Accounting MCQs / Q&A

A. Credited to P&L A/c
B. Debited to P&L A/c
C. Reduced from debtors in Balance Sheet
D. Added to debtors in Balance Sheet

Bad debts earlier written–off and later recovered is a profit to the firm and hence they
are transferred to Profit & loss Account.

A. P&L A/C is debited with 1,400
B. P&L A/C is debited with 1,200
C. 200 is shown as current asset
D. Both B. and C. above

Adjustments for prepaid subscription fees:
P& L A/c Extract
Total subscription fees paid 1,400
Less: Subscription fees prepaid
Relating to next A/c period 200
Subscription fees 1200
The prepaid subscription fees of ` 200 will be shown as a current asset in the Balance Sheet as it is
an expense relating to the next accounting period but has been paid in the current accounting
period.]

A. Debited to P&L A/c
B. Shown as liability in Balance Sheet
C. Reduced from related asset in Balance Sheet
D. Both A. and C. above

Any item appearing in the Trial Balance will have one effect i.e., depreciation appearing
in the Trial Balance will be debited to the Profit & Loss Account. However, if depreciation is given in the adjustments, it will have double effect i.e., it should be debited to P&L A/c and deducted from the gross fixed asset block in the Balance Sheet also.

A. Current Asset
B. Current Liability
C. Fixed Asset
D. Income

Prepaid insurance is the 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.

A. An Asset in the Balance Sheet
B. A Liability
C. By adjusting it in the P & L A/c
D. Both B. and C. above
Outstanding salaries is the expense relating to the current accounting period but has not
been paid yet and therefore, it is a current liability.

A. Replacement cost – Accumulated Depreciation
B. Historical cost – Salvage Value
C. Historical cost – Depreciation portion thereof
D. Original cost adjusted for general price-level changes

LIFO stands for__________?

A.  Lots in , Few out
B.  Link input, Format Output
C.  Last input, First Output
D.  Last in, First Out

Net sales equals, sales minus:

A. Return outwords
B. Return inwards
C. cost of goods sold
D. carriage on sales

_________is the cost of converting raw material into finished products?

A. Prime cost
B. Explicit cost
C. Job order cost
D. Conversion cost

Short term Assets expected to be converted into cash within 1 year or less than?

A. Current Assets
B. Fixed Assets
C.  Current Assets& current liabilities
D. All of the above