Accounting is an important subject for commerce students, finance professionals, and those preparing for competitive exams. One of the best ways to strengthen your understanding is by practicing well-designed Accounting MCQs. These questions help you revise key topics like journal entries, financial statements, cost accounting, GST, and income tax in a simple format. Solving MCQs regularly helps improve accuracy and recall. Whether you’re studying for CA, CMA, CS, or just brushing up on the basics, these Accounting MCQs will help make your learning more effective. This article includes a wide variety of MCQs along with correct answers for easy revision.
80 Accounting MCQs
1. A company purchases machinery for $500,000 with an estimated life of 10 years and no salvage value. What is the annual depreciation using the straight-line method?
A) $40,000
B) $50,000
C) $60,000
D) $55,000
Answer: B) $50,000
2. If goods costing $50,000 are sold for $70,000, what is the gross profit percentage?
A) 20%
B) 28.5%
C) 40%
D) 30%
Answer: C) 40%
3. Which principle states that revenue should be recorded when it is earned, regardless of when payment is received?
A) Matching Principle
B) Consistency Principle
C) Revenue Recognition Principle
D) Prudence Principle
Answer: C) Revenue Recognition Principle
4. A company has Current Assets of $1,00,000 and Current Liabilities of $50,000. What is the Current Ratio?
A) 1.5:1
B) 2:1
C) 3:1
D) 0.5:1
Answer: B) 2:1
5. Deferred revenue refers to:
A) Income received in advance
B) Income earned but not received
C) Accounts receivable
D) Bad debts provision
Answer: A) Income received in advance
6. If a company’s debt-to-equity ratio is 3:1, it means:
A) The company is fully financed by equity
B) The company has high financial leverage
C) The company has no debts
D) The company is risk-free
Answer: B) The company has high financial leverage
7. Which of the following is a contingent liability?
A) Outstanding salary
B) Bills payable
C) Claim under lawsuit
D) Accrued expenses
Answer: C) Claim under lawsuit
8. The formula for calculating the break-even point in sales value is:
A) Fixed Costs ÷ Contribution per unit
B) Fixed Costs ÷ (Selling price – Variable cost)
C) Fixed Costs ÷ Contribution Margin Ratio
D) Fixed Costs ÷ Gross Profit
Answer: C) Fixed Costs ÷ Contribution Margin Ratio
9. A company issued shares at $10 each with a premium of $2. What is the amount of securities premium for 10,000 shares?
A) $20,000
B) $100,000
C) $120,000
D) $10,000
Answer: A) $20,000
10. Which inventory valuation method results in lower taxable income when prices are rising?
A) FIFO
B) LIFO
C) Weighted Average
D) Specific Identification
Answer: B) LIFO
11. IFRS is issued by:
A) FASB
B) IASB
C) SEC
D) ICAI
Answer: B) IASB
12. The matching principle relates to:
A) Revenue recognition
B) Matching expenses to revenues
C) Recording assets
D) Valuing inventory
Answer: B) Matching expenses to revenues
13. Under IFRS, goodwill is:
A) Amortized every year
B) Tested annually for impairment
C) Written off immediately
D) Not recorded
Answer: B) Tested annually for impairment
14. A company buys equipment costing $100,000 and incurs installation costs of $10,000. What is the capitalized cost?
A) $100,000
B) $110,000
C) $90,000
D) $105,000
Answer: B) $110,000
15. Which is NOT considered a financial asset?
A) Cash
B) Accounts Receivable
C) Plant and Equipment
D) Equity shares held in another company
Answer: C) Plant and Equipment
16. A substantive audit procedure is aimed at:
A) Evaluating internal controls
B) Detecting material misstatements
C) Calculating depreciation
D) Preparing tax returns
Answer: B) Detecting material misstatements
17. Which type of audit opinion is issued when financial statements do not present a true and fair view?
A) Unqualified
B) Qualified
C) Adverse
D) Disclaimer
Answer: C) Adverse
18. Which audit technique involves observing processes?
A) Confirmation
B) Vouching
C) Observation
D) Inspection
Answer: C) Observation
19. An audit trail is important because it:
A) Tracks management decisions
B) Verifies the accuracy of financial data
C) Measures profitability
D) Avoids taxation
Answer: B) Verifies the accuracy of financial data
20. Internal audits are primarily intended for:
A) External reporting
B) Shareholders
C) Management
D) Government regulators
Answer: C) Management
21. Input tax credit under GST means:
A) Tax refund to customers
B) Credit for taxes paid on purchases
C) Deduction for personal expenses
D) Cash back on sales
Answer: B) Credit for taxes paid on purchases
22. Tax planning involves:
A) Tax evasion
B) Illegal avoidance
C) Legitimate minimization of tax liability
D) Ignoring tax laws
Answer: C) Legitimate minimization of tax liability
23. Which income is exempt from income tax?
A) Agricultural income
B) Salary income
C) Capital gains
D) Rent income
Answer: A) Agricultural income
24. TDS stands for:
A) Tax Deducted at Source
B) Tax Direct on Salary
C) Tax Deferred Savings
D) Tax Document Sheet
Answer: A) Tax Deducted at Source
25. GST is levied on:
A) Manufacture
B) Sale
C) Supply
D) Consumption only
Answer: C) Supply
26. Which cost changes with the level of production?
A) Fixed cost
B) Variable cost
C) Sunk cost
D) Opportunity cost
Answer: B) Variable cost
27. Absorption costing includes:
A) Only variable costs
B) Only fixed costs
C) Both fixed and variable costs
D) No costs
Answer: C) Both fixed and variable costs
28. Opportunity cost is:
A) Historical cost
B) The cost of next best alternative foregone
C) Fixed cost
D) Variable cost
Answer: B) The cost of next best alternative foregone
29. Margin of safety formula is:
A) Actual Sales – Break-even Sales
B) Fixed Cost – Variable Cost
C) Net Profit – Operating Expenses
D) Sales – COGS
Answer: A) Actual Sales – Break-even Sales
30. If variable cost per unit is $10, selling price is $25, and fixed costs are $30,000, what is the break-even point in units?
A) 1,200
B) 2,000
C) 3,000
D) 4,000
Answer: B) 2,000
31. Quick ratio excludes:
A) Inventory
B) Cash
C) Receivables
D) Marketable securities
Answer: A) Inventory
32. A high inventory turnover ratio indicates:
A) Slow sales
B) Strong sales performance
C) Overstocking
D) Poor cash flow
Answer: B) Strong sales performance
33. A company has a gross profit margin of 60%. If sales are $100,000, what is the gross profit?
A) $40,000
B) $60,000
C) $70,000
D) $50,000
Answer: B) $60,000
34. Which ratio is used to assess long-term solvency?
A) Current ratio
B) Quick ratio
C) Debt to equity ratio
D) Inventory turnover
Answer: C) Debt to equity ratio
35. Earnings Per Share (EPS) is calculated as:
A) Net Income ÷ Total Assets
B) Net Income ÷ Number of Outstanding Shares
C) Gross Profit ÷ Shares
D) Dividend ÷ Shares
Answer: B) Net Income ÷ Number of Outstanding Shares
36. A company received $5,000 for services not yet performed. What is the journal entry?
A) Debit Cash, Credit Revenue
B) Debit Revenue, Credit Cash
C) Debit Cash, Credit Unearned Revenue
D) Debit Accounts Receivable, Credit RevenueAnswer: C) Debit Cash, Credit Unearned Revenue
37. If a company’s working capital is negative, it means:
A) Current liabilities exceed current assets
B) Company is debt-free
C) Company has high profits
D) Assets are fully depreciated
Answer: A) Current liabilities exceed current assets
38. Which accounting concept prevents overstating assets?
A) Accrual
B) Prudence
C) Going concern
D) Consistency
Answer: B) Prudence
39. When inventory costs are falling, which method shows higher profit?
A) FIFO
B) LIFO
C) Weighted Average
D) Standard Cost
Answer: A) FIFO
40. A director withdrew $10,000 for personal use but recorded it as office rent. This violates:
A) Accrual Concept
B) Business Entity Concept
C) Conservatism
D) Dual Aspect
Answer: B) Business Entity Concept
41. Contra entry affects:
A) Only journal
B) Cash book
C) Ledger
D) Trial balance
Answer: B) Cash book
42. Prepaid expense appears in the balance sheet as:
A) Current liability
B) Current asset
C) Fixed asset
D) Equity
Answer: B) Current asset
43. Partnership firms are governed by:
A) Companies Act
B) Partnership Act
C) Income Tax Act
D) GST Act
Answer: B) Partnership Act
44. The double-entry system means:
A) Single side effect
B) Dual aspect—every debit has a credit
C) Only credit entry
D) No balancing
Answer: B) Dual aspect—every debit has a credit
45. Which asset is NOT depreciated?
A) Machinery
B) Building
C) Land
D) Furniture
Answer: C) Land
46. Carriage outwards is classified as:
A) Direct Expense
B) Selling Expense
C) Operating Expense
D) Manufacturing Expense
Answer: B) Selling Expense
47. Which account is affected when an owner withdraws cash for personal use?
A) Cash and Drawings
B) Cash and Sales
C) Cash and Capital
D) Cash and Rent
Answer: A) Cash and Drawings
48. Outstanding salaries are recorded under:
A) Assets
B) Liabilities
C) Expenses
D) Income
Answer: B) Liabilities
49. Which document is prepared to check arithmetical accuracy of ledger balances?
A) Balance Sheet
B) Trial Balance
C) Ledger
D) Cash Book
Answer: B) Trial Balance
50. Which concept assumes a business will continue indefinitely?
A) Accrual Concept
B) Going Concern
C) Matching Principle
D) Consistency
Answer: B) Going Concern
51. If a company forfeits 1,000 shares of ₹10 each, ₹7 called up, and ₹5 paid, what is the forfeiture amount?
A) ₹5,000
B) ₹7,000
C) ₹2,000
D) ₹10,000
Answer: A) ₹5,000
52. When shares are issued at a price higher than face value, the excess is credited to:
A) Capital Reserve
B) Securities Premium Account
C) Share Capital
D) General Reserve
Answer: B) Securities Premium Account
53. Dividend is usually declared on:
A) Authorized Capital
B) Paid-up Capital
C) Issued Capital
D) Subscribed Capital
Answer: B) Paid-up Capital
54. Interim dividend is declared between:
A) Two Annual General Meetings
B) End of the year
C) After audit only
D) Before company formation
Answer: A) Two Annual General Meetings
55. Buy-back of shares results in:
A) Increase in capital
B) Decrease in share capital
C) No change in capital
D) Increase in liabilities
Answer: B) Decrease in share capital
56. Prime cost =
A) Direct Material + Direct Labor + Direct Expenses
B) Direct Material + Indirect Costs
C) Total Cost + Profit
D) Factory Cost + Selling Expenses
Answer: A) Direct Material + Direct Labor + Direct Expenses
57. Factory Overheads include:
A) Direct wages
B) Rent of factory
C) Office salaries
D) Direct materials
Answer: B) Rent of factory
58. Contribution margin formula is:
A) Sales – Variable Cost
B) Sales – Fixed Cost
C) Profit – Overheads
D) Net Profit – Operating Expenses
Answer: A) Sales – Variable Cost
59. The costing technique focusing on reduction of production defects is:
A) Process Costing
B) Target Costing
C) Kaizen Costing
D) Standard Costing
Answer: C) Kaizen Costing
60. Which cost is not considered in marginal costing?
A) Fixed Cost
B) Variable Cost
C) Direct Cost
D) Prime Cost
Answer: A) Fixed Cost
61. Negative confirmation in audit means:
A) Requesting confirmation
B) Reply required only if information is incorrect
C) Mandatory response
D) Confirming balances
Answer: B) Reply required only if information is incorrect
62. Which type of audit is mandatory for listed companies?
A) Management Audit
B) External Audit
C) Tax Audit
D) Forensic Audit
Answer: B) External Audit
63. Audit sampling helps in:
A) Full checking
B) Reasonable assurance
C) Skipping work
D) Ignoring material misstatements
Answer: B) Reasonable assurance
64. The person responsible for fraud detection is:
A) Auditor
B) Management
C) Audit Committee
D) Internal Auditor only
Answer: B) Management
65. Internal Check is a system under:
A) Taxation
B) Auditing
C) Accounting only
D) None
Answer: B) Auditing
66. Capital gain arises on:
A) Sale of inventory
B) Sale of fixed assets
C) Income from salary
D) Bank interest
Answer: B) Sale of fixed assets
67. GST is applicable on:
A) Agriculture
B) Barter Transactions
C) Salary
D) Gifts
Answer: B) Barter Transactions
68. TDS on rent exceeds threshold is deducted at:
A) 2%
B) 10%
C) 5%
D) 15%
Answer: B) 10%
69. Goods exported are charged GST at:
A) Standard Rate
B) Zero Rate
C) Maximum Rate
D) 5%
Answer: B) Zero Rate
70. Tax Audit is mandatory if turnover exceeds:
A) ₹50 lakhs
B) ₹1 crore
C) ₹2 crore
D) ₹5 crore
Answer: B) ₹1 crore
71. Lease liability under IFRS 16 is recorded as:
A) Off-balance sheet
B) Liability
C) Expense
D) Deferred income
Answer: B) Liability
72. Revenue is recognized when:
A) Order is received
B) Delivery is made
C) Payment is received
D) Invoice is prepared
Answer: B) Delivery is made
73.Fair value means:
A) Historical cost
B) Estimated market value
C) Book value
D) Salvage value
Answer: B) Estimated market value
74. Goodwill is shown under:
A) Current Assets
B) Fixed Assets
C) Intangible Assets
D) Current Liabilities
Answer: C) Intangible Assets
75. Depreciation is based on which accounting concept?
A) Accrual
B) Matching
C) Going Concern
D) Cost
Answer: B) Matching
76. AS-10 relates to:
A) Revenue
B) Property, Plant, and Equipment
C) Borrowing Costs
D) Lease Accounting
Answer: B) Property, Plant, and Equipment
77. Impairment loss is booked when:
A) Asset’s carrying value > recoverable amount
B) Asset value increases
C) Asset is fully depreciated
D) Asset is revalued
Answer: A) Asset’s carrying value > recoverable amount
78. AS-2 is related to:
A) Fixed Assets
B) Valuation of Inventories
C) Amalgamation
D) Depreciation
Answer: B) Valuation of Inventories
79. Which is NOT a qualitative characteristic of financial statements?
A) Relevance
B) Reliability
C) Beauty
D) Understandability
Answer: C) Beauty
80.Which method is used for inventory in AS-2?
A) LIFO
B) FIFO or Weighted Average
C) Standard Cost
D) Moving Average
Answer: B) FIFO or Weighted Average
Wrapping Up
Solving Accounting MCQs is a simple and smart way to understand important topics in accounting. These questions help you remember key points and check how much you have learned. Whether it’s journal entries, GST, financial ratios, or costing, MCQs cover all the major parts of accounting. They are useful for students, job seekers, and anyone preparing for exams. Practicing regularly can improve your confidence and help you avoid mistakes. We hope these Accounting MCQs with answers made your learning easier and clearer. Keep practicing more questions to stay sharp and do well in your exams or interviews.
