Whats-app group joining link

Saturday, 11 May 2019

Financial Accounting MCQs page 14


239.         Which of the following entries is correct in respect of reserve for discounts on accounts payable?
(a)   Debit P&L A/c and Credit Reserve for Discount on Accounts Payable A/c
(b)   Debit Accounts Payable A/c and Credit P&L A/c
(c)   Debit Reserve for Discount on Accounts Payable A/c and Credit P&L A/c
(d)   Debit Reserve for Discount on Accounts Payable A/c and credit Accounts
Payable A/c [Hints: (c) The entry will be as follows:
Reserve for Discount on Creditors A/c ..........................................Dr.
To Profit & Loss A/c
It will be shown on the credit side as a separate item and will be shown on the
Liabilities side by way of deduction from the Sundry Creditors.]

240.         Sundry debtors as per Trial Balance is ' 43,000 which includes ' 2,200 due from H in respect of goods sent to him on approval basis, the cost price of which is ' 1,800. Rectification would involve:
(a)  Adding ' 2,200 to closing stock
(b)   Deducting ' 1,800 from closing stock and deducting ' 2,200 each from debtors and sales
(c)  Adding ' 1,800 to closing stock and deducting ' 2,200 each from debtors and sales
(d)   Deducting ' 1,800 from debtors

241.         Goods in stock worth ' 800 are destroyed by fire and the Insurance Co. is accepted the claim for ' 600. Adjustment would involve:
(a)   Debit of ' 800 to Trading Account and credit of ' 600 and ' 200 to insurance company and Profit and Loss Account respectively
(b)   Deduct the ' 800 from closing stock in the Trading Account
(c)   Credit insurance company for ' 600
(d)   Debit of ' 600 and ' 200 to insurance company and Profit and Loss Account respectively and credit of ' 800 to Trading Account

242.        Prepaid expenses are valued on the Balance Sheet at
(a)   Replacement cost
(b)  Current cost
(c)   Cost to acquire less accumulated amortization
(d)  Cost less expired portion
[Hints: (d) Prepaid expenses are the expenses which relate to the unexpired portion of the benefit of the expense. Hence, these are valued on the Balance Sheet at the cost less expired portion.]

243.        Which of the following relationships is/are false?
(a)   Net Profit = Gross Profit - Administration and Other expenses
(b)   Net Profit = Gross Profit + Administration expenses and Other expenses
(c)   Opening Stock + Purchases - Closing Stock = Cost of Sales
(d)   Both (b) and (c) above



[Hints:  (d)  Net  Profit=  Gross  Profit-  Administration  and  other  expenses.  Hence option (b) is false. Opening stock+ Purchases-Closing stock= Cost of material consumed not cost of sales.
Option (c ) is false.]

244.        Gross Profit is equal to
(a)  Sales - Cost of goods sold
(b)  Sales - Closing Stock + Purchases
(c)   Opening Stock + Purchases - Closing Stock
(d)   None of the above
245.         Which of the following shall not be deducted from net profit while calculating managerial remuneration?
(a)   Loss on sale of undertaking
(b)   Debts considered bad and written off
(c)   Liability arising from a breach of contract
(d)   Director's remuneration
[Hints:  (d)  Director's  remuneration  shall  not  be  deducted  from  net  profit  while calculating managerial remuneration.]

246.        Which of the following equations is correct?
(a)  Gross Profit+ Sales+ Direct expenses+ Purchases+ Closing stock = Opening stock
(b)  Gross Profit+ Sales+ Direct expenses+ Purchases- Closing stock = Opening Stock
(c)   Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock = Sales
(d)  Gross Profit - Opening Stock + Direct expenses + Purchases +Closing stock =
Sales

247.        Which of the following is not true with regard to preparation of Profit & Loss
Account?
(a)   Profit & Loss Account is prepared for a certain period and hence it is an interim statement
(b)   Profit & Loss Account does not disclose the effect of non-financial items
(c)   Net Profits are ascertained on the basis of current costs
(d)   Net Profits as disclosed by P&L Account is not absolute

248.        The Profit and Loss Account shows the
(a)   Financial results of the concern for a period
(b)   Financial position of the concern on a particular date (c)   Financial results of the concern on a particular date (d)  Cost of goods sold during the period
[Hints: (a) A profit and Loss Account is prepared for the period ending which shows
the financial or operating results of the concern for a period.]

249.        Which of the following statements is true?
(a)   Provision for doubtful debts represents the amount that cannot be collected (b)  Cash balance on hand shows whether the business has earned Profit or Loss (c)   Free samples received are business gains
(d)  The WDV of an asset depreciated on the reducing balance method can never



become zero

250.        Cash Profit is
(a)   Net profit - Non-trading Profit - Depreciation and provision
(b)  Gross Profit - Non-trading Profit + Depreciation and provision
(c)   Net Profit + Depreciation and provision
(d)  Gross Profit - Operational expenses
[Hints: (c) Cash Profit is the Net Profit + Depreciation and Provision. Depreciation is a non- cash outflow which is deducted from the profit and therefore, it is added back to the net profit to arrive at the net cash profit.]

251.        Which of the following statements is false?
(a)  Provision for discount on debtors can be estimated only after computing the provision for doubtful debts
(b)  All pre-received incomes under the cash system of accounting are current gains
(c)   Cash balance on hand shows whether the business has earned Profit or Loss
(d)  Capital expenditure should be shown in the books by debiting asset account and crediting supplier or cash account
252.        Which of the following will not appear in Profit and Loss Account of a business?
(a)   Drawings
(b)   Bad debts
(c)  Accrued expenses
(d)   Reserve for discount on Sundry Creditors
[Hints: (a) Profit and Loss Account is an income statement which depicts all incomes/gains and expenses/losses during an accounting period. Drawings are neither an income nor an expense to be recorded in Profit and Loss Account. Thus (a) is the correct answer. The items in other alternatives are either expenses or accrued expenses or probable income of discount on sundry creditors. The depreciation, bad debts and provision for doubtful debts and accrued expenses appear in the Profit and Loss  Account  and  provision  for  income  i.e.,  provision  for  discount  on  sundry creditors. Hence (a) is the correct answer.]

253.        Which of the following is not a financial statement?
(a)   Profit and Loss Account
(b)   Balance Sheet
(c)   Funds Flow Statement
(d)  Trial Balance
[Hints: (d) Trial Balance (d) is not a financial statement. It is a list of all accounts showing outstanding balances at the end of the accounting period. It helps in the preparation of financial statements. The Profit and Loss Account (a); Balance Sheet (b) and Funds Flow statement (c) are the financial statements prepared by a business entity. Funds flow statement though categorized as one of the financial statements, its preparation is not mandatory. Thus (d) is the correct answer.]

254.        If unexpired insurance appears in the Trial Balance, it should be
(a)  Credited to the Profit & Loss Account
(b)   Debited to the Profit & Loss Account
(c)  Shown on the liabilities side of the Balance Sheet



(d)  Shown on the assets side of the Balance Sheet
[Hints: (d) Unexpired insurance or prepaid insurance must be shown on the assets side of the Balance Sheet, because it is an asset. It cannot be shown on the liabilities side of the Balance Sheet. It cannot be debited to Profit & Loss A/c. Also it cannot be credited to Profit & Loss A/c. Hence (d) is true.]

255.        Which of the following are/is not a fixed asset?
(a)  Stock
(b)  Vehicle
(c)   Fixed deposit in bank
(d)   Both (a) and (c) above

256.        Which of the following are/is a current asset?
(a)  Sundry Debtors
(b)  Stock
(c)   Prepaid insurance
(d)  All of (a), (b) and (c) above

257.        Tax deducted at source appears in the Balance Sheet
(a)  On the assets side under current assets
(b)  On the assets side under loans and advances
(c)   On the liabilities side under current liabilities
(d)  On the liabilities side under provisions

258.        Which of the following statements is false?
(a)   Balance Sheet discloses financial position of the business
(b)  A person who owes to the business is called Debtor
(c)   Decrease in the value of the asset could decrease the value of a liability
(d)  Assets are to be shown in the Balance Sheet at the realizable value
[Hints: (d) AS-10 on Accounting for Fixed Assets states that fixed assets are to be shown in the Balance Sheet at their actual cost.]

259.        Which of the following statements is true?
(a)  The balance of the goods account shows the value of stock in hand
(b)   Balancing of all accounts must be done at the end of each day
(c)  Assets which are to remain in business for continuous use and not meant for conversion into cash are fixed assets
(d)   Balance Sheet discloses income position of the business

260.        The Balance Sheet gives information regarding the
(a)   Results of operations for a particular period (b)   Financial position during a particular period (c)   Profit earning capacity for a particular period (d)   Financial position as on a particular date



261.        Which of the following accounts appear(s) in the Balance Sheet of a business?
i.   Stock at the end of the financial year
ii.   Stock at the beginning of the financial year
iii.    Drawings
iv.    Prepaid Rent
v.    Interest received but not yet earned
(a)  Only (i) above
(b)  Only (iii) above
(c)   Both (i)and (iii) above
(d)   (i), (iii), (iv) and (v) above
[Hints: (d) Stock at the end of the financial year is the closing stock, drawings are the amounts withdrawn by the owner of the business for personal use; and prepaid rent is the amount of rent which is paid in advance of the current financial year and interest received but not yet earned is the amount of interest received which does not pertain to the current year are the items that appear in the Balance Sheet of a business.  Stock  at  the  beginning  of  the  financial  year  is  the  opening  stock  that appears in Trading Account of a business and not in the Balance Sheet. Thus
(d)  , the combination of all the accounts in alternatives (i), (iii), (iv) and (v) is the correct answer.]

Find more