Introduction to accounting - accounting concepts and conventions, Indian Accounting Standards, accounting equation, double entry system, journal, ledger, cash book, other subsidiary books, trial balance, rectification of errors, bank reconciliation statement - Question Bank

1. The primary function of a Journal is to:
A) Classify transactions
B) Summarize transactions
C) Record transactions chronologically
D) Provide a balance of accounts
2. Which of the following is typically a credit balance in the ledger?
A) Accounts Receivable
B) Sales Revenue
C) Expenses
D) Assets
3. When reconciling the bank statement, if the balance as per the cash book is taken as the starting point, and there is an error of overcasting the 'Bank' column in the cash book, what adjustment is needed?
A) Add the over-casted amount
B) Subtract the over-casted amount
C) No adjustment is needed
D) Credit the over-casted amount
4. The 'Entity Concept' means that the business is considered:
A) Part of the owner's personal affairs
B) A separate entity distinct from its owners
C) An extension of the government's financial system
D) A temporary arrangement for profit generation
5. Which principle requires that financial statements should be prepared on a consistent basis from one period to another?
A) Conservatism
B) Consistency
C) Matching
D) Materiality
6. The 'Materiality' convention implies that:
A) All information, however insignificant, must be disclosed.
B) Only material information needs to be disclosed.
C) Immaterial items should be combined with material items.
D) Accounting standards should be strictly followed for all items.
7. Which of the following is an example of an intangible asset?
A) Land
B) Goodwill
C) Machinery
D) Buildings
8. If a cheque received from a customer is dishonoured, it should be:
A) Debited to the customer's account and credited to the bank account
B) Credited to the customer's account and debited to the bank account
C) Debited to the bank account and credited to the customer's account
D) Credited to the bank account and debited to the customer's account
9. An error of casting (addition) in the Purchases Journal is an error of:
A) Omission
B) Commission
C) Principle
D) Original Entry
10. The Sales Returns Journal is used to record:
A) Goods returned by customers
B) Goods returned to suppliers
C) All credit sales
D) All cash sales
11. Which of the following is a liability?
A) Building
B) Cash
C) Loan from proprietor
D) Patents
12. A 'Suspense Account' is generally opened when:
A) The Trial Balance does not agree and the error cannot be immediately found.
B) The business is highly profitable.
C) All transactions are recorded perfectly.
D) A new accounting system is implemented.
13. The accounting equation Assets = Liabilities + Owner's Equity is derived from the principle of:
A) Matching
B) Dual Aspect
C) Conservatism
D) Full Disclosure
14. Which Indian Accounting Standard (Ind AS) deals with the presentation of financial statements?
A) Ind AS 1
B) Ind AS 7
C) Ind AS 101
D) Ind AS 115
15. The concept of 'Periodicity' in accounting means that:
A) Business life is divided into artificial periods for reporting.
B) All transactions are recorded as they occur.
C) Assets are valued at current market prices.
D) Profits are recognized only when realized.
16. Which accounting concept emphasizes that only transactions that can be measured in monetary terms should be recorded?
A) Going Concern Concept
B) Money Measurement Concept
C) Periodicity Concept
D) Dual Aspect Concept
17. The 'Cost Concept' in accounting states that assets should be recorded at:
A) Their current market value
B) Their realizable value
C) Their historical cost
D) Their depreciated value
18. Which of the following is NOT a principle of the Double Entry System?
A) Every transaction has two aspects.
B) Every transaction affects at least two accounts.
C) Every debit requires an equal credit.
D) Every credit requires an equal credit.
19. When starting a bank reconciliation, if you begin with the balance as per the passbook and there are deposits not yet credited by the bank, you should:
A) Add them
B) Subtract them
C) Ignore them
D) Debit them
20. When starting a bank reconciliation, if you begin with the balance as per the cash book and there are unpresented cheques, you should:
A) Add them
B) Subtract them
C) Ignore them
D) Credit them
21. Bank charges debited by the bank and not yet recorded in the cash book will:
A) Increase the cash book balance
B) Decrease the cash book balance
C) Require addition to the passbook balance
D) Require subtraction from the passbook balance
22. An interest credit by the bank appearing in the passbook but not in the cash book will:
A) Increase the cash book balance
B) Decrease the cash book balance
C) Not affect the cash book balance
D) Require adjustment in the passbook
23. Which of the following items typically appears as an unpresented cheque on the bank side of a reconciliation?
A) Dividend collected by bank
B) Cheque issued by the company but not yet cashed by the payee
C) Bank charges debited by the bank
D) Interest credited by the bank
24. A Bank Reconciliation Statement is prepared to reconcile the difference between:
A) Cash balance in books and cash in hand
B) Bank balance as per passbook and bank balance as per cash book
C) Assets and Liabilities of the business
D) Sales and Purchases during the period
25. If a sale of goods to Mr. X for $500 was wrongly recorded as $50 in the sales journal, this is an error of:
A) Omission
B) Principle
C) Commission
D) Compensating
26. Which account is debited when rectifying an error of overcasting the credit side of an account?
A) The account that was over-credited
B) The account that was under-credited
C) The Suspense Account
D) The Profit and Loss Account
27. An error that counterbalances another error is known as a:
A) Principle Error
B) Commission Error
C) Compensating Error
D) Omission Error
28. Recording an expense as an asset is an example of a:
A) Commission Error
B) Omission Error
C) Principle Error
D) Recording Error
29. An error where an amount is recorded incorrectly in the books is a type of:
A) Omission Error
B) Commission Error
C) Principle Error
D) Compensating Error
30. An error where a transaction is completely omitted from the books of account is called a:
A) Posting Error
B) Principle Error
C) Commission Error
D) Omission Error
31. If the Trial Balance does not tally, it indicates:
A) The business is profitable
B) There are errors in the accounting records
C) The business has sufficient liquidity
D) All transactions have been posted correctly
32. The primary purpose of preparing a Trial Balance is to verify:
A) Accuracy of arithmetic in ledger postings
B) Completeness of transactions recorded
C) Profitability of the business
D) Liquidity of the business
33. A Trial Balance is a statement showing:
A) All transactions for the year
B) The debit and credit balances of ledger accounts
C) The profit or loss of the business
D) The financial position of the business
34. Which subsidiary book is used to record returns of goods sold on credit?
A) Sales Book
B) Purchases Returns Book
C) Sales Returns Book
D) Bills Receivable Book
35. The Purchases Journal is used to record:
A) All credit sales of goods
B) All cash sales of goods
C) All credit purchases of goods
D) All cash purchases of goods
36. The Sales Journal is used to record:
A) All credit sales of goods
B) All cash sales of goods
C) All credit purchases of goods
D) All cash purchases of goods
37. Which of the following is a special journal used to record all cash receipts and cash payments?
A) Sales Journal
B) Purchases Journal
C) Cash Book
D) General Journal
38. The ledger is a collection of:
A) Journals
B) Accounts
C) Vouchers
D) Statements
39. The process of transferring entries from the journal to the ledger is called:
A) Journalizing
B) Posting
C) Balancing
D) Rectification
40. Recording a transaction in the journal is known as:
A) Posting
B) Balancing
C) Journalizing
D) Summarizing
41. The book of original entry where all business transactions are first recorded is called the:
A) Ledger
B) Journal
C) Cash Book
D) Trial Balance
42. In double-entry bookkeeping, for every debit, there must be an equal and corresponding:
A) Debit
B) Credit
C) Contra Entry
D) Balancing Entry
43. The 'Double Entry System' of accounting means that:
A) Every transaction is recorded twice.
B) Every transaction has at least two effects.
C) Every transaction affects only two accounts.
D) Each transaction is recorded in two different books.
44. Which of the following is an example of an asset?
A) Loan from a bank
B) Capital invested by the owner
C) Machinery
D) Accounts Payable
45. The accounting equation is represented as:
A) Assets = Liabilities - Owner's Equity
B) Assets = Liabilities + Owner's Equity
C) Liabilities = Assets + Owner's Equity
D) Owner's Equity = Assets + Liabilities
46. The convention of 'Conservatism' implies that accountants should:
A) Anticipate no profits but provide for all possible losses.
B) Anticipate all possible profits and losses.
C) Provide for all possible profits and no losses.
D) Recognize profits only when realized.
47. Which accounting convention suggests that all material information should be disclosed in financial statements?
A) Consistency
B) Full Disclosure
C) Materiality
D) Conservatism
48. According to the Business Entity Concept, the owner and the business are treated as:
A) A single unit
B) Separate entities
C) Interdependent entities
D) Unrelated entities
49. The accounting concept that requires expenses to be recognized in the same period as the revenues they help generate is known as:
A) Conservatism
B) Full Disclosure
C) Matching
D) Materiality
50. Which accounting concept states that a business is assumed to continue operating indefinitely?
A) Matching Concept
B) Going Concern Concept
C) Business Entity Concept
D) Cost Concept
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