43. If the Petty Cash fund is not reimbursed just prior to year end and an appropriate
adjusting entry
is not made, then
(a)
The petty cash account is
to be returned to
the company's
cashier
(b) Expenses are overstated and Cash is
understated
(c) Cash is overstated and expenses
are understated
(d)
Cash is overstated and expenses
are overstated
[Hints: (c) Under
the imprest system, an amount
is given to petty cashier
to meet
expenses during a period. At the end of the period he is given cash equal to the
amount spent during the relevant
period, if this adjusting entry is not made, the
cash balance in the main cash book is overstated to
the extent of the expenses
routed through the petty cash book and the expenses are unstated.]
44. XYZ Ltd. Paid wages of ? 8,000 for erection of machinery. The journal entry for the transaction is
(a) Debit wages and credit cash
(b) Debit machinery and credit cash
(c) Debit wages and credit erection
charges
(d) Debit machinery and credit erection
charges
[Hints: (b)
Wages paid for
the erection of machinery is included in the cost of the
machinery as it is specifically incurred for
the machinery and cannot be
categorized as an operating expense. Therefore, Machinery Account should be debited and
Cash Account should be credited.]
45. Purchase of goods
on credit
(a) Increases Liabilities
(b) Increases Assets
(c) Increases both Assets and Liabilities
(d) Decreases
Assets
[Hints: (c) Purchase of goods on credit increases the inventory (Asset) and increases
the creditors
for
goods (Liabilities).]
46. Purchase of Raw Material for Cash
(a) Increases total Assets
(b) Leaves total Assets
unchanged
(c) Increases total Fixed Assets
(d) Increases total Current Assets
[Hints: (b) Purchase of raw materials for cash leaves total assets unchanged as the increase in inventory
(Asset) is compensated by decrease in cash (Asset).]
47. Which of the following is not an Asset?
(a)
Stock of stationery
(b)
Goodwill
(c) Profit and Loss Account (Credit Balance)
(d)
Accounts
Receivable
[Hints: (c) Stock of stationery (a), Goodwill (b) and Accounts Receivable (d) are the
assets and not the correct answers. Profit & Loss Account (credit balance) (c) is the
amount belongs to the owner of the business and it is a liability to the business.
Hence it is not an asset,
and
(c ) is the correct
answer.]
48. The process of balancing of an account involves equalization of both sides of the account. If the
debit side of an account exceeds the credit side, the difference
is put on the credit side. The said balance is
(i) A Debit balance
(ii) A Credit balance
(iii) An expenditure or an Asset
(iv) An Income or a Liability
(a)
Only (ii) above
(b)
Only (iv) above
(c) Both (i)
and
(iii) above
(d) Both (ii) and (iii)
above
[Hints: (c) The process of balancing of an account involves equalization of both
sides of the account. If the debit side of an account exceeds the credit side, the
difference is put on the credit side. The said balance is a
debit balance and it
represents either expenditure
or an asset or both. Thus, the combination of items
under (i) and (iii) i.e., alternative (c) is the correct answer. The other alternatives are
incorrect because, the excess of debit
over
credit side is not
a credit balance
and it is neither an income nor a liability.]
49. Ledger is
also called
(a) Principal
book
of accounts
(b)
Cash books
(c) Subsidiary book
(d) None of
these
50. Which of the following transactions of a
business
is/ are recorded in Journal
Proper?
(i) Purchase of goods
on credit
(ii) Sale of Office Furniture for cash
(iii) Discounting of
Bill of Exchange with
a bank
(iv) Endorsement of a
Bill
of Exchange in settlement of debt
of the business
(a)
Only (i) above
(b)
Only (iv) above
(c) Both (ii) and (iv) above
(d) (i),(iii)
and (iv) above
[Hints: (b) Endorsement of a Bill Receivable in settlement of a debt of the business
is recorded in the Journal Proper (b) is the correct answer. The transactions in
other alternatives are not recorded in Journal Proper and they are recorded in other subsidiary books specified
for
them like alternative
(i) Purchase of goods
on credit is recorded in purchase book.
Sale of office Furniture for cash (ii) and Discounting of a Bill Receivable with a bank (iii) are recorded in
Cash book and
not in
the
Journal Proper.
Thus, the combination
of
these
transactions in alternatives (a), (c ) and (d)
are
not the correct answers.]
