( Multiple Choice Questions (MCQs) )
Select the correct alternative:
(i) Book Keeping and Accounting
(a) means same and are used interchangeably.
(b) does not mean same and are not used interchangeably.
(c) means both (a) and (b).
(d) None of the above.
(ii) Which of the following is not a sub-field of accounting?
(a) Book Keeping (b) Management Accounting
(c) Financial Accounting (a) Cost Accounting
(iii) Which of the following is not recorded in the books of account?
(a) Sales of goods (b) Payment of salary
(c) Quality of staff (a) Purchase of Goods
(iv) Book Keeping is concerned with
(a) recording financial data relating to business transactions.
(b) classifying and summarising recorded data.
(c) interpreting data for internal users.
(a) All of the above. [Education Department, Chandigarh, 2021]
(v) Which is the last step of accounting as a process of information?
(a) Recording the transaction
(b) Preparation of financial statements
(c) Communication of information
(a) Analysis and interpretation of information
(vi) Basic function of financial accounting is to
(a) record all business transactions. (b) interpret financial data.
(c) assist the management. (d) None of these.
(vii) Transactions are posted into Ledger Account from
(a) Vouchers. (b) Journal book.
(c) Bank Statement. (d) None of these.
(viii) Which of the following is not a business transaction?
(a) Purchase of goods for resale amounted to f 50,000
(b) Paid salaries and wages amounted tot 10, 000
(c) Paid rent for office premises f 5, 000
(d) Purchased a LED Television for personal use
(ix) Which one is the advantage of accounting:
(a) Replacement of Memory;
(b) Shows the present value of business;
(c) Accounting does not record price level changes;
(d) Accounting is not fully exact?
(x) Which is the important objective of accounting?
(a) To keep systematic records of financial transactions.
(b) To ascertain the net profit or loss of business.
(c) To ascertain the financial position of a business.
(d) All of the above.
(xi) Which of the following is not an internal user of financial statements?
(a) Board of Directors (b) Managers
(c) Employees (d) None of these.
(xii) Which of the following is a limitation of accounting?
(a) Assistance to Management (b) Replaces Memory
(c) Unrealistic Information (d) Evidence in Court
(xiii) Cost of Goods Manufactured is determined by
(a) Financial Accounting. (b) Cost Accounting.
(c) Management Accour>:ting. (d) Human Resource Accounting.
(xiv) Qualitative characteristic of Accounting includes
(a) Reliability and Relevance.
(b) Understandability and Comparability.
(c) True and Fair, Reliability, Understandability and Comparability
(d) None of the above.
(xv) Which of the following is not a qualitative characteristic of accounting information?
(a) Reliability (b) Understandability
(c) Comparability (d) Materiality
(xvi) Use of common unit of measurement and common format of reporting promotes
(a) Comparability. (b) Understandability,
(c) Relevance. (d) Reliability. (NCER1)
(xvii) Which qualitative characteristic of accounting information is reflected when accounting
information is clearly presented?
(a) Reliability (b) Relevance
(c) Comparability (d) Understandability
(NCERT, Kv, 2021)
[Ans.: (i) (b); (ii) (a); (iii) (c); (iv) (a); (v) (c); (vi) (a); (vii) (b); (viii) (d ); (ix) (a);
(x) (d); (xi) (c); (xii) (c); (xiii) (b); (xiv) (c); (xv) (d) ; (xvi) (a); (xvii) (d).]
(Objective Type Questions)
1. State whether the following statements are True or False:
(i) Accounting may be influenced by the personal judgment.
(ii) Financial Statements are not comparable.
(iii) Accounting Information must be presented in such a way that only accounting people
understand it.
(iv) Accounting Information should be reliable.
(v) Book Keeping and Accounting are synonymous terms.
(vi) No,1-Financial transactions are not recorded in the books of account.
(vii) Transactions are posted in a book called Journal.
(viii) Accounting does not include Book Keeping.
(ix) Accounting does not show the realisable value of business.
(x) Book Keeping is concerned with recording and classifying financial data relating to
business operations.
[Ans.: (i) True; (ii) False�· (iii) False; (iv) True; (v) False;
(vi) True; (vii) False; (viii) False; (ix) True; (x) True.]
2. Fill-in-the blanks with appropriate words:
(i) Accounting measures the business transactions in terms of _____ units.
(NCER'I)
(ii) ----- starts where Book Keeping ends.
(iii) Information in financial reports is based on (NCER'I)
(iv) Identified and measured economic events should be recorded in _____ order.
(v) The process of accounting starts with _____ and ends with _____
(NCER'I)
(vi) Manipulation of accounts in a way so as to show the better position than what it
actually is called _____
(vii) Information is said to be relevant if it is _____
(viii) Internal users of accounting information are _____ of the business entity.
(ix) To determine the financial position of a business _____ is prepared.
(x) Qualitative characteristics of Accounting include Reliability, Relevance, Comparability and
(xi) Cost of Goods Manufactured is determined by _____ Accounting.
(xii) Profit or L>ss is calculated by _____ Accounting.
(xiii) _____ are the basis of recording financial transactions in the b ooks of account.
(xiv) Balance Sheet is a statement of _____ and -----
(xv) The book where financial transactions are posted is termed as -----
(xvi) The statement prepared to calculate profit or loss of a business is termed as ____
[Ans.: (i) Monetary; (ii) Accounting; (iii) Economic Transactions; (iv) Chronological;
..;....
(v) Identification of Financial Transactions, Communicating the information;
(vi) Window Dressing; (vii) Free from Personal Bias; (viii) Owners/Management;
(ix) Balance Sheet or Position Statement; (x) Understandability;
(xi) Cost; (xii) Financial; (xiii) Vouchers; (xiv) Assets, Liabilities; (xv) Ledger;
(xvi) Income Statement or Statement of Profit & Loss.]
(very Short Answer Type Questions)
Q. 1. Give the meaning of 'Accounting'. (Delhi)
Ans. Accoun ting is a process of identifying financial transactions, measuring them in
money terms, recording them in primary books, classifying, summarising, analysing,
interpreting them and communicating the results to the users.
Q. 2. List any two functions of Accounting.
Ans. Two functions of accounting are:
(i) Identifyin g financial transactions; and (ii) Recording them in the books of account.
Q. 3. Name the branch of commerce, which keeps a record of monetary transactions in a set
of books. (MSE Chandiga rh)
Ans. Book Keeping.
Q. 4. Define Book Keeping.
Ans. Book Keeping is an art of recording in the books of account the monetary aspect of
commercial and financial transactions.
Q. 5. What is the function of Book �eeping?
Ans. The function of Book Keeping is to identify financial transactions and events, measuring
them in money terms, recording them in the books of account and classifying the recorded
transactions.
Q. 6. Name any two objectives of Accounting. (KVS)
Ans. The two objectives of Accounting are:
(i) Ascertaining profit or loss; and (ii) Ascertaining financial position.
Q. 7. What are the advantages of Accounting? (Any Two)
Ans. Two advantages of Accounting are:
(i) Financial performance and position is known; and
(ii) Assist management in making business plans, take decisions and exercise control.
Q. 8. What are the limitations of Accounting? (Any Two) (Delhi, KVS)
Ans. The limitations of Accounting are:
(i) Non-financial information are not recorded; and
(ii) It ignores price level changes.
Q. 9. Name any one external user of Accounting information. (Delhi)
Ans. Creditors.
Q. 10. Name the external user of accounting information from whom the firm purchases goods
on credit. (KVS)
Ans. Supplier of goods.
Q. 11. Is the basic objective of Book Keeping to maintain systematic records or to ascertain net
results of operations of financial transactions? (MSE Chandigarh)
Ans. The basic objective of Book Keeping is to maintain systematic records of financial transactions.
Q·. 12. Name the external users directly concerned with accounting inforqiation.
(MSE Chandigarh)
Ans. (;") Creditors,
(ii) Bankers or Financial Institutions.
(Short Answer Type Questions)
1. Explain themeaning of Accounting. (Delhi)
2. What is the process of Accounting?
3. Define Book Keeping. What is the function of Book Keeping?
4. Give one point of distinction between Book Keeping and (KVS)
Accounting.
5. What the following parties are interested in Accounting
(MSE Chandigarh)
Infor mation:
(MSE Chandigarh)
(a) Investors; (b) Government?
6. State what is the end-product of Financial Accounting.
[Hint: Financial Statements, i.e., (i) Income Statement, (ii) Balance Sheet.]
7. What are the attributes (features) of Accounting? (MSE Chandigarh)
8. What do you mean by Accounting? What are its main objectives? (KVS)
9. What are the advantages of Accounting? (MSE Chandigarh, Delhi)
10. Explain the primary objectives of Accounting. (MSE Chandigarh)
11. Explain any four objectives of Accounting. (KVS)
12. Define Accounting. Explain any two limitations of Accounting. (KVS)
13. What is Accounting? Explain four of its functions. (Delhi)
14. What do you mean by Financial Accounting? Explain its one main function. (Delhi)
15. Write a short note ·on Double Entry System of Accounting.
16. Accounting provides information about the profitabi�ity and financial soundness of a concern.
In addition, it provides various other valuable information also. However, accounting has
certain limitations. Explain any three of such limitations. (KVS)
