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question bank for Basic Accounting - V Sem Open Course
1. The prime function of accounting is to
(a) record economic data
(b) provide the informational basis for action
(c) classifying and recording business transactions
(d) attain non-economic goals.
2. The basic function of financial accounting is to
(a) record all business transactions
(b) interpret financial data
(c) assist the management in performing functions,
(d) none of the above.
3. A person who brings capital in the business is called
(a) debtor
(b) creditor
(c) proprietor
(d) none of the above.
4. A person who owes money to the firm is known as
(a) debtor
(b) creditor
(c) supplier
(d) none of the above
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5. Accounting principles are generally based on
(a) objectivity
(b) subjectivity
(c) convenience and personal interpretation
(d) none of the above.
6.The policy ‘anticipate the profit and provide for all possible losses’ arises
due to
(a) convention of consistency (b) convention of conservatism
(c) convention of full disclosure (d) convention of materiality.
7. Revenue is generally recognized as being earned at the point of time
(a) sale is made and ownership of goods transferred
(b) cash is received
(c) production is completed
(d) sales are effected or cash is received, whichever is earlier.
8. The system of recording transactions based on dual aspect is called
(a) dual account system (b) double entry system
(c) cash accounting (d) single entry system.
9. According to which of the following accounting concept even the
proprietor of business treated as a creditor of the business to the extent of
his capital
(a) money measurement concept (b) dual entry concept
(c) going concern concept (d) separate entity concept.
10. According to going concern concept, a business is viewed as having
(a) a limited life
(b) going to be liquidated after 100 years
(c) an indefinite life
(d) none of the above.
11. According to concept of conservatism, stock in trade is valued at
(a) cost price
(b) market price
(c) cost price or market price whichever is less
(d) cost price or market price whichever is higher.
12. Recording of capital contributed by the owner as liability ensures
adherence to the principle of
(a) double entry (b) going concern
(c) separate entity (d) materiality.
13. The basic concepts related to balance sheet are
(a) cost concept (b) business entity concept
(c) accounting period concept (d) all of the above.
14.The double entry concept is that
(a) assets + liabilities = capital
(b) capital – liability = asset
(c) capital = assets – liabilities
(d) none of the above.
15. Only the events that affect the business must be recorded, as per the
principle of
(a) separate entity (b) accrual
(c) materiality (d) none of the above.
16.The accounting measurement that is not consistent with the going
concern concept is
(a) historical concept (b) realization
(c) transaction approach (d) liquidation value.
17. Accounting does not record non-financial transactions because of the
concept of
(a) entity (b) cost
(c) accrual (d) measurement.
18. Fixed assets and current assets are categorized as per the concept of
(a) separate entity (b) going concern
(c) time period (d) consistency.
19. If the total assets of the firm are Rs. 1,00,000, outside liabilities are Rs.
40,000, the capital contributed by the owner is
(a) Rs. 1,00,000 (b) Rs. 40,000
(c) Rs. 20,000 (d) Rs. 60,000.
20. A business owes money to
(a) debtors (b) creditors
(c) investors (d) shareholders
21. Creditors account is a
(a) Personal account (b) Real account
(c) Nominal account (d) None of the above.
22. Which of the following accounts is not a real account
(a) Building account (b) Bank account
(c) Closing stock account (d) Goodwill account.
23. Which of the following is a real account?
(a) Drawings account (b) Outstanding rent account
(c) Bank account (d) Closing stock account.
24.Which of the following is a nominal account?
(a) Drawings account (b) Outstanding interest account
(c) Salary account (d) Machinery account.
25. Sale of goods to Rani for cash shall be debited to
(a) Rani account (b) Cash account
(c) Sales account (d) None of these
26. Cash account normally has
(a) Debit balance or credit balance (b) Credit balance
(c) Debit balance (d) None of these
27. Entries in the journal are made with the help of
(a) Cash book (b) Ledger
(c) Memorandum book (d) None of these
28. Account to be debited by the proprietor of business for purchasing
furniture for his private use for cash from Furniture House will be
(a) Purchase account (b) Furniture account
(c) Drawing account (d) Furniture House account
29. Ledger is a set of
(a) Balance (b) Accounts
(c) Rules (d) None of these
30. Purchase book records
(a) All purchases of goods (b) All cash purchases of goods
(c) All credit purchases of goods (d) None of these
31. Purchase journal is a job division of
(a) Journal (b) Ledger
(c) Balance sheet (d) None of these
32. Sale of old furniture will be recorded in
(a) Purchase journal (b) Sales journal
(c) Journal proper (d) nowhere
33. Cash book is
(a) Principal book (b) Subsidiary book
(c) Both (a) and (b), (d) None of these
34. Contra entries are related to
(a) Cash (b) Bank
(c) Both cash and bank (d) None of these
35. Cash discount is recorded in
(a) Journal proper (b) Purchase Journal
(c) Sales account (d) Cash book
36. Trial balance is
(a) Account (b) A statement
(c) Both (a) and (b), (d) None of these
37. Trial balance is prepared from
(a) Journal (b) Ledger
(c) Cash book (d) None of these
38. When a firm maintains a cash book, it need not maintain
(a) Sales journal (b) Purchase journal
(c) General journal (d) Cash account in the ledger
39. The credit balance of bank account indicates
(a) Balance in bank (b) Amount payable by the bank
(c) Amount payable to the bank (d) None of these
40. The debit balance in a nominal account shows
a) Gains (b) Expenses
(c) Assets (d) None of these
41. The amount brought in by the proprietor in the business shall be
credited to
(a) Cash account (b) Capital account
(c) Drawings account (d) None of these
42. The return of goods by a customer should be debited to
(a) Customer account (b) Return inward account
(c) Returns outward account (d) Goods account
43. The amount of salary paid to Madhu should be debited to
(a) Madhu (b) Cash account
(c) Salary account (d) None of these
44. The rent paid to the landlord should be credited to
(a) Rent account (b) Landlord account
(c) Cash account (d) None of these
45. The cash discount allowed to a debtor should be credited to
(a) Debtor account (b) Discount account
(c) Cash account (d) None of these
46. In case of a debt becoming bad, the amount should be credited to
(a) Bad debt account (b) Sales account
(c) debtors account (d) Provision for bad debt account.
47. Payment of LIC premium of the proprietor is debited to
(a) Capital account (b) Drawings account
(c) LIC premium account (d) None of these
48. Classification of accounts is made in
(a) Journal (b) Ledger
(c) Subsidiary book (d) Balance Sheet.
49. ------------- is prepared to find the financial position of business
( a) Trial balance (b) trading account
(c) P/L account (d) Balance Sheet
50. An expenditure is a capital expenditure because
(a) The amount is large
(b) It is intended to benefit the current period
(c) it is intended to benefit the future period
(d) All of these.
51. An expenditure is a revenue expenditure because
(a) The amount is small
(b) It is intended to benefit the current period
(c) It is deducted from the gross sale proceeds
(d) None of these.
52. A receipt is a revenue receipt because
(a) The amount is small
(b) It is received in the accounting year
(c) It related to the routine activity of business,
(d) All of these.
53. A receipt is a capital receipt because
(a) The amount is heavy
(b) It is credited to capital account
(c) It relates to fixed assets
(d) It is received not in the regular course of business.
54. A loss is a capital loss because
(a) it arises due to abnormal reasons
(b) it means withdrawal of capital
(c) It relates to current assets
(d) None of these.
55. A loss is a revenue loss because
(a) It is incurred to reduce the tax liability
(b) It arises due to normal reasons
(c) It relates to current assets
(d) None of these.
56. An expenditure is treated as that of a capital nature, when
(a) the receiver of the amount is going to use it for the purchase of
fixed assets,
(b) it increases the quantity of fixed assets,
(c) it is paid for meeting the normal expenses of the business,
(d) none of these.
57. Rs. 5,000 spent on replacement of worn-out part of the machine will
be charged as
(a) capital expenditure (b) Revenue expenditure
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(c) Deferred revenue expenditure (d) None of these.
58. Which one is revenue expenditure ?
(a) Interest on capital,
(b) Cost of building
(c) installation expenses of mechanic purchased,
(d) price of new car purchased for the M.D.
59. Which one is capital expenditure ?
(a) heavy repairs on used building,
(b) expenses incurred on acquisition of machines,
(c) Purchase of land for factory
(d) all of these
60. Which is deferred revenue expenditure ?
(a) expenditure on specific research and development,
(b) expenses on purchase of patents
(c) legal expenses on purchase of trademarks,
(d) heavy repairs on used mechanize at the time of purchase.

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