Accounts Assistant - Ledger, Cash Book & Audit Mock Test 50 MCQ

Accounts Assistant (Finance) - Accountancy & Book Keeping

Targeted 50 MCQ Practice Module focusing on: Ledger Accounts, Cash Book, and Financial Audit. Designed according to state exam standards for Accounts Assistant (FAA).

Select your answers and click Submit Assessment Answers at the bottom to view your total score and detailed explanations.

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SECTION I: Ledger Accounts [Questions 1 to 17]

1. The Ledger is famously known as the:

Book of Original Entry Principal Book of Accounts Auxiliary Book Memorandum Book

Explanation: While the Journal is the "Book of Original Entry", the Ledger is known as the "Principal Book of Accounts" because it contains the final summarized records of all transactions.

2. The process of transferring entries from the Journal to the appropriate Ledger accounts is termed:

Journalising Balancing Posting Auditing

Explanation: Recording in the Journal is Journalising, whereas transferring transactions from Journal to Ledger is called Posting.

3. What does J.F. stand for in a Ledger account column?

Journal Folio Ledger Folio Journal Format Joint Folio

Explanation: J.F. stands for Journal Folio (page number of the journal where the original entry was made). In the Journal, L.F. (Ledger Folio) is recorded.

4. Which type of accounts usually carry a Debit Balance after balancing at the end of an accounting period?

Liabilities and Revenues Capital and Incomes Creditors and Reserve Accounts Assets and Expenses

Explanation: Under modern rules of accounting, Asset and Expense/Loss accounts always carry a normal Debit balance.

5. If the total of the Debit side of a Ledger account exceeds the total of the Credit side, the balance is referred to as a:

Credit Balance Debit Balance Zero Balance Overdraft Balance

Explanation: When the debit side is heavier than the credit side, it leaves a Debit Balance (written as "By Balance c/d" on the credit side to balance it).

6. Nominal accounts are typically NOT balanced at year-end; instead, their balances are transferred directly to the:

Trading and Profit & Loss Account Balance Sheet Cash Flow Statement Capital Account

Explanation: Nominal accounts (expenses, incomes, losses, gains) are closed at year-end by transferring their totals to the Trading and P&L Account. Real and Personal accounts are balanced and carried forward.

7. A personal account showing a Credit Balance indicates that the person or entity is a:

Debtor Customer Creditor Investor

Explanation: A credit balance in a personal account means the business owes money to that person, making them a Creditor (Liability).

8. What is the phrase 'c/d' used in Ledger balancing shorthand for?

Carried down Carried directly Calculated daily Carried down

Explanation: 'c/d' stands for 'Carried down' (used at the end of an accounting period). 'b/f' or 'b/d' stands for 'Brought forward' / 'Brought down' at the beginning of a period.

9. When goods are sold on credit to Ramesh, which side of Ramesh's Ledger account will be posted?

Credit side Debit side Both sides simultaneously No posting required in Ramesh's account

Explanation: Journal entry: Ramesh A/c Dr. To Sales A/c. Therefore, posting is done on the Debit side of Ramesh's Ledger account as "To Sales A/c".

10. Purchase Returns Account always shows which type of balance?

Credit Balance Debit Balance Nil Balance Fluctuating Balance

Explanation: Purchases have a Debit balance, so Purchase Returns (Return Outward) reduces expense and has a Credit balance.

11. Ledger account entries on the Debit side are prefixed with the word:

By For To From

Explanation: In traditional T-account ledger formats, entries on the Debit side begin with "To" and entries on the Credit side begin with "By".

12. Which of the following is a Sub-division of Ledger containing individual customer accounts?

Creditors Ledger General Ledger Private Ledger Debtors Ledger (Sales Ledger)

Explanation: Debtors Ledger (or Sales Ledger) contains personal accounts of trade debtors (customers).

13. The Trial Balance is prepared using the closing balances extracted from:

Primary Journals Ledger Accounts Vouchers Cash Receipts

Explanation: The Trial Balance is a statement of debit and credit balances drawn directly from all Ledger accounts to test arithmetical accuracy.

14. When proprietor withdraws cash for personal use, what is the debit posting in the ledger?

Drawings Account Capital Account Cash Account Salary Account

Explanation: Journal entry: Drawings A/c Dr. To Cash A/c. Hence, posted on the Debit side of Drawings Account.

15. Capital Account of a business owner normally shows a:

Debit Balance Nil Balance Credit Balance Overdrawn Balance

Explanation: Capital represents internal liability of the business towards the owner, so it normally displays a Credit balance.

16. If an entry of ₹5,000 is posted as ₹500 in the ledger, this error is called an error of:

Omission Principle Compensation Commission

Explanation: Errors due to wrong recording, wrong posting, or wrong casting are called Errors of Commission.

17. Real Accounts (like Plant, Machinery, Building) are closed by balancing and writing:

Balance c/d To P&L Account To Trading Account Written off to Reserve

Explanation: Real accounts represent continuous assets and are carried down ('Balance c/d') to the next financial year.

SECTION II: Cash Book [Questions 18 to 34]

18. The Cash Book serves a dual role in accounting as both a:

Journal and Trial Balance Journal (Subsidiary Book) and Ledger Account Ledger and Balance Sheet Voucher and Invoice

Explanation: Cash book is a Book of Original Entry (Journal) as well as a principal account (Ledger) for cash transactions.

19. Cash Column in a Cash Book can NEVER show a:

Debit Balance Zero Balance Credit Balance Positive Balance

Explanation: A business cannot pay more physical cash than it possesses. Thus, the Cash Column can never show a Credit balance (negative cash).

20. What is a 'Contra Entry' in a Two-Column or Three-Column Cash Book?

An entry that affects both Cash and Bank columns simultaneously An entry posted to the Ledger twice An entry recorded only in the Journal Proper An entry involving trade discounts

Explanation: Contra entries involve transactions like cash deposited into bank or cash withdrawn from bank for office use, affecting both cash and bank sides within the Cash Book.

21. How is a Contra Entry denoted in the Ledger Folio (L.F.) column of a Cash Book?

By letter 'J' By letter 'X' By letter 'B' By letter 'C'

Explanation: The symbol 'C' is written in the L.F. column to indicate that it is a Contra Entry and requires no further posting in the Ledger.

22. Petty Cash Book is maintained to record:

Large capital expenditures Small, routine recurring expenses (e.g., postage, cartage, tea) Credit sales and purchases Bank transactions only

Explanation: The Petty Cash Book handles minor, high-frequency payments to avoid cluttering the main cash book.

23. In an 'Imprest System' of Petty Cash, the petty cashier receives an advance amount at the start of a period. At the end of the period, he is reimbursed:

An amount equal to total actual expenses incurred during the period A fixed double amount Unrelated lump sum amount Half of the total expenses

Explanation: Under the Imprest System, reimbursement equals exact expenses incurred, restoring the float/imprest balance to its fixed original amount.

24. Which discount is NOT recorded in any books of accounts or in the Cash Book?

Cash Discount Early Payment Discount Trade Discount Rebate

Explanation: Trade discount is deducted directly on the invoice/bill amount and is never recorded in the accounts. Cash discount IS recorded.

25. Bank Overdraft balance in a Three-Column Cash Book is shown as a:

Debit balance in Cash Column Debit balance in Bank Column Credit balance in Cash Column Credit balance in Bank Column

Explanation: Bank Overdraft means money owed to the bank (liability), represented as a Credit Balance in the Bank Column.

26. When a cheque received from a customer on the same day is deposited directly into the bank, it is recorded in the Cash Book as:

Debit in Cash Column Debit in Bank Column Credit in Bank Column Contra entry

Explanation: Direct deposit of a cheque increases bank balance immediately: Debit in Bank Column (To Customer A/c).

27. If a customer's cheque previously deposited into the bank is dishonoured, where is it recorded in the Cash Book?

Credit side of Bank Column Debit side of Cash Column Debit side of Bank Column Credit side of Cash Column

Explanation: Dishonour of cheque reduces the bank balance. To reverse original entry, record on the Credit side of Bank Column (By Customer A/c).

28. Cash sales are recorded on which side of the Cash Book?

Credit side Journal Proper Debit (Receipts) side Both sides as contra entry

Explanation: All receipts of cash are posted on the Debit side (Left side) of the Cash Book under "To Sales".

29. The Discount Column on the Debit side of a Three-Column Cash Book records:

Discount Received Trade Discount Allowed Rebate Earned Discount Allowed to debtors

Explanation: Debit side discount column = Discount Allowed (expense). Credit side discount column = Discount Received (gain).

30. Are the Discount columns in a Three-Column Cash Book balanced like Cash/Bank columns?

Yes, always balanced at month end No, they are simply totalled and posted to respective discount accounts Balanced only if there is bank overdraft Closed to Trading Account directly

Explanation: Discount columns are NOT balanced. Total of Dr discount column goes to Discount Allowed A/c (Dr) and Total of Cr discount column goes to Discount Received A/c (Cr).

31. Cash withdrawn from bank for personal use of proprietor is recorded as:

Payment on Credit side in Bank column (By Drawings) Contra entry in Cash Book Receipt on Debit side in Cash column Entry in Sales Book

Explanation: Personal withdrawal from bank reduces bank balance directly. Journal: Drawings A/c Dr. To Bank A/c. It is NOT a contra entry because cash did not enter office cash box.

32. Bank Reconciliation Statement (BRS) is prepared to reconcile differences between:

Cash column of Cash Book and Petty Cash Book Trial Balance and Balance Sheet Bank column of Cash Book and Pass Book (Bank Statement) Cash column and Bank column of Cash Book

Explanation: BRS reconciles the bank balance as per Cash Book with bank balance as per Pass Book / Bank Statement.

33. Direct payment made by bank for insurance premium on standing orders results in:

Passbook balance higher than Cashbook balance Increase in Cashbook cash column No difference in balances Passbook balance lower than Cashbook balance

Explanation: The bank debits/deducts insurance premium immediately, reducing Pass Book balance before entry is passed in Cash Book.

34. A Analytical Petty Cash Book contains multiple columns for:

Different bank accounts Classified head of petty expense items Customer credit sales Foreign currencies

Explanation: An Analytical Petty Cash Book has separate columns for major heads like Postage, Stationery, Conveyance, Refreshments, etc., for easier reporting.

SECTION III: Financial Audit [Questions 35 to 50]

35. The word 'Audit' originates from the Latin word 'Audire', which means:

To hear To write To inspect To calculate

Explanation: 'Audire' literally means "To hear". In ancient times, auditors listened to accounts read aloud by accountants.

36. What is the primary objective of an independent Financial Audit?

Detection and prevention of frauds and errors Assisting management in tax evasion Expressing an independent opinion on 'True and Fair' view of financial statements Writing the primary books of account for client

Explanation: Primary objective of financial audit is expressing an opinion whether financial statements reflect a True and Fair view. Detection of fraud is a secondary objective.

37. An audit conducted continuously throughout the accounting year at regular/irregular intervals is known as:

Statutory Audit Final / Balance Sheet Audit Interim Audit Continuous Audit

Explanation: Continuous audit involves detailed checking of accounting records continuously or periodically throughout the financial year.

38. An audit required mandatorily under the provisions of a specific law or statute is called:

Voluntary Audit Statutory Audit Private Audit Management Audit

Explanation: Audit compulsory by law (e.g., Companies Act for registered companies) is called Statutory Audit.

39. Examination of underlying documentary evidence (invoices, receipts, vouchers) supporting transactions is known as:

Vouching Verification Valuation Post-auditing

Explanation: Vouching is called the 'essence or backbone of auditing'—it is the verification of entries in books with documentary evidence (vouchers).

40. Verification of Assets involves checking which of the following?

Mathematical addition of ledger only Names of employees operating the asset Existence, ownership, title, charge, and proper valuation of the asset Market price changes daily

Explanation: Verification confirms that assets actually exist, belong to the business, are free from undisclosed encumbrances, and are correctly valued.

41. Internal Audit is conducted by:

Independent external CA firm appointed by shareholders Government Tax Department Comptroller and Auditor General (CAG) Employees or internal staff appointed by management

Explanation: Internal audit is an ongoing review of internal controls and operations conducted by employees or internal auditors appointed by management.

42. When an auditor issues an opinion without any reservation or qualification, stating financial statements show a true & fair view, it is called a:

Qualified Report Clean / Unqualified Report Adverse Report Disclaimer of Opinion

Explanation: A Clean or Unqualified audit report indicates full satisfaction of the auditor without any reservations.

43. An Audit Programme is a:

Detailed written scheme/plan of audit work to be executed Software used for accounting Final report presented to AGM List of financial frauds detected

Explanation: Audit programme outlines step-by-step procedures and guidelines for audit assistants during audit work.

44. Audit Working Papers are the property of:

The Client Company Registrar of Companies (ROC) The Auditor Income Tax Officer

Explanation: As per Auditing Standards (SA 230), working papers created/collected during audit belong exclusively to the Auditor.

45. An audit conducted between two annual general meetings to declare an interim dividend is called an:

Internal Audit Interim Audit Special Audit Tax Audit

Explanation: Interim audit is performed during the middle of a financial year to ascertain interim profit for dividend declaration.

46. What type of audit opinion is expressed when auditor faces severe scope limitation and cannot collect sufficient evidence?

Unqualified Opinion Adverse Opinion Positive Opinion Disclaimer of Opinion

Explanation: When the auditor is unable to obtain sufficient appropriate audit evidence due to extreme limitations, a Disclaimer of Opinion is issued.

47. "Window Dressing" in financial statements refers to:

Intentionally presenting financial statements in an over-optimistic/favourable light Purchasing office furniture and displays Writing off bad debts Checking voucher signatures

Explanation: Window dressing is the manipulation of accounts to make the financial position look stronger than it actually is.

48. The Comptroller and Auditor General (CAG) of India conducts statutory audit of:

Sole proprietorship shops Private Limited Companies Government Companies and Public Sector Undertakings (PSUs) Partnership firms

Explanation: Under Article 148-151 of Indian Constitution, CAG audits accounts of Government departments and public sector enterprises.

49. Test Checking in auditing refers to:

100% detailed checking of every voucher Checking a representative sample of transactions out of a large volume Checking only cash transactions Testing accounting software performance

Explanation: Test checking applies sampling principles to inspect representative transactions instead of 100% exhaustive verification.

50. Management Audit is primarily aimed at evaluating:

Arithmetical accuracy of trial balance Tax liability reduction Compliance with factory laws Overall efficiency, performance, and decision-making of management

Explanation: Management audit assesses operational performance, administrative efficiency, and managerial policies.

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