50 Accounting Multiple Choice Questions – Basics [2023]

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In this topic of “50 Multiple Accounting Multiple Choice Questions – Basics”, we are going to cover basic accounting questions which will be suitable for the Accounting positions like Junior Accountant, Account Assistant, Senior Accountant etc.,

We tried to cover most of the basic Multiple choice questions which will be useful while attending for computer based test (CBT)

So, please spare your valuable time to learn this topic. We shared valuable inputs for your knowledge purpose.

1. Which of the below is not a sub-field of accounting?

A) Cost accounting
B) Management Accounting
C) Book-keeping
D) Taxation

Answer: (C) Book-keeping

Explanation: Bookkeeping is the process of recording financial transactions on a daily basis and it is a part of the process of accounting and not a sub-field of Accounting.

2. Which financial statement will be prepared to ascertain the results of the business

A) Trial Balance
B) Profit and Loss account
C) Balance sheet
D) Cash flow statement

Answer: (B) Profit and Loss account

Explanation: Profit or loss is generally arrived after deducting all operating expenses not appearing in the trading account from the operating income if it is the case of surplus then it is called Net Profit. Whereas if it is the case of loss then it is called “Net Loss”.

3. Financial statements are part of

A) Accounting
B) Book-keeping
C) Management Accounting
D) Taxation

Answer: (A) Accounting

Explanation: Financial statements include the Balance Sheet, Profit and Loss account (Income and Expenditure account – In case of Not for Profit organization), Cash flow statement, and Notes to accounts. All the mentioned statements belong to Accounting only.

4. Which financial statement will be prepared to know the financial position of the business

A) Trial Balance
B) Profit and Loss account
C) Balance sheet
D) Cash flow statement

Answer: (C) Balance sheet

Explanation: The Major reason to prepare a Balance Sheet is to know the Financial position of the business enterprise at a specific time.i.e. 31st March of every year. I.e. It shows the Assets, Liabilities, Reserves, Capital, and other balances at their Book values.

Balance Sheet normally consists of
1. Assets 2. Liabilities 3. Equity

5. All of the following are functions of Accounting except

A) Decision-making
B) Ledger posting
C) Forecasting
D) Government regulation & Taxation

Answer: (B) Ledger posting

Explanation: Ledger posting plays a key role in Identifying all the transactions in one place, which are done by any entity in a particular period. It gives you all the details of the transactions related to an Asset, Liability, Expense & Income in a particular period.

6. Book-keeping is majorly concerned with

A) Recording of financial data.
B) Designing the systems for recording, and classifying the recorded data.
C) Interpreting the data for internal and external users.
D) Summarizing the data

Answer: (A) Recording of financial data
Explanation: Bookkeeping records Financial transactions only.

7. Users of Accounting information include

A) Creditors/Suppliers
B) Lenders/ Customers
C) Both (a) and (b)
D) None of the above

Answer: (C) Both (a) and (b)

Explanation: The users of Accounting information are not limited. It may be Creditors, Lenders, Government or Shareholders, and many more

8. On January 1, Mr.Ali paid an Electricity bill of Rs.10,000. This can be classified as

A) An event.
B) A transaction.
C) A transaction as well as an event.

Answer: (B) A transaction

Explanation: A transaction is of a financial nature that occurs during the accounting period and will be recorded in the books of accounts.

Paying an electricity bill if Rs.10,000 is of a financial nature that occurred during the accounting period and will be recorded in the books of accounts.

9. On March 31, 2020, after the sale of goods worth Rs.2,000, he is left with the closing inventory of Rs.6,000. This is

A) An event.
B) A transaction.
C) Neither transaction nor event
D) A transaction as well as an event.

Answer: (A) An event

Explanation: An event might be either Financial nature or Non-financial nature and also it may or may not have an impact on financial records.

10. Which of the following are Objectives of Accounting

A) Systematic recording of transactions
B) Ascertainment of the financial position of the business
C) Providing information to the users for rational decision-making
D) All the above

Answer: (D) All the above

Explanation: Click here to know more

11. Rent payable to Landlord will be credited to

A) Rent account
B) Landlord account
C) Cash account
D) Bank account

Answer: (B) Landlord account

Explanation: Rent payable is Liability will be credited to Landlord’s account

12. Electricity charges paid by cheque credited to

A) Bank account
B) Power charges account
C) Cash account
D) Creditors account

Answer: (A) Bank account

Explanation: Electricity charges are paid by cheque will be credited to the bank account.

13. If a company identified a Bad debt, such an amount should be credited to

A) Cash account
B) Trade Payable account
C) Trade Receivables account
D) Bad debt account

Answer: (C) Trade Receivables account

Explanation: Due to the identification of Bad debts, the Accounts receivable or Trade receivables balance is to be reduced. Therefore, the Trade receivables account should be credited.

14. If the company allowed discounts to customers, such an amount should be credited to

A) Loss account
B) Discount account
C) Profit and Loss account
D) Balance sheet

Answer: (C) Profit and Loss account

Explanation: The discount allowed by the company is a Loss and to record such effect, the Profit and Loss account is to be credited

15. Paid cash to Creditors of Rs.10,000/-, should be debited to

A) Cash account
B) Creditor’s account
C) Purchases account
D) Sales account

Answer: (B) Creditor’s account

Explanation: Due to the payment of Creditors, the said account balance will be reduced. Therefore, it should be debited.

16. Borrowed money of Rs.5,00,000/- for business, mention the impact of the transaction

A) Increase in assets and Increase in Liability
B) Decrease in assets and Decrease in Liability
C) Increase in assets and Increase in Equity
D) Decrease in assets and Increase in Equity

Answer: (A) Increase in assets and Increase in Liability

Explanation: Due to the borrowing, Cash will flow into the business i.e. Increase in asset,s and Liability will be increased i.e. Increase in Liability

17. As per the Golden rules of accounting, in “Nominal account” Debit means

A) Income & Gains
B) Expenses & Losses
C) What comes in
D) Receiver

Answer: (B) Expenses & Losses

Explanation: As per the golden rules of Accounting, Debit means all Expenses and Losses.

Read more: 3 Golden Rules of Accounting [Rules & Explanation]

18. Paid Salary of Rs.10,000 to employee for Salary, mention the Accounts involved

A) Salary & Bank
B) Wages & Cash
C) Remuneration & Bank
D) Capital & Liability

Answer: (A) Salary & Bank

Explanation: Salary payment involves Debiting of “Salary account” and crediting of “Bank account”

19. Paid Salary of Rs.10,000 to an employee for Salary, mention the Nature of accounts involved

A) Capital & Asset
B) Expenses & Asset
C) Expenses & Liability
D) Expenses & Capital

Answer: (B) Expenses & Asset

Explanation: Salary payment involves
Dr side – Increase in Expenses
Cr side – Decrease in Assets

20. Interest received of Rs.2,000 from Union Bank of India, mention the Nature of accounts involved

A) Income & Asset
B) Expenses & Asset
C) Income & Liability
D) Expenses & Capital

Answer: (A) Income & Asset

Explanation: Interest received involves
Dr side – Increase in Asset
Cr side – Increase in Income

21. Identify the Odd one out of it

A) Furniture
B) Plant & Machinery
C) Land
D) Stock of materials

Answer: (D) Stock of materials

Explanation: All are Fixed assets, whereas the Stock of Materials is a Current asset and short-term in nature.

22. A purchase of goods from Geeta in Cash should be credited to

A) Geeta
B) Purchases
C) Cash
D) Creditors

Answer: (C) Cash

Explanation: On the Purchase of goods for cash, Purchases will increase and the Cash balance will be decreased. Therefore, the Cash account is to be credited.

23. Business started with a Capital of Rs.10,00,000/- should be credited to

A) Cash account
B) Capital account
C) Drawings
D) Salaries account

Answer: (B) Capital account

Explanation: Due to capital investment, Money will flow into the business i.e. Bank account -Dr side, and the person who brought it, will be credited i.e. Capital account.

24. Deposit of cash into State Bank of India of Rs.75,000/- should be debited to

A) Cash account
B) Bank account
C) Capital account
D) Drawings account

Answer: (B) Bank account

Explanation: Due to Cash deposits in SBI, Money will flow out of the business i.e. Bank account.

25. As per the golden rules of accounting, in “Real account” Credit means

A) Receiver
B) Giver
C) What goes out
D) Incomes & Gains

Answer: (C) What goes out

Explanation: As per the Golden Rules of Accounting, Real account credit means “What goes out” and Debit means “What comes in”

26. Bad debts are written off but recovered subsequently should be credited to

A) Profit and Loss account
B) Trade receivables account
C) Bad debts recovered account
D) Discount account

Answer: (C) Bad debts recovered account

Explanation: Bad debts which are not recovered, will be written off subsequently. But in the case recovered, later should be credited to the “Bad debts recovered account”

27. A Sale of goods to Sita on credit should be debited to

A) Sita
B) Sales
C) Cash
D) Creditors

Answer: (A) Sita

Explanation: On the Sale of goods on credit, the Accounts receivable balance will be increased i.e. Sita a/c and Credit Sales will be increased.

Also Read: 40 Basic Accounting terminology

28. The below Financial statement of which represents the Accounting equation Assets = Liabilities + Equity

A) Cash flow statement
B) Profit and Loss account
C) Notes to accounts
D) Balance sheet

Answer: (D) Balance sheet

Explanation: Balance sheet represents Assets = Liability + Equity

29. Withdrew cash from the business of Rs.50,000/- should be debited to

A) Cash account
B) Bank account
C) Capital account
D) Drawings account

Answer: (A) Cash account

Explanation: Due to cash withdrawal, the Bank balance will be reduced, and the Cash balance will be increased. Therefore, the “Cash account” will be debited.

30. Identify the Odd one out of it

A) Cash
B) Bills Receivables
C) Land
D) Stock of materials

Answer: (C) Land

Explanation: Land is Fixed asset and all the others are Current assets.

31. As per the golden rules of accounting, in “Personal account” Debit means

A) Giver
B) What goes out
C) Incomes & Gains
D) Receiver

Answer: (D) Receiver

Explanation: Personal account, Dr – The Receiver, and Cr – The giver

32. Sold goods on Credit Rs.3,25,000/- , identify the nature of accounts involved

A) Real & Nominal
B) Real & Personal
C) Personal & Nominal
D) None of the above

Answer: (C) Personal & Nominal

Explanation:
Sold goods on Credit Rs.3,25,000/-
Accounts involved
Dr – Personal account i.e. Accounts receivables
Cr – Nominal account i.e. Sales a/c

33. Loan taken from Mr.Ram of Rs.1,00,000/-, the journal entry would be

A) Dr – Bank a/c & Cr – Mr.Ram’s Loan
B) Dr – Mr.Ram’s Loan & Cr – Bank a/c
C) Dr – Asset a/c & & Cr – Bank a/c
D) No Entry is required

Answer: (A) Dr – Bank a/c & Cr – Mr.Ram’s Loan

Explanation: A loan was taken from Mr.Ram of Rs.1,00,000/-
Bank / Cash account Dr Rs.1,00,000/-
To Mr.Ram’s Loan a/c Rs.1,00,000/-

34. Mr. Ramesh withdrew cash for business from the bank of Rs.5,500/- , the journal entry would be

A) Dr – Bank a/c & Cr – Cash a/c
B) Dr – Cash a/c & Cr – Bank A/c
C) Dr – Mr. Ramesh a/c & Cr – Cash a/c
D) Dr – Mr. Ramesh a/c & Cr – Bank a/c

Answer: (B) Dr – Cash a/c & Cr – Bank A/c

Explanation: Due to cash withdrawal, the Bank balance will be reduced, and the Cash balance will be increased. Therefore, the “Cash account” will be debited, and the “Bank account” will be credited.

35. As per the Traditional accounting approach, classify the “Building” account is

A) Real account
B) Nominal account
C) Personal account
D) None of the above

Answer: (A) Real

Explanation: Building account is a Real account.
The rules are as follows
1. Debit – What comes in and
2. Credit – What goes out

36. Mr.Ram sold goods of Rs.2,50,000/- including a discount of Rs.5,000/-. Mention the amount shall be debited with the account of-

A) Ram A/c – Rs.2,45,000
B) Ram A/c – Rs.2,50,000
C) Cash A/c – Rs.2,45,000
D) Cash A/c – Rs.2,50,000

Answer: (B) Ram A/c – Rs.2,50,000

Explanation: Even in the case of Discounts, the journal entry shall be made a Gross basis only.

37. As per the Traditional accounting approach, classify the “Discount allowed” account as

A) Real
B) Nominal
C) Personal
D) None of the above

Answer : (B) Nominal 

Explanation: As per the Traditional accounting approach, “Discount allowed” is a “Loss” and the accounts involved will be “Nominal account”

38. The process of transferring the debit and credit transactions from the journal to their respective Ledger is termed as

A) Purchase
B) Posting
C) Balancing
D) None of the above

Answer: (B) Posting

Explanation: The process of transferring the debit and credit transactions from the journal to their respective is Ledger posting.

39. Ledger’s book is popularly known as

A) Primary book of accounts
B) Subsidiary book of accounts
C) Principal book of accounts
D) All of the above

Answer: (A) Principal book of accounts

Explanation: Ledgers are the Principal books of accounts for any organization.

40. The next step after ledger preparation is

A) Preparation of Trading account
B) Preparation of PL
C) Preparation of BS
D) Preparation of Trial balance

Answer: (D) Preparation of Trial balance

Explanation: The next step after ledger preparation is the Preparation of the Trial balance i.e. to check the Arithmetical accuracy of the books of accounts.

41. After preparation of the Trial balance on the Total debit side an amount of Rs.500 is short. The difference will be

A) Debited to Suspense a/c
B) Credited to Suspense a/c
C) Adjusted with any other a/c
D) No entry is required

Answer: (A) Debited to Suspense a/c

Explanation: A suspense account will be created to temporarily store the uncertain transactions.

42. The Purchase book records the transactions of

A) Only Cash purchase of goods
B) Only Credit purchase of goods
C) Cash purchases or Credit purchases
D) All purchases of goods

Answer: (B) Only Credit purchase of goods

Explanation: The purchase credit book records all the credit purchases of goods.

43. The cash purchase transactions will be recorded in

A) Purchase book
B) Purchase returns book
C) Cash book
D) All the above

Answer: (C) Cash book

Explanation: All the Purchase transactions will be recorded in Cashbook only.

44. The purchase returns will be recorded in

A) Purchases book
B) Accounts receivable book
C) Cash book
D) Purchase returns book

Answer: (D) Purchase returns book

Explanation: All the purchase returns will be recorded in the Purchase returns book.

45. In which book of original entry, you will record a Rental income of Rs.500

A) Cash book
B) Sales book
C) Purchase book
D) None of the above

Answer: (A) Cash book

Explanation: Rental income of Rs.500 shall be recorded in Cashbook

46. Sales return book also called as

A) Return Inward book
B) Return Outward book
C) Sales book
D) Cash book

Answer: (A) Return Inward book

Explanation: Sales return book also called as Return Inward book

47. Second-hand motor cables was purchased on a credit basis from M/s Good Motors for Rs.20,000/- will be recorded in

A) Sales book
B) Cash book
C) Purchases book
D) Journal proper [General Journal]

Answer: (D) Journal proper (General Journal)

Explanation: A journal proper record all the miscellaneous credit transactions which are not fit into any other books.

48. Which of the below is not a column of three-column cash book

A) Petty cash column
B) Cash column
C) Bank column
D) None of the above

Answer: (A) Petty cash column

Explanation: Petty cash column is multi column cash book, therefore it is not a three-column cash book.

49. A cash book records the transactions of

A) All cash receipts
B) All cash payments
C) All cash receipts & Payments
D) None of the above

Answer: (C) All cash receipts & Payments

Explanation: A cash book records the transactions of all cash receipts & Payments.

50. Balance in the Petty cash book is an

A) Expense
B) Asset
C) Proft
D) All the above

Answer: (B) Asset

Explanation: Balance in the Petty cash book is a Current asset.

Also Read: Top 10 Objectives of Accounting


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Author is a Qualified CMA with rich industry experience for more than 6 years. He is an All India Ranker (AIR-101) in CMA and also a Semi-Qualified Chartered Accountant having a quite good experience in teaching the subjects of Accounting and Costing to the commerce aspirants.

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