Accounting – An Introduction
- A loan due for repayment in 22 months’ time has been included as a current liability, what will be the effect when this is corrected?
(a) Increase net assets
(b) reduce net current assets
(c) increase net current assets
(d) no effect on net current assets - Which of the following transaction result in increase of assets and increase in owner’s equity?
(a) Bonus shares issued
(b) Shares issued for cash
(c) A dividend is declared
(d) All of the above - An asset was purchased for Rs. 5,00,000 with the down payment of Rs. 1,00,000 and bills accepted for Rs. 4,00,000. What would be the effect on the total asset and total liabilities in the balance Sheet?
(a) Assets increased by Rs. 4,00,000 and liabilities increased by Rs. 4,00,000
(b) Assets increased by Rs. 4,00,000 and liabilities decreased by Rs. 4,00,000
(c) Assets decreased by Rs. 4,00,000 and liabilities increased by Rs. 4,00,000
(d) Assets increased by Rs. 5,00,000 and liabilities increased by Rs. 4,00,000 - Which of the following does not follow dual aspect?
(a) Increase in one asset, decrease in other
(b) Increase in both assets and liability
(c) Decrease in one assets, decrease in other
(d) Increase in one asset and capital - Pearl Ltd. Company purchased a van for Rs. 12,000 making a down payment of Rs. 5,000 cash and signing a Rs. 7,000 note payable in 60 days, As a results of his transaction:
(a) Total assets will increase by Rs. 12,000
(b) Total liabilities will increase by Rs. 7,000
(c) This transactions will not have immediate effect on owner’s equity in the business
(d) From the point of view of short term creditor this transaction will make business more liquid
Choose the correct options:
(a) a and c
(b) b and d
(c) a and b
(d) b and c - Paid utility expenses Rs. 500 in cash. What would be the impact of this transaction on accounting equation?
(a) The assets balance will remain unchanged
(b) Assets and equity will increases by Rs. 500 each
(c) Assets and equity will decrease by Rs. 500 each
(d) Assets will decrease by Rs. 500 and liabilities will increase by Rs. 500. - Identify the transaction that will result in decrease in owner’s equity and increase in liabilities.
(a) Issue of bonus shares
(b) Shares issued in payment of bills payable
(c) Shares issued for purchase of land and building
(d) None of the above - A firm had a capital balance of Rs.1,00,000 at the beginning of a year. At the end of the year, the firm had total assets of Rs.1,50,000 and total liabilities of Rs.70,000. If the total withdrawals during the period were Rs.30,000, what was the amount of Net profit / Net loss for the year?
(a) Rs.10,000 loss
(b) Rs.50,000 loss
(c) Rs.10,000 profit
(d) Rs.20,000 loss - A business borrowed Rs. 60,000 from its bank and used the cash to buy a new computer. How is accounting equation affected by these transactions?
(a) Assets increased; liabilities decreased
(b) Assets unchanged; liabilities increased
(c) Assets increased; liabilities increased
(d) Assets unchanged; liabilities decreased - Which one of the following is a correct equation?
(a) Opening capital = Closing capital + Additional capital – Drawings – Profit
(b) Opening capital = Closing capital + Drawings – Additional capital – Losses
(c) Opening capital = Closing Capital + Drawings – Additional capital – Profit
(d) Opening capital = Closing Capital – Drawings – Additional capital – Profit
Classification of Accounts
- Capital Account is ……………… account
(a) Personal
(b) Real
(c) Nominal
(d) None of the above - Trade mark is a ………….. .
(a) Tangible Real Account
(b) Intangible Real Account
(c) Representative Personal Account
(d) Nominal Account - Joint venture account is:
(a) Personal account
(b) Real account
(c) Nominal account
(d) None of these - Income and expenditure Account of non-profit organisation is a
(a) Real Account
(b) Nominal Account
(c) Personal Account
(d) Representative Personal Account - Which one of the following statements is correct?
(a) Increase in Liabilities are credits and decrease are debits
(b) Increase in assets are credits and decrease are debits
(c) Increase in capital are debits and decrease are credits
(d) Increase in expenses are credits and decrease are debits - Premium on redemption of debenture is
(a) Nominal A/c
(b) Real A/c
(c) Personal Account
(d) None of these - Prepaid Salary is which type of account?
(a) Personal Account
(a) Real Account
(c) Nominal Account
(d) Real and Nominal Both - Commission received is
(a) Real account
(b) Nominal account
(c) Personal account
(d) Liability - General Reserve Account and Dividend Equalization Account are
(a) Personal account
(b) Real account
(c) Nominal Account
(d) None of these - Credit means:
(a) Decrease in assets account
(b) Make payment early before due date
(c) To evade tax
(d) All the three
Capital & Revenue Expenditure
- Which one of the following statements is true?
(a) Capital expenditure does not affect the profitability of a concern but revenue expenditure does.
(b) Capital expenditure affects the profitability of a concern directly but revenue expenditure does not.
(c) Capital expenditure affects the profitability of a concern indirectly but revenue expenditure affects directly
(d) Both capital expenditure and revenue expenditure affect the profitability of a concern directly - Which of the following is deferred revenue expenditure?
(a) Legal expenses incurred on the purchase of land.
(b) Expenses on a mega advertisement campaign while launching a new product.
(c) Expenses incurred on installation of a new machine.
(d) Wages paid for construction of an additional room in the building. - Which of the following expenditures is considered as deferred revenue expenditure?
(a) Rs. 2,000 spent on repairs of machinery
(b) Rs. 4,000 spent on dismantling, transportation and reinstalling plant and machinery to a new site
(c) Rs. 60,000 spent on construction of railway siding
(d) Rs. 20,000 spent on some major alterations to a theatre which made it more comfortable and attractive. - Which of the following is not a feature of capital expenditure?
(a) They yield benefit over a long period
(b) They are debited to profit and loss account
(c) They are incurred for acquiring fixed assets
(d) They increase the earning capacity of the business - Which statement is true for the difference in Capital and Revenue Expenditure?
(a) Capital expenditures are for short run whereas the revenue expenditures are for long run.
(b) Capital expenditures are defined for industry whereas the revenue expenditures are defin5ed for firms.
(c) Capital expenditures are recorded in the books of business whereas the revenue expenditures are need not to record in the books of business.
(d) Capital expenditures increase earning capacity of business whereas the revenue expenditures are incurred to maintain earning capacity. - Read the statements carefully and choose a correct option given below:
Statement I: Capital Expenditures and Revenue Expenditures both are non-recurring by Nature.
Statement II: Capital Expenditures increase earning capacity of business whereas Revenue Expenditures are incurred to maintain earning capacity.
(a) Only statement I is correct.
(b) Only statement II is correct.
(c) Both statements are correct.
(d) Both statements are incorrect. - “Legal expenses incurred to defend a suit for breach of contract to supply goods” is
(a) Capital Expenditure
(b) Revenue Expenditure
(c) Deferred Revenue Expenditure
(d) More than one of the above - Which of the following statements are true?
(i) Prepaid rent is a Personal A/c.
(ii) Interest on Drawings is an income for the business.
(iii) Accrued income and income due but not received are same.
(iv) Cost of obtaining licence to carry out business is a capital expenditure.
Code :
(a) (ii) and (iii)
(b) (i), (ii) and (iii)
(c) (ii), (iii) and (iv)
(d) More than one of the above - Mark out which is not a capital expenditure.
(a) Cost of issuing shares and debenture
(b) Wages paid for construction of a new office
(c) Purchase of a new spark plug for Rs.9.75
(d) Repair on a secondhand vehicle newly purchased - Expenditure incurred by a publisher for acquiring copyrights is a–
(a) Capital expenditure
(b) Revenue expenditure
(c) Deferred revenue expenditure
(d) None of the above
Accounting Concepts, Principles and Conventions
- The accounting principle of matching is best demonstrated by:
(a) Not recognizing any expenses unless some revenue is realized
(b) Associating effort (cost) with accomplishment (revenue)
(c) Recognizing prepaid rent received as revenue
(d) Establishing a reserve for possible future market decline in inventory account - Choose the correct code for the following statements being correct or incorrect.
Statement I: Punctuality and team spirit among employees of an organisation has great contribution in enhancing profits of the business but they do not appear as asset in the balance sheet.
Statement II: Financial statements do not reflect the correct financial position of a business.
Code:
(a) Both the Statement I and II are correct.
(b) Both the Statement I and II are incorrect.
(c) Statement I is correct, but II is incorrect.
(d) Statement I is incorrect, but II is correct. - The traditional accounting practice of resolving uncertainty by choosing then solution that leads to the lower amount of income being recognized in the current accounting period is based on which of the following accounting principles?
(a) Realization
(b) Matching
(c) Conservatism
(d) Materiality - Arrange in sequence the following accounting constructs and principles in order of their precedence.
(a) Conservation
(b) Full disclosure
(c) Separate entity and going concern
(d) Matching principle
(e) Revenue recognition
Choose the correct answer from the options given below:
(a) a-b-d-c-e
(b) c-a-e-d-b
(c) c-d-e-b-a
(d) a-d-c-e-b - Accounting principles are generally based on:
(a) Practicability
(b) Subjectivity
(c) Convenience in recording
(d) Legal framework - The Basic concept related to Balance Sheet are
(a) Cost Concept (Purchase Price)
(b) Business Entity Concept
(c) Accounting Period Concept
(d) Both Cost Concept (Purchase Price) and Business Entity Concept - Revenue is generally recognized being earned at the point of time when-
(a) Order is received.
(b) Production is completed.
(c) Goods are delivered.
(d) Cash is received. - The Basic concept related to profit & loss account
(a) Realization Concept
(b) Matching Concept
(c) Cost Concept
(d) Both Realization Concept and Matching Concept - Policy of ‘Playing safe’ followed by the accounted is based on which one of the following concept.
(a) Dual Aspect Concept
(b) Conversation Conventions
(c) Money Measurement Concept
(d) Realization Concept - Revenue from sale of products, ordinarily is reported as part of the earning in the period when:
(a) The sales made
(b) The cash is collected
(c) The products are manufactured
(d) The profit is computed - Which of the following is ‘true’ regarding the prudence principle of Accounting?
(a) Taking care of the future losses
(b) Taking care of bad debts
(c) Taking care of the future profits
(d) Taking care of inventory and depreciation - Which of the following are key features of prudent accounting concepts and conventions?
(A) It includes revenues and profits in the accounts when they are realized.
(B) It prevents profits from being overstated.
(C) It prevents a trader from more withdrawing from the business then is wise.
(D) Managerial efficiency and expertise.
(E) Good customer relations.
Choose the most appropriate answer from the option given blow:
(a) (C), (D) and (E) only
(b) (A), (D) and (E) only
(c) (B), (C) and (D) only
(d) (A), (B) and (C) only - Match the following:
List-I List-II (A) Matching Principle (i) Ignores future profit estimations (B) Materiality Principle (ii) Normal basis for valuing assets (C) Conservation Principle (iii) Revenues and expenses of a particular period (D) Cost Principle (iv) Relates to relative size or importance of item or event Codes:
(a) (A)-(i), (B)-(iv), (C)-(ii), (D)-(iii)
(b) (A)-(ii), (B)-(iii), (C)-(iv), (D)-(i)
(c) (A)-(iii), (B)-(iv), (C)-(i), (D)-(ii)
(d) (A)-(iv), (B)-(iii), (C)-(ii), (D)-(i) - Match List – I with List-II and select the correct answer:
List-I List-II (A) Measurement of income (i) Accrues to the equity of owners (B) Recognition of expense (ii) Recognition of revenue (C) Basis of Realization (iii) Matching revenue with expenses (D) Identification of revenue (iv) Accounting period Codes:
(a) (A)-(i), (B)-(ii), (C)-(iii), (D)-(iv)
(b) (A)-(ii), (B)-(i), (C)-(iii), (D)-(iv)
(c) (A)-(iii), (B)-(i), (C)-(iii), (D)-(iv)
(d) (A)-(iii), (B)-(iv), (C)-(ii), (D)-(i) - Match the items in Columns-1 with the items in Column-2.
Column-I Column-II (A) Materiality Concept (i) The same accounting method used by a firm from one period to another (B) Going Concern Concept (ii) An inappropriate assumption of a firm being bankrupt (C) Historical Cost concept (iii) A normal basis used for accounting assets (D) Consistency Concept (iv) Relates to the importance of an item or event Codes:
(a) (A)-(iv), (B)-(ii), (C)-(iii), (D)-(i)
(b) (A)-(i), (B)-(ii), (C)-(iii), (D)-(iv)
(c) (A)-(ii), (B)-(iii), (C)-(iv), (D)-(i)
(d) (A)-(iv), (B)-(ii), (C)-(i), (D)-(iii)