Accounting MCQs / Q&A

A. Results of operations for a particular period
B. Financial position during a particular period
C. Profit earning capacity for a particular period
D. Financial position as on a particular date

A. Balance Sheet discloses financial position of the business
B. A person who owes to the business is called Debtor
C. Decrease in the value of the asset could decrease the value of a liability
D. Assets are to be shown in the Balance Sheet at the realizable value
fixed assets are to be shown in the Balance Sheet at their actual cost.

A. On the assets side under current assets
B. On the assets side under loans and advances
C. On the liabilities side under current liabilities
D. On the liabilities side under provisions

A. Sundry Debtors
B. Stock
C. Prepaid insurance
D. All of A. B. and C. above

A. Stock
B. Vehicle
C. Fixed deposit in bank
D. Both A. and C. above

A. Credited to the Profit & Loss Account
B. Debited to the Profit & Loss Account
C. Shown on the liabilities side of the Balance Sheet
D. Shown on the assets side of the Balance Sheet
Unexpired insurance or prepaid insurance must be shown on the assets side of the Balance Sheet, because it is an asset. It cannot be shown on the liabilities side of the Balance Sheet. It cannot be debited to Profit & Loss A/c. Also it cannot be credited to Profit & Loss A/c. Hence D. is true.

A. Profit and Loss Account
B. Balance Sheet
C. Funds Flow Statement
D. Trial Balance
Trial Balance D. is not a financial statement. It is a list of all accounts showing
outstanding balances at the end of the accounting period. It helps in the preparation of financial statements. The Profit and Loss Account A.; Balance Sheet B. and Funds Flow statement C. are the financial statements prepared by a business entity. Funds flow statement though categorized as one of the financial statements, its preparation is not mandatory. Thus D. is the correct answer

A. Drawings
B. Bad debts
C. Accrued expenses
D. Reserve for discount on Sundry Creditors
Profit and Loss Account is an income statement which depicts all incomes/gains and
expenses/losses during an accounting period. Drawings are neither an income nor an expense to be recorded in Profit and Loss Account. Thus A. is the correct answer. The items in other alternatives are either expenses or accrued expenses or probable income of discount on sundry creditors. The depreciation, bad debts and provision for doubtful debts and accrued expenses appear in the Profit and Loss Account and provision for income i.e., provision for discount on sundry creditors. Hence A. is the correct answer.

A. Financial results of the concern for a period
B. Financial position of the concern on a particular date
C. Financial results of the concern on a particular date
D. Cost of goods sold during the period

A profit and Loss Account is prepared for the period ending which shows the financial or
operating results of the concern for a period.

A. Profit & Loss Account is prepared for a certain period and hence it is an interim statement
B. Profit & Loss Account does not disclose the effect of non-financial items
C. Net Profits are ascertained on the basis of current costs
D. Net Profits as disclosed by P&L Account is not absolute