a part of : (A) Internal check system. (B) Continuous audit. (C)
Internal audit system. (D) Final audit. Ans. (C) Internal audit system.
26) Audit in depth is synonymous for: (A) Complete audit. (B) Completed audit. (C) Final
audit. (D) Detailed audit. Ans. : (D) Detailed audit.
27) Balance sheet audit included verification of : (A) Assets. (B) Liabilities. (C) Income &
expenditure accounts where appropriate. (D) All of the above. Ans. : (D) All of the above.
28) Which of the following statements is not true about continuous audit? (A) It is
conducted at regular interval. (B) It may be carried out on daily basis. (C) It is needed
when the organization has a good internal control system. (D) It is expensive. Ans. : (C) It
is needed when the organization has a good internal control system.
29) Which of the following is not a fact of EPA ? (A) Economic audit. (B) Efficiency audit.
(C) Expenditure audit. (D) Effectiveness audit. Ans.: (C) Expenditure audit.
30) Balance sheet does not include : (A) Verification of assets & liabilities. (B) Vouching of
income & expense accounts related to assets and liabilities. (C) Examination of adjusting
and auditing & closing entries. (D) Routine checks. Ans.: (D) Routine checks.
31) When issuing unqualified opinion the auditor who evaluates the audit findings
should be satisfied that the : (A) Amount of known miss-statement is documented in
working papers. (B) Estimates of the total likely misstatement are less than materiality
level. (C) Estimated of the total likely misstatement is more than materiality level. (D)
Estimates of the total likely misstatement cannot be made. Ans. : (B) Estimates of the
total likely misstatement are less than materiality level.
32) Under check system principle of_________ is followed. (A) Division of labour (B)
Division of work (C) Principle of scalar chain (D) Accountancy .ANS : (A) Division of
labour
33) This kind of audit is generally conducted between two annual audits. (A) Internal
audit (B) Interim audit (C) Final audit (D) Continuous audit Ans. : (B) Interim audit.
34) Before the work of audit is commenced, the auditor plans out the whole of audit work
is known as – (A) Audit plan (B) Audit note (C) Audit risk (D) Audit program Ans. : (D)
Audit program.
35) Internal auditor is appointed by – (A) The management (B) The shareholders (C)
The government (D) statutory body Ans. : (A) The management.
36) The audit that is made compulsory under the statute is called – (A) Statuary audit
(B) Partial audit (C) Complete audit (D) Continues audit Ans. : (A) Statuary audit.
37) Who among the following can be appointed as the auditor of company? (A) A
partner or the director of the company (B) A person of unsound mind (C) Mr. ‘Y’ who
owes Rs.500 to company (D) Mr. ‘Z’ who holds the ‘CA’ Certificate Ans. : Mr. ‘Z’ who holds
the ‘CA’ Certificate.
38) ___ is documentary evidence by which the accuracy in the books of accounts may be
proved. (A) Cheque (B) Receipt (C) Voucher (D) Statement Ans. : (C) Voucher.
39) Sale of Rs.50,000 to ‘A’ was entered as a sale to ‘B’. This is an example of – (A) Error of
omission (B) Error of commission (C) Compensating error (D) Error of Principle.
Ans. : (B) Error of commission.
40) In comparison to the independent auditor an internal auditor is more likely to be
concerned with – (A) Cost accountancy system (B) Internal control system (C) Legal
compliance D) Accounting system Ans. : (B) Internal control system.
41) The audit program is prepared by – (A) The auditor (B) The client (C) The audit
assistants (D) Auditor & his assistants Ans. : (D) Auditor & his assistants.
42) Interim audit refers to – (A) Examination of accounts continuously (B) Examination
of accounts intermittently (C) Audit work to find out & check interim profits of a
company (D) Carrying on audit for bonus purposes at the end of year Ans. : (C) Audit
work to find out & check interim profits of a company .
43) A company auditor should see that the dividend is paid – (A) After charging
depreciation (B) Without charging depreciation (C) Out of capital (D) None
of the above. Ans. : (A) After charging depreciation.
44) Errors of omission are – (A) Technical errors (B) Error of principle (C)
Compensating error (D) none of these Ans.: (A) Technical errors.
45) Vouching implies – (A) Inspection of receipts (B) Examination of vouchers to check
authenticity of records (C) Surprise checking of accounting records (D) Examining the
various assets Ans. : (B) Examination of vouchers to check authenticity of records.
46) Undervaluation of stock is – (A) Technical error (B) Compensatory error (C) Error of
principle (D) none of these Ans. : (C) Error of principle.
47) Verification refers to – (A) Examination of journal & ledger (B) Examination of
vouchers related to assets (C) Examining the physical existence & valuation of assets (D)
Calculation of valuation of assets Ans. : (C) Examining the physical existence & valuation
of assets.
48) Valuation of fixed assets is based on the concept – (A) Going concern (B) Money
measurement (C) Dual aspect (D) Cost concept. Ans. : (A) Going concern.
49) “Auditor is not valuer.” This statement was stated in – (A)Kingston Cotton Mill Case
(B) London & General Bank Case (C) Lee VS Neuchatel Co. LTD Case (D) London Oil
Storage Co.LTDCase Ans. :(A)Kingston Cotton Mill Case.
50) Floating assets are valued at – (A) Cost (B) Market price (C) Cost price or market
price whichever is less (D) Cost less than depreciation Ans. : (C) Cost price or market
price whichever is less.
51) Outstanding expenses should be verified with the help of – (A) Cashbook (B) Balance
book (C) Journal proper (D)None of above. Ans. : (C) Journal proper
52) First auditor of the company is appointed by the – (A) Shareholders (B) Central
government (C) Company law board (D) Board of directors Ans. :(D) Board of
directors.
53) The vacancy caused by resignation at a auditor is filled by – (A) Board of directors
(B) At the general meeting of shareholders (C) By the central government (D) By the
company law board Ans. : (B) At the general meeting of shareholders
54) A special auditor is appointed by the – (A) Shareholders (B) Board of directors (C)
Central government (D) CAG Ans. : (C) Central government.
55) A remuneration of a company auditor is fixed by the – (A) Shareholders (B) Board of
directors (C) Central Government (D) Appointing authority Ans. : (D) Appointing
authority.
56) Internal auditor has to submit report to – (A) Shareholders (B) Government (C)
Company law board (D) none of above Ans. : D) none of above.
57) Auditor in general is – (A) Employee of the company (B) Agent of the company (C)
Agent of the shareholders (C) None of the above Ans. : (C) Agent of the shareholders.
58) Shares issued for consideration other than cash should be vouched with help of – (A)
Directors minutes book (B) Shareholders minute’s book (C) Contract with the party
concerned (D) Cash book Ans. : (C) Contract with the party concerned.
59) The term Standard Auditing Practices refers – (A) Auditing techniques adopted by
auditor for collecting & vouching evidences (B) Test checking (C) Standards of auditing
(D) True & fair view Ans. : (A) Auditing techniques adopted by auditor for collecting &
vouching evidences.
60) AAS refers to – (A) Audit evidence (B) Audit Planning (C) Risk assessments
&Internal control (D) Knowledge of business Ans. :(D) Knowledge of business.
61) The panel of Auditors of cooperative society is maintained by – (A) Charted
Accountant (B) Central Government (C) Registrar (D) Shareholders Ans. : (C) Registrar.
62) Banking Regulation Act was passed in the year– (A) 1912 (B) 1949 (C) 1956 (D)
1955. Ans. : (B) 1949.
63) Which of the following statements is not correct regarding removal of first auditor
before expiry of the term? (A) He is removed at general meeting (B) Shareholders are
authorized to do so (C) The approval of central government is required for such removal
(D) The provision for such removal is contained in Section 224 (7) Ans. : (C) The approval
of central government is required for such removal
64) Retiring auditor does not have right to – (A) Make written representations (B) Get
his representation circulated (C) Be heard at the meeting (D) Speak as member of
company Ans. :(A) Make written representations
65) According to Section ___ Special Audit is conducted at the central government (A)
Section 233(A) (B) Section 233(B) (C) Section 242(A) (D) Section 242(B) Ans. : (C)
Section 242(A).
66) Audit of Banks is an example of – (A) Statutory Audit (B) Balance Sheet Audit (C)
Concurrent Audit (D) All of above Ans. : (D) All of above.
67) Auditor of a _____ company does not have right to visit foreign branches of company.
(A) Unlimited Company (B) Manufacturing Company (C) Banking Company (D) Non-
Profit making company Ans. : (B) Manufacturing Company. 68) Cost Audit under Section
233(B) of The Company Act is _____ (A) Voluntary (B) Compulsory (C) Advisable. (D)
Avoidable Ans. : (C) Avoidable.
69) Internal Auditing Standards are issued by the – (A) International Accounting
Standard Board (B) Financial Accounting Standard Board (C) International Audit &
Assurance Standard Board (D) Auditing Practices Board Ans. : (C) International Audit &
Assurance Standard Board
70) Which of the following is not a duty of an auditor? (A) Duty to report company’s
banker (B) Duty to report to the members (C) Duty to sign the audit report (D) Duty to
report on any violation of law Ans. : (A) Duty to report company’s banker.
71) The main object of vouching is : (A) To prepare trial balance. (B) Conduct routine
checking. (C) Verify authenticity & authority of transactions. (D) Checking of vouchers.
Ans. : (C) Verify authenticity & authority of transactions
72) Valuation is the basis of : (A) Verification. (B) Marketing. (C) Internal checking. (D)
Vouching. Ans. : (A) Verification
73) The first auditor or auditors are appointed by : (A) Central Government. (B)
Company Law Board. (C) Board of Directors. (D) Shareholders. Ans.: (C) Board Of
Directors
74) Voucher relates to: (A) Cash receipt. (B) Cash payment. (C) Credit transactions. (D)
All the above. Ans. : All of the above.
75) Internal auditor is appointed by : (A) The management. (B) The shareholders. (C)
The government. (D) The statutory body. Ans. : (A) The management
76) Auditing begins where -------- ends. (A) Selling. (B) Inventory valuation. (C)
Accounting. (D) Purchases. Ans. : (C) Accounting
77) The work of one clerk is automatically check by another clerk is called : (A) Internal
control. (B) Internal check. (C) Internal audit. (D) None of the above. Ans. : (B) Internal
Check
78) The owners of the company are called: (A) Debenture holders. (B) Debtors. (C)
Shareholders. (D) None of the above. Ans.: (C) Shareholders
79) An auditor is like a : (A) Watchman. (B) Foolish dog. (C) Mad dog. (D) Watch dog.
Ans.: (D) Watch dog
80) A company auditor can be removed by : (A) Board of directors. (B) Managing director.
(C) Any director. (D) General Meeting. Ans. : (D) General Meeting
81) This kind of audit is generally conducted between two annual audits. (A) Internal
audit (B) Interim audit (C) Final audit (D) Continuous audit Ans.: (B) Interim audit.
82) Before the work of audit is commenced, the auditor plans out the whole of audit
work is known as – (A) Audit plan (B) Audit note (C) Audit risk (D) Audit program Ans. :
(D) Audit program.
83) Internal auditor is appointed by – (A) The management (B) The shareholders (C)
The government (D) statutory body Ans. : (A) The management.
84) The audit that is made compulsory under the statute is called – (A) Statuary audit (B)
Partial audit (C) Complete audit (D) Continues audit Ans. : (A) Statuary audit.
85) Who among the following can be appointed as the auditor of company? (A) A
partner or the director of the company (B) A person of unsound mind (C) Mr. ‘Y’ who
owes Rs.500 to company (D) Mr. ‘Z’ who holds the ‘CA’ Certificate Ans. : Mr. ‘Z’ who holds
the ‘CA’ Certificate.
86) ___ is documentary evidence by which the accuracy in the books of accounts may be
proved. (A) Cheque (B) Receipt (C) Voucher (D) Statement Ans. : (C) Voucher.
87) Sale of Rs.50,000 to ‘A’ was entered as a sale to ‘B’. This is an example of – (A) Error of
omission (B) Error of commission ( C) Compensating error (D) Error of Principle.
Ans. : (B) Error of commission.
88) In comparison to the independent auditor an internal auditor is more likely to be
concerned with – (A) Cost accountancy system (B) Internal control system (C) Legal
compliance D) Accounting system Ans. : (B) Internal control system.
89) The audit program is prepared by – (A) The auditor (B) The client (C) The audit
assistants (D) Auditor & his assistants Ans. : (D) Auditor & his assistants.
90) Interim audit refers to – (A) Examination of accounts continuously (B) Examination
of accounts intermittently (C) Audit work to find out & check interim profits of a
company (D) Carrying on audit for bonus purposes at the end of year Ans. : (C) Audit
work to find out & check interim profits of a company .
91) A company auditor should see that the dividend is paid – (A) After charging
depreciation (B) Without charging depreciation (C) Out of capital (D) None
of the above. Ans. : (A) After charging depreciation.
92) Errors of omission are – (A) Technical errors (B) Error of principle (C)
Compensating error (D) None of these Ans.: (A) Technical errors.
93) Vouching implies – (A) Inspection of receipts (B) Examination of vouchers to check
authenticity of records (C) Surprise checking of accounting records (D) Examining the
various assets Ans. : (B) Examination of vouchers to check authenticity of records.
94) Undervaluation of stock is – (A) Technical error (B) Compensatory error (C) Error of
principle (D) none of these Ans. : (C) Error of principle.
95) Verification refers to – (A) Examination of journal & ledger (B) Examination of
vouchers related to assets (C) Examining the physical existence & valuation of assets (D)
Calculation of valuation of assets Ans. : (C) Examining the physical existence & valuation
of assets.
96) Valuation of fixed assets is based on the concept – (A) Going concern (B) Money
measurement (C) Dual aspect (D) Cost concept. Ans. : (A) Going concern.
97) “Auditor is not valuer.” This statement was stated in – (A)Kingston Cotton Mill Case
(B) London & General Bank Case (C) Lee VS Neuchatel Co. LTD Case (D) London Oil
Storage Co.LTD Case Ans. : (A)Kingston Cotton Mill Case.
98) Floating assets are valued at – (A) Cost (B) Market price (C) Cost price or market
price whichever is less (D) Cost less than depreciation Ans. : (C) Cost price or market
price whichever is less.
99) Outstanding expenses should be verified with the help of – (A) Cashbook (B) Balance
book (C) Journal proper (D) None of above. Ans. : (C) Journal proper
100) First auditor of the company is appointed by the – (A) Shareholders (B) Central
government (C) Company law board (D) Board of directors Ans. : (D) Board of
directors.
101) Thevacancy caused by resignation of an auditor is filled by – (A) Board of directors
(B) At the general meeting of shareholders (C) By the central government (D) By the
company law board Ans. : (B) At the general meeting of shareholders
102) A special auditor is appointed by the – (A) Shareholders (B) Board of directors (C)
Central government (D) CAG Ans. : (C) Central government.
103) A remuneration of a company auditor is fixed by the – (A) Shareholders (B) Board
of directors (C) Central Government (D) Appointing authority Ans. : (D)
Appointing authority.
104) Internal auditor has to submit report to – (A) Shareholders (B) Government (C)
Company law board (D) None of above Ans. : D) none of above. 105) Auditor in general is
– (A) Employee of the company (B) Agent of the company (C) Agent of the shareholders
(D) None of the above Ans. : (C) Agent of the shareholders.
106) Shares issued for consideration other than cash should be vouched with help of –
(A) Directors minutes book (B) Shareholders minute’s book (C) Contract with the party
concerned (D) Cash book Ans. : (C) Contract with the party concerned.
107) The term Standard Auditing Practices refers – (A) Auditing techniques adopted by
auditor for collecting & vouching evidences (B) Test checking (C) Standards of auditing
(D) True & fair view Ans. : (A) Auditing techniques adopted by auditor for collecting &
vouching evidences.
108) AAS refers to – (A) Audit evidence (B) Audit Planning (C) Risk assessments
&Internal control (D) Knowledge of business Ans. : (D) Knowledge of business .
109) The panel of Auditors of cooperative society is maintained by – (A) Charted
Accountant (B) Central Government (C) Registrar (D) Shareholders
Ans. : (C) Registrar.
Accounting MCQ
1. Accounting is the of monetary transactions.
(a) recording (b) verification (c) tallying (d) all of them
Ans. d

2. Accounting is concerned with transactions involving .

(a) money (b) no money (c) movement of humans (d) none of them
Ans. a

3. Accounting transactions relate to .

(a) income/expense (b) asset/liability (c) inventory (d) all of them
Ans. d

4. Form used to record accounting transactions contains columns.

(a) 3 (b) 5 (c) 8 (d) 11
Ans. c

5. First 4 columns of account sheet are used for recording .

(a) credit (b) debit (c) income (d) expense
Ans. b

6. Columns 5 to 8 of account sheet are used for recording .

(a) credit (b) debit (c) income (d) expense
Ans. a

7. First column of debit/ credit form is used to record of transaction.

(a) date (b) particulars (c) Journal Folio (d) amount
Ans. a

8. Second column of debit/ credit transaction is used to record of transaction.

(a) date (b) particulars (c) Journal Folio (d) amount
Ans. b

9. Third column of debit/ credit form is used to record of transaction.

(a) date (b) particulars (c) Journal Folio (d) amount
Ans. c

10. Fourth column of debit/ credit form is used to record of transaction.

(a) date (b) particulars (c) Journal Folio (d) amount
Ans. d

11. The method of recording debit and credit sides separated by a line is nicknamed
accounting.
(a) T (b) U (c) V (d) W
Ans. a

12. Accounting system which considers assets, liabilities, revenue and expense is called
method of accounting.
(a) British (b) American
(c) Indian (d) none of them
Ans. b
13. Accounting system which considers personal account, real account and nominal account is
called method of accounting.
(a) British (b) American (c) Indian (d) none of them
Ans. a

14. Recording of debits and credits of individuals, bank accounts or other business sources is
called account.
(a) real (b) nominal (c) personal (d) none of them
Ans. c

15. Recording of debits and credits related to movable assets, immovable assets, inventory (stock
needed for production) is called account.
(a) real (b) nominal (c) personal (d) none of them
Ans. a

16. Recording of debits and credits related to income, expense, Inflow of money and outflow of
money is called account.
(a) real (b) nominal (c) personal (d) none of them
Ans. b

17. concept in accounting considers the business and its owner are different entities.
(a) Business entity (b) Money measurement (c) Going concern (d) Dual aspect
Ans. a

18. concept in accounting considers that only transactions involving money should be
recorded.
(a) Business entity (b) Money measurement
(c) Going concern (d) Dual aspect
Ans. b

19. concept in accounting considers that the business is a perpetual entity.

(a) Business entity (b) Money measurement
(c) Going concern (d) Dual aspect
Ans. c

20. concept in accounting considers that each debit has a corresponding credit.
(a) Business entity (b) Money measurement
(c) Going concern (d) Dual aspect
Ans. d

21. concept in accounting considers that only the actual cost of transaction should be
recorded (not the market value of the transaction).
(a) Cost (b) Accounting period
(c) Matching cost (d) Accrual
Ans. a

22. concept in accounting considers that cost of manufacture should be matched against
the proceeds of sales.
(a) Cost
(b) Accounting period
(c) Matching cost
(d) Accrual
Ans. c
23. concept in accounting considers that an account should be closed on a periodic basis
and reopened .
(a) Cost (b) Accounting period
(c) Matching cost (d) Accrual
Ans. b

24. concept in accounting considers that revenue is recorded on the date of transaction
itself but expenditure is recorded only on the date of outlow of money (not the date of transaction,
like encashing a cheque).
(a) Cost (b) Accounting period
(c) Matching cost (d) Accrual
Ans. d

25. concept in accounting considers that each transaction should be supported by

evidence.
(a) Objective evidence (b) Accounting period
(c) Matching cost (d) Accrual
Ans. a

26. account debits the receiver and credits the giver.

(a) personal (b) real (c) nominal (d) none of them
Ans. a

27. account debits the incoming asset and credits the outgoing asset.
(a) personal (b) real (c) nominal (d) none of them
Ans. b

28. account debits expense and credits the income.

(a) personal (b) real (c) nominal (d) none of them
Ans. c

29. denotes increase in money.

(a) Accrual basis (b) Asset (c) Credit (d) Debit
Ans. c

30. considers incoming money to be instantly available and reduction of cash to occur only
on the date of actual outflow of money (instead of the date of transaction).
(a) Accrual basis (b) Asset (c) Credit (d) Debit
Ans. a

31. denotes movable or immovable property and inventory.

(a) Accrual basis (b) Asset (c) Credit (d) Debit
Ans. b

32. considers that each debit has a corresponding credit.

(a) Double entry accounting (b) Expense
(c) Income or revenue (d) Debit
Ans. a

33. The evidence/ proof of a financial transaction is called .

(a) amount (b) particulars
(c) date (d) voucher
Ans. d
34. is a format for recording financial transactions.
(a) amount (b) particulars (c) date (d) voucher
Ans. d

35. Voucher has sides.

(a) 2 (b) 3 (c) 5 (d) 7
Ans. a

36. The left side of a voucher is meant for entries.

(a) rough (b) unrelated (c) credit (d) debit
Ans. d

37. The right side of a voucher is meant for entries.

(a) rough (b) unrelated (c) credit (d) debit
Ans. c

38. voucher changes inventory position.

(a) Accounting (b) Inventory (c) Cash (d) Contra
Ans. b

39. voucher changes monetary position.

(a) Accounting (b) Inventory (c) Contra (d) none of them
Ans. a

40. voucher transfers money from one deposit/loan account to another.

(a) Accounting (b) Inventory (c) Contra (d) none of them
Ans. c

41. Vouchers are before posting them in ledgers.

(a) torn off (b) thrown aside (c) discarded (d) journalized
Ans. d

42. Transferring voucher entries to a ledger is called in ledger.

(a) tearing (b) posting (c) erasing (d) removing
Ans. b

43. Journal entries carry the name of in which the transaction is to be posted.
(a) account (b) voucher (c) journal (d) ledger
Ans. d

44. The process of entering finalized financial transaction in a ledger is called .

(a) posting (b) tearing (c) erasing (d) removing
Ans. a

45. Each ledger belongs to a specific .

(a) voucher (b) journal
(c) account group (d) inventory
Ans. c

46. A journal entry from the debit side is entered in side of ledger.
(a) debit (b) credit
(c) centre (d) margin
Ans. a
47. A journal entry from the credit side is enteredin side of ledger.
(a) debit (b) credit (c) centre (d) margin
Ans. b

48. The statement which shows the totaldebits and liabilities on the left side andcredits and assets
on the right side iscalled .
(a) balance sheet (b) trading account
(c) profit and loss account (d) cash account
Ans. a

49. To finalize a balance sheet isprepared with the aim of making corrections.
(a) profit and loss account (b) Stock & Inventory
(c) trial balance (d) cash flow account
Ans. c

50. Balance sheet and profit & loss accountsare prepared according to schedule of
Companies Act.
(a) I (b) III (c) IV (d) VI
Ans. d

51. Bank withdrawal, receipt of cash from investor, proceeds of sale, etc. are entered in
side of cash book.
(a) top (b) margin (c) debit (d) credit
Ans. c

52. Salary payment, rent payment, phone bill, electricity bill, etc. are entered in side of
cash book.
(a) top (b) margin (c) debit (d) credit
Ans. d

53. The reduction in value of an asset with passage of time is called .

(a) appreciation (b) depreciation (c) escalation (d) inflation
Ans. b

54. The initial cost of an asset is called .

(a) asset value (b) book value (c) salvage value (d) lifespan
Ans. a

55. The present cost of an asset after allowing for depreciation is called .
(a) asset value (b) book value (c) salvage value (d) lifespan
Ans. b

56. The amount of money obtainable through the disposal of an asset after useful lifespan is
called .
(a) asset value (b) book value (c) salvage value (d) lifespan
Ans. c

57. The duration of useful service period of an asset is called .

(a) asset value
(b) book value
(c) salvage value
(d) lifespan
Ans. d
58. At the end of every year, the book value of an asset is recorded after allowing reduction
for .
(a) asset value (b) book value (c) salvage value (d) depreciation
Ans. d

59. The safe stock level at which placing fresh order will just allow fresh stock to reach before old
stock depletes is called level.
(a) stock (b) cash (c) account (d) reorder
Ans. d

60. Storing more stock than necessary for production/ sale, thus reducing cash availability is
called level.
(a) stock (b) overstocking (c) understocking (d) reorder
Ans. b

61. Storing very low reserve stock resulting in disruption of production/sale is called level.
(a) stock (b) overstocking (c) understocking (d) reorder
Ans. c

62. The difference between sales value and purchase value of a product is called .
(a) value addition (b) rate (c) cost (d) sales
Ans. a

63. Inflow and outflow of money in a business is called flow.

(a) stock (b) cash (c) rate (d) VAT
Ans. b

64. Which of the following does not describe accounting?

a) Language of business
b) Useful for decision making
c) Is an end rather than a mean to an end?
d) financial accounting and accounting systems
Ans. c

65. The two most common specialized fields of accounting in practice are?
a) Environmental accounting and financial accounting
b) Managerial accounting and financial accounting
c) Managerial accounting and tax accounting
d) Financial accounting and accounting systems
Ans. b

66. Which of the following user groups required the most detailed financial information?
a) Lenders b) Investor and potential investors
c) Government agencies d) The management
Ans. d

67. Which one of the following statement completely and correctly describes accounting?
a) Recording, classifying and summarizing economic activities in systematic way
b) Recording, classifying and summarizing all activities in useful manner
c) Accounting is the systematic process of recording social activities only
d) Recording, classifying and summarizing economic activities in informal manner
Ans. a
68. Which of the following provides information about the financial information’s, obligations and
activities on the economic entity that is intended for use primarily by external decision makers?
a) Management accounting b) Financial accounting
c) Tax accounting d) Environmental accounting
Ans. b

69. Which of the following statement is true about purpose of accounting?

a) The purpose of accounting provide information to manager
b) Accounting purpose gives quantitative information to economic decision makers
c) Provision of base for decision making is purpose of accounting
d) All of the above statement are true regarding purpose of accounting
Ans. d

70. External reporting is the result of?

a) Financial accounting b) Management accounting
c) Cost accounting d) Social accounting
Ans. a

71. How many approaches accounting has?

a) One b) Two c) Three d) None
Ans. b

72. To understand and use accounting information in making economic decisions, you must
understand?
a) The nature of economic activities that accounting information describes
b) The assumptions and measurement techniques involved in developing accounting information
c) Which information is relevant for a particular type of decision that is being made?
d) All of Above
Ans. d

73. The controller’s responsibilities are primarily in nature, while the treasurer’s responsibilities are
primarily related to?
a) Operational; Financial accounting b) Accounting: Financial management
c) Financial management; Operations d) Financial management; Accounting
Ans. b

74. The outcome of financial accounting is to?

a) Record all transactions in the books of accounts
b) Provide management with detailed analyses of costs
c) Present the financial results to the organization by means of recognized financial statements
d) Calculate profit
Ans. c

75. Internal users of accounting information include all of the following except?
a) store manager b) Creditor c) Chief executive officer d) Chief financial officer
Ans. b

76. Accounting is an information and measurement system that does all of the following except?
a) Analyze transactions
b) Handle routine book –keeping tasks
c) Structure information
d) Recording social activities
Ans. d
77. External users of accounting information include all of the following except?
a) Investors b) Labor union c) Line manager d) General Public
Ans. c

78. Which of the following groups use financial accounting information?

a) Management, employees, shareholders and lenders
b) Suppliers, customers and competitors
c) Tax authorities, government and general public
d) All of the above
Ans. d

79. Which of the following persons are most likely to use accounting information?
a) Business owners
b) Lending institutions
c) All of the above
d) None of the above
Ans. c

80. Someone who uses accounting information is?

a) A user b) An external user c) An internal user d) A manager
Ans. a

81. External users include all of the following except?

a) Lenders b) Customers c) Employees d) Officers
Ans. d

82. Which of the following statement is incorrect?

a) Liabilities + Assets = Capital
b) Assets – Liabilities = Capital
c) Liabilities + Capital = Assets
d) Assets – Capital = Liabilities
Ans. a

83. On January 1st, 2009 an entity’s balance sheet showed total assets of Rs. 750 and liabilities of
Rs. 250. Owners’ equity at January 1st was?
a) Rs. 750 b) Rs. 1,000 c) Rs. 500 d) Rs. 250
Ans. c

84. If the assets of a business are Rs. 100,000 and equity is Rs. 20,000, the value of liability will
be?
a) Rs. 100,000 b) Rs. 80,000 c) Rs. 120,000 d) Rs. 20,000
Ans. b

85. Which of the following is not a correct form of the Accounting Equation?
a) Assets = claims b) Assets = Liabilities + Owner Equity
c) Assets – Liabilities = Owner’s Equity d) Assets + Owner’s Equity = Liabilities
Ans. d

86. Find out value of receivable from following Cash Rs. 48,000 account payable Rs. 33,000 office
equipment Rs. 21,000 owner equity Rs. 77,000?
a) Rs. 21,000 b) Rs. 41,000 c) Rs. 110,000 d) Rs. 15,000
Ans. b
87. During a reporting period, a company’s assets increase by Rs. 80,000,000. Liabilities decrease
by Rs. 20,000,000. Equity must therefore?
a) Decrease by Rs. 100,000,000
b) Increase by Rs. 100,000,000
c) Decrease by Rs. 60,00,000
d) Increase by Rs. 60,000,000
Ans. b

89. Which one of the following equations correctly expresses the relationship between assets
(A), liabilities
(L), revenues
(R), expenses
(E), and capital
(C), ?
a) A= L+ R+E + C b) A = C + L + (R-E)
c) A = C – (R-E) + L d) A = (L –C) + (R – E)
Ans. b

90. The liabilities of a business are Rs. 30,000; the capital of the proprietor is Rs. 70,000. The total
assets are?
a) Rs. 70,000 b) Rs. 30,000 c) Rs. 40,000 d) None
Ans. d

91. Which of the following account is affected from the drawings of cash in sole- proprietorship
business?
a) Shareholder b) Capital account c) Liability account d) Expense account
Ans. b

92. Mr. “A” borrowed money from bank; this transaction involves which one of the following
accounts?
a) Cash & Bank Loan b) Bank & Debtors c) Drawing & Cash d) Cash & Bank
Ans. a

93. Which of the following accounts will be used in equation, if the goods are sold on credit to Mr.
Mahmood?
a) Cash account and Owner’s equity
b) Account Receivable and owner’s equity
c) Cash and account receivable
d) Account Payable and owner’s Equity
Ans. b

94. The favorable balance of profit and loss account should be?
a) Added in liabilities
b) Subtracted from current assets
c) Subtracted from liabilities
d) Added in capital
Ans. d

95. Double entry bookkeeping means that?

a) Entry in two sets of accounting books
b) Entry at two dates
c) Entry for two aspects of transaction
d) All of these
Ans. c
96. The basic sequence in the accounting process can best be described as?
a) Transaction, journal entry, source document, ledger account, trial balance
b) Source document, transaction, ledger account, journal entry, trial balance
c) Transaction, source document, journal entry, ledger account, trial balance
d) Transaction, source document, trial balance, ledger account
Ans. c

97. Revenue is generally recognized being earned at the point of time when?
a) Cash is received b) Billed to customers
c) Production is completed d) Goods are delivered
Ans. b

99. The accounting system, in which accounting entries are made on the basis of amount having
become due for payment or receipt, is known as?
a) Cash system of accounting b) Current accounting period
c) Accrual system of accounting d) None of the given option
Ans. c

100. Bookkeeping is mainly concerned with?

a) Recording the Economic Activities
b) Interpreting the data
c) Designing the systems for recording, classifying and summarizing
d) All of Above
Ans. a

101. The document relating to purchase of asset must be authorized by?

a) Senior management b) Middle management
c) Lower level management d) None
Ans. a

102. Accrual basis of accounting?

a) Result in higher income than Cash-basis of accounting?
b) Is not acceptable under GAAP
c) Leads to the reporting of more complete information than does cash- basis
d) None of the Above
Ans. c

103. Bill payable book is a ?

a) journal b) Principle book c) Ledger d) Memorandum book
Ans. a

104. The return of goods by a customer should be debited to?

a) return outward b) Return inward account
c) Goods account d) Accounts receivable
Ans. b

105. An alternative name for a sales journal is?

a) Sales invoice b) Sales ledger c) Daily sales d) sales day book
Ans. d

106. Which of the following is not a book of prime or original entry?

a) Sales daybook b) Purchase daybook c) Debtor’s account d) Cashbook
Ans. c
107. There are two books of account they are ?
a) journal& ledger b) Journal & trial balance c) Trial balance & ledger d) none of these
Ans. a

108. X sends back Rs. 80 of faulty goods to Y. In which book of prime entry would Y record this
transaction?
a) General journal b) Purchase Return journal c) Sales Journal d) Sales Return Journal
Ans. d

109. A bookkeeper discovers that an amount paid to a supplier has been wrongly entered in
another supplier’s account. Which book of original entry will the bookkeeper use when correcting
this error?
a) Cash book b) General Journal c) Purchase day book d) Sales day book
Ans. b

110. Which of the followings are books of prime entry?

a) Sales day book and trial balance
b) Petty cash book and accounts receivable ledger
c) Petty cash book and journal
d) Cash book and assets register
Ans. c

111. Corrected the balance in the prepaid insurance at the end of the month in?
a) Cash payments journal b) General journal
c) Cash Receipts journal d) Purchases journal
Ans. b

112. Record goods return inward?

a) Debit sale account and credit payable account
b) Debit returns inward account and credit payable account
c) Debit returns inward account and credit receivable account
d) Debit Receivables account and credit return inward account
Ans. c

113. If a company used special journals, purchase of supplies on account should be recorded in
which journal?
a) Cash receipts journal b) Purchases journal
c) cash disbursements journal d) General journal

114. Which of the following is the correct journal entry to record a credit note issued to a customer
for goods returned?
a) Debit sales returns and credit cash
b) Debit cash and credit sales returns
c) Debit Trade receivable and credit sales returns
d) Debit sales returns and credit trade receivables
Ans. d

115. Adjustment is to record depreciation at the end of the month in?

a) Cash Payments journal
b) Cash Receipts Journal
c) General Journal
d) Purchase journal
Ans. c
116. Mr. Ali buys goods on credit from star Co. but finds that some of them are faulty. What
document would Mr. Ali return to star co. with the faulty goods?
a) Statement b) Debit note c) Sales Invoice d) Purchase invoice
Ans. b

117. Which of the following book (s) is (are) a part of journal?

a) cash book b) Purchase return book c) Purchase Book d) All of the given option
Ans. d

118. If a company uses special journals, credit sales should be recorded in which journal?
a) General journal b) Purchases journal
c) Sales journal d) Cash receipts journal
Ans. c

119. If a company uses special journals, purchase of a building financed by a mortgage payable
should be recorded in which journal?
a) sales journal b) general journal c) Cash receipts journal d) purchases journal
Ans. b

120. Cash book is a?

a) voucher b) general journal c) general ledger d) dual book
Ans. d

1. Accounting transactions relate to .

(a) income/expense (b) asset/liability
(c) inventory (d) all of them

2. is a record of all monetary transactions.

(a) Accrual basis (b) Asset (c) Credit (d) Account

3. considers outflow of money for the inflow of goods/ services.

(a) Double entry accounting (b) Expense
(c) Income or revenue (d) Debit

4. considers inflow of money to the business due to sales.

(a) Double entry accounting (b) Expense
(c) Income or revenue (d) Debit

5. Final accounts are prepared at .

(a) beginning of financial year
(b) beginning of each working day
(c) end of each working day
(d) end of accounting period (financial year/ quarter/ month)

6. is an important accounts prepared at the end of accounting period.

(a) Balance sheet (b) Profit and Loss account
(c) Trading account (d) all of them

7. All inflow and outflow of money is recorded in .

(a) cash book
(b) inventory ledger
(c) purchase ledger
(d) sales ledger
8. Purchase, storage and disposal of stock is options
called
18. Which of the following document is
management. prepared for documentary evidence by
(a) stock (b) cash (c) account business?
(d) reorder a) Invoice b) Voucher c) Receipt
d) All of these
9. VAT stands for in taxation.
(a) Value Added Tax (b) Value Amount 19. Transactions are initially recorded in the?
Tax a) Book of prime entry b) Book of original
(c) Visual Added Tax (d) Value Asset Tax entry c) Journal
d) All of these
10. Movement of money into and out of a
business is called 20. Receipt of cash from sale of office
equipment recorded in ?
flow. a) Cash Payments journal b) Cash
(a) stock (b) cash (c) rate (d) Receipts journal
VAT c) Purchases journal d) General
journal
11. Inflow of money the strength of business.
(a) increases (b) decreases (c)
does not affect (d) none of them

12. Outflow of money the strength of

business.
(a) increases (b) decreases (c)
does not affect (d) none of them

13. Money held in the form of account balance

and cash is generally called

.
(a) fund (b) liquid money (c) voucher
(d) journal

14. Inflow and outflow of funds in the form of

currency and account balance is called

.
(a) stock flow (b) ledger (c)
voucher (d) fund flow

15. AAA stands for?

a) American accounting agency b)
American accounting association
c) Asian accounting association d)
Australian accounting association

16. Accounting is the language of ?

a) Proprietor b) School c)
Business d) Management

17. The accounting equation should

remain in balance because every
transaction affects how many accounts?
a) Only one b) only two c) Two
or more d) All of given