35. When Fixed
Assets are sold
(a)
The Total Assets
will
increase
(b)
The Total
Liabilities will increase
(c) The Total Assets
will decrease
(d)
There is no
change in the Total Assets
[Hints: (d) When fixed assets are sold for book value, there will be no change in the total
assets.]
36. Withdrawal of goods from stock by the
owner of the business for personal use
should be recorded by
(a) Debiting
Stock Account and crediting Capital Account
(b) Debiting
Capital Account and crediting
Drawings
Account (c) Debiting
Drawings Account and Crediting Stock Account (d) Debiting
Stock Account and Crediting Drawings Account
[Hints: (c) Withdrawal
of
goods from
stock by
the
owner of the business
for personal use should be
recorded by debiting Drawings Account
and
crediting Stock
Account]
37. Which of the following transactions would cause a
change in “owners' equity”?
(a) Repayment of a
Bank
Loan
(b) Payment of Dividends and Unprofitable Operations
(c) Sale of Land on Credit
(d) Purchase of Assets
and incurrence of Liabilities [Hints: (b) Accounting Equation is
Assets =
Liabilities+ Owners' equity.
Repayment of bank loan results in reduction in both assets and a liability with the
same amount and
hence does not affect owners'
equity.
Owners equity is directly increased by introduction of further
capital or incurrence of profits, similarly a dividend payment and an operating loss reduces the owners'
equity.
Hence option (b)
results in change in the owners'
equity.
Sale of land
on credit results in decrease in fixed assets (on the left side of the
equation)
and
increase in current assets (i.e., debtors), as a result the owners' equity is not affected. Hence
option (c ) results
in no change in owners' equity.
Purchase of assets and incurrence of liabilities results in increase in assets and increase in liabilities, hence does not result
in change in owners'
equity.
So option
(b) is the right option.]
38. Withdrawals by proprietor would
(a) Reduce both Assets and
Owner's Equity
(b) Reduce Assets
and increase
Liabilities
(c) Reduce Owner's
Equity
and increase Liabilities
(d) Have no affect on the Balance Sheet
[Hints: (a) Withdrawals by
proprietor would
reduce both assets
and owner's
equity.]
39. Which of the following is true?
(a)
The payment
of a Liability
causes an increase
in Owner's Equity
(b)
The collection
of an Account Receivable will cause Total Assets
to increase
(c) The accounting
equation may be stated as:
Assets+Liabilities
= Owners'
equity
(d)
The purchase of an asset
such as office equipment, either for cash or on credit,
does
not
change the Owners'
Equity
[Hints: (d) The purchase of an asset such as office equipment, either for cash or on
credit does not result in any change in the owner's equity as decrease in one asset is compensated by increase in the other asset.]
40. Which of the following statements is/are true?
(i) Cash Book records
all cash receipts and cash payments
(ii) Cash Book records all sale and purchase transactions of goods both in cash and on credit
(iii) Cash Book records
discount on Cash Payments
(a)
Only (i) above (b)
Only (ii) above
(c) Only
(iii) above
(d) Both (i)
and (iii) above
[Hints: (d)
A cash book records only cash transactions and a three-columnar cash
book
also records bank
and discount transactions. A cash book does not record the
credit
transactions]
41. Trade discount allowed at the time of Sale
of goods.
(a) Is recorded in Sales Book
(b) Is recorded in Cash Book
(c) Is recorded in Journal
(d) Is not recorded in Books of Accounts
[Hints: (d)
Trade discount is offered to customers at fixed percentage of list price to promote sales,
it is generally based on the quantity of goods purchased. No entry is made for trade discount in accounting records. Only it is recorded in the invoice
and
sale and purchase
transactions are recorded at net invoice price (list price less
trade discount).]
42. The Periodical
total
of the Sales Return
Book
is posted to
the
(a) Debit of Sales
Account
(b) Debit of Sales
Return Account (c) Credit of Sales
Return Account (d) Debit of Debtors Account
[Hints: (b) Sales Account is a credit balance and therefore Sales Returns Account is a debit balance and the total of Sales Returns Book will be posted to the debit side of the Sales
Return Account.]
