This quiz works best with JavaScript enabled. Home > General Knowledge > Economy > Accounting > Accounting – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Accounting Quiz 1 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Cost of inventories includes A) Direct material only. B) Direct Labour + Direct Expenses. C) Direct Material + Direct Expenses. D) All costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Show Answer Correct Answer: D) All costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. 2. All capital expenditures and receipts are taken to A) Trial balance. B) Balance sheet. C) Trading and Profit and Loss Account. D) None of the above. Show Answer Correct Answer: B) Balance sheet. 3. Which of the following profits are capital profits? A) Profit made on redemption of debentures. B) Premium received on issue of shares or debentures. C) Profit set aside for redemption of preference shares. D) All of the above. Show Answer Correct Answer: D) All of the above. 4. Stock is valued in the books of accounts at A) Market price. B) Cost price. C) Cost price of market price whichever is less. D) Depends whether LIFO method is used or FIFO method is used. Show Answer Correct Answer: D) Depends whether LIFO method is used or FIFO method is used. 5. According to which of the following the firms market value is not affected by capital market. A) Net Income Approach. B) The Traditional View. C) M.M. Hypothesis. D) None of the above. Show Answer Correct Answer: C) M.M. Hypothesis. 6. Receipts and payments account of non-trading concerns is a A) Real Account. B) Personal Account. C) Nominal Account. D) All of the above. Show Answer Correct Answer: A) Real Account. 7. If cost of goods sold is Rs. 100,000, other; operating expenses are Rs. 20,000 and total net sales are Rs. 150,000 the operating ratio will be equal to ..... A) 100 %. B) 70 %. C) 90 %. D) 80 %. Show Answer Correct Answer: D) 80 %. 8. The largest volume of foreign exchange trading takes place in A) The United States. B) China. C) Germany. D) The United Kingdom. Show Answer Correct Answer: D) The United Kingdom. 9. A ..... is a regional trading bloc in which member countries eliminate internal trade barriers but maintain existing barriers against countries that are not members A) Monetary union. B) Common market. C) Free trade area. D) Customs union. Show Answer Correct Answer: C) Free trade area. 10. Capital Budgeting Decisions are based on A) Incremental Capital. B) Incremental Assets. C) Incremental Profit. D) Incremental Cash Flows. Show Answer Correct Answer: D) Incremental Cash Flows. 11. Which one of the following ratio is the indicator of the long term solvency of the firm? A) Acid test ratio. B) Debt equity ratio. C) Time interest earned ratio. D) None of these. Show Answer Correct Answer: B) Debt equity ratio. 12. Dividend Payout Ratio is A) DPS $\div$ EPS. B) Pref. Dividend $\div$ Equity Dividend. C) Pref. Dividend $\div$ PAT. D) PAT Capital. Show Answer Correct Answer: A) DPS $\div$ EPS. 13. Scruting of financial transactions is called A) Auditing. B) Accounting. C) Budgeting. D) Programming. Show Answer Correct Answer: A) Auditing. 14. Which exchange rate system does not require monetary reserves for official exchange rate intervention A) Floating exchange rates. B) Pegged exchange rates. C) Dual exchange rates. D) Managed floating exchange rates. Show Answer Correct Answer: A) Floating exchange rates. 15. Which factor of production in the United States is most likely to be made worse off (its factor payment will decrease) because of the North American Free Trade Agreement? A) Unskilled labor. B) Skilled labor. C) Capital. D) Land. Show Answer Correct Answer: A) Unskilled labor. 16. How will the increase in volatility in asset price affect the value of the option? A) Increase the value. B) Decrease the value. C) May not affect. D) Any of the above. Show Answer Correct Answer: A) Increase the value. 17. As per SEBI's guidelines underwriting is A) Optional. B) Mandatory. C) Not necessary. D) Not mandatory. Show Answer Correct Answer: B) Mandatory. 18. Given, Ke = (DPS / MP) X 100, may be used in A) Calculating capital structure. B) Calculating cost of equity capital. C) Calculating dividend yield on equity share. D) All of the above. Show Answer Correct Answer: B) Calculating cost of equity capital. 19. The Financial Management is responsible for the A) Finance function of the firm. B) Recording the transaction. C) Organising training programmes. D) Controlling of the organisation. Show Answer Correct Answer: A) Finance function of the firm. 20. Which of the following provisions held for various assets should be transferred to the realisation account upon dissolution of the firm? A) Provision for Discounts. B) Provision for Depreciation. C) Investment Fluctuation Fund. D) All of the above. Show Answer Correct Answer: D) All of the above. 21. All information which is of material interest to ..... should be disclosed in accounting statements. A) Proprietors. B) Creditors. C) Investors. D) All of the above. Show Answer Correct Answer: D) All of the above. 22. Which of the following is not deferred revenue expenditure? A) Heavy advertisement expenditure. B) Depreciation on fixed assets. C) Preliminary expenses. D) Expenses incurred in removing the business to more convenient premises. Show Answer Correct Answer: B) Depreciation on fixed assets. 23. Revenue is generally recognised as being earned at that point of time when A) Cash is received. B) Production is completed. C) Debts are collected. D) Sale is effected. Show Answer Correct Answer: D) Sale is effected. 24. The conflicts in project ranking in capital budgeting as per NPV and IRR may arise because of A) Life disparity. B) Size disparity. C) Time disparity. D) All of the above. Show Answer Correct Answer: D) All of the above. 25. As per AS - 2, inventory is to be valued at A) Actual cost. B) Sales value. C) Net realisable value. D) The lower of cost, or net realisable value. Show Answer Correct Answer: D) The lower of cost, or net realisable value. 26. Direct investment and security purchases are classified as A) Capital account transactions. B) Current account transactions. C) Unilateral transfer transactions. D) Merchandise trade transactions. Show Answer Correct Answer: A) Capital account transactions. 27. Ratios may be classified as A) Profitability ratios. B) Financial ratios. C) Leverage ratios. D) All of the above. Show Answer Correct Answer: D) All of the above. 28. The cost of capital method includes A) Dividend yield method. B) Earning yield method. C) Growth in dividend method. D) All of the above. Show Answer Correct Answer: D) All of the above. 29. Which of the following has the highest cost of capital? A) Preference shares. B) Bonds. C) Loans. D) Equity shares. Show Answer Correct Answer: D) Equity shares. 30. The proposal is rejected in case the profitability index is A) Less than one. B) Less than Zero. C) Less than five. D) Less than Two. Show Answer Correct Answer: A) Less than one. 31. What are the advantage of double entry system? A) Lesser possibility of fraud. B) Arithmetical accuracy of records. C) Helps users of accounting information. D) All of the above. Show Answer Correct Answer: D) All of the above. 32. Small nations with more than one major trading partner tend to peg the value of their currencies to A) A single currency. B) A basket of currencies. C) Gold. D) Silver. Show Answer Correct Answer: B) A basket of currencies. 33. Current ratio is a..... ratio A) Profitability. B) Balance sheet. C) Profit and loss. D) Trading account. Show Answer Correct Answer: B) Balance sheet. 34. All of the following are debit items in the balance of payments, except A) Capital outflows. B) Merchandise exports. C) Private gifts to foreigners. D) Foreign aid granted to other nations. Show Answer Correct Answer: B) Merchandise exports. 35. The accounting equation (i.e., Assets = Liabilities + Capital) is an expression of the A) Business Entity Concept. B) Matching Concept. C) Cost Concept. D) Money Measurement Concept. Show Answer Correct Answer: A) Business Entity Concept. 36. If depreciation is calculated on the basis of the formula, (n (n + 1))/2, then which of the following methods is adopted? A) Diminishing value method. B) Sum of years digits method. C) Annuity method. D) Sinking fund method. Show Answer Correct Answer: B) Sum of years digits method. 37. Which of the following is a type of responsibility centre? A) Profit Centre. B) Investment Centre. C) Cost or Expense Centre. D) All of the above. Show Answer Correct Answer: D) All of the above. 38. Intrinsic Value of a 'out of money' call option is equal to A) Strike Price. B) Premium. C) Spot Price. D) Zero. Show Answer Correct Answer: D) Zero. 39. Which of the following accounting concepts has the working rule: "anticipate no profits but provide for all possible losses. "? A) Consistency concept. B) Materiality concept. C) Revenue recognition concept. D) Conservatism concept. Show Answer Correct Answer: D) Conservatism concept. 40. The profit on the reissue of forfeited share are transferred to A) Profit & Loss A/c. B) General Issues. C) Capital Reserve. D) Capital A/ c. Show Answer Correct Answer: C) Capital Reserve. 41. Relationship between Spot and Forward Exchange Rate s is referred to as A) One-price rule. B) Interest Rate Parity. C) Purchasing Power Parity. D) Exchange Power Parity. Show Answer Correct Answer: B) Interest Rate Parity. 42. ..... represent the most widely used tool in international finance for measuring the average value of a currency relative to a number of other currencies. A) Cross exchange rates. B) Exchange rate indexes. C) Nominal exchange rates. D) Real exchange rates. Show Answer Correct Answer: A) Cross exchange rates. 43. The expired portions of capital/deferred revenue expenditures and revenue expenditures (adjusted for outstanding and prepaid expenses) are regarded as A) Loss. B) Expenses. C) Payments. D) All of the above. Show Answer Correct Answer: B) Expenses. 44. Following expenses are not shown in Profit & Loss Account A) Domestic and household expenses. B) Life insurance premium. C) Income tax. D) All of the above. Show Answer Correct Answer: D) All of the above. 45. Which one of the following is capital expenditure? A) Purchase of raw material. B) Purchase of machine oil. C) Purchase of a delivery van. D) Cost of advertisement. Show Answer Correct Answer: C) Purchase of a delivery van. 46. An aggressive share would have a beta A) Equal to Zero. B) Less than Zero. C) Greater than one. D) Equal to one. Show Answer Correct Answer: C) Greater than one. 47. Capital profits can be distributed as dividend only if A) They are realised in cash. B) The capital losses have been written off. C) The surplus remains after the revaluation of all assets. D) All of the above. Show Answer Correct Answer: D) All of the above. 48. The overall capitalisation rate and the cost of debt remain constant for all degrees of financial leverage is advocated by A) M-M Approach. B) Traditional Approach. C) Net operating Income Approach. D) Net Income Approach. Show Answer Correct Answer: A) M-M Approach. 49. Credit Rating of a debt security is A) Merely opinion. B) Positive suggestion. C) Guarantee of Repayment. D) None of the above. Show Answer Correct Answer: A) Merely opinion. 50. Risk in capital budgeting implies that the decision maker knows ..... of the cash flows. A) Probability. B) Variability. C) Certainity. D) None of these. Show Answer Correct Answer: A) Probability. 51. In MM-Model, irrelevance of capital structure is based on A) Decreasing k0. B) Arbitrage Process. C) Cost of Debt and Equity. D) All of the above. Show Answer Correct Answer: B) Arbitrage Process. 52. Which is the items of capital structure? A) Debt Capital. B) Equity Capital. C) Preference Share Capital. D) All of the above. Show Answer Correct Answer: D) All of the above. 53. Amalgamation of firms takes place to A) Avoid competition. B) Reduce unnecessary advertisement expenditure. C) To secure internal and external economies of scale. D) All of the above. Show Answer Correct Answer: D) All of the above. 54. Financial break-even level of EBIT is A) Intercept at X-axis. B) Intercept at Y-axis. C) Slope of EBIT-EPS line. D) None of the above. Show Answer Correct Answer: A) Intercept at X-axis. 55. The European Union is an example of a/an A) Economic union. B) Common market. C) Free trade area. D) Customs union. Show Answer Correct Answer: B) Common market. 56. The difference between bid (buying) rates and ask (selling) rates is called the A) Arbitrage. B) Profit. C) Spread. D) Forward transaction. Show Answer Correct Answer: C) Spread. 57. Identify the transaction that has no effect on the current ratio. A) Bills receivable collected. B) Preference shares redeemed. C) Machinery bought for cash. D) Motor car sold for cash. Show Answer Correct Answer: A) Bills receivable collected. 58. Under the EU's Common Agricultural Policy, a variable import levy equals the A) Support price of the EU. B) Amount by which the world price exceeds the EU's support price. C) Amount by which the EU's support price exceeds the world price. D) World price. Show Answer Correct Answer: C) Amount by which the EU's support price exceeds the world price. 59. Payment to creditors is a manifestation of cash held for A) Speculative Motive. B) Precautionary Motive. C) Transactionary Motive. D) All of the above. Show Answer Correct Answer: C) Transactionary Motive. 60. If the company announces dividend then it is necessary to pay it A) Within certain time. B) Within seven years. C) Within six years. D) Within five years. Show Answer Correct Answer: A) Within certain time. Next →Related QuizzesEconomy QuizzesGeneral Knowledge QuizzesAccounting Quiz 2Accounting Quiz 3Accounting Quiz 4Accounting Quiz 5Accounting Quiz 6Accounting Quiz 7Accounting Quiz 8 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books