Important MCQs on Financial Statements – II with Explanations
MCQs for Accountancy Class 11 Chapter 10 are essential for understanding the practical concepts and adjustments in Financial Statements – II. This topic is crucial for school exams, competitive tests, and strengthens basic business skills. Practicing these multiple-choice questions makes you confident in handling real-life finance and accounting problems.
| Adjustment Type | Description | Financial Impact |
|---|---|---|
| Outstanding Expenses | Expenses due but not yet paid by year-end | Increase liabilities; reduce net profit |
| Prepaid Expenses | Expenses paid in advance for future period | Increase assets; reduce current period expense |
| Accrued Income | Income earned but not yet received | Increase assets and income |
| Income Received in Advance | Money received for service not yet given | Increase liabilities; reduce current period income |
| Depreciation | Decrease in value of fixed assets over time | Reduce asset value and profit |
Accountancy Class 11 Chapter 10 MCQs With Solutions
Practicing MCQs for Accountancy Class 11 Chapter 10 helps students master adjustments and final accounts. These questions follow the latest CBSE pattern and offer conceptual and application-based challenges for exams and daily business decisions.
- Which expense is due but not paid at the end of the year?
- (a) Outstanding expense
- (b) Prepaid expense
- (c) Accrued income
- (d) Unearned revenue
- Answer: (a) Outstanding expense
- Depreciation on machinery reduces:
- (a) Asset value
- (b) Liabilities
- (c) Capital
- (d) Inventory
- Answer: (a) Asset value
- Income earned but not received is called:
- (a) Outstanding expense
- (b) Accrued income
- (c) Prepaid expense
- (d) Income received in advance
- Answer: (b) Accrued income
- The object of non-trading concerns is:
- (a) Social service
- (b) Profit earning
- (c) Both of these
- (d) None of the above
- Answer: (a) Social service
- If rent of one month is unpaid, which journal entry will be recorded?
- (a) Debit outstanding rent account, Credit rent account
- (b) Debit rent account, Credit outstanding rent account
- (c) Debit profit & loss account, Credit rent account
- (d) Debit rent account, Credit profit & loss account
- Answer: (b) Debit rent account, Credit outstanding rent account
Key Subtopics in Chapter 10: Financial Statements – II
The MCQ questions in this chapter focus on:
- Adjustment entries in Financial Statements
- Differentiating outstanding, prepaid, accrued and advance items
- Depreciation and impact on Balance Sheet
- Calculation of interest on capital
How to Use Accountancy MCQs for Better Results
Solving MCQs regularly for Accountancy Class 11 Chapter 10 improves your exam skills:
- Practice daily with MCQ sets and explanations
- Check answers and learn from detailed solutions
- Understand common mistakes in adjustment entries
- Attempt online tests for speedy revision
Answer Explanations: Why Are They Important?
MCQs with stepwise answer explanations help clear doubts. When you review why an answer is correct, you strengthen your conceptual understanding. For example, knowing why accrued income is an asset prevents confusion during your school and competitive exams.
Tips to Master MCQs in Accountancy Chapter 10
- Read every adjustment carefully in the question
- Remember classification: asset, liability, expense, or income
- Watch for words like “prepaid”, “outstanding”, “accrued”, and “advance”
- Practice journal entries for all adjustments
- Review solved examples in your textbook and at Vedantu
- Use Adjustment Entries resources for more exercises
Real-Life Application: Why These MCQs Matter
Learning to handle such adjustments is important for young entrepreneurs, accountants, and anyone managing business records. School exams, government exam preps (like UPSC or SSC), and daily business rely on correct application of these principles. Practicing with MCQs builds a strong foundation for your accounting journey.
Internal Resources for Further Learning
- Explore Adjustment Entries for in-depth understanding of adjustments
- Review Balance Sheet concepts for asset-liability classification
- Study Objectives and Functions of Accounting to connect theory with MCQ practice
- For more solved examples, see TS Grewal Solutions Chapter 10 and DK Goel Solutions Chapter 10
In summary, MCQs for Accountancy Class 11 Chapter 10 sharpen your skill in adjustment entries, outstanding expenses, and financial statement presentation. They are vital for exam preparation, competitive tests, and practical business learning. Regular practice with solutions at Vedantu strengthens understanding and boosts scores.
FAQs on Accountancy Class 11 Chapter 10: MCQ Questions & Answers
1. What are the key adjustment topics I must focus on for MCQs in Accountancy Class 11 Chapter 10?
For MCQs in Chapter 10, 'Financial Statements - II', you should focus on the treatment of key adjustments. According to the CBSE 2025-26 syllabus, these include:
- Closing Stock
- Outstanding and Prepaid Expenses
- Accrued Income and Income Received in Advance
- Depreciation
- Provision for Doubtful Debts
- Interest on Capital and Drawings
MCQs will primarily test your ability to correctly place these items in the Trading Account, Profit & Loss Account, and Balance Sheet.
2. How do you differentiate between outstanding expenses and prepaid expenses in MCQs?
In multiple-choice questions, the key difference is their nature and treatment. Outstanding Expenses are costs incurred but not yet paid, making them a current liability. They are added to the specific expense in the P&L Account. In contrast, Prepaid Expenses are costs paid in advance but not yet used, making them a current asset. They are deducted from the specific expense in the P&L Account.
3. What is the importance of Chapter 10, 'Financial Statements - II', in the Class 11 Accountancy exam?
This chapter is crucial as it moves beyond basic trial balances to test the practical application of core accounting principles through adjustment entries. It holds significant weightage in exams because it assesses your ability to prepare accurate financial statements that provide a true and fair view of business performance and financial position. Mastering these concepts is essential for scoring well.
4. Why do students often find the adjustment entries in Chapter 10 challenging, and what is the best strategy to master them for MCQs?
The primary challenge is understanding the dual effect of each adjustment, as every adjustment impacts at least two accounts (often one in the Trading/P&L Account and one in the Balance Sheet). The best strategy to master this for MCQs is to first learn the specific journal entry for each adjustment. This clarifies which accounts are debited and credited, making it easier to identify the correct treatment in a multiple-choice format.
5. How does an adjustment for 'depreciation' in an MCQ affect both the Profit & Loss Account and the Balance Sheet?
Depreciation has a two-fold impact that is frequently tested in MCQs. Firstly, it is an expense for the period, so it is shown on the debit side of the Profit & Loss Account. Secondly, it represents a reduction in the value of an asset, so it is deducted from the cost of the corresponding asset on the Balance Sheet's asset side.
6. In an MCQ scenario, what is the correct treatment for 'income received in advance' and why is it considered a liability?
The correct treatment for 'income received in advance' is to deduct it from the relevant income in the Profit & Loss Account and show it on the liabilities side of the Balance Sheet. It is considered a liability because the business has received payment but has not yet earned it, creating an obligation to provide a service or product in the future.
7. What common mistakes should be avoided while solving MCQs on 'provision for doubtful debts' from Chapter 10?
A critical mistake is applying the provision percentage before accounting for all adjustments. Always follow this order: first, subtract any 'further bad debts' from the sundry debtors. Then, calculate the 'new provision' on the adjusted debtor amount. MCQs often try to trick students who do not follow this correct sequence of calculations.
8. How does the 'matching principle' of accounting justify the need for all the adjustment entries covered in Chapter 10?
The Matching Principle requires that expenses for an accounting period be matched against the revenues of the same period to determine the correct profit or loss. Adjustment entries are essential to uphold this principle. They ensure that all expenses (like outstanding rent) and incomes (like accrued commission) for the current year are recorded, regardless of whether cash has been transacted, thus giving a true and fair view of the business's financial performance.
