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Free CA Accounting Practice Questions & Answers
150 exam-style Accounting questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 31
Rs.6,000 paid to Ram was correctly entered in the cash book but posted to the debit of Rama's account. The rectifying entry is:
Select an option first.
Correct answer: C — Ram A/c Dr. Rs.6,000; To Rama A/c Rs.6,000
Explanation: An error of commission: the right amount was debited on the right side, only to the wrong person. Remove the wrong debit by crediting Rama and place the correct debit in Ram's account. Since a debit was made either way, the Trial Balance never disagreed, which is why Suspense has no part to play here.
Question 32
The sale of old office furniture for Rs.12,000 was credited to the Sales Account. The rectifying entry, before finalisation of accounts, is:
Select an option first.
Correct answer: D — Sales A/c Dr. Rs.12,000; To Furniture A/c Rs.12,000
Explanation: This is an error of principle: a capital receipt has been treated as revenue, inflating both sales and profit while leaving furniture overstated. Reverse the wrong credit by debiting Sales and give the correct credit to Furniture. Because both a debit and a credit were originally recorded the Trial Balance agreed, so no Suspense Account is involved.
Question 33
Wages of Rs.35,000 paid for the erection of a new plant were debited to the Wages Account. Ignoring depreciation, the effect before rectification is:
Select an option first.
Correct answer: C — Profit understated by Rs.35,000 and fixed assets understated by Rs.35,000
Explanation: Erection wages are a directly attributable cost and should have been capitalised. Charging them to Wages depresses profit by Rs.35,000 and leaves the plant carried Rs.35,000 below its true cost, so BOTH the Profit and Loss Account and the Balance Sheet are wrong. Rectify by Plant A/c Dr., To Wages A/c, and then provide the depreciation that was consequently never charged.
Question 34
An error affecting a nominal account is discovered AFTER the final accounts have been prepared. It must be rectified through:
Select an option first.
Correct answer: C — The Profit and Loss Adjustment Account
Explanation: Once nominal accounts have been closed off to the Profit and Loss Account they no longer exist to be corrected, so the correction is routed through a Profit and Loss Adjustment Account, whose balance is ultimately transferred to Capital. Real and personal accounts, which carry forward, are still rectified directly. Watch for the phrase 'after the final accounts' - it changes the whole answer.
Question 35
Rs.7,500 paid towards the installation of a new machine was debited to the Repairs Account. The error is discovered before the accounts are finalised. The rectifying entry is:
Select an option first.
Correct answer: A — Machinery A/c Dr. Rs.7,500; To Repairs A/c Rs.7,500
Explanation: Capital expenditure has been treated as revenue - an error of principle. Both a debit and a credit were recorded, just in the wrong account, so the Trial Balance still agreed and NO Suspense Account is involved. Remove the wrong debit (credit Repairs) and put in the right one (debit Machinery). Also note the consequential effect: depreciation on Rs.7,500 must now be provided.
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Question 36
The Purchases Day Book was overcast by Rs.900. The error was found after the Trial Balance was drawn up and a Suspense Account opened. The rectifying entry is:
Select an option first.
Correct answer: C — Suspense A/c Dr. Rs.900; To Purchases A/c Rs.900
Explanation: Individual creditors are posted from the day book one by one and are unaffected; only the PERIODIC TOTAL posted to the Purchases Account is wrong. Purchases has therefore been over-debited by Rs.900, so credit Purchases Rs.900 and debit Suspense Rs.900. The tell for a one-sided error is that just one account carries the mistake - which is exactly why the Trial Balance disagreed.
Question 37
The Purchases Book records:
Select an option first.
Correct answer: D — Credit purchases of goods dealt in by the business only
Explanation: Two filters apply together: the transaction must be on CREDIT, and it must be of goods the business trades in. Cash purchases go to the cash book; credit purchases of assets go to the Journal Proper. Candidates lose easy marks by putting a credit purchase of furniture into the Purchases Book, which inflates cost of goods sold and understates fixed assets.
Question 38
Goods returned by a customer are recorded in the:
Select an option first.
Correct answer: C — Sales Return Book
Explanation: Goods coming BACK from a customer are sales returns, recorded in the Sales Return Book (Returns Inward Book) on the basis of the credit note issued. Purchases Return Book records goods sent back to a supplier, evidenced by a debit note. Fix the direction by asking who is returning to whom - candidates routinely reverse the two under exam pressure.
Question 39
The Trial Balance shows a debit total of Rs.9,84,600 and a credit total of Rs.9,88,100. The Suspense Account will show:
Select an option first.
Correct answer: D — A debit balance of Rs.3,500
Explanation: Credits exceed debits by Rs.3,500, so the debit side is short and Rs.3,500 must be placed on the DEBIT side to make the Trial Balance agree - giving Suspense a debit balance. The account is purely temporary: as each one-sided error is rectified it is cleared, and any balance still standing at the year end is shown in the Balance Sheet pending investigation.
Question 40
In a three column cash book, the discount columns are:
Select an option first.
Correct answer: C — Totalled, the totals being posted to the Discount Allowed Account (debit) and the Discount Received Account (credit)
Explanation: The discount columns are MEMORANDUM columns - they are totalled but never balanced, because the two sides record different things (discount allowed on the debit side, discount received on the credit side) and have no reason to be equal. Each total is posted to its own nominal account; the individual amounts are posted to the customers and suppliers concerned.
Question 41
Goods were sold to R for Rs.50,000 at a trade discount of 10%, with a further cash discount of 2% if payment is made within 7 days. R pays within 7 days. The amount credited to the Sales Account is:
Select an option first.
Correct answer: C — Rs.45,000
Explanation: Trade discount is NEVER recorded - it is simply deducted on the invoice, so Sales is credited with 50,000 - 10% = Rs.45,000. Cash discount is a separate financing incentive: the Rs.900 allowed on receipt is debited to Discount Allowed (an expense) and does not touch Sales. Distractor B, Rs.44,100, is the trap of netting both discounts against sales.
Question 42
The Sales Day Book total of Rs.64,000 was posted to the Sales Account as Rs.46,000. The Trial Balance will:
Select an option first.
Correct answer: D — Show the credit side short by Rs.18,000
Explanation: Sales is credited with the day book total. Posting 46,000 in place of 64,000 understates credits by Rs.18,000, while individual debtors were posted correctly from the day book. So the credit side falls short by Rs.18,000 and the difference goes to Suspense. When a question gives a transposed figure, always first ask WHICH side that account normally sits on - the direction of the difference follows from that.
Question 43
Which of the following, on its own, makes the pass book balance HIGHER than the cash book balance (both favourable)?
Select an option first.
Correct answer: C — A cheque issued but not yet presented for payment
Explanation: On issuing a cheque the firm credits its cash book at once, but the bank debits the account only when the cheque is presented - so until presentation the bank shows more money. The other three all reduce the pass book balance relative to the cash book. When answering, always identify WHO has recorded the item and who has not yet; that single sentence decides the direction every time.
Question 44
A cheque of Rs.4,600 received from a customer was entered in the cash book as Rs.6,400, though the bank correctly credited Rs.4,600. In a BRS starting from the cash book balance, this item requires:
Select an option first.
Correct answer: B — Deducting Rs.1,800
Explanation: The cash book has been overstated by 6,400 - 4,600 = Rs.1,800, so moving from cash book to pass book requires deducting Rs.1,800. Note the practical point examiners look for: this is an error in the firm's OWN books, so besides showing it in the BRS the cash book itself must be corrected - a reconciling item caused by a firm's error is not left standing.
Question 45
The pass book shows an overdraft of Rs.32,000. Cheques issued but not yet presented amount to Rs.9,400, and cheques deposited but not yet cleared amount to Rs.6,300. The overdraft as per the cash book is:
Select an option first.
Correct answer: D — Rs.35,100
Explanation: Treat an overdraft as a negative balance and the usual rules still work: cash book = pass book - unpresented + uncleared = (-32,000) - 9,400 + 6,300 = -35,100, i.e. an overdraft of Rs.35,100. Sanity check the direction before writing: unpresented cheques mean the bank has not yet paid them, so the bank's position looks BETTER, and the overdraft per the pass book must be the smaller of the two.
Question 46
The cash book shows a favourable balance of Rs.18,000. Cheques issued but not yet presented amount to Rs.4,500; cheques deposited but not yet credited amount to Rs.2,800; bank charges of Rs.120 and interest credited by the bank of Rs.620 are not yet recorded in the cash book. The balance as per the pass book is:
Select an option first.
Correct answer: D — Rs.20,200
Explanation: Start from 18,000; add 4,500 unpresented cheques (bank has not yet paid them out); deduct 2,800 uncleared deposits (bank has not yet given credit); deduct 120 bank charges; add 620 interest. 18,000 + 4,500 - 2,800 - 120 + 620 = Rs.20,200. Set the statement out line by line with the reason against each item - in a written answer the reasons carry as many marks as the total.
Question 47
An accommodation bill is one which is drawn:
Select an option first.
Correct answer: C — To provide financial accommodation to one or both parties, with no underlying sale of goods
Explanation: An accommodation bill has no trade transaction behind it - it is drawn and accepted purely so that one party (or both, in a mutual accommodation) can raise funds by discounting it. Accounting-wise the entries mirror a trade bill, but the proceeds are shared in the agreed ratio and each party records the other's share as a loan, which is where marks are usually lost.
Question 48
A three-month bill for Rs.90,000 is discounted with the bank immediately at 12% per annum. The discounting charge is:
Select an option first.
Correct answer: A — Rs.2,700
Explanation: Discount = 90,000 x 12% x 3/12 = Rs.2,700, so the bank pays Rs.87,300. Distractor B applies the rate for a full year. In the drawer's books the entry is Bank Dr. 87,300 and Discount Rs.2,700 (a revenue expense), with Bills Receivable credited Rs.90,000 - the discount is a financing cost, never a reduction of the debtor.
Question 49
X had discounted B's acceptance with the bank. The bill is dishonoured on maturity and the bank pays Rs.500 as noting charges. In X's books the entry is:
Select an option first.
Correct answer: C — B's A/c Dr. (bill amount plus Rs.500); To Bank A/c (bill amount plus Rs.500)
Explanation: On dishonour of a discounted bill the drawer must reimburse the bank the full amount plus noting charges, and recover the whole of it from the acceptor. Noting charges are ALWAYS borne ultimately by the party in default, so they are debited to B's account, not treated as X's expense. Bills Receivable is not re-credited because it was already cleared when the bill was discounted.
Question 50
A bill dated 15 May 2026 is made payable three months after date. Its due date, including days of grace, is:
Select an option first.
Correct answer: D — 18 August 2026
Explanation: Three months after 15 May is 15 August; adding the three days of grace gives 18 August 2026. Two refinements the examiner watches for: months are counted as calendar months, not 90 days; and if the due date falls on a public holiday the bill matures on the PRECEDING business day, while an emergency holiday moves it to the NEXT day.
Question 51
A company redeems preference shares of Rs.5,00,000 at par. Rs.2,00,000 is funded out of a fresh issue of equity shares made for that purpose and the balance out of divisible profits. The amount to be transferred to the Capital Redemption Reserve is:
Select an option first.
Correct answer: C — Rs.3,00,000
Explanation: The nominal value of shares redeemed OUT OF PROFITS must be transferred to the Capital Redemption Reserve: 5,00,000 - 2,00,000 = Rs.3,00,000. The purpose is capital maintenance - the company's capital base must not shrink merely because it has returned money to preference shareholders. Note that only the proceeds of a FRESH ISSUE made for the purpose reduce the transfer; existing reserves do not.
Question 52
Interest on debentures is:
Select an option first.
Correct answer: D — A charge against profit, payable whether or not the company earns a profit
Explanation: Debenture holders are creditors, not members, so their interest is a contractual cost debited to the Profit and Loss Account irrespective of profits - unlike a preference dividend, which is an appropriation payable only out of profits. This charge-versus-appropriation distinction is the heart of most theory questions on debentures, and it also explains why debenture interest attracts tax deduction at source.
Question 53
A company issues 50,000 equity shares of Rs.10 each at a premium of Rs.4, payable Rs.5 on application (including Rs.2 of premium), Rs.6 on allotment (including Rs.2 of premium), and the balance on first and final call. The first and final call per share is:
Select an option first.
Correct answer: D — Rs.3
Explanation: Total collectible per share = face value Rs.10 + premium Rs.4 = Rs.14. Application Rs.5 + allotment Rs.6 = Rs.11, so the call is Rs.3. Keep face value and premium in separate columns throughout the working: the Securities Premium Account is credited only with the Rs.4, and it is credited as and when each instalment falls due, not all at application.
Question 54
Under the Companies Act, 2013, the Securities Premium Account may be applied for:
Select an option first.
Correct answer: C — Writing off the preliminary expenses of the company
Explanation: Section 52(2) permits the premium to be applied only for specified purposes - issuing fully paid bonus shares, writing off preliminary expenses, writing off the expenses, commission or discount on an issue of shares or debentures, providing the premium payable on redemption of preference shares or debentures, and buy-back under section 68. It is a capital reserve in substance and is never available for dividends or revenue losses. Verify the current text of section 52 against the ICAI study material for your attempt, as the permitted list has been amended in the past.
Question 55
A machine costing Rs.3,60,000 was purchased on 1 October 2025. Depreciation is 15% per annum on the straight line basis. The charge for the year ended 31 March 2026 is:
Select an option first.
Correct answer: C — Rs.27,000
Explanation: The asset was held for 6 of the 12 months: 3,60,000 x 15% x 6/12 = Rs.27,000. Distractor A charges the full year. Whenever a date of purchase or sale is given mid-year, write the time fraction explicitly in the working - examiners award a mark for the pro-rating itself, separately from the arithmetic.
Question 56
Depreciation is best described as:
Select an option first.
Correct answer: B — The systematic allocation of the depreciable amount of an asset over its useful life
Explanation: Depreciation is an ALLOCATION process, not a valuation or a funding exercise. It spreads cost less residual value over useful life so that revenue bears the cost of the resource consumed in earning it, which is the matching concept at work. No cash is set aside unless a separate sinking fund is created, and the carrying amount after depreciation is not a claim about market value.
Question 57
An asset with an original cost of Rs.2,00,000 and accumulated depreciation of Rs.1,45,000 is sold for Rs.48,000. The result of the sale is:
Select an option first.
Correct answer: A — Loss of Rs.7,000
Explanation: Written down value = 2,00,000 - 1,45,000 = Rs.55,000; sale proceeds Rs.48,000; loss on sale Rs.7,000, charged to the Profit and Loss Account. Present it as a three-line Asset Disposal Account - cost in, accumulated depreciation out, proceeds out, balance being the profit or loss - which is the format expected in a written answer.
Question 58
A machine costing Rs.5,20,000 has an estimated residual value of Rs.40,000 and a useful life of 8 years. Annual depreciation under the straight line method is:
Select an option first.
Correct answer: C — Rs.60,000
Explanation: Depreciable amount = cost less residual value = 5,20,000 - 40,000 = Rs.4,80,000; spread over 8 years gives Rs.60,000 a year. Distractor A ignores the residual value altogether, which is the standard trap. Always write the depreciable amount as a separate line before dividing - it shows the examiner you applied the definition rather than a remembered formula.
Question 59
A machine costing Rs.1,50,000 was purchased on 1 April 2024. Depreciation is charged at 30% per annum on the written down value. The WDV as at 31 March 2026 is:
Select an option first.
Correct answer: A — Rs.73,500
Explanation: Year 1: 1,50,000 x 30% = 45,000, leaving Rs.1,05,000. Year 2: 1,05,000 x 30% = 31,500, leaving Rs.73,500. Distractor B stops after one year; distractor C applies the straight line method (30% x 2 years on cost). Under WDV the charge falls each year, which is precisely why it suits assets whose repair costs rise with age - a point worth making in any theory comparison.
Question 60
Opening stock Rs.1,20,000; purchases Rs.8,40,000; purchase returns Rs.40,000; carriage inwards Rs.30,000; closing stock Rs.1,60,000; sales Rs.11,00,000; sales returns Rs.50,000. Gross profit is:
Select an option first.
Correct answer: D — Rs.2,60,000
Explanation: Net sales = 11,00,000 - 50,000 = Rs.10,50,000. Cost of goods sold = 1,20,000 + (8,40,000 - 40,000) + 30,000 - 1,60,000 = Rs.7,90,000. Gross profit = Rs.2,60,000. Carriage INWARDS is part of cost of goods sold; carriage outwards is a selling expense in the Profit and Loss Account - misplacing it changes gross profit and costs marks throughout the rest of the answer.
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