Accounting MCQ Questions & Answers

Answer: N/A

Answer: Option D

Explanation:

Accounting provides information on Cost and income for managers, Company's tax liability for a particular year and Financial conditions of an institutions.

Answer: Option C

Explanation:

The long term assets that have no physical existence but are rights that have value is known as Intangible assets. An intangible asset is an asset that is not physical in nature. Goodwill, brand recognition and intellectual property, such as patents, trademarks, and copyrights, are all intangible assets.

Answer: Option A

Explanation:

The assets that can be converted into cash within a short period (i.e. 1 year or less) are known as Current assets. Current assets include cash, cash equivalents, accounts receivable, stock inventory, marketable securities, pre-paid liabilities, and other liquid assets.

Answer: Option A

Explanation:

The debts which are to be repaid within a short period (year or less) are known as Current liabilities. Current liabilities are a company's debts or obligations that are due within one year or within a normal operating cycle.

Answer: Option C

Explanation:

The sales income (Credit and Cash) of a business during a given period is called Turnover. In the investment industry, turnover is defined as the percentage of a portfolio that is sold in a particular month or year.

Answer: Option C

Explanation:

The account that records expenses, gains and losses is Nominal account. A nominal account is an account in which accounting transactions are stored for one fiscal year.

Answer: Option B

Explanation:

Real account records Dealings in commodities.

Answer: Option A

Explanation:

In Journal, the business transaction is recorded Same day. A journal, which is also known as a book of original entry, is the first place that a transaction is written in accounting records.

Answer: Option D

Explanation:

The following are the types of Journal: Purchase Journal, Sales Journal and Cash Journal.

Answer: Option A

Explanation:

The process of entering all transactions from the Journal to Ledger is called Posting. Posting refers to the process of transferring entries in the journal into the accounts in the ledger. Posting to the ledger is the classifying phase of accounting.

Answer: Option C

Explanation:

Balance Sheet is a statement showing the financial status of the comapany at any given time. The balance sheet, together with the income statement and cash flow statement, make up the cornerstone of any company's financial statements.

Answer: Option C

Explanation:

Profit & Loss statements is a statement of revenues and expenses for a specific period of time, usually a fiscal quarter or year.

Answer: Option D

Explanation:

Balance sheet is a statement of Assets, Liabilities and Capital.

Answer: Option D

Explanation:

Balance sheets are prepared annually. It lists the current and fixed assets on the left side of the sheet and liabilities and owner's equity (capital) on the right.

Answer: Option A

Explanation:

The ratios that refer to the ability of the firm to meet the short term obligations out of its short term resources is known as Liquidity ratio.

Answer: Option C

Explanation:

The measure of how efficiently the assets resources are employed by the firm is called Activity ratio. Activity ratios are a category of financial ratios that measure a firm's ability to convert different accounts within its balance sheets into cash or sales.

Answer: Option D

Explanation:

Bills payable, Outstanding expenses and Bank Overdraft are the current liabilities.

Answer: Option B

Explanation:

Current ratio = Current assets/Current liabilities. Current ratio is a comparison of current assets to current liabilities, calculated by dividing your current assets by your current liabilities.

Answer: Option A

Explanation:

Liquid or Quick assets = Current assets - (Stock + Work in progress).

Answer: Option B

Explanation:

Lower the Debt Equity ratio higher is the protection to creditors. Creditors usually like a low debt to equity ratio because a low ratio (less than 1) is the indication of greater protection to their money.

Answer: Option C

Explanation:

A higher inventory ratio indicates Better inventory management and Quicker turnover.

Answer: Option D

Explanation:

Return on Investment Ratio (ROI) = (Net profit / Total assets) x 100. Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.

Answer: Option C

Explanation:

A low Return on Investment Ratio (ROI) indicates Improper utilization of resources and Over investment in assets.

Answer: Option D

Explanation:

Sales expenditure budget is prepared by estimating the expense(s) of Advertisement, Market analysis and Salesman's salary.

Answer: Option D

Explanation:

Budgeting is difficult to apply in the Products subjected to rapid changes, Job order manufacturing and Uncertain market condition.

Answer: Option B

Explanation:

Discount allowed is a kind of deduction from Account Receivable.

Answer: Option C

Explanation:

The other name of Journal is Day Book. A journal is also named the book of original entry, from when transactions were written in a journal prior to manually posting them to the accounts in the general ledger or subsidiary ledger.

Answer: Option D

Explanation:

The Journal entry in which two or more account is debited or credited is referred to as Compound entry. A compound journal entry is an accounting entry in which there is more than one debit, more than one credit, or more than one of both debits and credits.

Answer: Option D

Explanation:

A Master Budget consists of Sales budget, Production budget and Material budget. The master budget is the aggregation of all lower-level budgets produced by a company's various functional areas, and also includes budgeted financial statements, a cash forecast, and a financing plan.

Answer: Option C

Explanation:

Goods returned by customer should be debited to Return inward account.

Answer: Option A

Explanation:

The accounting process involves recording Quantifiable economic event. An accounting event is a transaction that is recognized in the financial statements of an accounting entity.

Answer: Option A

Explanation:

Discount allowed is Expense of business. When the buyer receives a discount, this is recorded as a reduction in the expense (or asset) associated with the purchase, or in a separate account that tracks discounts.

Answer: Option D

Explanation:

Purchases will be debited if a business purchases goods on credit.

Answer: Option C

Explanation:

In accounting, an economic event is referred to as Transaction. An accounting event is a transaction that is recognized in the financial statements of an accounting entity. In accounting, a transaction includes such things as recording the depreciation of an asset or payment of dividends. Accounting events can be either external or internal.

Answer: Option A

Explanation:

Drawings accounts will be debited if the business's owner withdraws cash from business for personal use. Goods withdrawn for personal use by the owner of a business reduce inventory and are recorded on a drawings account.

Answer: Option D

Explanation:

Identifying -> Recording -> Communicating is the correct sequence of accounting process.

Answer: Option B

Explanation:

Journals are also referred to as Book of original entries. The information in these books is then summarized and posted into a general ledger, from which financial statements are produced.

Answer: Option A

Explanation:

The standard format of Journal does not include Assets column. An asset purchased on account is not recorded in the purchase journal. But many are of opinion to record all credit transactions in multi-column purchase journal.

Answer: Option C

Explanation:

Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business. Bookkeeping refers mainly to the record-keeping aspects of financial accounting, and involves preparing source documents for all transactions, operations, and other events of a business.

Answer: Option D

Explanation:

In Chronological order, data is entered into the Journal. Journal entries are typically entered in chronological order and debits are entered before credits – debits are entered in a column to the left, and credits are entered to the right.

Answer: Option B

Explanation:

Auditing refers to Examination of financial information. A financial audit is an objective examination and evaluation of the financial statements of an organization to make sure that the financial records are a fair and accurate representation of the transactions they claim to represent.

Answer: Option D

Explanation:

Cash account will be credited if a company purchases building for cash. Cash is credited because cash is an asset account that decreased because cash was used to pay the bill.

Answer: Option C

Explanation:

Discount for quick repayment of debt is normally referred to as Cash discount. It is called cash discount which might be offered or received.

Answer: Option C

Explanation:

Creditor of the business is the external user of financial statements. External users are people outside the business entity (organization) who use accounting information.

Answer: Option D

Explanation:

Sales return journal records "goods returned by customers". Sales Return (Journal) Book Sales return books are used to record the goods returned by customers to them on credit.

Answer: Option D

Explanation:

Manager of the business is the internal user of financial statements. Internal users are people within a business organization who use financial information.

Answer: Option A

Explanation:

Identifying an economic event or transaction is the first phase of accounting cycle, which includes any transaction involving the use or exchange of a company's assets.

Answer: Option B

Explanation:

The sales journal is used to record all of the company sales on credit. Most often these sales are made up of inventory sales or other merchandise sales.

Answer: Option C

Explanation:

Company is a separate legal entity whose total capital can be divided into many shares.

Answer: Option D

Explanation:

Transactions that a business does not record in any specialized journal are recorded in General journal.

Answer: Option A

Explanation:

An asset possesses future economic benefits for the business. An asset is a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide a future benefit.

Answer: Option C

Explanation:

Purchase return journal records "goods returned by the business". The Purchases Returns Book is written up from the credit notes received from the suppliers.

Answer: Option B

Explanation:

Liabilities are Obligations. Liabilities are defined as a company's legal financial debts or obligations that arise during the course of business operations.

Answer: Option D

Explanation:

Sales and purchase journal doesn't record Cash sales and purchases.

Answer: Option C

Explanation:

Income is the gross inflow of economic benefits during the period arising from the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants.

Answer: Option C

Explanation:

An asset must be controlled by the business to be shown as an asset in its balance sheet.

Answer: Option C

Explanation:

Cash received from debtor is recorded in Cash receipts journal. The cash receipts journal is a special journal used to record cash received by a business.

Answer: Option D

Explanation:

Future economic benefits is the most important characteristic that all assets of a business have.

Answer: Option C

Explanation:

Cash book is a type of cash receipt journal + cash payment journal. A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals.

Answer: Option D

Explanation:

Cash purchases is recorded in Cash payments journal. Cash payment journal or cash disbursement journal is used to record all cash payments made by the business.

Answer: Option A

Explanation:

Capital + Liabilities = assets is the basic accounting equation. The fundamental accounting equation, also called the balance sheet equation, represents the relationship between the assets, liabilities, and owner's equity of a person or business. It is the foundation for the double-entry bookkeeping system.

Answer: Option A

Explanation:

A brief explanation recorded below every entry in General Journal is commonly known as Narration. A short explanation of each transaction is written under each entry which is called narration.

Answer: Option D

Explanation:

Debit note is the basis for recording a transaction in Purchase return journal. The source document for recording entries in the purchases return journal is generally a debit note.

Answer: Option D

Explanation:

Creditors are a liability. Creditors means the persons to whom business owes money. Creditors are the persons to whom the money is payable by the business in future. So it is a liability of business towards creditors to pay them in future so it comes under current liabilities in balance sheet.

Answer: Option B

Explanation:

Credit note is the basis for recording a transaction in Sales return journal. A credit note or credit memo is a commercial document issued by a seller to a buyer.

Answer: Option B

Explanation:

Specialized journals are more adequate for Big businesses.

Answer: Option C

Explanation:

Owner's claim on total assets is equity. Total claims include liabilities, which are all the debts that the business owes but has not yet paid out, as well as owners' equity, the value of the business that was granted by owner investment.

Answer: Option C

Explanation:

Transferring entries from journal to ledger account is commonly known as Posting. Posting refers to the process of transferring entries in the journal into the accounts in the ledger. Posting to the ledger is the classifying phase of accounting.

Answer: Option C

Explanation:

An 'account' records the Increase or decrease in the balance of an item. An account is an individual accounting record of increase and decrease in a specific asset, liability or stockholders equity item.

Answer: Option C

Explanation:

Purchases will be credited if goods are given as charity. When accounting for goods given as charity, purchases are reduced with the exact cost of goods contributed. The amount is reduced from purchases in the trading account. It is shown as an expense on the debit side of the income statement.

Answer: Option A

Explanation:

Cash and cash equivalent are the asset from the following. Cash and cash equivalents (CCE) are the most liquid current assets found on a business's balance sheet. Cash equivalents are short-term commitments "with temporarily idle cash and easily convertible into a known cash amount".

Answer: Option C

Explanation:

Ledger account is known as the base for preparing trial balance. The trial balance can then be prepared by listing each closing balance from the general ledger accounts as either a debit or a credit balance.

Answer: Option A

Explanation:

The normal balance of capital account is Credit balance. Normal balance is the side where the balance of the account is normally found. Asset accounts normally have debit balances, while liabilities and capital normally have credit balances. Income has a normal credit balance since it increases capital .

Answer: Option B

Explanation:

Drawings is the withdrawal of cash and goods by the owner of the business for his/her personal use. Assets in the form of Cash or Goods which are withdrawn from a business by the owner(s) for their personal use are termed as drawings.

Answer: Option B

Explanation:

The normal balance of asset account is Debit balance. Normal balance is the side where the balance of the account is normally found.

Answer: Option A

Explanation:

Net loss occurs when Expenses are greater than income. A net loss, sometimes referred to as a net operating loss (NOL), occurs when expenses exceed the income or total revenue produced for a given period of time.

Answer: Option A

Explanation:

The normal balance of liability account is Credit balance. Normal balance is the side where the balance of the account is normally found. Asset accounts normally have debit balances, while liabilities and capital normally have credit balances. Income has a normal credit balance since it increases capital .

Answer: Option C

Explanation:

Double entry implies that recording two aspects of every transaction. The double-entry system of accounting or bookkeeping means that for every business transaction, amounts must be recorded in a minimum of two accounts.

Answer: Option A

Explanation:

Debit increases the capital account balance statements is incorrect regarding capital account. It decreases the capital account balance.

Answer: Option D

Explanation:

Debit balance is the normal balance of a rent expense account. Asset accounts normally have debit balances.

Answer: Option D

Explanation:

Rent expenses account is the nominal account. In other words, nominal accounts are the accounts that report revenues, expenses, gains, and losses.

Answer: Option A

Explanation:

Revenue and expense accounts are referred to as Nominal accounts because each period they are closed out to Income Summary in the closing process.

Answer: Option B

Explanation:

Office equipment's account is classified as Real account.

Answer: Option D

Explanation:

Cash account can be classified as a real account. A real account is an account that retains and rolls forward its ending balance from period to period. The areas in the balance sheet in which real accounts are found are assets, liabilities, and equity.

Answer: Option A

Explanation:

Nominal accounts in accounting are the temporary accounts, Revenue or Expense are transferred to profit and loss account and closed at the end of each accounting year.

Answer: Option D

Explanation:

Capital increases if revenue increases. The extent to which an increase in revenue will affect company's working capital depends on how efficiently business operates.

Answer: Option A

Explanation:

Balance c/d is the closing balance of a ledger account.

Answer: Option A

Explanation:

Capital of a business decreases if there is an increase in Drawings. Drawing is always deducted from capital.

Answer: Option A

Explanation:

A Trial Balance is a statement that shows the total of debit and credit balances of accounts. The total of debit amounts shall be equal to the credit amounts for the trial balance to tally. Hence, it verifies the arithmetical accuracy of the postings in the ledger accounts.

Answer: Option C

Explanation:

Net income equal to Revenues minus Expenses. Revenue is the income generated before any expenses are taken out. Therefore, when a company is said to have "top-line growth," the company's revenue is growing. Revenue is also called net sales which is revenue minus any returns of purchased merchandise.

Answer: Option C

Explanation:

The real accounts are accounts of Assets, Liabilities and Capital. The accounting formula essentially shows that what the firm owns (its assets) is purchased by either what it owes (its liabilities) or by what its owners invest (its shareholders equity or capital).

Answer: Option A

Explanation:

Ledger accounts is the common base for preparing a trial balance. This process is known as 'balancing off' the general ledger accounts. The trial balance can then be prepared by listing each closing balance from the general ledger accounts as either a debit or a credit balance.

Answer: Option A

Explanation:

Trial balance It lists down the balances of accounts. The debit balance values will be listed in the debit column of the trial balance and the credit value balance will be listed in the credit column.

Answer: Option B

Explanation:

Payment of expenses will reduce the assets. When an expense is recorded at the same time it is paid for with cash, the cash (asset) account declines, while the amount of the expense reduces the retained earnings account.

Answer: Option D

Explanation:

Debit balance = Credit balance in a trial balance indicates that Mathematically Capital + Liabilities = Assets.

Answer: Option C

Explanation:

Assets - Liabilities = Capital is correct. The Accounting Equation states that the Assets are always equal to the sum of Capital & Liabilities.

Answer: Option B

Explanation:

Trial Balance is commonly prepared at the end of an accounting period. It is usually prepared at the end of an accounting period to assist in the drafting of financial statements.

Answer: Option B

Explanation:

Fresh capital introduction will increase Assets and Equity.Capital will increase the Equity.Cash at Bank will increase the Asset.

Answer: Option B

Explanation:

Partial omission of a transaction will affect the agreement of a trial balance. When only one aspect of a transaction is posted to the ledger, it is called as error of partial omission.

Answer: Option D

Explanation:

Current Assets - Current Liabilities = Working capital. Working capital is calculated as current assets minus current liabilities.

Answer: Option C

Explanation:

The process of recording in Journal is done frequently during the accounting period. An organization begins its accounting cycle with the recording of transactions using journal entries.

Answer: Option A

Explanation:

If debit balances = credit balances, trial balance only shows or checks the Arithmetic accuracy and it does not indicate that no errors were made during recording and posting.

Answer: Option B

Explanation:

General Journal, sometimes also known as the Book of Original Entry, because it is the first place a transaction is entered into the books. Journal Entries are made from source documents, which can be anything from receipts to invoices to bank statements.

Answer: Option D

Explanation:

Cash account with normal balance is shown at the debit side of a trial balance.

Answer: Option D

Explanation:

The process of recording transactions in different journals is called Journalising. Journalizing is the process of recording a business transaction in the accounting records. This activity only applies to the double-entry bookkeeping system.

Answer: Option D

Explanation:

Accrued expenses account with normal balance is shown at the credit side of a trial balance.

Answer: Option B

Explanation:

Every business transaction affects at least two accounts, our accounting system is known as a double-entry system.

Answer: Option B

Explanation:

Payment of rent expenses is recorded on Payments side of cash book. All cash payments are recorded by date on the right-hand side.

Answer: Option B

Explanation:

An entry which is made on both sides of a cash book is called Contra entry. In the dual entry accounting system, a Contra Entry is an entry which is recorded to reverse or offset an entry on the other side of an account. If a debit entry is recorded in an account, it will be recorded on the credit side and vice-versa.

Answer: Option C

Explanation:

A cash book with cash, bank and discount column is commonly referrred to as Three columns cash book. The three column cash book (also known as triple column cash book) has three money columns on both debit and credit side – one on each side for recording discount, cash and bank amounts.

Answer: Option C

Explanation:

Cash book records Cash payments and cash receipts. A Cash Book is a type of subsidiary book where cash (or) bank receipts and cash (or) bank payments made during a period are recorded in a chronological order.

Answer: Option B

Explanation:

Cash discount is allowed on Prompt repayment of debt. It is cash discount it may be allowed or received. In case of discount allowed It is an Expense and in case of received it is an income.

Answer: Option B

Explanation:

Cash book is prepared by Accountant of business. A cash book is set up as a ledger in which all cash transactions are recorded according to date. It is a book of original entry and final entry.

Answer: Option A

Explanation:

The most common imprest system is the Petty cash system. The base characteristic of an imprest system is that a fixed amount is reserved, which after a certain period of time or when circumstances require, because money was spent, it will be replenished.

Answer: Option B

Explanation:

Discount Received is a column found on the credit side of the Cash Book.When a creditor is paid and the business receives a discount the discount received and is recorded in the discount received column and the corresponding entry appears as a debit in the creditor’s account.

Answer: Option C

Explanation:

The matching concept matches revenues with expenses. The matching concept is an accounting practice whereby firms recognize revenues and their related expenses in the same accounting period.

Answer: Option B

Explanation:

Drawings by owner of business are generally recorded on Payments side of a cash book. Drawings are money or assets that are withdrawn from a company by its owners for personal use.

Answer: Option C

Explanation:

The allocation of owner's private expenses to his/her business violates Separate business entity concept. The business entity concept states that the transactions associated with a business must be separately recorded from those of its owners or other businesses.

Answer: Option A

Explanation:

Introduction of capital by owner of business is recorded on Receipts side of a cash book.

Answer: Option B

Explanation:

Two Column Cash Books - In this discounts is also recorded with cash transactions. So both discounts received and the discount that is given is recorded here. If any organization is in a general practice of giving or receiving discounts this is the preferable option.

Answer: Option A

Explanation:

The going concern concept assumes that the entity continue running for forseeable future. The going concern principle is the assumption that an entity will remain in business for the foreseeable future.

Answer: Option D

Explanation:

A cash book that is used to record the small payments of cash is generally referred to as Petty cash book. Petty cash book can be expressed as a formal summarization of the petty cash expenditures which refers to the day-to-day normal expenditures of the business which is not related to the direct line of the business.

Answer: Option B

Explanation:

American companies prepare their financial statement in Dollars whereas Japanese companies produce financial statement in Yen. This is an example of Unit of measurement concept.

Answer: Option B

Explanation:

Purchase of office equipment for cash will be recorded on Payments side of a cash book. All transactions in the cash book have two sides: debit and credit. All cash receipts are recorded on the left-hand side, and all cash payments are recorded by date on the right-hand side.

Answer: Option C

Explanation:

Accounting period is time spann into which the total life of a business is divided for the purpose of preparing financial statements. This period defines the time range over which business transactions are accumulated into financial statements, and is needed by investors so that they can compare the results of successive time periods.

Answer: Option C

Explanation:

Postdated cheques are considered as Accounts receivable. If the postdated check was received as payment on accounts receivable, the accounts receivable balance is not reduced until the date of the check.

Answer: Option D

Explanation:

Materiality is a concept in financial accounting and reporting that firms may disregard trivial matters, but they must disclose everything that is important to the report audience. Items that are important enough to matter are material items.

Answer: Option B

Explanation:

Postage stamps on hand are considered as Prepaid expenses. Prepaids are any expense the business pays for in advance, such as rent, insurance, office supplies, postage, travel expense, or advances to employees.

Answer: Option D

Explanation:

Exercising a degree of caution in the case of judgements needed under the condition of uncertainity is the assumption of Prudence concept. Prudence Concept or Conservatism principle is a key accounting principle which makes sure that assets and income are not overstated and provision is made for all known expenses and losses whether the amount is known for certain or just an estimation.

Answer: Option D

Explanation:

Petty cash fund is supposed to be replenished at the end of every accounting period. Replenish means to return the amount of actual cash in the petty cash box back to the amount appearing in the general ledger account Petty Cash. This is done whenever the amount of actual cash in the petty cash box is low and at the end of each accounting period.

Answer: Option C

Explanation:

Timeliness concept states that the publication or presentation of financial statements should not be delayed. Timeliness principle in accounting refers to the need for accounting information to be presented to the users in time to fulfill their decision making needs.

Answer: Option C

Explanation:

A credit balance in cash book indicates Bank overdraft. Overdrafts are where the bank account becomes negative and the businesses in effect have borrowed from the bank. This is shown in the cash book as a credit balance.

Answer: Option B

Explanation:

Favourable balance of cash book implies balance at Bank. The credit balance as per the cash book indicates bank overdraft.

Answer: Option D

Explanation:

Land on lease should be shown in Blance sheet contrary to the fact that the company does not own that piece of land is the implementation of Substance over form concept.

Answer: Option B

Explanation:

A cash deposit made by business appears on the bank statement as Credit balance.

Answer: Option A

Explanation:

Depreciation is charged on fixed assets to comply with Matching concept which requires that revenues must be matched with associated expenses to get a complete and accurate picture of profit and loss.

Answer: Option C

Explanation:

Bank Reconciliation statement is the comparision of a bank statement (sent by bank) with the Cash book. In other words, the balance shown in the Pass Book given by the bank should tally with the balance of Bank Account Kept in his ledger or Cash Book (Bank Column).

Answer: Option B

Explanation:

Net profit is computed in Income statement. Net income, also called net profit, is a calculation that measures the amount of total revenues that exceed total expenses. It other words, it shows how much revenues are left over after all expenses have been paid.

Answer: Option B

Explanation:

A cheque returned by bank marked "NSF" means that There are not sufficient funds in your account. Non-sufficient funds (NSF) is a term used in the banking industry to indicate that a cheque cannot be honored because insufficient funds are available in the account on which the instrument was drawn.

Answer: Option C

Explanation:

In income statement, gross profit is always equal to Sales - cost of goods sold.

Answer: Option A

Explanation:

Bank Reconciliation statement is prepared by Accountant of business. Bank reconciliation statement is generally prepared by the company accountant or the bookkeeper with the purpose to compare the bank's records with your own company records. It is done on monthly basis whenever bank statement arrives.

Answer: Option D

Explanation:

Office equipment is a Fixed asset for a computer manufacturer and the same office equipment is a current asset for a company that deals in these equipments.

Answer: Option C

Explanation:

Unpresented cheques are also referred to as Outstanding cheques. An unpresented check is a check written by a company and entered in its records, but the check has not yet cleared the company's checking account. In other words, the check has not yet been paid by the bank on which the check is drawn. An unpresented check is also known as an outstanding check.

Answer: Option D

Explanation:

Financial statements mainly help in Communication of economic events.

Answer: Option C

Explanation:

Outstanding cheques are cheques that are issued by the business but not yet presented to bank for payment.

Answer: Option B

Explanation:

Accrued expenses are considered as Liability. Accrued expenses are typically periodic, and are documented on a company's balance sheet as current liabilities.

Answer: Option C

Explanation:

Purchases + opening stock - closing stock = Cost of goods sold.

Answer: Option A

Explanation:

Prepaid expenses are considered as Asset. Prepaid expenses are future expenses that have been paid in advance. You can think of prepaid expenses as costs that have been paid but have not yet been used up or have not yet expired. The amount of prepaid expenses that have not yet expired are reported on a company's balance sheet as an asset.

Answer: Option A

Explanation:

Balance sheet financial statements shows the financial position of a business at a specific date. The balance sheet, sometimes called the statement of financial position, lists the company's assets, liabilities,and stockholders ' equity (including dollar amounts) as of a specific moment in time. That specific moment is the close of business on the date of the balance sheet.

Answer: Option A

Explanation:

Earned but not yet received income is treated as Asset. It is income earned during a particular accounting period but not received until the end of that period. It is treated as an asset for the business.

Answer: Option A

Explanation:

Income statement shows the profitability of a business. The income statement is the most important report for many analysts. It shows the company's operating results for an entire year.

Answer: Option C

Explanation:

Revenue earned but not yet received by the business is known as Accrued revenue. Accrued income is very important in accounting because companies receive advances for their goods or services all the time. To prevent overstating certain accounts, companies need to differentiate between the revenue that they have earned versus revenue that they have not earned yet.

Answer: Option D

Explanation:

Correction concept is not regarded as the fundamental concept that is identified by IAS-1.

Answer: Option D

Explanation:

Assets minus liabilities equal to Capital, it shows that a company's total amount of assets equals the total amount of liabilities plus owner's (or stockholders') equity.

Answer: Option C

Explanation:

A cash book with cash bank and discount column is commonly referred as The prudence concept. Under the prudence concept, do not overestimate the amount of revenues recognized or underestimate the amount of expenses.

Answer: Option C

Explanation:

Cash flow statement shows the movement of cash and cash equivalents during an accounting period. A cash flow statement, also known as statement of cash flows or funds flow statement, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.

Answer: Option D

Explanation:

Ownership in business entities can be a sole proprietorship, partnership, or corporation. From the accounting perspective and its purpose these types of business are considered separate entities from their owners. The corporation is only one considered as a separate legal entity.

Answer: Option D

Explanation:

Goodwill is classified as Intangible assets. The goodwill amounts to the excess of the "purchase consideration" (the money paid to purchase the asset or business) over the total value of the assets and liabilities. It is classified as an intangible asset on the balance sheet, since it can neither be seen nor touched.

Answer: Option B

Explanation:

Prudence is the application of caution in the exercise of the judgements needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated. However, the exercise of prudence does not allow, for example, the creation of hidden reserves or excessive provisions, the deliberate understatement of assets or income, or the deliberate overstatement of liabilities or expenses, because the financial statements would not be neutral and therefore, not have the quality of reliability.

Answer: Option D

Explanation:

Rent expenses does not appear in Balance sheet.

Answer: Option A

Explanation:

Current assets are also known as Gross working capital. Gross working capital is the sum of all of a company's current assets (assets that are convertible to cash within a year or less).

Answer: Option C

Explanation:

The revenue recognition principle dictates that all types of incomes should be recorded or recognized when they are earned. The revenue recognition principle, a combination of accrual accounting and the matching principle, stipulates that revenues are recognized when realized and earned, not necessarily when received.

Answer: Option D

Explanation:

The expenses related to the main operations of a business are referred to as Operating expense. The operating expenses refer to the specific costs after gross revenue is defined in the income statement.

Answer: Option D

Explanation:

A current asset that is convertible to cash within 3 months can be referred to as Cash equivalent. Cash and cash equivalents refer to the line item on the balance sheet that reports the value of a company's assets that are cash or can be converted into cash immediately.

Answer: Option D

Explanation:

Portion of a fixed asset's cost consumed during the current accounting period is known as depreciation. Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account for declines in value. Businesses depreciate long-term assets for both tax and accounting purposes.

Answer: Option A

Explanation:

Under Straight line method, the amount of depreciation expenses remains same throughtout the life of the asset. In a straight line depreciation method, it is assumed that the asset uniformly depreciates over its useful life.

Answer: Option A

Explanation:

Cost of the asset = Rs. 6,000Salvage Value = Rs. 1,000Total Depreciation Cost = Cost of asset – Salvage Value = 6000 – 1000 = Rs. 5000Useful life of the asset = 5 yearsThus, annual depreciation cost = (Cost of asset – Salvage Cost)/Useful Life = 5000/5 = Rs. 1000.

Answer: Option B

Explanation:

Depreciation expenses Debit and accumulated depreciation Credit is a double entry for deprecation expenses.

Answer: Option A

Explanation:

Provision for depreciation is an alternative term used for accumulated depreciation expenses. Depreciation expense is recognized on the income statement as a non-cash expense that reduces the company's net income.

Answer: Option C

Explanation:

In the calculation of depreciation, all of the following items are actually estimates except Historical cost. A historical cost is a measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the company.

Answer: Option C

Explanation:

Amortization and Depletion are kind of depreciation expenses. Depreciation, depletion, and amortization (DD&A) are accounting techniques that enable companies to gradually expense resources of economic value.

Answer: Option C

Explanation:

Under Straight line method of depreciation, the amount of depreciation expenses remains constant throughout the life of the asset.

Answer: Option C

Explanation:

Depreciable amount + Residual value of a fixed asset = Cost of the fixed asset. Fixed assets are depreciated only to the extent of their depreciable amount, which equals cost minus the salvage value.

Answer: Option B

Explanation:

An increase in the value of fixed asset is referred to as Appreciation. Appreciation, in general terms, is an increase in the value of an asset over time. The increase can occur for a number of reasons, including increased demand or weakening supply, or as a result of changes in inflation or interest rates.

Answer: Option A

Explanation:

Cost of a fixed asset - Accumulated depreciation expenses of the fixed asset = Book value of a fixed asset. Except for the cost of land, the cost of a fixed asset is spread over its estimated useful life to the business; the amount allocated to each period is called depreciation expense.

Answer: Option B

Explanation:

The term Depletion is generally used for the depreciation of natural resources. Depletion is an accrual accounting technique used to allocate the cost of extracting natural resources such as timber, minerals, and oil from the earth.

Answer: Option B

Explanation:

The purchase price of a software that will be used for more than 12 months should be regarded as a capital expenditure. It is considered a capital expenditure when the asset is newly purchased or when money is used towards extending the useful life of an existing asset.

Answer: Option D

Explanation:

Living plants and animals is a biological asset. Biological asset is any living plant or animals owned by the business, and are typically measured at fair value minus selling costs.

Answer: Option D

Explanation:

XYZ firm has imported a machine from abroad. Refundable tax is NOT the element of the machine's cost.

Answer: Option A

Explanation:

Net income will increase is the effect on net income if a business decreases its provision for bad debts.

Answer: Option C

Explanation:

Land foxed assets is not depreciated in the ordinary circumstances. Land is not depreciated, since it has an unlimited useful life.

Answer: Option B

Explanation:

A firm has not recorded the bad debts by mistake. Net profit would increase is the effect of bad debt ommission.

Answer: Option B

Explanation:

When Account receivable is credited it is certain that a debt won't be recovered.

Answer: Option A

Explanation:

A recovery of bad debt increases net income. Bad debt recovery is a payment received for a debt that was written off and considered uncollectible. The receivable may come in the form of a loan, credit line, or any other accounts receivable. Because it generally generates a loss when it is written off, bad debt recovery usually produces income.

Answer: Option A

Explanation:

Aged debtors analysis shows how long debts have been outstanding. An aged debtors report is a totalled list of all the invoices your customers haven't yet paid you for, less any credit notes you've issued to your customers and not yet refunded them for.

Answer: Option D

Explanation:

Both listed and non listed companies are types of Public Limited Companies.

Answer: Option D

Explanation:

Debtor declared to be a bankrupt is the most common cause of bad debt. A bad debt is a monetary amount owed to a creditor that is unlikely to be paid and, or which the creditor is not willing to take action to collect for various reasons, often due to the debtor not having the money to pay, for example due to a company going into liquidation or insolvency.

Answer: Option A

Explanation:

The memorandum of association of a company is the charter and defines the limitation of the power of the company established under Companies Act. Memorandum of Association is the most important document of a company. It states the objects for which the company is formed. It contains the rights, privileges and powers of the company. Hence it is called a charter of the company. It is treated as the constitution of the company. It determines the relationship between the company and the outsiders.

Answer: Option D

Explanation:

Prudence concept dictates the inclusion of 'provision for doubtful debts' in the financial statements.

Answer: Option D

Explanation:

Merchandise on hand at either the beginning or end of the accounting period is called Inventory. Inventory is the array of finished goods or goods used in production held by a company. Inventory is classified as a current asset on a company's balance sheet, and it serves as a buffer between manufacturing and order fulfillment.

Answer: Option B

Explanation:

Total credit sales is a commonly used base to create the provision for doubtful debts. The provision for doubtful debts is the estimated amount of bad debt that will arise from accounts receivable that have been issued but not yet collected. It is identical to the allowance for doubtful accounts.

Answer: Option A

Explanation:

Issued capital is taken up by the general public. Such capital can be offered to the public at a later date. It is that part of subscribed capital, which is called by the company to pay on shares allotted. It is not necessary for the company to call for the entire amount on shares subscribed for by shareholders.

Answer: Option B

Explanation:

Provision for doubtful debts account is an Contra asset account. It is used along with the account Accounts Receivable in order for the balance sheet to report the net realizable value of the company's accounts receivable.

Answer: Option B

Explanation:

Current liabilities and current assets items of balance sheet are useful in evaluating a company's liquidity.

Answer: Option C

Explanation:

Provision for cash discount on debtors is a percentage of Net debtors less provision for doubtful debts.

Answer: Option B

Explanation:

General reserve can be distributed among the shareholders. General reserve can be used for distribution of dividend among shareholders when profit is insufficient. Reserves and surpluses are shown in liabilities side of balance sheet.

Answer: Option D

Explanation:

The value of inventories or stock is figured out at the lower of cost and Net realizable value.

Answer: Option B

Explanation:

Shares for which amount is paid by public are called Paid up shares. Paid-Up Share Capital All paid-up capital is listed under the shareholders' equity section of the issuing company's balance sheet. Share capital can fall into four categories; paid-up share capital, called-up share capital, authorized share capital, and issued share capital.

Answer: Option D

Explanation:

An overstatement in the value of closing stock overstates all of the following except Cost of goods sold.

Answer: Option D

Explanation:

Trust is non-profit organization. A nonprofit organization is a business that has been granted tax-exempt status by the Internal Revenue Service (IRS) because it furthers a social cause and provides a public benefit.

Answer: Option B

Explanation:

Commercial accounting is based on Double entry book keeping. Commercial accounting is something about providing right informatin to right people on right time. In commercial accounting, the system is maintained by the business organizations. The main objective of commercial accounting is to know the profit or loss and the financial position of any business.

Answer: Option D

Explanation:

Stock take is not the methods of inventory costing. Stock-taking or "inventory checking" or "wall-to-wall" is the physical verification of the quantities and condition of items held in an inventory or warehouse. This may be done to provide an audit of existing stock. It is also the source of stock discrepancy information.

Answer: Option A

Explanation:

An asset that is NOT physical in nature is called Intangible asset. An intangible asset is an asset that is not physical in nature. Goodwill, brand recognition and intellectual property, such as patents, trademarks, and copyrights, are all intangible assets.

Answer: Option A

Explanation:

FIFO methods of inventory costing yields highest taxable income. First-in, first-out, or FIFO, applies the earliest costs first. In rising markets, FIFO yields the lowest cost of goods sold and the highest taxable income.

Answer: Option B

Explanation:

In profit and loss appropriation account interim dividend is treated. An interim dividend is a dividend payment made before a company's annual general meeting (AGM) and the release of final financial statements.

Answer: Option B

Explanation:

LIFO inventory costing methods is supposed to issue the most recently purchased goods. LIFO, which stands for last-in-first-out, is an inventory valuation method which assumes that the last items placed in inventory are the first sold during an accounting year.

Answer: Option B

Explanation:

Articles of association contains rules and regulations for internal management of the business. Articles of Association is a document which prescribes the rules and bye-laws for the general management of the company and for the attainment of its object as given in the memorandum.

Answer: Option D

Explanation:

Opening inventory + Net purchases = Cost of goods available for sale. The cost of goods available for sale equals the beginning value of inventory plus the cost of goods purchased.

Answer: Option D

Explanation:

Purchase of fixed asset is NOT a cash inflow. Cash inflow is the money received by an organization as a result of its operating activities, investment activities, and financing activities.

Answer: Option D

Explanation:

Cost of goods available for sale - closing inventory = Cost of goods sold.

Answer: Option B

Explanation:

NRV or net realizable value of inventory is the expected selling price or market value less Expenses necessary to complete sale. Net realizable value is generally equal to the selling price of the inventory goods less the selling costs (completion and disposal).

Answer: Option C

Explanation:

Listed company is quoted company. The CA 2006 definition of 'quoted company' in s. 385 refers to companies listed on 'regulated markets' including the Main Market, but not AIM.

Answer: Option B

Explanation:

Under Standard cost method of inventory costing, a pre-determined cost is assigned to all items of inventory. A standard cost is described as a predetermined cost, an estimated future cost, an expected cost, a budgeted unit cost, a forecast cost, or as the "should be" cost. Standard costs are often an integral part of a manufacturer's annual profit plan and operating budgets.

Answer: Option C

Explanation:

Authorized capital is required for the registration of the company. The authorized capital of a company (sometimes referred to as the authorized share capital, registered capital or nominal capital, particularly in the United States) is the maximum amount of share capital that the company is authorized by its constitutional documents to issue (allocate) to shareholders.

Answer: Option A

Explanation:

Term 'Credit' means Receiving of benefits by the business. The terms which indicate when payment is due for sales made on account (or credit).

Answer: Option D

Explanation:

When a liability is reduced or decreased, it is recorded on the Left or debit side of the account.

Answer: Option A

Explanation:

Accounts receivable & inventory are the examples of Current assets. Current assets include cash, cash equivalents, accounts receivable, stock inventory, marketable securities, pre-paid liabilities, and other liquid assets. Current assets are important to businesses because they can be used to fund day-to-day business operations and to pay for the ongoing operating expenses.

Answer: Option C

Explanation:

When capital is increased by an amount, it is recorded on the Right or credit side of the account.

Answer: Option D

Explanation:

General expenses, Financial expenses and Selling expenses are paid out of Gross Profit.

Answer: Option C

Explanation:

Bank account will be credited in the books of XYZ Co. Ltd, if the business purchases a vehicle thriugh cheque.

Answer: Option D

Explanation:

Land is NOT an example of intangible assets. An intangible asset is an asset that is not physical in nature.

Answer: Option D

Explanation:

Creditors is an example of business liability. A liability is defined as a company's legal financial debts or obligations that arise during the course of business operations.

Answer: Option C

Explanation:

Loss is subtracted from capital account and profit is added to capital account.

Answer: Option B

Explanation:

Debenture is also named as Bond. In a sense, all debentures are bonds , but not all bonds are debentures. Whenever a bond is unsecured, it can be referred to as a debenture.

Answer: Option B

Explanation:

Mr. Z account account will be credited, if business bought goods on credit from Mr. Z.

Answer: Option A

Explanation:

Interest on loan paid by business is an example of Revenue expense. A revenue expenditure is a cost that is charged to expense as soon as the cost is incurred.

Answer: Option A

Explanation:

Memorandum of association is the most important document of the company. It is the charter of the company, which defines the objects of the company's formation and the utmost possible scope of its operations beyond which its actions cannot go.

Answer: Option A

Explanation:

Office equipment account will be credited when a typewriter is sold that has been used in the office.

Answer: Option B

Explanation:

The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the as set, is termed as Depreciation. Depreciation is any method of allocating such net cost to those periods in which the organization is expected to benefit from use of the asset. The asset is referred to as a depreciable asset.

Answer: Option A

Explanation:

Authorized share capital is also known as Registered capital. The authorized capital of a company is the maximum amount of share capital that the company is authorized by its constitutional documents to issue to shareholders.

Answer: Option D

Explanation:

Credit sales will be shown on debit side of debtors account. Credit sales means allowances of goods to customers in order to pay in advance.

Answer: Option A

Explanation:

The maximum amount with which a company is registered is called Authorized capital.

Answer: Option A

Explanation:

When one or both aspects of a transaction are recorded in the wrong class or category of account, it is called Error of principle. An error of principle is an accounting mistake in which an entry is recorded in the incorrect account, violating the fundamental principles of accounting.

Answer: Option B

Explanation:

Revenue expenditure does not improve the financial position of the business. Revenue expenditures are typically referred to as ongoing operating expenses.

Answer: Option C

Explanation:

Salaries of selling staff would NOT be considered as a component of 'cost' of stock. When investors purchase shares of stock, the price paid includes two components: the price of the stock and the fee charged by the brokerage firm, called commission.

Answer: Option A

Explanation:

Current asset is TRUE about the treatment of insurance premium paid in advance. Current assets represent all the assets of a company that are expected to be conveniently sold, consumed, utilized or exhausted through the standard business operations, which can lead to their conversion to a cash value over the next one year period.

Answer: Option B

Explanation:

Long term liabilities consist of all debts, payabke after 12 months. Long-term liabilities are obligations not due within the next 12 months or within the company's operating cycle if it is longer than one year.

Answer: Option B

Explanation:

Listed company can offer its share to public at large. Listed company is a corporation whose ownership is dispersed among the general public in many shares of stock which are freely traded on a stock exchange or in over-the-counter markets.

Answer: Option A

Explanation:

The persons who sign Articles and Memorandum of the company and contribute in the initial share capital of the company are called Subscribers. They are called subscribers because, as part of the company formation.

Answer: Option A

Explanation:

Balance sheet financial statements show the financial health of an organisation at a stated point of time. A balance sheet is a financial statement that reports a company's assets, liabilities and shareholders' equity at a specific point in time, and provides a basis for computing rates of return and evaluating its capital structure.

Answer: Option C

Explanation:

Shareholders are the owners of a company. A shareholder, also referred to as a stockholder, is any person, company, or institution that owns at least one share of a company's stock.

Answer: Option D

Explanation:

The estimated value at which an asset is expected to be sold after the end of its useful life is called Residual value, Salvage value and Scrap value.

Answer: Option C

Explanation:

Tax & freight paid on sale is a selling expense. Selling expense (or sales expense) includes any costs incurred by the sales department.

Answer: Option A

Explanation:

General office expenses are charged to Administrative expenses head because we know that all types of official expenses are known as administrative expense.

Answer: Option B

Explanation:

A debit balance in the bank statement indicates Bank overdraft. Overdrafts are where the bank account becomes negative and the businesses in effect have borrowed from the bank.

Answer: Option D

Explanation:

Capital expenditure does not reduce the profit of the concern. Capital expenditures refer to funds that are used by a company for the purchase, improvement, or maintenance of long-term assets to improve the efficiency or capacity of the company.

Answer: Option C

Explanation:

Sales revenue is not an item of Balance Sheet. Sales revenue is the amount realized by a business from the sale of goods or services.

Answer: Option C

Explanation:

Stock of a Trading concern consists of Merchandise inventory. Merchandise inventory is the cost of goods on hand and available for sale at any given time. Merchandise inventory (also called Inventory) is a current asset with a normal debit balance meaning a debit will increase and a credit will decrease.

Answer: Option B

Explanation:

In an account, when credit side total < debit side total, then, the balance is known as Debit balance. It is the positive balance in the left side of the account.

Answer: Option B

Explanation:

General Journal is used to record financial transactions in chronological (day-to-day) order.

Answer: Option A

Explanation:

Net Profit = Gross Profit minus Operating expenses.

Answer: Option A

Explanation:

Expenditure incurred annually on renewal of patent is a Revenue expenditure. A revenue expenditure is a cost that will be an expense in the accounting period when the expenditure takes place.

Answer: Option B

Explanation:

Money spent to acquire or upgrade physical assets is known as Capital expense, as the asset is expected to be utilised in a long run.

Answer: Option A

Explanation:

Salaries paid in advance should be shown on Asset side of the Balance sheet. An advance paid is recorded as a current asset in the company's balance sheet.

Answer: Option B

Explanation:

Cash account will be credited when the goods are purchased on cash.

Answer: Option D

Explanation:

Fixed asset are shown at written down value in Balance sheet. If the asset is not impaired and the company operates under GAAP, then the cost model must be used.

Answer: Option D

Explanation:

Closing stock does not reduce the resources of business. Closing stock is the amount of inventory that a business still has on hand at the end of a reporting period.

Answer: Option B

Explanation:

Mr. Ali account will be credited when the goods are purchased on credit from Mr. Ali.

Answer: Option A

Explanation:

Outsider's claim against the assets of the business is called Liability. Liabilities are defined as a company's legal financial debts or obligations that arise during the course of business operations.

Answer: Option A

Explanation:

An expenditure whose benefit is finished or enjoyed immediately is called Expense. An expense is the cost of operations that a company incurs to generate revenue.

Answer: Option C

Explanation:

An informal accounting statement that lists the ledger account balances at a point of time and compares the total of debit balances with the total of credit balances is known as Trial balance. A trial balance is a bookkeeping worksheet in which the balance of all ledgers are compiled into debit and credit account column totals that are equal.

Answer: Option C

Explanation:

A company's merchandise, raw materials, finished and unfinished products which have not yet been sold is known as Inventory.

Answer: Option B

Explanation:

Credit is nature of Capital account. Asset accounts normally have debit balances, while liabilities and capital normally have credit balances.

Answer: Option B

Explanation:

Documentary evidence, in a specific format used to record the details of a transaction is known as Voucher. Voucher is documentary evidence in a specific format that records the details of a transaction. It is accompanied by the evidence of transaction.

Answer: Option B

Explanation:

The assets which have a limited useful life are termed as Depreciable assets. The assets which are held by a business for the production and supply of goods and services, expected to be used for more than an accounting year and have a limited useful life are known as Depreciable Assets.

Answer: Option A

Explanation:

A decrease in value of a fixed asset due to age, wear and tear is known as Depreciation. Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account for declines in value. Businesses depreciate long-term assets for both tax and accounting purposes.

Answer: Option C

Explanation:

Cost incurred for the maintenance of shop is considered as Revenue expenditure. A revenue expenditure is a cost that will be an expense in the accounting period when the expenditure takes place.

Answer: Option D

Explanation:

In balance sheet, fixed assets are shown at Written Down Value (WDV). If the asset is not impaired and the company operates under GAAP, then the cost model must be used.

Answer: Option B

Explanation:

The accrual basis of accounting records revenues when they are earned. In other words, under the accrual basis of accounting, the receipt of cash and the payment of cash are not the focus of reporting revenues and expenses.

Answer: Option C

Explanation:

Double entry accounting system includes both cash and accrual accounting. Double entry, a fundamental concept underlying present-day bookkeeping and accounting, states that every financial transaction has equal and opposite effects in at least two different accounts.

Answer: Option D

Explanation:

When a debtor pays his dues there is no change in total assets or total liabilities because debtor in current assets decrease and cash & bank in current assets increase.

Answer: Option C

Explanation:

Acid test ratios indicate the short-term liquidity of a business. The acid-test ratio uses a firm's balance sheet data as an indicator of whether it has sufficient short-term assets to cover its short-term liabilities.

Answer: Option C

Explanation:

The maximum amount beyond which a company is not allowed to raise funds by issue of shares is Nominal capital. Nominal capital, also known as authorized capital, represents the securities that are designated for shareholders.

Answer: Option A

Explanation:

Based on Business entity concept, share capital account shown on the liability side of a balance sheet. The business entity concept also explains why owners' equity appears on the liability side of a balance sheet (i.e. credit side).

Answer: Option B

Explanation:

Legal work on patent application is not considered as Research & Development costs. Research and development (R&D) expenses are associated with the research and development of a company's goods or services.

Answer: Option C

Explanation:

Amortization of unidentified intangible assets is in terms of Matching concept. In the Matching Concept of Accounting, all the expenses matched with the revenue of an accounting period should only be taken into consideration.

Answer: Option B

Explanation:

Declared dividend should be classified in the balance sheet as a Current liability. Dividends payable are dividends that a company's board of directors has declared to be payable to its shareholders. Until such time as the company actually pays the shareholders, the cash amount of the dividend is recorded within a dividends payable account as a current liability.

Answer: Option A

Answer: Option C

Explanation:

The main objective of providing depreciation is to Create funds for replacement of fixed assets. The main objective of charging depreciation is to accumulate adequate fund to replace old asset with the new one after the useful life. Depreciation is charged to fixed assets which helps to show the current value of the asset.

Answer: Option D

Explanation:

If the opening inventory of a business is undercast, it will Increase gross profit as well as net profit.

Answer: Option D

Explanation:

Trial Balance is not a financial statement. Trial Balance is a list of closing balances of ledger accounts on a certain date and is the first step towards the preparation of financial statements. It is usually prepared at the end of an accounting period to assist in the drafting of financial statements.

Answer: Option D

Explanation:

The three column cash book represents Real, personal and nominal accounts. The three column cash book (also known as triple column cash book) has three money columns on both debit and credit side – one on each side for recording discount, cash and bank amounts.

Answer: Option A

Explanation:

Provision for bad debts is made as per the Conservatism concept. The conservatism principle is the general concept of recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received.

Answer: Option A

Explanation:

Carriage inwards refers to the cost of transportation for Purchase of materials. The carriage inwards costs are considered to be part of the cost of items purchased, since an asset's cost is defined as all costs that are necessary to get the asset in place and ready for use.

Answer: Option C

Explanation:

Right shares are the shares Offered to the existing equity shareholders. A rights offering (rights issue) is a group of rights offered to existing shareholders to purchase additional stock shares, known as subscription warrants, in proportion to their existing holdings.

Answer: Option C

Explanation:

The claims against the company not acknowledged as debts are shown as notes to balance sheet. All claims which the company does not acknowledge as debts should be disclosed. Claims against the company by the labour union for additional wages, compensation, etc. come under this category.

Answer: Option B

Explanation:

Cash account is a real account. Real accounts show up on a company's balance sheet, which is the financial statement that lists all the accounts that a company has and their balances.

Answer: Option B

Explanation:

Under cash basis of accounting, revenue is recognized when Cash is received. Realizable means it is reasonable to expect that cash will be received in the future.

Answer: Option D

Explanation:

The trade discount on purchases are not all recorded in the books. Trade discount is not separately shown in the books of accounts, and all amounts recorded in a purchases or sales book are done in the net amount only.

Answer: Option C

Explanation:

Customs duty paid in connection with the import of equipment is not an item of revenue expenditure. Customs duty paid on import of raw materials. It is capital expenditure.

Answer: Option C

Explanation:

Patents are fixed assets. The accounting process for patents is similar to other fixed assets. Companies allocate or amortize the costs over the life of the patent.

Answer: Option A

Explanation:

Debt equity ratio is a leverage ratio. The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Closely related to leveraging, the ratio is also known as risk, gearing or leverage.

Answer: Option A

Explanation:

The expenses that have fallen due for payment but not paid are Outstanding expenses. Outstanding expenses are those expenses which have been incurred during the current accounting period and are due to be paid, however, the payment is not made.

Answer: Option D

Explanation:

The document inviting offers from public to subscribe for the debentures or shares of a body corporate is a Prospectus.

Answer: Option A

Explanation:

The portion of the acquisition cost of an asset yet to be allocated is known as Written down value. Written-down value is the value of an asset after accounting for depreciation or amortization.

Answer: Option D

Explanation:

Cash Book serves the purpose of ledger too, in addition to the recording of accounting transaction. A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. Entries in the cash book are then posted into the general ledger.

Answer: Option B

Explanation:

Dividend appears in the profit and loss appropriation account. The main intention of preparing a profit and loss appropriation account is to show the distribution of profits among the partners.

Answer: Option B

Explanation:

Accounting is the process of matching Revenues and costs. The matching concept is an accounting practice whereby firms recognize revenues and their related expenses in the same accounting period. Firms report "revenues," that is, along with the "expenses" that brought them.

Answer: Option C

Explanation:

Payment of Rs.1000 to bank in discharge of outstanding loan is subject matter of Accounting.

Answer: Option B

Explanation:

Assets = Liabilities + Owner's eq accounting equations is correct. It shows that a company's total amount of assets equals the total amount of liabilities plus owner's (or stockholders') equity.

Answer: Option A

Explanation:

Reserve capital means Part of subscribed uncalled capital. Reserve Capital is defined as a part of subscribed uncalled capital, which will not be called up until and unless the company goes into liquidation.

Answer: Option A

Explanation:

A purchase book is a special purpose subsidiary book prepared by a business to record all credit purchases.

Answer: Option B

Explanation:

Revenue from sale of product ordinarily is reported as part of earning in the period when the sale is made.

Answer: Option C

Explanation:

A document sent to customer when he returns the goods is called Credit note. A credit note or credit memo is a commercial document issued by a seller to a buyer.

Answer: Option C

Explanation:

Preceding working day the bill will mature if the date of maturity of a bill is a holiday, where the date of maturity is a public holiday, the instrument will become due on the preceding business day.

Answer: Option C

Explanation:

Memorandum Joint Venture account is a Nominal account.

Answer: Option A

Explanation:

Acceptance is not required in Promissory Note. It does not require any acceptance because payer is only the maker of the promissory note. It requires acceptance by the drawee or someone else on his behalf as the drawer is not the payer.

Answer: Option A

Explanation:

Loss leads to reduction in Capital. The reduction of capital is done by companies for numerous reasons, including increasing shareholder value and producing a more efficient capital structure.

Answer: Option B

Explanation:

Transaction between business and owner are recorded following Business entity concept. The business entity concept states that the transactions associated with a business must be separately recorded from those of its owners or other businesses.

Answer: Option D

Explanation:

Those transactions for which there is no separate book, are recorded in the Journal Proper. Only those transactions, which cannot be conveniently recorded in any of the other books of original entry i.e., subsidiary books or which are not sufficiently numerous to necessitate a special book being devised for them, are recorded in this book.

Answer: Option B

Explanation:

One of the Fundamental accounting assumption is Going concern. Going concern is an accounting term for a company that has the resources needed to continue operating indefinitely until it provides evidence to the contrary.

Answer: Option A

Explanation:

Contra-entries are passed only when Double column cash book is prepared. The reason for making two entries is to comply with the principle of double entry.

Answer: Option B

Explanation:

The person from whom the goods are purchased on credit are called Creditors. The person, firm or an organization from whom goods or services are purchased on credit by the business are called creditors of the business.

Answer: Option D

Explanation:

Petty cash balance is Asset. The petty cash amount may appear as the first or second item listed in the current asset section of the balance sheet.

Answer: Option D

Explanation:

Dividends are usually paid as a percentage of Paid up capital.

Answer: Option D

Explanation:

A proforma invoice is sent by Consignor to consignee. A Pro-forma invoice is a document prepared by the consignor which is sent to the consignee along with the goods. It contains the details with respect to the quantity of goods sent, rates at which the goods are sent and other terms and conditions for sending the goods on consignment.

Answer: Option D

Explanation:

Wages, Carriage Inward, Octroi and Purchases, Wages, Coal Expenses sets of expense are the direct expense of business.

Answer: Option A

Explanation:

Commission to promote credit sale by consignee is known as Del credere commission. It is a special commission given by the consignor to the consignee.

Answer: Option B

Explanation:

Suspense account given in the trial balance will be entered in the Balance sheet. If the Trial Balance does not agree, the difference is put to Suspense A/c. Suspense A/c on credit side of Trial Balance will be entered on the liabilities side of Balance Sheet. Suspense A/c on debit side of Trial Balance will be entered on the assets side of Balance Sheet.

Answer: Option A

Explanation:

The accounting equation is based on Dual aspect. The accounting equation is made visible in the balance sheet, where the total amount of assets listed must equal the total of all liabilities and equity.

Answer: Option D

Explanation:

Different accounting policies can be adopted in the Valuation of inventories, Valuation of Investments and Calculation of depreciation.

Answer: Option B

Explanation:

Normally the Personal account and Real account are balanced. Only accounts relating to assets and liabilities ,that is real account and personal accounts are balanced periodically.

Answer: Option A

Explanation:

Opening and closing inventories are recorded in Journal proper.

Answer: Option C

Explanation:

Crossed cheque is not a negotiable instrument. A cheque is a negotiable instrument. It can either be open or crossed. While a crossed cheque is not payable over the counter but shall be collected only through a banker. The amount payable for the crossed cheque is transferred to the bank account of the payee.

Answer: Option C

Explanation:

The installation expenses for a new machinery will be debited to Machinery A/c.

Answer: Option A

Explanation:

When obligation is not probable or the amount expected to be paid to settle the liability cannot be measured with sufficient reliability, it is called Contingent liability. Contingent liability is a potential liability that may occur, depending on the outcome of an uncertain future event.

Answer: Option D

Explanation:

A Trial Balance contains the balances of Real A/c and Nominal A/c and Personal A/c.

Answer: Option B

Explanation:

Error which affect only one account can be Error of posting. An error in which amount is posted to the wrong side of the same account is known as error of posting. For example, goods sold to X wrongly credited to his account.

Answer: Option D

Explanation:

In case goods are manufactured and segregated for specified consumers, the best method for valuation of inventory would be Specific identification method. Specific identification inventory valuation method is a way of keeping track of all items in an inventory individually.

Answer: Option B

Explanation:

Overriding commission is generally calculated on Total sales exceeding invoice value/cost. Overriding Commission is the extra commission allowed to the consignee in addition to the normal commission usually for making extra efforts to sell a new product in the market.

Answer: Option B

Explanation:

Economic life of an enterprise Is split into periodic interval as per Periodicity concept. It is the concept that each accounting period has an economic activity associated with it, and that the activity can be measured, accounted for, and reported upon.

Answer: Option C

Explanation:

Present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation is termed as Provision. A provision is an account which records a present liability of an entity.

Answer: Option A

Explanation:

When the goods are returned to a supplier a Debit note is sent to him which indicates that his/her account has been debited with the repective amount.

Answer: Option C

Explanation:

Bills receivable endorsed are debited to Endorsee A/c. The endorsee will be the owner of the bill and he will realise the payment of the bill on the due date from the drawee.

Answer: Option D

Explanation:

Del Credere Commission. It is a special commission given by the consignor to the consignee. When of commission is given, the consignee undertakes upon himself the risk of any .bad debts arising out of the credit So this Del Credere commission in the form of insurance premium against the risk of bed debts.

Answer: Option B

Explanation:

Interest on Capital is expense for the business and is debited to the profit and loss appropriation account.

Answer: Option A

Explanation:

Accounts payable has Credit balance. Since Accounts Payable is a liability account, it should have a credit balance.

Answer: Option A

Explanation:

Conservation concept states that "an accountant shouldn't anticipate profit, but must provide for all losses". The concept that an accountant shouldn't anticipate profit, but must provide for all losses is known as The conservatism concept.

Answer: Option C

Explanation:

Patents accounts are Real account. Patent right is classified as intangible asset and appear on balance sheet, that is why it is of nature of real account. The balances of real accounts are not cancelled out at the end of an accounting period but are carried over to the next period.