100 Solved MCQs of Mgt101 Financial Accounting pdf

100 Solved MCQs of Mgt101 Financial Accounting pdf with Answers for Preparation of MBA, BBA, MCA, BCA, & Competitive Examinations

100 Solved MCQs of Mgt101 Financial Accounting

1. The success of the business depends on factors.
a. Land
b. Labor and capital
c. Management
d. All of the above
Answer: (d)

2. ___ States that “anticipate no profits but provide for all possible losses.”
a. The Realization concept
b. Concept of prudence
c. Both a & b
d. The Accrual concept
Answer: (b)

3. Luca Fra Pacioli, ___ mathematician.
a. An Italian
b. An Indian
c. An American
d. None of the above
Answer: (c)

4. A voucher can be of
a. Two types
b. Three types
c. Four types
d. Six types
Answer: (b)

5. There are ___ elements of profit and loss accounts.
a. Two
b. Three
c. Four
d. Five
Answer: (a)

6. The term Credit is derived from
a. French word
b. Greek word
c. Latin word
d. None of the above
Answer: (c)

7. ___ is the residual interest of owners in assets over liabilities.
a. Expenses
b. Income
c. Equity
d. None of the above
Answer: (d)

8. ___ records goods returned to the supplier(s).
a. Salas daybook
b. Purchase daybook
c. Returns Inward book
d. Return outward book
Answer: (d)

9. ___ records credit sale of traded goods.
a. Purchase daybook
b. Sales daybook
c. Cashbook
d. None of the above
Answer: (b)

10. ___ of the cash book is not balanced
a. Discount column
b. Bank
c. Cash
d. All of the above
Answer: (a)

11. There are ___ types of primary books.
a. Two
b. Four
c. Six
d. Eight
Answer: (a)

12. The suffix “c/d” denotes
a. Carried down
b. Count down
c. Credit or debit
d. None of the above
Answer: (a)

13. Which of the following is a book of secondary entries/
a. Posting
b. Ledger
c. Account
d. None of the above
Answer: (b)

14. The account maintained by the bank for its customer is an
a. Pay-in-slip
b. Passbook
c. Mirror – version
d. None of the above
Answer: (b)

15. The bank reconciliation statement is
a. Not a part of books of accounts
b. A part of books of accounts
c. A part and parcel of books of accounts
d. Both b & c
Answer: (a)

16. ___ gives the details of transactions between the bank and the customer.
a. Reconciliation statement
b. Bank statement
c. Passbook
d. Cashbook
Answer: (a)

17. ___ is not a part of books of account.
a. Trial balance
b. P & L A/c
c. Trading A/c
d. Balance sheet
Answer: (a)

18. Trading account shows
a. Gross profit
b. Net profit
c. Notional profit
d. Both a & b
Answer: (a)

19. Omission of recording a transaction in the primary book is called
a. Error of principle
b. Error of omission
c. Both a & b
d. Error of commission
Answer: (b)

20. ___ shows the position of Assets and Liabilities of a business entity as on a particular date.
a. P & L A/c
b. P & L appropriation A/c
c. Balance sheet
d. Suspense Account
Answer: (c)

21. In India Corporate entities registered as per
a. Companies Act 1948
b. Companies Act 1956
c. Banking Regulation Act 1947
d. None of the above
Answer: (b)

22. Reserve is the part of
a. Profit
b. Dividend
c. Bonus
d. All of the above
Answer: (a)

23. Minute books are maintained as per
a. Sec 143
b. Sec 157
c. Sec 193
d. Sec 307
Answer: (c)

24. The abridged statements shall be audited and approved by the
a. Board of Directors
b. Accountant
c. Finance Manager
d. All of the above
Answer: (a)

25. Historical cost of inventories may be determined by using
a. FIFO
b. LIFO
c. Both a & b
d. Variable Costing Method
Answer: (c)

26. Variable costing is also called
a. Direct costing
b. Absorption costing
c. Both a & b
d. None of the above
Answer: (b)

27. ___ has a residual interest in corporate profits.
a. Debenture Capital
b. Preference Share Capital
c. Equity Share Capital
d. Both a & b
Answer: (c)

28. Statutory books are required to be maintained by a Companies Act.
a. 1932
b. 1948
c. 1949
d. None of the above
Answer: (d)

29. Intangible assets
a. Have physical existence
b. Have no physical existence
c. Which can be seen?
d. None of the above
Answer: (b)

30. The term ‘depreciable assets’ refers to:
a. Tangible assets
b. Tangible fixed assets
c. Intangible assets
d. None of the above
Answer: (b)

31. Prevision for taxation is shown under the head ___ in the Balance Sheet.
a. P & L
b. Reserves
c. Provision
d. All of the above
Answer: (a)

32. All dividends must be paid within ___ days of its declaration.
a. 37
b. 42
c. 48
d. 52
Answer: (a)

33. MODVAT was introduced by incorporating Rules 57A to 57J in the Central Excise Rules ___
a. 1932
b. 1944
c. 1952
d. None of the above
Answer: (d)

34. MODVAT was introduced in the year
a. 1980
b. 1989
c. 1992
d. None of the above
Answer: (d)

35. Which of the following is the distribution of profits to shareholders?
a. Amortization
b. Effective Capital
c. Dividend
d. Provisions
Answer: (c)

36. Capital required to maintain routine operations is called
a. Fixed Capital
b. Working Capital
c. Fixed assets
d. All of the above
Answer: (b)

37. Short term obligations that have to be met within the next twelve months is called
a. Current Assets
b. Working capital
c. Secured loans
d. Current liabilities
Answer: (d)

38. ___ denotes the loss in value on an asset due to wear and tear.
a. Provision of taxation
b. Dividend
c. Depreciation
d. None of the above
Answer: (c)

39. Managerial remuneration is payable to managerial personnel within the overall ceiling prescribed in the section of the Companies Act, ___.
a. 1956
b. 1959
c. 1947
d. 1955
Answer: (a)

40. The Income Tax Act ___
a. 1958
b. 1968
c. 1972
d. 1961
Answer: (d)

41. Expand MAT
a. Modified Annual Tax
b. Minimum Alternative Tax
c. Maximum Annual Tax
d. Maximum Alternative Tax
Answer: (a)

42. An Annual Report comprises
a. Director’s Report
b. Auditor’s Report
c. Annual Account
d. All of the above
Answer: (d)

43. Loans obtained against hypothecation of an asset is called
a. Unsecured Loan
b. Capital
c. Secured Loan
d. All of the above
Answer: (c)

44. ICAI has issued Accounting Standard- 6 (AS-6) on:
a. Material charges
b. Dividend
c. Depreciation Accounting
d. All of the above
Answer: (c)

45. It is a part of the total equity of a company. The holders of these shares enjoy a certain privilege is called
a. Equity Share capital
b. Preference Share capital
c. Capital Structure
d. Leverage
Answer: (a)

46. ‘It’ is an artificial account that appears in the Trial Balance to account for undetected errors. Here ‘It’ stands for:
a. Fixed A/c
b. Reserve A/c
c. Suspense A/c
d. None of the above
Answer: (c)

47. Which of the following is arrived at by deducting the direct cost of goods sold from sales proceeds?
a. Net profit
b. Gross profit
c. Balance Sheet profit
d. All of the above
Answer: (b)

48. Which of the following is a document supporting cheques deposited into the bank?
a. Bank statement
b. Passbook
c. Cashbook
d. Pay-in-slip
Answer: (d)

49. Folio means the page of
a. A Journal
b. A Ledger
c. Both a & b
d. None of the above
Answer: (b)

50. Furniture Account is
a. Real A/c
b. Nominal A/c
c. Personal A/c
d. Representative Personal A/c
Answer: (a)

51. ‘It’ is a control account maintained in the general ledger which records transactions of individual customers’ accounts in a summarized manner. Here ‘It’ stands for
a. General Reserve A/c
b. Sundry Creditors A/c
c. Sundry Debtors A/c
d. Both b & c
Answer: (c)

52. Subsidiary Ledger is classified into
a. Main Ledger and Secondary Books
b. General Ledger: Debtors Ledger, Creditors Ledger
c. Both a & b
d. None of the above
Answer: (b)

53. A ___ Increase in liability, while ___ increase in liability.
a. Debit, Debit
b. Credit, Credit
c. Debit, Credit
d. Credit, Debit
Answer: (b)

54. Return inward = ___, return outward = ___.
a. Sales return, purchase return
b. Purchase return, sales return
c. Purchase return, purchase book
d. None of the above
Answer: (a)

55. ___ is the person who draws the bills of exchange & ___ is the person to whom the payment is to be made.
a. drawer, drawee
b. drawee, payee
c. payee, drawee
d. drawer, the payee.
Answer: (d)

56. 1. Expenses and Losses = Debit
2. Decrease in assets and increase in Liabilities (also equity) = Credit
a. 1-True; 2-True
b. 1-False; 2-False
c. 1-True; 2-False
d. 1-False; 2-True
Answer: (a)

57. 1. The schedules to the Balance Sheet and Profit & Loss A/c contain as many details as possible.
2. Finance charges include lease rentals, bank commission, and bank charges. Etc.
a. 1-True; 2-False
b. 1-False; 2-False
c. 1-True; 2-True
d. 1-False; 2-True
Answer: (c)

58. 1. Double-entry accounting is not followed while recording transactions.
2. The books of accounts are maintained on an accrual basis.
a. 1-True; 2-True
b. 1-False; 2-False
c. 1-True; 2-False
d. 1-False; 2-True
Answer: (d)

59. Journal is used as the book of ___ entry which cannot be recorded in ___.
a. secondary, journal
b. primary, cash book
c. entries, sales book
d. primary, cash book
Answer: (d)

60. In ___ transaction personal account may or may not be involved while in ___
Transaction personal account is definitely involved.
a. General, journal
b. Cash, sales
c. Credit, purchase
d. Cash, credit
Answer: (d)

61. Wealth maximization ignores the time value of money.
a. True
b. False
Answer: (b)

62. Which of the following are the functions of treasures?
a. Taxation and insurance
b. Managing working capital
c. Accounting & auditing
d. All of the above
Answer: (b)

63. (D1 / Pe) + g = ?
a. Kp
b. Ke
c. Kd
d. Kd
Answer: (b)

64. ___ is the influence of power to achieve something.
a. Operating leverage
b. Financial leverage
c. Leverage
d. None of the above
Answer: (c)

65. As per the NOI approach the ___ remains constant for all degrees of leverage.
a. Operating earning
b. Market value
c. Overall capitalization rate
d. Operating income
Answer: (c)

66. Risk may be defined as the variation of actual cash flows from the expected cash flows.
a. True
b. False
Answer: (a)

67. Project invisibility can lead to sub-optimal results when ___ is used for capital retaining.
a. NPV
b. IRR
c. PI
d. ARR
Answer: (c)

68. Cash management is concerned with:
a. Management of cash flows into & out of the firm
b. Cash management with the firm
c. Management of cash balances held by the firm
d. All of the above
Answer: (d)

69. ___ refers to the credit extended by the supplier goods & services in the normal course of business transaction.
a. Cash trade
b. Creditors
c. Trade credit
d. Debtors
Answer: (c)

70. Before dispatching the goods to customers on sale, there is always a time log. The goods manufactured or held for sale cannot be converted into cash immediately. This log is known as ___ log.
a. Sale
b. Storage
c. Creation
d. Time
Answer: (b)

71. An annuity for an infinite time period is ___.
a. Annuity
b. Capital recovery factors
c. Perpetuity
d. Irredeemable
Answer: (c)

72. A company can issue convertible preference shares and not vice-versa.
a. True
b. False
Answer: (a)

73. The Kd is lesser than the coupon rate, the value of the bond is ___ than its face value.
a. Lesser
b. Stable
c. Greater
d. None of the above
Answer: (c)

74. Operating leverage occurs any time a firm has ___ cost.
a. Fixed
b. Variable
c. Semi-variable
d. Mixed
Answer: (a)

75. Profitability Index is also known as ___.
a. Internal profitability ratio
b. Net present worth
c. Benefit-cost ratio
d. Estimated wealth benefit ratio
Answer: (c)

76. Inflation, changes in interest ratio, and changes in economic conditions affect all firms and all industries. These factors are part of ___
a. International risk
b. Project risk
c. Industry risk
d. Market risk
Answer: (d)

77. When a firm imposes constraints on the total size of its capital budget, is known as ___.
a. Capital structure
b. Capita budgeting
c. Capital rationing
d. Capitalization
Answer: (c)

78. Capital-intensive industries with longer manufacturing processes will have ___ requirements of working capital.
a. Higher
b. Moderate
c. Power
d. Extremely low
Answer: (a)

79. According to Baumol’s model, the holding cost for cash management is calculated by –
a. K(C/2)
b. C(T/C)
c. √2CT/K
d. K(C/2) + C(T/C)
Answer: (a)

80. ___ is the order quantity that minimizes the total cost associated with inventory management.
a. TQM
b. EOQ
c. ABC
d. Re-Order
Answer: (c)

81. Which method prices the issues at the value at which can be procured from the market.
a. Standard price method
b. Weighted average
c. LIFO method
d. Replacement price method
Answer: (d)

82. IRR is also called:
a. Yield on investment
b. Managerial efficiency of capital
c. The marginal productivity of capital
d. All of the above
Answer: (d)

83. Higher the risk, the greater the premium.
a. True
b. False
Answer: (a)

84. The extra working capital required as per the changing production and sales levels of a firm is known as –
a. Fixed working capital
b. Networking capital
c. Temporary working
d. Permanent working capital
Answer: (c)

85. Which of the following is the assumption are made in Miller and Modigliani’s approach.
a. Perfect capital market
b. 100% dividend payout ratio
c. Both a & b
d. Personal tax 100%
Answer: (c)

86. Which of the following points are examined for the economic appraisal?
a. Cost of the project
b. Break-even point
c. Impact of the project on the environment
d. All of the above
Answer: (c)

87. The firm incurs ___ cost when the customer failed to pay the amount to it on the expiry of the credit period.
a. Administrative cost
b. Credit administrative
c. Delinquency
d. Opportunity cost
Answer: (c)

88. MIRR is a better indicator of the relative profitability of the project which is also defined as PV of cost.
a. True
b. False
Answer: (a)

89. The time gap between acquisition of resources & collection of each from customers is known as ___.
a. Operating cycle
b. Business cycle
c. Production gap
d. Cask conversion cycle
Answer: (a)

90. A firm that allows liberal credit to its customers will need more working capital.
a. True
b. False
Answer: (a)

91. Which of the following is the objective of cash management?
a. Meeting payment schedule
b. Minimizing funds held in the form of cash
c. Both a & b
d. Neither a & b
Answer: (c)

92. Obtaining finance is an important function of:
a. Finance controller
b. Financial accountant
c. Auditor
d. Treasurer
Answer: (d)

93. Implicit cost is not a visible cost.
a. True
b. False
Answer: (a)

94. Seasonal pack requirements to be met from ___ from banks.
a. Long firm loan
b. Short term loan
c. Medium-term
d. Debentures
Answer: (b)

95. A bond’s price moves ___ proportional to its 77m.
a. Direct
b. Straight
c. Inverse
d. None of the above
Answer: (c)

96. ___ is the mix of the long-term sources of funds like debenture loans, preference loans, preference shall & equity.
a. Capital rationing
b. Capital structure
c. Capital budgetary
d. Capitalization
Answer: (b)

97. Kt = Ke
a. True
b. False
Answer: (b)

98. The effect of overcapitalization is ___ and of undercapitalization is ___ dividend rates.
a. Fall, rise
b. Rise, fall
c. Rice, constant
d. Constant, rise
Answer: (a)

99. RADR is the sum of ___ and ___.
a. Risk assessment, discount rate
b. Rate of earning, debenture rate
c. The risk-free rate, the risk premium
d. Risky risk, discount rate
Answer: (c)

100. ___ is the process of buying a security at a lower price in one market & selling it in another market at a higher price bringing about ___.
a. Arbitrage, market value
b. WACC, equilibrium
c. Operating leverage, equilibrium
d. Arbitrage, equilibrium
Answer: (d)

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