accqs

Cost concept MCQs

1. What is the basic concept of cost concept?

A) Cost ascertainment.

B) Tax compliance.

C) Financial audit

D) Profit analysis

Answer: A

2. Process costing is appropriate for which firm?

A) Bricklaying firms

B) Transport firms

C) Hospitals

D) Oil refining firms

Answer: D

3. In how many ways cost classification can be done?

A) Three ways

B) Two ways

C) Four ways

D) Many ways

Answer: D

4. Which cost is incurred even if the company is closed?

A) Sunk cost

B) Historical cost

C) Shutdown cost

D) Imputed cost

Answer: C

5. Direct expenses are also known as

A) Overhead expenses

B) Sundry expenses

C) Chargeable expenses

D) Major expenses

Answer: C

6. Warehouse rent is a part of which cost?

A) Production cost

B) Distribution cost

C) Prime cost

D) Factory cost

Answer: B

7. What is tender?

A) Estimation of cost

B) Estimation of profit

C) Estimation of units

D) Estimation of the selling price

Answer: D

8. A total of all the direct costs is known as

A) Cost of production

B) Cost of sales

C) Prime cost

D) Works cost

Answer: C

9. What item is not included in cost accounting?

A) Product costing

B) Profit-sharing

C) Planning

D) Controlling

Answer: B

10. Toy manufacturing companies use what type of costing?

A) Multiple costing

B) Process costing

C) Unit costing

D) Batch costing

Answer: D

MCQs on Cost Accounting -2 

1. Standard costs is…………………

(A) Predetermined cost

(B) budgeted cost

(C) Actual cost

(D) none of these

Answer : A

2. ……………………are costs which have been applied against revenue of particular accounting period.

(A) Expenses

(B) income

(C) loss

(D) none of these

Answer :    A

3. ……………….is the smallest segment of activity or area or responsibility for which costs are accumulated.

(A) Cost Object

(B) Cost centre

(C) cost driver

(D) none of the above

Answer :  B

4. The primary emphasis of………………..cost is on the planning function of management.

(A) Budgeted

(B) standard

(C) period

(D) none of these

Answer : A

5. …………..cost is irrecoverable cost.

(A) marginal

(B) out of pocket

(C) Sunk

(D) none of these

Answer :  C

6. ……………….is the value of a benefit where no actual cost is incurred.

(A) Imputed

(B) sunk

(C) out of pocket

(D) none of these

Answer :  A

7. ……………is the cost which involves payment to outsiders.

(A) Out of pocket cost

(B) Imputed cost

(C) notional cost

(D) none of these

Answer :   A

8. ………………… is the maximum possible alternative earning that might have been earned if the productive capacity is put to some alternative use.

(A) Opportunity

(B) incremental revenue

(C) alternative revenue

(D) none of these

Answer :  A

9. An item of cost that is direct for one business may be …………..for another business.

(A) Important

(B) direct

(C) Indirect

(D) none of the above.

Answer :  C

10. The total of all direct expenses is known as …………..cost.

(A) Prime

(B) Works

(C) Production

(D) both a & b

Answer : A

MCQs on Cost Accounting -3 

1. The principle types of inventories are raw materials and ,…………and finished goods

(A) Processed materials

(B) Goods-in-progress

(C) stored goods

(D) goods for dispatch

Answer : B

2. Re-ordering level = Maximum consumption x …………………………

(A) Average re-order period

(B) Maximum usage

(C) Maximum re-order period

(D) Normal usage

Answer :  C

3. Inventory turnover ratio = Cost of inventory consumed during the period ÷ Cost of ……………………held during the period

(A) Average inventory

(B) minimum inventory

(C) maximum inventory

(D) none of these

Answer :  A

4. Inventory turnover in days = Days during the period ÷………………..

(A) Inventory turnover ratio

(B) material consumed during the period

(C) cost of average stock during the period

(D) none of these

Answer :  A

5. ………….is a technique of material cost control which leads to low carrying cost as a result of low investment in inventory

(A) ABC Analysis

(B) JIT Inventory System

(C) VED Analysis

(D) Perpetual Inventory System

Answer :  B

6. ………………is a technique of stock control which leads to saving of time of the management because attention is required to be paid only to some of the items rather than on all the items.

(A) ABC Analysis

(B) JIT Inventory System

(C) VED Analysis

(D) Perpetual Inventory System

Answer :  A

7. ……………….. is used primarily for control of spare parts.

(A) ABC Analysis

(B) JIT Inventory System

(C) VED Analysis

(D) Perpetual Inventory System

Answer :  C

8. Inventory turnover ratio = Cost of …………………..during the period ÷Cost of average inventory held during the period.

(A) Inventory consumed

(B) minimum inventory

(C) maximum inventory

(D) none of these

Answer :  A

9. Re-ordering level = ……………………. X Maximum re-order period

(A) Average re-order period

(B) Maximum usage

(C) Maximum consumption

(D) Normal usage

Answer :  C

10. ……………obviates the necessity for the physical checking of all items of stores at the end of the year and thereby avoids dislocation of production.

(A) ABC Analysis

(B) JIT Inventory System

(C) VED Analysis

(D) Perpetual Inventory System

Answer :  D

MCQs on Cost Accounting -4 

1. Material control does not cover the following stage.

(A) Purchase of materials

(B) storing of materials

(C) issue of materials

(D) production

Answer :  D

2. Material control aims at achieving effective…………

(A) Material management

(B) quality control

(C) accounting of material

(D) material supply

Answer :  A

3. Stores Ledger is maintained in the…………………

(A) Store

(B) finance department

(C) cost accounting department

(D) Both a & b

Answer :  C

4. Stock verification sheets are maintained to record the results of ……….

(A) Physical verification

(B) financial control

(C) financial verification

(D) quality verification

Answer :  A

5. Stock Adjustment Account is debited with ……….and credited with ………..

(A) Surplus, shortage of stock

(B) shortage of stock, surplus

(C) excess, loss

(D) none of these

Answer :  B

6. Bin card is a record of ………….only.

(A) Cost

(B) value

(C) quantity

(D) expense

Answer :  C

7. Bin card is maintained by the…………….

(A) Cost accountant

(B) Clerk

(C) storekeeper

(D) branch accountant

Answer :  C

8. Material abstract is also known as ………………

(A) Material issue analysis sheet

(B) bill of materials

(C) stores ledger

(D) none of the above

Answer :  A

9. Material should be issued by the store keeper against……………….

(A) Material requisition

(B) bill of materials

(C) both a & b

(D) none of these

Answer :  C

10. First in first out method of valuing material issues is suitable in times of…………

(A) Rising prices

(B) falling prices

(C) fluctuating prices

(D) none of these

Answer :  B

MCQs on Cost Accounting - 6 

1. Fixed cost …………………… in the same proportion in which output changes.

(A) does not change

(B) changes

(C) increases

(D) none of these.

Answer :  A

2. Administration expenses are mostly……………….

(A) semi-variable

(B) variable

(C) fixed

(D) none of these.

Answer :  C

3. Abnormal cost is …………………..

(A) Uncontrollable

(B) controllable

(C) fixed

(D) none of these

Answer :  A

4. Cost of production is equal to ……………………

(A) works overhead plus administration overheads

(B) Prime cost plus Works cost

(C) prime cost plus works overhead

(D) Works cost plus Administration Overheads 

Answer :  D

5. Variable cost increases with ………….in output.

(A) Increase

(B) decrease

(C) increase or decrease

(D) none of these.

Answer :  A

6. ……………………….Accounting provides information for cost control.

(A) Financial

(B) Cost

(C) Human Resource

(D) none of these.

Answer :  B

7. ………………………. is one which can be conveniently identified with and charged to a particular unit of cost.

(A) Direct cost

(B) Indirect cost

(C) Overhead

(D) none of these

Answer :  A

8. Cost centre and cost unit are……………………

(A) not the same

(B) the same

(C) not related

(D) none of these

Answer :  A

9. Fixed cost per unit …………………… with rise in output and …………… with fall in output.

(A) Decreases, increases

(B) increases, decreases

(C) is constant, remains same

(D) none of the above

Answer :  A

10. Period costs charged to……………….

(A) cost of production

(B) Products

(C) Period

(D) none of these

Answer :  C

MCQs on Cost Accounting - 7 

1. The budget relating to ………….must be prepared first and the other budgets should be prepared in the light of that factor.

(A) Limiting factor

(B) materials

(C) labour

(D) production

Answer :  A

2. …………………budget is the most important budget and it forms the basis on which all the other budgets are built up.

(A) Production

(B) material

(C) cash budget

(D) sales

Answer :  D

3. ………………….budget may be classified into material cost budget, labour cost budget and overhead budget.

(A) Cost of Production

(B) purchase

(C) sales

(D) Cash

Answer :  A

4. ……………….budget gives an estimate of the anticipated receipts and payment of cash during the budget period.

(A) Sales

(B) Production

(C) Cash

(D) Master

Answer :  C

5. ……………….is the consolidated summary of the various functional budgets.

(A) Master Budget

(B) Sales budget

(C) Performance budget

(D) Cash Budget

Answer :  A

6. …………………budget is designed to remain unchanged irrespective of the volume of output or turnover attained.

(A) Master

(B) Fixed

(C) Flexible

(D) all of these

Answer :  B

7. …………………budget gives different budgeted costs for different levels of activity.

(A) Master

(B) Fixed

(C) Flexible

(D) all of these

Answer :  C

8. …………………budget is the preparation of budget starting from a clean state.

(A) Performance

(B) Zero Base

(C) Cash

(D) none of these

Answer :  B

MCQs on Cost Accounting - 8 

1. ……………….is a summary of all function budgets in a Capsule form.

(A) Sales budget 

(B) Master Budget

(C) Performance budget

(D) Cash Budget

Answer : A

2 . ……………..determines the priorities of functional budget.

(A) Principal Budget Factor

(B) Limiting Factor

(C) both a & b

(D) none of the above.

Answer :  C

5. Cash Budget is a ……………….budget.

(A) Long term

(B) short term 

(C) very long term

(D) very short term

Answer :  B

6. The primary difference between a fixed budget and a variable(flexible) budget is that a fixed budget:

(A) Includes only fixed costs, while a variable budget includes only variable costs.

(B) Is concerned only with future acquisitions of fixed assets, while a variable budget is concerned with expenses which vary with sales.

(C) Cannot be changed after the period begins, while a variable budget can be changed after the period begins.

(D) Is a plan for a single level of sales(or other measure of activity), while a variable budget consists of several plans, one for each of several levels of sales (or other measure of activity)

Answer :  D

7. Sales budget is a

(A) Functional budget

(B) Master budget

(C) Expenditure budget

(D) none of these

Answer :  A

8. In the case of plant, the limiting factor may be:

(A) Insufficient capacity

(B) shortage of experienced salesmen

(C) general shortage of power

(D) shortage of materials

Answer :  A

9. The difference between fixed and variable cost has a special significance in the preparation of

(A) Flexible budget

(B) master budget

(C) cash budget

(D) sales budget

Answer :  A

10. The budget that is prepared first of all is…………..

(A) Cash budget

(B) master budget

(C) budget for the key factor

(D) sales budget

Answer :  C

MCQs on Cost Accounting - 9 

1. ……………costs are partly fixed and partly variable in relation to output.

(A) Variable

(B) fixed

(C) Semi-variable

(D) both a & b

Answer :  C

2. An opportunity cost is …………………..

(A) the advantage foregone

(B) the cost

(C) the income

(D) none of the above.

Answer :  A

3. Works cost is a total of………………

(A) Indirect material, Indirect labour

(B) Direct material, direct labour, direct or chargeable expenses and works expenses

(C) Direct material, direct labour

(D) Indirect material, Indirect labour, Indirect expenses

Answer :  B

4. An opportunity cost does not involve…………

(A) Cash outlays

(B) direct cost

(C) indirect cost

(D) none of the above

Answer :  A

5. Variable costs change ……………………with change in output.

(A) Proportionately

(B) Inversely

(C) Disproportionately

(D) Sometimes

Answer :  A

6. Fixed cost per unit …………………….with increase in output.

(A) decreases

(B) increases

(C) changes

(D) sometimes

Answer :  A

7. Depreciation is…………………expenditure.

(A) fixed

(B) variable

(C) adjustable

(D) Semi-variable

Answer :  D

8. Out of pocket costs involve payment to …………………

(A) Outsiders

(B) self

(C) employees

(D) none of the above

Answer :  A

9. Added value is the change in…………………

(A) Market value

(B) cost

(C) income

(D) none of the above.

Answer :  A

10. …………………. Accounting is not only a positive science but also a normative science because it includes techniques of budgetary control and standard costing.

(A) Financial

(B) Cost

(C) both a & b

(D) none of these

Answer :  B

Sample Accounting MCQs with Answers:

Question 1

Accounting furnishes data on

A) Income and cost for the managers

B) Financial conditions of the institutions

C) Company’s tax liability for a particular year

D) All the above

Answer: D

Question 2

Long term assets having no physical existence but, possessing a value are called

A) Intangible assets

B) Fixed assets

C) Current assets

D) Investments

Answer: A

Question 3

The assets that can be easily converted into cash within a short period, i.e., 1 year or less are known as

A) Current assets

B) Fixed assets

C) Intangible assets

D) Investments

Answer: A

Question 4

Copyrights, Patents and Trademarks are,

A) Current assets

B) Fixed assets

C) Intangible assets

D) Investments

Answer: C

Question 5

The debts which are to be repaid within a short period (a year or less) are referred to as,

A) Current Liabilities

B) Fixed liabilities

C) Contingent liabilities

D) All the above

Answer: A

Question 6

Gross profit is

A) Cost of goods sold + Opening stock

B) Excess of sales over cost of goods sold

C) Sales fewer Purchases

D) Net profit fewer expenses of the period

Answer: B

Question 7

Net profit is computed in the

A) Profit and loss account

B) Balance sheet

C) Trial balance

D) Trading account

Answer: A

Question 8

In order to find out the value of the closing stock during the end of the financial year we,

A) do this by stocktaking

B) deduct the cost of goods sold from sales

C) deduct opening stock from the cost of goods sold

D) look in the stock account

Answer: A

Question 9

Which of these best explains fixed assets?

A) Are bought to be used in the business

B) Are expensive items bought for the business

C) Are items which will not wear out quickly

D) Are of long life and are not purchased specifically for resale

Answer: D

Question 10

The charges of placing commodities into a saleable condition should be charged to

A) Trading account

B) P & L a/c

C) Balance Sheet

D) None of the above

Answer: B

Question 11

Suppliers personal a/c are seen in the

A) Sales Ledger

B) Nominal ledger

C) Purchases Ledger

D) General Ledger

Answer: C

Question 12

If you want to ensure that your money will be secured if cheques sent are wasted in the post, you should

A) Always pay by cash

B) Cross your Cheques ‘Account Payee only, Not Negotiable.’

C) Always get the money in person

D) Not use the postal service in future

Answer: B

Question 13

Discounts received are

A) Deducted by us when we pay our accounts

B) Deducted when we receive cash

C) Given by us when we sell goods on credit

D) None of these

Answer: A

Question 14

Sales invoices are first entered in

A) The Cash Book

B) The Purchases Journal

C) The Sales Journal

D) The Sales Account

Answer: C

Question 15

Entered in the Purchases Journal are

A) Discounts received

B) Purchases invoices

C) Payments to suppliers

D) Trade discounts

Answer: B

Question 16

At the balance sheet date, the balance on the Accumulated Provision for Depreciation Account is

A) Transferred to Depreciation Account

B) Transferred to the Asset Account

C) Transferred to Profit and Loss Account

D) Simply deducted from the asset in the Balance Sheet

Answer: D

Question 17

If we take goods for own use we should

A) Debit Drawings Account, Credit Purchases Account

B) Debit Drawings Account: Credit Stock Account

C) Debit Sales Account: Credit Stock Account

D) Debit Purchases Account: Credit Drawings Account

Answer: A

Question 18

When a petty cash book is kept there will be

A) No entries made at all in the general ledger for items paid by petty cash

B) The same number of entries in the general ledger

C) Fewer entries made in the general ledger

D) More entries made in the general ledger

Answer: C

Question 19

If a trial balance totals do not agree, the difference must be entered in

A) The Profit and Loss Account

B) A Nominal Account

C) The Capital Account

D) A Suspense Account

Answer: D

Question 20

If it is required to maintain fixed capitals then the partners’ shares of profits must be

A) Credited to capital accounts

B) Debited to capital accounts

C) Debited to partners’ current accounts

D) Credited to partners’ current accounts

Answer: D

Question 21

Liability- side of the balance-sheet comprises:

(a) Capital and reserve

(b) Long-term liabilities

(c) Current liabilities

(d) All of the above

Answer: D

Question 22

Balance Sheet of a firm indicates which of the following?

(a) Profit or Loss over a period.

(b) Financial position of the unit over a period.

(c) Financial position of the unit as on a particular date.

(d) Position of assets and liabilities over a period of time.

Answer: C

Question 23

Economic life of an enterprise is split into the periodic interval as per ------- concept

(a) Matching

(b) Money measurement

(c) Periodicity

(d) Accrual

Answer: C

Question 24

Provision is provided for doubtful debts is based on the principle of 

(a) Going concern

(b) Objectivity

(c) Materiality

(d) Conservation

Answer: D

Question 25

Prepaid salary has

(a) Debit balance

(b) Negative balance

(c) Credit balance

(d) None of the above

Answer: A

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Question 26

When money is withdrawn from the bank, the bank will ------- the account of customer 

(a) Credit

(b) Debit and Credit

(c) Debit

(d) None of the above

Answer: C

Question 27

An entry with more than one debit or credit is known as 

(a) Compound entry

(b) Singly entry

(c) Multiple entry

(d) Double entry

Answer: A

Question 28

Loss leads to

(a) reduction in income

(b) Reduction in capital

(c) Reduction in profit

(d) Increase in capital

Answer: B

Question 29

Residual value of an asset is

(a) The amount realized on the sale of an asset

(b) The price paid on the purchase of the asset

(c) Reduced value of the asset every year

(d) one of the above

Answer: A

Question 30

Depreciation account is closed by

(a) Transferring to balance sheet

(b) Transferring to profit & loss account

(c) Transferring to asset account

(d) Totaling

Answer: B

Question 31

Which of the following asset is not subject to depreciation

(a) Plant & Machinery

(b) Land

(c) Loose tools

(d) Furniture

Answer: B

Question 32

The term depletion is used in relation to

(a) Natural resources

(b) Fixed assets

(c) Current assets

(d) None of the above

Answer: A

Question 33

An asset is purchased for Rs.50,000 on which depreciation is provided annually according to the straight line method. the useful life is 10 years and the scrap value is 10,000. The rate of depreciation is

(a) 18%

(b) 8%

(c) 12%

(d) 10%

Answer: D

Question 34

Secret reserve may result by

(a) Creating general reserve

(b) Overvaluation of stocks

(c) Providing excessive depreciation

(d) Undervaluation of liabilities

Answer: C

Question 35

Gross profit is 25% on sales and cost of goods sold 75,000. The amount of sales will be

(a) 150000

(b) 125000

(c) 80000

(d) 100000

Answer: D

Question 36

Opening capital 9,000; closing capital 16,500; drawings during the year 2,600. The amount of profit will be

(a) 10100

(b) 4900

(c) 9100

(d) 10000

Answer: A