ANSWER KEY
Trial Balance MCQs
1. Trial Balance shows:
Answer: (c) Both debit and credit balances
Explanation: Trial balance lists all ledger balances, both debits and credits, to check
arithmetic accuracy.
2. Errors not disclosed by Trial Balance:
Answer: (d) Capital expenditure shown as revenue expenditure
Explanation: Trial balance cannot detect errors of principle like wrong classification
of expenses.
3. Preparation of Trial Balance is:
Answer: (b) Optional
Explanation: It's a tool for checking ledger arithmetic but not mandatory for
accounting.
4. Trial Balance tests:
Answer: (c) Arithmetical
Explanation: It checks mathematical accuracy, not theoretical correctness.
5. Errors of omission permit:
Answer: (c) Trial Balance to agree
Explanation: When transactions are completely omitted, debits and credits remain
balanced.
6. Rs. 2,000 received from previously written off debtor credited to:
Answer: (a) Bad Debts Recovered Account
Explanation: Recovery of bad debts is credited to Bad Debts Recovered.
7. Error disclosed by Trial Balance:
Answer: (a) Error of omission
Explanation: Trial balance reveals errors where debit ≠ credit but not all omission
errors.
8. Shown as debit balance in Trial Balance:
Answer: (a) Cash in hand
Explanation: Assets have debit balances.
9. Rectifying entry for Rent wrongly credited by Rs. 5,000 instead of Rs. 500:
Answer: (d) Rs. 4,500
Explanation: The difference (Rs. 5,000 - Rs. 500) = Rs. 4,500 debited to Rent
Account.
10. Freight expenses for machinery are:
Answer: (a) Capital expenditure
Explanation: Expenses to bring asset to working condition are capitalized.
11. Trial Balance checks:
Answer: (a) Arithmetical accuracy of books
Explanation: It checks ledger balances for arithmetical accuracy.
12. Debit Rs. 50,000 and Credit Rs. 49,000 difference Rs. 1,000 indicates:
Answer: (c) Error in totaling
Explanation: Difference usually due to errors in totaling ledger/trial balance.
13. Goods taken by owner for personal use:
Answer: (b) Debited to Drawing Account
Explanation: Goods withdrawn by owner recorded as drawings.
14. If Trial Balance doesn't match, difference recorded in:
Answer: (a) Suspense Account
Explanation: Suspense account temporarily records difference until error is located.
15. Discount allowed shown on:
Answer: (a) Debit side of Trial Balance
Explanation: Discount allowed is an expense so shown as debit.
Provisions and Reserves MCQs
16. Provision for doubtful debts shown on:
Answer: (a) Asset side
Explanation: It reduces debtors' value, shown as deduction on asset side.
17. Example of revenue reserve is:
Answer: (a) General reserve
Explanation: Revenue reserves created from profits for future use.
18. Reserve created out of profits is:
Answer: (b) Revenue reserve
Explanation: Created from net profits earned.
19. Provision for discount on debtors is shown as:
Answer: (a) Deduction from debtors balance
Explanation: Reduces debtors amount on balance sheet.
20. Provision for depreciation shown as:
Answer: (a) Deduction from asset side
Explanation: Shown as deduction from fixed asset value.
21. Reserve for replacement of fixed assets is a:
Answer: (c) Specific reserve
Explanation: Created for a specified purpose.
22. Unrecorded liability is provided for in:
Answer: (a) Provision for expenses
Explanation: Estimated expenses recognized as provision.
23. Provision for warranties shown in:
Answer: (b) Liabilities
Explanation: Estimated warranty expenses shown as liability.
24. Reserve is created from:
Answer: (b) Revenue profits
Explanation: Reserves come from revenue profits, not capital.
25. Provision for bad debts shown in:
Answer: (d) Credit side of Balance Sheet
Explanation: Shown as deduction from debtors on asset side (credit balance of
provision).
26. Provision created for:
Answer: (a) Loss
Explanation: Provisions cover anticipated losses or expenses.
27. Capital reserve arises from:
Answer: (b) Capital profits
Explanation: Created from non-operating gains like sale of fixed assets.
28. Reserve for unforeseen losses is called:
Answer: (a) General reserve
Explanation: General reserve is for contingencies.
29. Purpose of Provisions is to:
Answer: (b) Provide for known liabilities
Explanation: Recognizes probable, quantifiable liabilities.
30. Not shown in Balance Sheet is:
Answer: (c) Contingent liability
Explanation: Contingent liabilities are disclosed in notes only.