Saturday 11 May 2019

Financial Accounting MCQs /Page 11

134.  Any donation received for a specific purpose is a
(a)   Liability
(b)  Assets
(c)   Revenue receipts
(d)  Capital receipts

135.  Which of the following is an item of capital expenditure?
(a)   Research and development costs during the year
(b)   Interest on borrowed fund utilized for acquisition of Office Furniture
(c)   Installation charges paid in conjunction with the purchase of Office Equipment
(d)  Monthly rent of a machinery used in the business
[Hints: (c) A capital expenditure is a non- recurring expenditure whose benefit lasts for more than one accounting period. Installation charges paid in conjunction with the purchase of office equipment is an one-time expenditure whose benefit lasts for more than one accounting period.]
136.  Which of the following statements is true?
(a)   Provision for doubtful debts represents the amount that cannot be collected
(b)  The distinction between capital and revenue items is important because it is of fundamental importance to the determination of profits
(c)   Goods lost by fire need not be accounted for since they are not sales
(d)   Free samples received are business gains

137.  The balance of which of the following accounts do not disappear, once they are debited/credited to Trading Account.
(a)  Sales
(b)   Purchases
(c)   Inward returns
(d)  Closing stock
[Hints: (d) The closing stock (d) is the value of goods which remain unsold at the end of the period whose balance appears once in Trading Account and once in Balance Sheet of the business. All other accounts sales (a), purchases (b) and Inward Returns (c) are closed once they are absorbed by the Trading Account. Thus (d) is the correct answer.]

138.  Which one of the following should be considered a revenue expenditure?
(a)  '1000 paid for the execution of a new plant
(b)   Loss of '10,000 incurred in increasing the sitting accommodation of a hotel

(c)   Damage paid on account of breach of a contract to supply certain goods
(d)   Repair to machinery purchased, second hand.

139.  Which of the following statements are / is true? “Events after Balance Sheet” are
(a)  All the significant events after the Balance Sheet date
(b)  The events after Balance Sheet date but before submitting it to the Registrar of
(c)  The events after Balance Sheet date but before its approval by the board
(d)  All changes after Balance Sheet date before its approval

[Hints: (c) Events occurring after the Balance Sheet date are those significant events, both favourable and unfavourable, that occur between the Balance Sheet date and the date on which the financial statements are approved by the Board of Directors in the case of a company, and by the corresponding approving authority in the case of any other entity.]

140.  Which one of the following is a capital expenditure?
(a)  Compensation paid to Directors on termination of their services
(b)   Expenditure incurred in connection with the renewal of a Trade Mark.
(c)   Gratuities paid to Directors on termination of their services.
(d)   Royalty paid in installments for the purchase of rights to manufacture and sell patient medicines.
141.  Which of the following enhances the earning capacity of an asset?
(a)   Increase in working capacity of an asset
(b)   Reduction in operating costs
(c)   Replacing damaged parts of an asset
(d)   Both (a) and (c) above
[Hints: (d) Enhancement of earning capacity can be by way of replacement of worn out or damaged parts which retarded the earning capacity and increase in the working capacity increases the earning capacity of the asset.]

142.  Which of the following items should not be capitalized relating to fixed assets?
(a)   Interest payable on loans or deferred credits taken for the acquisition or
construction of fixed assets before they are ready for use
(b)  Stand by equipment and servicing equipment
(c)   Expenditure incurred on test runs and experimental production
(d)  Administration and general expenses
[Hints: (d) Only those expenses which relate to and specifically attributable to the asset are capitalized. Administration and general expenses cannot be specifically attributable to the asset and hence cannot be capitalized.]
143.  Which of these errors affect only one account
(a)   Errors of casting
(b)   Errors of carry forward
(c)   Errors of posting

(d)  All the three

144.  Which of these errors affect two or more accounts
(a)   Errors of complete omission
(b)   Errors of principle
(c)   Errors of posting to wrong account
(d)  All the three
145.  Which of the following error is an error of principle
(a)  ? 5,000 received from Sham credited to Ram A/c
(b)  ? 5,000 incurred on installation of new plant debited to travelling expenses A/c
(c)  ? 500 paid for wages debited to salary A/c
(d)  ? 500 being purchase of raw material debited to purchase A/c ? 50

146.  Which of the following is an one sided error
(a)  ? 500 purchase of old equipment not recorded in the books of A/c at all
(b)  ? 500 being expense on travelling expense credited to travelling expenses
(c)   Both
(d)   None
147.  Any gain on the sale of non-current assets should be  from the net profit and the loss
must be           to the net profit in determining fund from operation
(a)  Added, Reduced
(b)  Added, Added
(c)   Deducted, Added
(d)   Deducted, Deducted

148.  Cash book records
(a)  Only cash sales
(b)  All types of cash receipts and payments
(c)   Only revenue receipts
(d)  Only capital receipts

149.  In a three column cash book ......does not exist
(a)  Cash column
(b)   Bank column
(c)   Petty cash column
(d)   Discount column

150.  Which of these transactions will not be recorded in cash book
(a)  Cash received from debtors
(b)  Cash paid to creditors
(c)  Salary remained outstanding
(d)  Cash deposited with bank

151.  The closing balance of a petty cash book is a / an
(a)   Liability
(b)  Gain (c)  Assets (d)   Loss

152.  Which column of a cash book will not have credit balance
(a)   Bank column
(b)   Discount column
(c)   Cash column
(d)   None

153.  Petty cash balance is a/an
(a)  Assets
(b)   Expenditure
(c)   Liability
(d)   None

154.  Which of these is a Part of cash in hand
(a)   Postage stamps
(b)   B/R
(c)   Cheque Deposited with Bank
(d)   B/R endorsed

155.  Which of the following is a Real A/c
(a)  Salary A/c
(b)   Bank A/c
(c)   Building A/c
(d)  Goodwill A/c

156.  Which of the following is a Personal A/c
(a)  Outstanding Salary A/c
(b)   Rent A/c
(c)  SBI A/c
(d)   Bad debts A/c

157.  Which of the following is a representative Personal A/c
(a)  Outstanding Salary A/c
(b)   Rent A/c
(c)  SBI A/c
(d)   Bad debts A/c

158.  Which of the following is a Nominal A/c
(a)  Outstanding Salary A/c
(b)   Rent A/c

(c)  SBI A/c
(d)   Debtors A/c

159.  Goodwill A/c is a/an
(a)   Nominal A/c
(b)  Tangible Asset
(c)   Intangible Asset
(d)   Fictitious Asset

160.  Posting is the process of
(a)   Posting the letters in drop box
(b)   Posting suitable person to a suitable job
(c)   Entering in the ledger the information contained in the ledger
(d)  All the three

161.  A book wherein various accounts are opened is called
(a)  Subsidiary books
(b)  Journal
(c)   Ledger
(d)  Trial Balance

Capital expenses are shown in
(a)   Balance Sheet
(b)   Profit and Loss A/c
(c)  Trading A/c
(d)   None of these

Revenue receipts are shown in
(a)   Balance Sheet
(b)   Profit and Loss appropriation A/c
(c)   Manufacturing A/c
(d)  Trading and Profit and Loss A/c

Revenue is generally recognised as being earned at that point of time when
(a)  sale is effected
(b)  cash is received
(c)   production is completed
(d)  debts are collected

Which of the following is a revenue expenses
(a)   Raw material consumed
(b)   Plant purchased
(c)   Long term loan raised from bank
(d)  Share Capital

Which of the following is a capital expenditure
(a)   Repair of plant and machinery
(b)  Salary paid to workers

(c)   Cost of stand by equipment
(d)  Annual whitewash of the office building

Which of these types of expenditure would not be treated as a Capital
(a)  Acquisition of an Asset
(b)   Extension of an Asset
(c)   Improvement of the existing Asset

(d)  Maintenance of the Asset

171.        Expenses of the following nature are treated as a Revenue expenses except
(a)   Expenses for day to day running of the business
(b)   Putting the new asset in working condition
(c)   Depreciation
(d)   Purchase of raw material

172.        Cash received from debtors would be deemed as ..of funds.
(a)   No flow (b) Sources (c)   Uses
(d)  Gain

173.         Purchase day book records
(a)  All cash purchases
(b)  All credit purchases
(c)   Only credit purchase of raw material or goods purchased for resale
(d)  All purchases

174.         Journal is also known by
(a)  Memorandum A/c
(b)   Kaccha books
(c)   Books of original entry
(d)   Proper books

175.        Generally the term fund is used to mean the difference between
(a)  Current assets and current liabilities
(b)   Profit and loss A/C and Balance sheet
(c)   Current assets and non-current liabilities
(d)  Current liabilities and non-current liabilities

176.        The periodic total of purchase day book is posted to
(a)  Creditors A/c
(b)   Debtors A/c (c)   Purchase A/c (d)   None

177.        Which of these documents is not required for Bank Reconciliation
(a)   Bank column of Cash Book
(b)   Bank Pass Book (c)   Bank Statement (d)  Trial Balance

178.        Which of these will not affect Bank and Cash balance
(a)  Cash received from X credited to Y
(b)  Cheques issued to A but debited to B

(c)   Cheques deposited and cleared on the same date
(d)  All the three

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