MCQs on Reconciliation of Cost and Financial Accounts

Reconciliation of the Cost and Financial Accounts is a process to determine the difference between the profits calculated from Financial Accounts and Cost Accounts. Companies use this method to find out if there are any discrepancies while preparing the accounting statements.

Below is a list of multiple-choice questions and answers on the Reconciliation of Cost and Financial Accounts to understand the topic better.

1. Which of the following are financial charges responsible for reducing financial profits?
   1. Discount on debentures or bonds
   2. Stamp duty and other expenses on the issuance and transferring of bonds, shares or stocks
   3. Losses on capital assets
   4. All of the above

Answer: d

2. Which of the following are financial changes responsible for increasing financial profits?
   1. Interest on investments or bank deposits
   2. Profits from the sale of assets
   3. Rent or dividend received
   4. All of the above

Answer: d

3. Which of the following statements is true about the reconciliation of the cost and financial accounts?
   1. Reconciliation of the cost and financial accounts doesn’t facilitate internal control
   2. Reconciliation of the cost and financial accounts facilitates internal control
   3. Reconciliation of the cost and financial accounts facilitates external control
   4. All of the above

Answer: b

4. Which of the following statements is true about the dividend received from shares of a company?
   1. The dividend received is reflected only in the balance sheet
   2. The dividend received is reflected only in the financial accounts
   3. The dividend received is reflected only in the cost accounts
   4. The dividend received is not reflected in either cost or financial account

Answer: b

5. Which of the following statements is true about the interest on capital?
   1. The interest on capital reduces profits in the financial account
   2. The interest on capital reduces profits in the cost account
   3. The interest on capital reduces profits both in the financial and the cost accounts
   4. The interest on capital does not reduce profits either in the financial or the cost accounts

Answer: a

6. Which of the following statements is true about the premium on the issue of shares?
   1. The premium on issue of shares is reflected in the profit and loss statement of the financial accounts
   2. The premium on issue of shares is reflected in the profit and loss statement of the cost accounts
   3. The premium on issue of shares is reflected in the profit and loss statement of both the financial and the cost accounts
   4. The premium on issue of shares is not reflected in the profit and loss statement of either the financial or the cost accounts

Answer: a

7. Which of the following statements is true about the notional rent?
   1. The notional rent is reflected in the profit and loss statement of the financial accounts
   2. The notional rent is reflected in the profit and loss statement of the cost accounts
   3. The notional rent is reflected in the profit and loss statement of both the financial and the cost accounts
   4. The notional rent is not reflected in the profit and loss statement of either the financial or the cost accounts

Answer: b

8. Which of the following statements is true about the undervaluation of stock?
   1. The undervaluation of stock reduces profits in the financial account
   2. The undervaluation of stock reduces profits both in the financial and the cost accounts
   3. The undervaluation of stock reduces profits in the cost account
   4. The undervaluation of stock does not reduce profits either in the financial or the cost accounts

Answer: c

9. Which of the following statements is true about the interest on investments?
   1. The interest on investment increases profits in the cost account
   2. The interest on investment increases profits both in the financial and the cost accounts
   3. The interest on investment increases profits in the financial account
   4. The interest on investment does not increase profits either in the financial or the cost accounts

Answer: c

10. Which of the following statements is true about the loss on sale of capital assets?
    1. The loss on sale of a capital asset increases profits in the cost account
    2. The loss on sale of a capital asset increases profits both in the financial and the cost accounts
    3. The loss on sale of a capital asset increases profits in the financial account
    4. The loss on sale of a capital asset does not increase profits either in the financial or the cost accounts

Answer: c

11. Which of the following statements is correct about the interest on bank deposits?
    1. The interest on bank deposits is debited in the costing profit and loss account
    2. The interest on bank deposits is credited in the costing profit and loss account
    3. The interest on bank deposits is debited in the financial profit and loss account
    4. The interest on bank deposits is credited in the financial profit and loss account

Answer: d

12. What is the full form of FIFO?
    1. First inside first out
    2. First inside first over
    3. First in first out
    4. None of the above

Answer: c

13. What is the full form of LIFO?
    1. Last inside first out
    2. Last inside first over
    3. Last in first out
    4. None of the above

Answer: c

14. Which of the following statements is correct about donations paid by an organisation?
    1. The donations paid by an organisation is debited in the costing profit and loss account
    2. The donations paid by an organisation is credited in the costing profit and loss account
    3. The donations paid by an organisation is debited in the financial profit and loss account
    4. The donations paid by an organisation is credited in the financial profit and loss account

Answer: c

15. In the reconciliation statement, ____________.
    1. The expenses shown only in the financial accounts are added to the financial profits
    2. The expenses shown only in the financial accounts are deducted from the financial profits
    3. The expenses shown only in the financial accounts do not affect the financial profits
    4. The expenses shown only in the financial accounts are deducted from the costing profits

Answer: a

Also See:

• Difference between Balance Sheet and Profit and Loss Account
• Difference between Cost Accounting and Financial Accounting
• Difference between Cost Accounting and Management Accounting
• Difference between Comparative Financial Statement and Common Size Financial Statement