Sunk costs are: MCQ with Answer and Explanation

Sunk costs are:

A. Future costs that differ among alternatives

B. Costs that have already been incurred and cannot be recovered

C. Variable costs of a project

D. Relevant for decision making

Answer: Option B

Solution (By JKExamLibrary)

Sunk costs are past expenditures. Since they cannot be changed by present or future decisions, they are considered irrelevant for decision making.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Practice More Accountancy and Book Keeping Questions

Question #1 Report Error

The 'Variable Lease Payments' that depend on an index or rate:

A. Are always expensed

B. Are included in the lease liability initially measured using the index/rate at commencement date

C. Are excluded from lease liability

D. Are capitalised only if fixed

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Correct Answer: Option B

Explanation:
Variable payments based on index/rate are included; those based on performance/usage are excluded.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #2 Report Error

Deductions for investments in PPF, LIC, and ELSS fall under which section of the Income Tax Act?

A. Section 24(b)

B. Section 80G

C. Section 80C

D. Section 80D

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Correct Answer: Option C

Explanation:
Section 80C allows a maximum deduction of Rs 1.5 Lakhs for specified investments and expenditures.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #3 Report Error

Assertion (A): In a bank reconciliation statement, if we start with the overdraft balance as per the Cash Book, cheques deposited but not credited by the bank will be added. Reason (R): Cheques deposited but not credited increase the bank balance as per the pass book, but not the cash book. Choose the correct option.

A. A is true but R is false

B. A is false but R is true

C. Both A and R are true but R is NOT the correct explanation of A

D. Both A and R are true and R is the correct explanation of A

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Correct Answer: Option A

Explanation:
A is false. If starting with an overdraft as per the Cash Book, cheques deposited but not credited (which increase the pass book balance) must be deducted to increase the overdraft amount, not added. R is true as a standalone statement.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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