Accountancy Auditing MCQs Questions with Answers pdf free download for competitive exams preparation. Basic financial, management and cost accounting mcqs with answers.
1. What happens to fixed cost with production?
Answer: Fixed costs never change even if production capacity is doubled. This means no matter how much or how little you produce, the fixed costs remain the same.
2. What does conversion cost consist of?
Answer: Conversion cost is made up of labour costs and overhead costs. Labour costs include wages and salaries paid to employees directly involved in the production process. Overhead costs include indirect expenses like rent, utilities, and depreciation.
3. In which industry is process costing relevant?
Answer: Process costing is most relevant in industries where products are produced in a continuous process, like the cement industry or the oil refining industry. This is because it’s difficult to track the cost of individual units in these industries, so total costs are spread out over the entire production run.
4. How would you define operating profit?
Answer: Operating profit is the profit a company makes from its core business operations after deducting normal operating expenses, including depreciation. It’s calculated by subtracting the cost of goods sold and operating expenses from revenue.
5. What makes a cost accounting system good?
Answer: A good cost accounting system should enable management to increase productivity and rationalize cost structure. It should provide accurate and timely information about costs, so managers can make informed decisions about pricing, production, and resource allocation.
6. What does a stratified audit sample involve?
Answer: A stratified audit sample involves carefully selecting items from each group or stratum of the population being audited. This ensures that the sample is representative of the entire population and that all groups have a chance of being included.
7. What is another term that is synonymous with internal control?
Answer: Internal check is another term that is synonymous with internal control. It refers to the policies and procedures put in place by a company to safeguard its assets, prevent errors and fraud, and ensure the accuracy and reliability of its financial records.
8. How is the audit of a bank generally conducted?
Answer: The audit of a bank typically involves a balance sheet audit. This means the auditor will focus on verifying the accuracy and completeness of the bank’s financial statements, including its assets, liabilities, and equity.
9. Who is an auditor liable to for their annual audit of accounts?
Answer: An auditor is liable to the owners of the company for their annual audit of accounts. This means the auditor is responsible for ensuring that the financial statements are accurate and fair, and that they comply with all relevant accounting standards and regulations.
10. How should partners behave if a firm has paid super-tax?
Answer: If a firm has paid super-tax, the partners should simply pay income tax as required under the law. The super-tax is an additional tax levied on companies in Pakistan, but it does not exempt them from their regular income tax obligations.
11. Under what conditions does a resident multinational company need not pay income tax?
Answer: A resident multinational company does not need to pay income tax in Pakistan if it is not enjoying tax exemption under the Income Tax Ordinance, 1979 (Second Schedule). This schedule lists various exemptions and concessions available to different types of companies.
12. Is the super tax on companies currently in vogue in Pakistan?
Answer: Yes, the super tax on companies is currently in vogue in Pakistan. It was introduced in 2015 and has been amended several times since then.
13. How is the current ratio calculated?
Answer: The current ratio is calculated by dividing a company’s current liabilities by its current assets. This ratio measures a company’s ability to meet its short-term obligations with its short-term assets.
14. How would you define a short-term loan?
Answer: A short-term loan is a loan that is due to be repaid within one year or less. Examples of short-term loans include bank overdrafts, lines of credit, and commercial paper.
15. According to current law in Pakistan, how many partners can a partnership have?
Answer: According to current law in Pakistan, a partnership can have a maximum of 20 partners. However, there is no minimum number of partners required to form a partnership.
16. How would you best describe a combination?
Answer: A combination is a type of corporate restructuring that involves two or more companies merging their operations and assets to form a new entity. This is different from an acquisition, where one company purchases another company and takes control of its assets and operations.
Basic Accountancy & Auditing Solved MCQs Questions with Answers
Partnership Act 1932:
Q: What is the maximum number of partners allowed in a partnership firm set up in Pakistan under the Partnership Act, 1932?
Ans: 20
Financial Report Preparation:
Q: Which law governs the preparation of final financial reports in Pakistan?
Ans: Companies Ordinance 1984
Depreciation:
Q: On what basis is depreciation calculated?
Ans: Economic life of the asset
Inventory Turnover:
Q: How is inventory turnover calculated?
Ans: Cost of Goods sold divided by Closing Inventory
Worksheet vs. Balance Sheet:
Q: What is the difference between a worksheet and a balance sheet?
Ans: Worksheet is a combination of results of profits and financial positions
Deferred Revenue:
Q: What category does deferred revenue fall under?
Ans: Liability
Annual Report Preparation:
Q: Under what document is the preparation of an annual report for a firm governed?
Ans: Partnership Deed
Deferred Taxation:
Q: How should deferred taxation amount be treated?
Ans: As an item in the Balance Sheet on the asset side
Return on Equity:
Q: How is Return on Equity calculated?
Ans: Operating Profit multiplied by 100 divided by Equity
Current Loan Maturity:
Q: Is the current maturity of a long-term loan classified as a current liability or a long-term liability?
Ans: Current Liability
Sales Budget Preparation:
Q: How should a sales budget be prepared?
Ans: Based on sales forecasts of the market
Consolidation of Subsidiary Accounts:
Q: Is the consolidation of subsidiary accounts in the balance sheet of an unlisted Holding company in Pakistan currently:
Ans: Voluntary
Retained Earnings:
Q: What is retained earnings synonymous with?
Ans: Accumulated profit and loss account
Banking Company Audit:
Q: Under which ordinance are the requirements of an audit report for a banking company in Pakistan governed?
Ans: Banking Companies Ordinance, 1962
Deferred Taxation:
Q: Is deferred taxation considered a fixed liability or a part of owner’s equity?
Ans: Part of owner’s equity
Mutual Funds:
Q: Which type of mutual funds does the Investment Corporation of Pakistan follow?
Ans: Closed-end mutual funds
Limited Company Director’s Report:
Q: Is the inclusion of a Directors Report mandatory or voluntary for a limited company in respect of the financial report constituent?
Ans: Mandatory for a limited company
Limited Company Financial Reports:
Q: What is required by law to be included along with financial reports for every limited company in Pakistan?
Ans: Chairman’s Review
Cash Budget:
Q: Which items are excluded from a cash budget?
Ans: Non-Cash items
NGO Accounts:
Q: Are NGOs legally required to prepare accounts in a prescribed manner under the law?
Ans: Yes, NGOs must prepare accounts in a prescribed manner under the law.