1. The primary objective of record keeping in accounting is:
- A. To avoid taxation
- B. To show profit always
- C. To maintain systematic records of financial transactions
- D. To inflate asset values
Record keeping ensures all financial transactions are documented systematically, which helps in preparing accounts and financial statements.
2. Which of the following is considered the “book of original entry”?
- A. Ledger
- B. Journal
- C. Trial Balance
- D. Balance Sheet
The Journal is called the book of original entry because all transactions are first recorded there before posting to the Ledger.
3. Double entry system of record keeping means:
- A. Recording each transaction twice in the same account
- B. Maintaining two sets of books
- C. Recording only income and expenditure
- D. Recording both debit and credit aspects of a transaction
The double entry system records every transaction with equal debit and credit entries, ensuring the accounting equation remains balanced.
4. A Ledger is also known as:
- A. The book of final entry
- B. The book of prime entry
- C. The subsidiary book
- D. The trial balance
The Ledger is called the book of final entry as it contains all accounts where transactions from journals and subsidiary books are posted.
5. Which one of the following is NOT a subsidiary book?
- A. Cash Book
- B. Sales Book
- C. Trial Balance
- D. Purchase Book
Trial Balance is not a subsidiary book; it is a statement prepared to check the arithmetical accuracy of ledger balances.
6. Accounts are broadly classified into how many categories under traditional classification?
- A. Two
- B. Three
- C. Four
- D. Five
Under traditional classification, accounts are divided into three types: Personal Accounts, Real Accounts, and Nominal Accounts.
7. Which of the following is a Real Account?
- A. Salaries Account
- B. Capital Account
- C. Building Account
- D. Debtors Account
Real Accounts are related to assets and properties. Building Account is an example of a Real Account.
8. Which account follows the rule: “Debit the receiver, Credit the giver”?
- A. Personal Account
- B. Real Account
- C. Nominal Account
- D. Expense Account
The golden rule of Personal Account is: Debit the receiver, Credit the giver.
9. Rent paid is an example of which type of account?
- A. Personal Account
- B. Real Account
- C. Asset Account
- D. Nominal Account
Rent paid is an expense; expenses and incomes are classified under Nominal Accounts.
10. Which of the following correctly matches the account category with its rule?
- A. Real Account – Debit the giver, Credit the receiver
- B. Nominal Account – Debit all expenses & losses, Credit all incomes & gains
- C. Personal Account – Debit what comes in, Credit what goes out
- D. Real Account – Debit expenses, Credit incomes
The golden rule for Nominal Account is: Debit all expenses & losses, Credit all incomes & gains.
11. The rule “Debit what comes in, Credit what goes out” applies to:
- A. Nominal Account
- B. Personal Account
- C. Real Account
- D. Expense Account
The golden rule of Real Account is: Debit what comes in, Credit what goes out.
12. In accounting, 'Debit' always represents:
- A. Increase in assets or expenses
- B. Increase in liabilities or income
- C. Decrease in assets
- D. Owner’s equity
Debit represents increases in assets and expenses, or decreases in liabilities and income.
13. Which entry is correct when a bank pays office rent of ₹20,000 by cheque?
- A. Rent A/c Dr. ₹20,000; To Cash A/c ₹20,000
- B. Cash A/c Dr. ₹20,000; To Rent A/c ₹20,000
- C. Bank A/c Dr. ₹20,000; To Rent A/c ₹20,000
- D. Rent A/c Dr. ₹20,000; To Bank A/c ₹20,000
Rent is an expense, hence debited. Payment by cheque reduces Bank balance, hence Bank A/c is credited.
14. Which of the following will be credited when capital is introduced in business?
- A. Cash Account
- B. Capital Account
- C. Bank Account
- D. Expense Account
Capital is the liability of the business towards the owner. Hence, Capital Account is credited.
15. If Goods worth ₹5,000 are sold on credit to Mr. Sharma, which is the correct entry?
- A. Debtors (Mr. Sharma) A/c Dr. ₹5,000; To Sales A/c ₹5,000
- B. Sales A/c Dr. ₹5,000; To Debtors A/c ₹5,000
- C. Purchases A/c Dr. ₹5,000; To Debtors A/c ₹5,000
- D. Cash A/c Dr. ₹5,000; To Sales A/c ₹5,000
On credit sales, Debtor’s account (asset) is debited, and Sales account (income) is credited.
16. A Cash Book with two columns (Cash and Bank) is called:
- A. Single Column Cash Book
- B. Double Column Cash Book
- C. Triple Column Cash Book
- D. Petty Cash Book
A Double Column Cash Book contains both Cash and Bank columns, recording cash and banking transactions together.
17. The Triple Column Cash Book includes which three columns?
- A. Cash, Purchases, Sales
- B. Cash, Bank, Ledger
- C. Cash, Bank, Petty Cash
- D. Cash, Bank, Discount
A Triple Column Cash Book has three columns: Cash, Bank, and Discount.
18. Contra entries are recorded in:
- A. Double/Triple Column Cash Book
- B. Journal Proper
- C. Purchase Book
- D. Sales Book
Contra entries involve both cash and bank accounts (e.g., cash deposited into bank) and are recorded only in Cash Book having both columns.
19. Which of the following is NOT an advantage of maintaining columnar cash books?
- A. Reduces posting work to ledger
- B. Provides ready information of cash and bank balances
- C. Eliminates need for trial balance
- D. Records discounts allowed and received
Trial Balance cannot be eliminated; it is required even if columnar cash books are maintained.
20. Petty Cash Book is usually maintained under which system?
- A. Voucher system
- B. Journal system
- C. Ledger posting system
- D. Imprest system
The imprest system is used for Petty Cash, where a fixed amount is given to the petty cashier, and replenished periodically.
21. The process of recording financial transactions in the Journal is called:
- A. Posting
- B. Journalising
- C. Balancing
- D. Ledgerising
Recording a transaction in the Journal, the book of original entry, is called Journalising.
22. Which of the following is the correct journal entry for purchasing furniture worth ₹50,000 in cash?
- A. Cash A/c Dr. ₹50,000; To Furniture A/c ₹50,000
- B. Furniture A/c Dr. ₹50,000; To Purchases A/c ₹50,000
- C. Purchases A/c Dr. ₹50,000; To Cash A/c ₹50,000
- D. Furniture A/c Dr. ₹50,000; To Cash A/c ₹50,000
Furniture is an asset, hence debited. Cash decreases, so Cash A/c is credited.
23. Which of the following journal entries is correct when goods worth ₹20,000 are returned by a customer?
- A. Sales Return A/c Dr. ₹20,000; To Debtors A/c ₹20,000
- B. Purchases Return A/c Dr. ₹20,000; To Creditors A/c ₹20,000
- C. Cash A/c Dr. ₹20,000; To Sales Return A/c ₹20,000
- D. Debtors A/c Dr. ₹20,000; To Sales A/c ₹20,000
When customers return goods, Sales Return A/c is debited (expense), and Debtors A/c is credited to reduce receivable.
24. Which entry is correct when the owner withdraws ₹10,000 cash for personal use?
- A. Drawings A/c Dr. ₹10,000; To Purchases A/c ₹10,000
- B. Capital A/c Dr. ₹10,000; To Cash A/c ₹10,000
- C. Drawings A/c Dr. ₹10,000; To Cash A/c ₹10,000
- D. Cash A/c Dr. ₹10,000; To Drawings A/c ₹10,000
Owner’s withdrawals reduce capital; hence Drawings A/c is debited, and Cash A/c is credited.
25. If goods worth ₹15,000 are purchased on credit from M/s Gupta and Co., which entry is correct?
- A. Cash A/c Dr. ₹15,000; To Purchases A/c ₹15,000
- B. Purchases A/c Dr. ₹15,000; To M/s Gupta and Co. ₹15,000
- C. M/s Gupta and Co. Dr. ₹15,000; To Purchases A/c ₹15,000
- D. Purchases A/c Dr. ₹15,000; To Cash A/c ₹15,000
Purchases are debited (expense). Since bought on credit, M/s Gupta and Co. (a creditor) is credited.
