Q.1 Which of the following best describes Branch Accounts?
Accounts prepared to record the activities of different departments
Accounts prepared to record the activities of different branches of a business
Accounts prepared to record head office activities only
Accounts prepared for tax authorities
Explanation - Branch accounts are maintained to record and report the financial activities of separate branches of a business.
Correct answer is: Accounts prepared to record the activities of different branches of a business
Q.2 In departmental accounts, why are separate trading and profit & loss accounts prepared?
To calculate tax separately
To ascertain the performance of each department individually
To simplify accounting records
To reduce audit fees
Explanation - Separate departmental accounts help management analyze the profitability and efficiency of each department.
Correct answer is: To ascertain the performance of each department individually
Q.3 When goods are transferred from Head Office to Branch at invoice price, the difference between invoice price and cost is known as?
Gross Profit
Loading
Net Profit
Depreciation
Explanation - The excess of invoice price over cost is called 'loading' and must be adjusted while preparing branch accounts.
Correct answer is: Loading
Q.4 Which type of branch does not maintain its own set of books?
Dependent Branch
Independent Branch
Foreign Branch
Wholesale Branch
Explanation - Dependent branches do not maintain their own accounts; instead, the Head Office maintains records for them.
Correct answer is: Dependent Branch
Q.5 In Departmental Accounting, which expense is NOT allocated but directly charged to a specific department?
Rent
Electricity
Salaries of departmental staff
Advertising
Explanation - Direct departmental expenses like salaries are charged directly, while others like rent are apportioned.
Correct answer is: Salaries of departmental staff
Q.6 The main purpose of preparing Departmental Accounts is?
Tax calculation
Cost control and performance evaluation
Avoiding duplication of records
Preparing consolidated accounts
Explanation - Departmental accounts help assess performance and control costs across different divisions.
Correct answer is: Cost control and performance evaluation
Q.7 If closing stock includes goods transferred from one department to another, how should it be shown?
At cost price only
At invoice price only
At cost after eliminating unrealized profit
At selling price
Explanation - Unrealized profit on inter-departmental transfers should be adjusted to avoid inflated profits.
Correct answer is: At cost after eliminating unrealized profit
Q.8 Which branch is allowed to maintain full books of accounts independently?
Dependent Branch
Independent Branch
Small Branch
Nominal Branch
Explanation - Independent branches maintain their own books and prepare final accounts, unlike dependent branches.
Correct answer is: Independent Branch
Q.9 When preparing Branch Accounts under the Debtors System, Branch Debtors A/c is debited when?
Cash is remitted to Head Office
Goods are received by branch
Sales are made on credit by branch
Expenses are incurred by Head Office
Explanation - Branch Debtors Account is debited when goods are sold on credit at the branch.
Correct answer is: Sales are made on credit by branch
Q.10 In Departmental Accounts, common expenses like rent are usually divided based on?
Equally
Area occupied by each department
Sales turnover
Number of staff
Explanation - Expenses like rent are apportioned according to floor area occupied by each department.
Correct answer is: Area occupied by each department
Q.11 Which of the following is a method of maintaining branch accounts?
Stock and Debtors System
Balance Sheet System
Profit & Loss System
Depreciation System
Explanation - The Stock and Debtors System is commonly used to maintain detailed branch accounts.
Correct answer is: Stock and Debtors System
Q.12 If goods are sent to a branch at cost plus 20%, then loading is?
10%
20%
16.67%
25%
Explanation - Loading = (Profit ÷ Invoice Price) × 100 = 20 ÷ 120 × 100 = 16.67%.
Correct answer is: 16.67%
Q.13 Departmental accounts are generally prepared in which type of organizations?
Manufacturing units only
Trading and manufacturing organizations with divisions
Only service firms
Small shops
Explanation - Departmental accounts are useful where business is divided into several product or service divisions.
Correct answer is: Trading and manufacturing organizations with divisions
Q.14 Which of the following expenses is NOT apportioned but charged to General Profit & Loss A/c?
Direct wages
Insurance for one department
Manager's salary (general)
Department-specific rent
Explanation - General expenses like the overall manager's salary are charged to the General P&L A/c.
Correct answer is: Manager's salary (general)
Q.15 Stock reserve is created in branch accounts to adjust for?
Depreciation
Unrealized profit on goods sent to branch
Bad debts
Cash shortages
Explanation - Stock reserve eliminates unrealized profit in unsold branch stock.
Correct answer is: Unrealized profit on goods sent to branch
Q.16 Head Office expenses incurred for branches are shown in which account?
Branch A/c
Head Office A/c
General Profit & Loss A/c
Branch Debtors A/c
Explanation - Branch A/c is debited with branch-related expenses incurred by the Head Office.
Correct answer is: Branch A/c
Q.17 Departmental transfers of goods should be recorded at?
Selling price
Invoice price
Cost or agreed transfer price
Fair value
Explanation - Goods transferred between departments are recorded at cost or agreed price, with unrealized profits adjusted later.
Correct answer is: Cost or agreed transfer price
Q.18 Which method of branch accounting provides maximum information about branch performance?
Debtors System
Stock and Debtors System
Final Accounts System
Wholesale Branch System
Explanation - The Stock and Debtors System provides detailed information on stock, debtors, and profitability of branches.
Correct answer is: Stock and Debtors System
Q.19 If Head Office sends cash to branch for petty expenses, the entry in Head Office books is?
Branch A/c Dr. To Cash A/c
Cash A/c Dr. To Branch A/c
Branch Expenses A/c Dr. To Cash A/c
Cash A/c Dr. To Branch Expenses A/c
Explanation - Cash remitted to branch is debited to Branch A/c in Head Office books.
Correct answer is: Branch A/c Dr. To Cash A/c
Q.20 Goods sent to branch at cost are recorded in Head Office books at?
Invoice price
Selling price
Cost price
Market price
Explanation - When goods are sent at cost, no loading adjustment is needed.
Correct answer is: Cost price
Q.21 Departmental expenses that cannot be allocated directly are called?
Direct expenses
Indirect expenses
Fixed expenses
Variable expenses
Explanation - Expenses that cannot be directly linked to a department are indirect and must be apportioned.
Correct answer is: Indirect expenses
Q.22 The balance of Branch Account in Head Office books shows?
Branch profit or loss
Branch stock
Branch debtors
Branch creditors
Explanation - The Branch A/c acts as a nominal account and its balance reveals the profit or loss of the branch.
Correct answer is: Branch profit or loss
Q.23 In departmental accounts, cost of goods transferred from one department to another should be?
Added to purchases of receiving department
Ignored
Recorded in selling expenses
Recorded in general P&L
Explanation - Transfers are treated as internal purchases for the receiving department.
Correct answer is: Added to purchases of receiving department
Q.24 Which one is an advantage of maintaining departmental accounts?
It reduces workload
Helps in inter-departmental comparison
Avoids need for consolidated accounts
Minimizes cash handling
Explanation - Departmental accounts allow comparison of performance between departments.
Correct answer is: Helps in inter-departmental comparison
Q.25 When goods are invoiced to branch at cost plus profit, which reserve is created?
General Reserve
Branch Adjustment Reserve
Stock Reserve
Debtors Reserve
Explanation - Stock Reserve is created to adjust unrealized profit included in branch closing stock.
Correct answer is: Stock Reserve