Q1. Social accounting primarily focuses on
(a) Recording only financial transactions of a firm
(b) Measuring and reporting the social impact of an organization’s activities
(c) Preparing cash flow statements
(d) Auditing tax returns
Answer: (b)
Explanation: Social accounting extends beyond traditional financial accounting to capture and report the social, environmental, and economic effects of an organization’s operations on stakeholders.
Q2. Which of the following is NOT a typical component of a social accounting report?
(a) Employee welfare initiatives
(b) Carbon emissions data
(c) Statement of profit and loss
(d) Community development projects
Answer: (c)
Explanation: While profit and loss statements are part of financial accounting, social accounting reports emphasize non‑financial aspects such as employee welfare, environmental impact, and community involvement.
Q3. The main objective of a social audit is to
(a) Verify the arithmetical accuracy of books of accounts
(b) Assess compliance with tax laws
(c) Evaluate an organization’s performance against its social responsibilities and stakeholder expectations
(d) Determine the market value of shares
Answer: (c)
Explanation: Social audit examines whether an organization fulfills its social obligations and how its actions affect stakeholders, differing from financial audit which checks financial statements’ correctness.
Q4. Which principle underlies social accounting?
(a) Historical cost principle
(b) Matching principle
(c) Stakeholder accountability
(d) Conservatism principle
Answer: (c)
Explanation: Social accounting is grounded in stakeholder accountability, requiring entities to report how they impact various stakeholder groups.
Q5. In the context of social accounting, “triple bottom line” refers to
(a) Profit, loss, and equity
(b) Economic, environmental, and social performance
(c) Assets, liabilities, and capital
(d) Revenue, expenses, and net income
Answer: (b)
Explanation: The triple bottom line expands the traditional profit focus to include social and environmental dimensions alongside economic performance.
Q6. Which of the following is a limitation of social accounting?
(a) It increases transparency
(b) It lacks standardized measurement units for social impacts
(c) It improves stakeholder trust
(d) It helps in strategic decision‑making
Answer: (b)
Explanation: Unlike financial metrics, social impacts (e.g., community well‑being) are difficult to quantify uniformly, posing measurement challenges.
Q7. Social audit is most commonly conducted by
(a) External statutory auditors only
(b) Internal management teams exclusively
(c) Independent external agencies or civil society groups
(d) Tax authorities
Answer: (c)
Explanation: Social audits are often performed by independent bodies (NGOs, consultancies) to ensure objectivity, though internal social audits also exist.
Q8. Which step is NOT part of the social audit process?
(a) Defining audit scope and objectives
(b) Preparing a trial balance
(c) Collecting data through surveys and interviews
(d) Reporting findings and recommending improvements
Answer: (b)
Explanation: Preparing a trial balance belongs to financial accounting; social audit focuses on gathering qualitative and quantitative social data.
Q9. Cash basis of accounting records transactions when
(a) They are incurred, regardless of cash flow
(b) Cash is received or paid
(c) An invoice is issued
(d) Goods are delivered on credit
Answer: (b)
Explanation: Under cash basis, revenue is recognized when cash is received and expenses when cash is paid.
Q10. Which of the following is a characteristic of a single entry system?
(a) Every transaction affects two accounts with equal debits and credits
(b) Only personal and cash accounts are maintained; nominal accounts are ignored
(c) It provides a complete trial balance
(d) It is suitable for large corporations
Answer: (b)
Explanation: Single entry system records mainly cash and personal accounts; nominal accounts (expenses, revenues) are often omitted, making it incomplete.
Q11. Single entry system is most appropriate for
(a) Multinational companies with complex transactions
(b) Small traders and professionals with limited transactions
(c) Government departments requiring fund accounting
(d) Banks needing rigorous regulatory reporting
Answer: (b)
Explanation: Due to its simplicity, single entry is used by small businesses where detailed double‑entry recording is not cost‑effective.
Q12. Which statement about the cash based single entry system is TRUE?
(a) It automatically ensures arithmetic accuracy
(b) It can easily produce a balance sheet
(c) It records transactions only when cash changes hands
(d) It requires maintaining a ledger for every asset and liability
Answer: (c)
Explanation: Cash based single entry records only cash inflows/outflows; other accounts are not systematically maintained.
Q13. A major disadvantage of the single entry system is
(a) It provides detailed information for managerial decision‑making
(b) It prevents fraud detection
(c) It facilitates easy conversion to double entry
(d) It complies with International Financial Reporting Standards
Answer: (b)
Explanation: Because many accounts are omitted, the system lacks internal checks, making fraud harder to detect.
Q14. Converting from single entry to double entry typically involves
(a) Ignoring all past records and starting afresh
(b) Preparing a statement of affairs to ascertain capital and then opening proper ledgers
(c) Only recording cash transactions in a new journal
(d) Skipping the trial balance preparation
Answer: (b)
Explanation: Conversion starts with a statement of affairs (like a balance sheet) to determine opening capital, after which proper double entry books are opened.
Q15. Social accounting reports are primarily intended for
(a) Tax authorities only
(b) Shareholders seeking dividend information
(c) Stakeholders such as employees, community, investors, and regulators
(d) Auditors checking arithmetic accuracy
Answer: (c)
Explanation: The audience for social accounting includes all parties affected by or interested in the organization’s social impact.
Q16. Which of the following best describes “social return on investment (SROI)”?
(a) A ratio of net profit to total assets
(b) A measure of financial dividend paid to shareholders
(c) A methodology that assigns monetary value to social, environmental, and economic outcomes
(d) A cash flow indicator used in single entry systems
Answer: (c)
Explanation: SROI quantifies the social value created per unit of investment, expressing outcomes in monetary terms.
Q17. In social audit, “participatory approach” means
(a) Only senior management participates
(b) Stakeholders are actively involved in data collection, analysis, and validation
(c) Auditors work in isolation to maintain objectivity
(d) The process is limited to reviewing financial statements
Answer: (b)
Explanation: Participation of affected parties enhances credibility and ensures that the audit reflects ground realities.
Q18. Which of the following is NOT an advantage of cash basis accounting?
(a) Simplicity and ease of understanding
(b) Accurate matching of revenues with expenses
(c) Reduced record‑keeping burden
(d) Immediate reflection of cash flow
Answer: (b)
Explanation: Cash basis does not match revenues with expenses incurred; it records them only when cash changes hands, violating the matching principle.
Q19. Under cash basis accounting, credit sales are recorded
(a) At the time of sale, irrespective of cash receipt
(b) When the cash is actually received from the customer
(c) When the invoice is prepared
(d) Never, as credit sales are ignored
Answer: (b)
Explanation: Revenue is recognized only upon cash receipt; credit sales await payment.
Q20. Which statement about social audit is FALSE?
(a) It evaluates non‑financial performance
(b) It is mandatory for all companies under the Companies Act, 2013
(c) It can improve corporate reputation
(d) It often uses surveys and focus groups
Answer: (b)
Explanation: Social audit is generally voluntary (except for certain government schemes); it is not universally mandated for all companies.
Q21. In a single entry system, the “statement of affairs” is analogous to
(a) Income statement
(b) Balance sheet
(c) Cash flow statement
(d) Trial balance
Answer: (b)
Explanation: The statement of affairs lists assets and liabilities to ascertain capital, similar to a balance sheet.
Q22. Which of the following is a typical feature of social accounting frameworks like GRI (Global Reporting Initiative)?
(a) Prescribes specific tax rates
(b) Provides standardized indicators for economic, environmental, and social performance
(c) Requires double entry bookkeeping only
(d) Focuses exclusively on profitability ratios
Answer: (b)
Explanation: GRI offers universal standards and indicators for reporting sustainability performance across three dimensions.
Q23. A limitation of cash based single entry system for decision making is
(a) It provides too much detail, causing information overload
(b) It fails to show accrued expenses or revenues, leading to distorted profitability
(c) It automatically complies with IND AS
(d) It eliminates the need for any financial statements
Answer: (b)
Explanation: Without accruals, the system cannot reflect obligations earned or incurred but not yet paid/received, affecting profit measurement.
Q24. Which of the following best defines “social audit trail”?
(a) A chronological record of cash transactions
(b) Documentation showing how social audit findings were derived, including data sources and analysis methods
(c) A ledger of equity transactions
(d) A register of fixed assets
Answer: (b)
Explanation: The audit trail ensures transparency and reproducibility of the social audit process by recording evidence and steps taken.
Q25. When converting a cash based single entry system to double entry, the opening capital is determined by
(a) The total cash balance at year‑end
(b) The net profit shown in the incomplete records
(c) The excess of assets over liabilities as per the statement of affairs
(d) The total of all debit entries made so far
Answer: (c)
Explanation: Opening capital = Assets – Liabilities, derived from the statement of affairs prepared during conversion.
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End of 25 MCQs.
