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100+ Free CA Foundation Accounting Practice Questions

ICAI CA Foundation Paper 1: Accounting practice questions are available now; exam metadata is being verified.

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2026 Statistics

Key Facts: CA Foundation Accounting Exam

100 marks

Paper 1 Total Marks

ICAI Foundation New Scheme

3 hours

Exam Duration

ICAI Foundation New Scheme

40%

Minimum Per Paper

ICAI Passing Criteria

50%

Aggregate Across 4 Papers

ICAI Passing Criteria

Subjective

Paper 1 Format

ICAI Foundation New Scheme

4 papers

CA Foundation Level

ICAI Foundation New Scheme

CA Foundation Paper 1 Accounting is a 100-mark, 3-hour subjective (descriptive) paper under the ICAI New Scheme of Education and Training introduced in 2023. To pass the Foundation level, a candidate must score at least 40% in each paper and a 50% aggregate across all four papers. Paper 1 spans the theoretical framework of accounting, accounting process, bank reconciliation, inventories (AS 2), depreciation (AS 10), bills of exchange, final accounts of sole proprietors, not-for-profit organisations, accounts from incomplete records, partnership and LLP accounts, and company accounts under Schedule III of the Companies Act, 2013. This free bank offers 100 MCQs for knowledge prep.

Sample CA Foundation Accounting Practice Questions

Try these sample questions to test your CA Foundation Accounting exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1According to the accounting concept that a business is treated as separate and distinct from its owners, how should a proprietor's personal car purchased from business funds for private use be recorded?
A.As a fixed asset of the business
B.As a current liability of the business
C.As a business expense in the profit and loss account
D.As drawings reducing the owner's capital
Explanation: The business entity (separate entity) concept treats the business as distinct from its proprietor. Personal use of business funds is not a business asset or expense; it is recorded as drawings, which reduces the owner's capital.
2The accounting convention that requires anticipating all possible losses but not anticipating profits is known as:
A.Consistency
B.Materiality
C.Conservatism (prudence)
D.Full disclosure
Explanation: The convention of conservatism (prudence) requires that anticipated losses be provided for, while gains are recognised only when realised. This is why inventory is valued at cost or net realisable value, whichever is lower.
3Expenditure incurred to acquire a new delivery van for a trading business is classified as:
A.Revenue expenditure
B.A contingent liability
C.Deferred revenue expenditure
D.Capital expenditure
Explanation: Capital expenditure provides a benefit extending beyond one accounting period and is incurred to acquire fixed assets. A delivery van is a long-term asset, so its purchase cost is capitalised and depreciated over its useful life.
4Under the accrual concept, rent of 12,000 paid for the year but covering 3 months of the next accounting period should be treated in the current year as:
A.Full 12,000 expense with no adjustment
B.3,000 expense and 9,000 prepaid expense
C.12,000 expense and 3,000 outstanding liability
D.9,000 expense and 3,000 prepaid expense (asset)
Explanation: The accrual (matching) concept recognises expense in the period to which it relates. Of 12,000, three months (3,000) relates to next year and is carried forward as prepaid rent (an asset); the remaining 9,000 is the current year's expense.
5Which qualitative characteristic of financial statements requires that information be free from material error and bias and faithfully represent transactions?
A.Reliability
B.Comparability
C.Understandability
D.Timeliness
Explanation: Reliability means information is free from material error and bias and can be depended upon to faithfully represent what it purports to show. It is a primary qualitative characteristic in the ICAI conceptual framework.
6The fundamental accounting equation is best expressed as:
A.Assets = Liabilities − Capital
B.Capital = Assets + Liabilities
C.Assets = Capital + Liabilities
D.Liabilities = Capital + Assets
Explanation: The accounting equation states that Assets = Capital (owner's equity) + Liabilities. Every transaction keeps the equation in balance because of the dual aspect concept, which underlies double-entry bookkeeping.
7A contingent liability is:
A.A confirmed present obligation recorded in the balance sheet
B.A provision charged against profit
C.An asset that may be realised in future
D.A possible obligation depending on a future uncertain event, disclosed in notes
Explanation: A contingent liability is a possible obligation arising from past events whose existence depends on uncertain future events not wholly within the entity's control. It is not recognised in the books but is disclosed by way of a note to the accounts.
8Which accounting standard issued by ICAI deals with the valuation of inventories?
A.AS 1
B.AS 10
C.AS 6
D.AS 2
Explanation: AS 2, Valuation of Inventories, prescribes that inventories be valued at the lower of cost and net realisable value. AS 1 deals with disclosure of accounting policies, and AS 10 deals with property, plant and equipment.
9The money measurement concept implies that:
A.Only transactions expressed in monetary terms are recorded
B.All events affecting the business must be recorded
C.Money has constant purchasing power over time
D.Non-monetary qualities like management skill are recorded as assets
Explanation: The money measurement concept states that only transactions and events measurable in money are recorded in the books of account. Qualitative factors such as employee morale or management skill, though important, are not recorded because they cannot be expressed in money.
10Goods worth 5,000 purchased on credit from Ram are recorded by debiting:
A.Ram's account and crediting Purchases account
B.Purchases account and crediting Cash account
C.Cash account and crediting Purchases account
D.Purchases account and crediting Ram's account
Explanation: For a credit purchase of goods, Purchases account (an expense/nominal account) is debited because the business receives goods, and the supplier Ram's account (personal) is credited because he is the giver. No cash is involved.

About the CA Foundation Accounting Practice Questions

Verified exam format metadata for ICAI CA Foundation Paper 1: Accounting is pending. The practice questions above remain available while official exam length, timing, passing score, fee, and administrator details are reviewed.