Commerce & Accountancy MCQ & Objective Questions
Commerce & Accountancy is a vital subject for students aiming to excel in their school exams and competitive assessments. Mastering this field not only enhances your understanding of financial principles but also significantly boosts your exam scores. Practicing MCQs and objective questions is essential, as it helps you identify important questions and reinforces your exam preparation through targeted practice questions.
What You Will Practise Here
Fundamental concepts of accounting and financial statements
Key principles of commerce including trade, marketing, and economics
Important formulas related to profit and loss, balance sheets, and cash flow
Definitions of key terms such as assets, liabilities, and equity
Diagrams illustrating accounting processes and business models
Theory areas covering the role of commerce in the economy
Analysis of case studies relevant to real-world commerce scenarios
Exam Relevance
Commerce & Accountancy is a significant part of the curriculum for CBSE, State Boards, and various competitive exams like NEET and JEE. Questions often focus on practical applications of concepts, requiring students to solve numerical problems and interpret financial data. Common question patterns include multiple-choice questions that test both theoretical knowledge and practical understanding, making it crucial to be well-prepared.
Common Mistakes Students Make
Misunderstanding the difference between assets and liabilities
Confusing terms related to accounting principles
Overlooking the importance of accurate calculations in numerical questions
Neglecting to review the impact of transactions on financial statements
FAQs
Question: What are the key topics I should focus on in Commerce & Accountancy?Answer: Focus on financial statements, accounting principles, and key formulas to excel in this subject.
Question: How can I improve my performance in Commerce & Accountancy exams?Answer: Regular practice of MCQs and understanding the concepts thoroughly will enhance your performance.
Start solving practice MCQs today to test your understanding and boost your confidence in Commerce & Accountancy. Remember, consistent practice is the key to success in your exams!
Q. What is the impact of using LIFO on the balance sheet during a period of rising prices?
A.
Higher current assets.
B.
Lower current assets.
C.
No impact on current assets.
D.
Higher liabilities.
Show solution
Solution
LIFO results in lower ending inventory values, leading to lower current assets on the balance sheet.
Correct Answer:
B
— Lower current assets.
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Q. What is the impact of using straight-line depreciation on financial statements?
A.
It increases net income in the early years
B.
It decreases net income evenly over the asset's life
C.
It has no impact on cash flow
D.
It increases asset value over time
Show solution
Solution
Straight-line depreciation decreases net income evenly over the asset's life, reflecting a consistent expense recognition.
Correct Answer:
B
— It decreases net income evenly over the asset's life
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Q. What is the impact on the trial balance if a $500 payment to a supplier is recorded as a $500 increase in Accounts Receivable?
A.
No impact
B.
Assets increase
C.
Liabilities increase
D.
Assets decrease
Show solution
Solution
This incorrect entry would increase Accounts Receivable instead of decreasing Cash, leading to an imbalance in the trial balance.
Correct Answer:
C
— Liabilities increase
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Q. What is the input tax credit (ITC) in GST?
A.
Tax paid on inputs
B.
Tax paid on outputs
C.
Tax refund
D.
None of the above
Show solution
Solution
Input tax credit (ITC) refers to the tax paid on inputs that can be claimed back against the output tax liability.
Correct Answer:
A
— Tax paid on inputs
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Q. What is the input tax credit?
A.
Tax paid on inputs that can be claimed back
B.
Tax paid on outputs
C.
Tax that cannot be claimed back
D.
Tax on exempt goods
Show solution
Solution
Input tax credit refers to the tax paid on inputs that can be claimed back against the output tax liability.
Correct Answer:
A
— Tax paid on inputs that can be claimed back
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Q. What is the Internal Rate of Return (IRR)?
A.
The discount rate that makes NPV zero
B.
The rate of return on equity
C.
The average return on investment
D.
The cost of capital
Show solution
Solution
The Internal Rate of Return (IRR) is the discount rate that makes the Net Present Value (NPV) of a project equal to zero.
Correct Answer:
A
— The discount rate that makes NPV zero
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Q. What is the journal entry for a partner withdrawing cash from the partnership?
A.
Debit Cash, Credit Capital Account
B.
Debit Drawings Account, Credit Cash
C.
Debit Capital Account, Credit Drawings Account
D.
Debit Cash, Credit Drawings Account
Show solution
Solution
The correct entry is to debit the Drawings Account and credit Cash to record the withdrawal.
Correct Answer:
B
— Debit Drawings Account, Credit Cash
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Q. What is the journal entry for a partner's share of profit in a partnership?
A.
Debit Partner's Capital Account, Credit Profit and Loss Account
B.
Debit Profit and Loss Account, Credit Partner's Capital Account
C.
Debit Cash, Credit Partner's Capital Account
D.
Debit Partner's Capital Account, Credit Cash
Show solution
Solution
The correct entry is to debit Profit and Loss Account and credit Partner's Capital Account to reflect the share of profit.
Correct Answer:
B
— Debit Profit and Loss Account, Credit Partner's Capital Account
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Q. What is the journal entry for depreciation on a partnership asset?
A.
Debit Depreciation Expense, Credit Accumulated Depreciation
B.
Debit Accumulated Depreciation, Credit Depreciation Expense
C.
Debit Asset, Credit Depreciation Expense
D.
Debit Depreciation Expense, Credit Asset
Show solution
Solution
The correct entry is to debit depreciation expense and credit accumulated depreciation to reflect the reduction in asset value.
Correct Answer:
A
— Debit Depreciation Expense, Credit Accumulated Depreciation
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Q. What is the journal entry for purchasing inventory on credit for $500?
A.
Debit Inventory $500, Credit Cash $500
B.
Debit Inventory $500, Credit Accounts Payable $500
C.
Debit Accounts Payable $500, Credit Inventory $500
D.
Debit Cash $500, Credit Inventory $500
Show solution
Solution
The correct entry is to debit Inventory and credit Accounts Payable, reflecting the increase in inventory and the obligation to pay.
Correct Answer:
B
— Debit Inventory $500, Credit Accounts Payable $500
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Q. What is the journal entry for purchasing inventory on credit?
A.
Debit Inventory, Credit Cash
B.
Debit Inventory, Credit Accounts Payable
C.
Debit Accounts Payable, Credit Inventory
D.
Debit Cash, Credit Inventory
Show solution
Solution
When inventory is purchased on credit, the inventory account is debited to increase it, and accounts payable is credited to reflect the liability.
Correct Answer:
B
— Debit Inventory, Credit Accounts Payable
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Q. What is the journal entry for recording a cash sale of $1,000?
A.
Debit Cash $1,000, Credit Sales $1,000
B.
Debit Sales $1,000, Credit Cash $1,000
C.
Debit Cash $1,000, Credit Accounts Receivable $1,000
D.
Debit Accounts Receivable $1,000, Credit Cash $1,000
Show solution
Solution
The correct journal entry for a cash sale is to debit Cash and credit Sales.
Correct Answer:
A
— Debit Cash $1,000, Credit Sales $1,000
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Q. What is the journal entry for recording a credit sale of $2,000?
A.
Debit Accounts Receivable $2,000, Credit Sales $2,000
B.
Debit Sales $2,000, Credit Accounts Receivable $2,000
C.
Debit Cash $2,000, Credit Sales $2,000
D.
Debit Sales $2,000, Credit Cash $2,000
Show solution
Solution
The correct journal entry for a credit sale is to debit Accounts Receivable and credit Sales.
Correct Answer:
A
— Debit Accounts Receivable $2,000, Credit Sales $2,000
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Q. What is the journal entry for recording a purchase of inventory on credit for $3,000?
A.
Debit Inventory $3,000, Credit Accounts Payable $3,000
B.
Debit Accounts Payable $3,000, Credit Inventory $3,000
C.
Debit Purchases $3,000, Credit Cash $3,000
D.
Debit Cash $3,000, Credit Purchases $3,000
Show solution
Solution
The correct journal entry is to debit Inventory and credit Accounts Payable, reflecting the increase in inventory and the obligation to pay.
Correct Answer:
A
— Debit Inventory $3,000, Credit Accounts Payable $3,000
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Q. What is the journal entry for recording a sale of goods for cash?
A.
Debit Cash, Credit Sales Revenue
B.
Debit Sales Revenue, Credit Cash
C.
Debit Accounts Receivable, Credit Cash
D.
Debit Cash, Credit Inventory
Show solution
Solution
When goods are sold for cash, the cash account is debited to increase it, and sales revenue is credited to recognize the income.
Correct Answer:
A
— Debit Cash, Credit Sales Revenue
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Q. What is the journal entry for recording a sole trader's capital contribution?
A.
Debit Capital Account, Credit Cash
B.
Debit Cash, Credit Capital Account
C.
Debit Cash, Credit Revenue
D.
Debit Revenue, Credit Cash
Show solution
Solution
The correct entry is to debit Cash and credit the Capital Account to reflect the increase in cash from the owner's contribution.
Correct Answer:
B
— Debit Cash, Credit Capital Account
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Q. What is the journal entry for recording a sole trader's capital introduced into the business?
A.
Debit Capital Account, Credit Cash
B.
Debit Cash, Credit Capital Account
C.
Debit Cash, Credit Revenue
D.
Debit Revenue, Credit Cash
Show solution
Solution
The correct entry is to debit Cash (increasing assets) and credit Capital Account (increasing owner's equity).
Correct Answer:
B
— Debit Cash, Credit Capital Account
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Q. What is the journal entry for recording accrued expenses at the end of the accounting period?
A.
Debit Expenses, Credit Cash
B.
Debit Cash, Credit Expenses
C.
Debit Expenses, Credit Accounts Payable
D.
Debit Accounts Payable, Credit Expenses
Show solution
Solution
The correct entry is to debit Expenses (increasing expenses) and credit Accounts Payable (increasing liabilities).
Correct Answer:
C
— Debit Expenses, Credit Accounts Payable
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Q. What is the journal entry for recording accrued expenses at year-end?
A.
Debit Expense, Credit Cash
B.
Debit Cash, Credit Expense
C.
Debit Expense, Credit Accounts Payable
D.
Debit Accounts Payable, Credit Expense
Show solution
Solution
The correct entry is to debit Expense and credit Accounts Payable to recognize expenses incurred but not yet paid.
Correct Answer:
C
— Debit Expense, Credit Accounts Payable
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Q. What is the journal entry for recording accrued expenses?
A.
Debit Expense, Credit Cash
B.
Debit Expense, Credit Accounts Payable
C.
Debit Accounts Payable, Credit Expense
D.
Debit Cash, Credit Expense
Show solution
Solution
Accrued expenses are recorded by debiting the expense account and crediting accounts payable.
Correct Answer:
B
— Debit Expense, Credit Accounts Payable
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Q. What is the journal entry for recording depreciation expense of $500?
A.
Debit Depreciation Expense $500, Credit Accumulated Depreciation $500
B.
Debit Accumulated Depreciation $500, Credit Depreciation Expense $500
C.
Debit Depreciation Expense $500, Credit Cash $500
D.
Debit Cash $500, Credit Depreciation Expense $500
Show solution
Solution
The correct journal entry for recording depreciation expense is to debit Depreciation Expense and credit Accumulated Depreciation.
Correct Answer:
A
— Debit Depreciation Expense $500, Credit Accumulated Depreciation $500
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Q. What is the journal entry for recording depreciation expense on equipment?
A.
Debit Depreciation Expense, Credit Accumulated Depreciation
B.
Debit Accumulated Depreciation, Credit Depreciation Expense
C.
Debit Equipment, Credit Depreciation Expense
D.
Debit Depreciation Expense, Credit Equipment
Show solution
Solution
The correct entry is to debit Depreciation Expense and credit Accumulated Depreciation, reflecting the expense incurred and the reduction in asset value.
Correct Answer:
A
— Debit Depreciation Expense, Credit Accumulated Depreciation
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Q. What is the journal entry for recording depreciation expense?
A.
Debit Depreciation Expense, Credit Accumulated Depreciation
B.
Debit Accumulated Depreciation, Credit Depreciation Expense
C.
Debit Depreciation Expense, Credit Cash
D.
Debit Cash, Credit Depreciation Expense
Show solution
Solution
The correct entry is to debit Depreciation Expense to recognize the expense and credit Accumulated Depreciation to reduce the asset's book value.
Correct Answer:
A
— Debit Depreciation Expense, Credit Accumulated Depreciation
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Q. What is the journal entry for recording depreciation on a partnership asset?
A.
Debit Depreciation Expense, Credit Accumulated Depreciation
B.
Debit Accumulated Depreciation, Credit Depreciation Expense
C.
Debit Asset Account, Credit Depreciation Expense
D.
Debit Depreciation Expense, Credit Asset Account
Show solution
Solution
The correct entry is to debit Depreciation Expense and credit Accumulated Depreciation to record the depreciation.
Correct Answer:
A
— Debit Depreciation Expense, Credit Accumulated Depreciation
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Q. What is the journal entry for recording depreciation on a partnership's asset?
A.
Debit Depreciation Expense, Credit Accumulated Depreciation
B.
Debit Accumulated Depreciation, Credit Depreciation Expense
C.
Debit Asset Account, Credit Depreciation Expense
D.
Debit Depreciation Expense, Credit Asset Account
Show solution
Solution
The correct entry is to debit Depreciation Expense and credit Accumulated Depreciation to record the depreciation.
Correct Answer:
A
— Debit Depreciation Expense, Credit Accumulated Depreciation
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Q. What is the journal entry for recording depreciation on a partnership's fixed asset?
A.
Debit Depreciation Expense, Credit Accumulated Depreciation
B.
Debit Accumulated Depreciation, Credit Depreciation Expense
C.
Debit Fixed Asset, Credit Depreciation Expense
D.
Debit Depreciation Expense, Credit Fixed Asset
Show solution
Solution
The correct entry is to debit Depreciation Expense and credit Accumulated Depreciation.
Correct Answer:
A
— Debit Depreciation Expense, Credit Accumulated Depreciation
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Q. What is the journal entry for recording sales revenue of $5,000?
A.
Debit Cash $5,000, Credit Sales Revenue $5,000
B.
Debit Sales Revenue $5,000, Credit Cash $5,000
C.
Debit Accounts Receivable $5,000, Credit Sales Revenue $5,000
D.
Debit Sales Revenue $5,000, Credit Accounts Receivable $5,000
Show solution
Solution
The correct journal entry is to debit Cash and credit Sales Revenue, reflecting the increase in cash from sales.
Correct Answer:
A
— Debit Cash $5,000, Credit Sales Revenue $5,000
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Q. What is the journal entry for recording the purchase of inventory on credit?
A.
Debit Inventory, Credit Accounts Payable
B.
Debit Accounts Payable, Credit Inventory
C.
Debit Cash, Credit Inventory
D.
Debit Inventory, Credit Cash
Show solution
Solution
The correct entry is to debit Inventory and credit Accounts Payable to reflect the purchase of inventory on credit.
Correct Answer:
A
— Debit Inventory, Credit Accounts Payable
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Q. What is the journal entry for recording the sale of goods for cash?
A.
Debit Cash, Credit Sales Revenue
B.
Debit Sales Revenue, Credit Cash
C.
Debit Accounts Receivable, Credit Cash
D.
Debit Cash, Credit Accounts Receivable
Show solution
Solution
When goods are sold for cash, the cash account is debited to increase it, and sales revenue is credited to recognize the income.
Correct Answer:
A
— Debit Cash, Credit Sales Revenue
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Q. What is the journal entry for the depreciation of a partnership asset?
A.
Debit Depreciation Expense, Credit Accumulated Depreciation
B.
Debit Accumulated Depreciation, Credit Depreciation Expense
C.
Debit Asset Account, Credit Depreciation Expense
D.
Debit Depreciation Expense, Credit Asset Account
Show solution
Solution
The correct entry for recording depreciation is to debit the depreciation expense and credit accumulated depreciation.
Correct Answer:
A
— Debit Depreciation Expense, Credit Accumulated Depreciation
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