Saturday 11 May 2019

Financial Accounting MCQs /page 4

24.    Which of the following is an example of Capital Expenditure?
(a)   Insurance Premium
(b)  Taxes and Legal expenses
(c)   Discount allowed
(d)  Customs duty on Import of Machinery
[Hints: (d) Customs duty on import of machinery is a Capital Expenditure and is to be capitalized along with the cost of the asset. The other expenditures stated in alternatives (a) Insurance Premium (b) Taxes and legal expenses and (c) Discount allowed are of revenue nature whose benefit expires within the financial year and are not the correct answers. Thus, the correct answer is

25.    In the creditors control account, all of the below exist except:
(a)  Credit purchases
(b)   Purchase returns
(c)   Cash purchases
(d)  Cash/cheques paid

26.    Ledger contains various        
(a)  Transactions
(b)   Entries
(c)  Accounts
(d)   None of these

in it

27.    Which of the following concepts assumes that a business will last indefinitely?
(a)   Business Entity
(b)  Going Concern
(c)   Periodicity
(d)  Consistency
[Hints: (b) According to Going Concern Concept (b), a business entity is assumed to carry on its operations forever. Seemingly inconsequential, this is a fundamental concept, which has far reaching consequences. The other concepts, Business Entity Concept (a) treats business distinct from the entity of its owners. According to the concept  of  periodicity  (c  )  the  income  or  loss  of  the  business  is  measured periodically, one year is the usual accounting period. The consistency concept (d) requires that once an entity has decided on one method of treating an event in recording it in books of accounts, it will treat all subsequent events of the same character in the same fashion. Thus, the alternative (b) is the correct answer.]

28.    Which of the following is an example of Personal Account?
(a)  Machinery

(b)   Rent
(c)   Cash
(d)  Creditor
[Hints: (d) Machinery, cash are real accounts, Rent is a nominal account. Only
Creditors is a personal account.]

29.    Payment received from Debtor (a)   Decreases the Total Assets (b)   Increases the Total Assets
(c)   Results in no change in the Total Assets
(d)   Increases the Total Liabilities
[Hints: (c) Payments received from debtors results in decrease of debtors and increase in cash. It does not result in any change in the total assets as decrease in one asset is compensated by increase in the other asset.]

30.    The                 in a ledger helps in locating the accounts contained in it
(a)   Folio
(b)   Pages
(c)  Serial Number
(d)   None of these
31.    Cash Purchases
(a)   Increases Assets
(b)   Results in no change in the Total Assets
(c)   Decreases Assets
(d)   Decrease Liability
[Hints: (b) Cash purchases result in decrease in cash and increase in stock. Thus there is no change in the total assets.]

32.    In which of the following statement opening stock is shown?
(a)   Profit and loss account (Right Answer)
(b)   Balance sheet
(c)   Cash flow statement
(d)  Owner's equity

33.    The process of transfer of entries from day book to ledgers is called   
(a)  Simple posting
(b)  Journal posting
(c)  Transaction
(d)   Ledger posting

34.    Goods returned from X is entered as
(a)   Debit X A/c; Credit Purchase Return A/c
(b)   Debit X A/c; Credit Cash A/c
(c)   Debit Sales Return A/c; Credit X A/c
(d)   Debit X A/c; Credit Sales A/c

[Hints: (c) Sales Returns A/c will be debited and X A/c will be credited following the principle of debit the receiver and credit the giver.]

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