Accounting MCQs / Q&A

A. Gross Profit+ Sales+ Direct expenses+ Purchases+ Closing stock = Opening stock
B. Gross Profit+ Sales+ Direct expenses+ Purchases- Closing stock = Opening Stock
C. Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock = Sales
D. Gross Profit – Opening Stock + Direct expenses + Purchases +Closing stock = Sales

A. Loss on sale of undertaking
B. Debts considered bad and written off
C. Liability arising from a breach of contract
D. Director‘s remuneration

Director‘s remuneration shall not be deducted from net profit while calculating
managerial remuneration

A. Sales – Cost of goods sold
B. Sales – Closing Stock + Purchases
C. Opening Stock + Purchases – Closing Stock
D. None of the above

A. Net Profit = Gross Profit – Administration and Other expenses
B. Net Profit = Gross Profit + Administration expenses and Other expenses
C. Opening Stock + Purchases – Closing Stock = Cost of Sales
D. Both B. and C. above

Net Profit= Gross Profit- Administration and other expenses. Hence option B. is false.
Opening stock+ Purchases-Closing stock= Cost of material consumed not cost of sales.
Option (c ) is false.

A. Replacement cost
B. Current cost
C. Cost to acquire less accumulated amortization
D. Cost less expired portion
Prepaid expenses are the expenses which relate to the unexpired portion of the benefit
of the expense. Hence, these are valued on the Balance Sheet at the cost less expired portion

A. Debit of 800 to Trading Account and credit of 600 and 200 to insurance company and
Profit and Loss Account respectively
B. Deduct the 800 from closing stock in the Trading Account
C. Credit insurance company for 600
D. Debit of 600 and 200 to insurance company and Profit and Loss Account respectively and
credit of 800 to Trading Account

A. Adding 2,200 to closing stock
B. Deducting 1,800 from closing stock and deducting 2,200 each from debtors and sales
C. Adding 1,800 to closing stock and deducting 2,200 each from debtors and sales
D. Deducting 1,800 from debtors

A. Debit P&L A/c and Credit Reserve for Discount on Accounts Payable A/c
B. Debit Accounts Payable A/c and Credit P&L A/c
C. Debit Reserve for Discount on Accounts Payable A/c and Credit P&L A/c
D. Debit Reserve for Discount on Accounts Payable A/c and credit Accounts Payable A/c
The entry will be as follows:
Reserve for Discount on Creditors A/c……………………………………………… Dr.
To Profit & Loss A/c
It will be shown on the credit side as a separate item and will be shown on the Liabilities side by way of deduction from the Sundry Creditors.

i. Depreciation for 2011-2012- 7,000 understated
ii. Accrued expenses as at March 31, 2013 – 10,000 understated
The impact of this on the reported net income for the year ending March 31, 2013 is
A. 7,000 Overstated
B. 10,000 Overstated
C. 17,000 Understated
D. 17,000 Overstated

Net income will be overstated by 10,000 because the accrued expense are
understated. Under/ Overstatement of depreciation of the year 2011-2012 does not affect the net
income of current year i.e., 2012-13.]

A. Add prepaid expenses to respective expenses and show it as an asset
B. Deduct prepaid expenses from respective expenses and show it as an asset
C. Add prepaid expenses to respective expenses and show it as a liability
D. Deduct prepaid expenses from respective expenses and show it as a liability

Prepaid expense is an expense relating to the next accounting period but has been paid
in the current accounting period and hence it is a current asset. The adjustment would be to
deduct it from the respective expense account in the P&L A/c and show it as a current asset in the
Balance Sheet.