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Saturday, 11 May 2019

Financial Accounting MCQs /page 7




51.    Which of the following statements is/are true?
(i)    Drawings Account is a Nominal Account
(ii)   Capital Account is a Real Account
(iii)  Sales Account is a Nominal Account
(iv)  Outstanding salaries account is a Nominal Account
(v Patents Account is a Personal Account
(a)  Only (i) above
(b)  Only (iii) above
(c Both (ii) and (iii) above
(d Both (ii) ,(iv) and (v)above
[Hints: (b) Sales Account is a Nominal Account is the correct statement and alternative  (b)  is  the  correct  answer.  The  alternative  (a)  is  incorrecbecause drawing is not a Nominal Account and it is a Personal Account of the owner which indicates the value of money or goods withdrawn by him for personal consumption. The alternative (c) is incorrect because the combinations of wrong statements (ii) Capital Account is a Personal Account and not a Real Account with (iii) correct statement. The alternative (d) is incorrect because the statement (iv) is incorrect as outstanding  salaries  is  a  representative  Personal  Account  annot  a  Nominal Account and the statement (v) is incorrect as Patents Account is a Real Account and not Personal Account and the combination of
(ii)  , (iv) and (v) is not correct answer. Thus the correct answer is (b).]
52.    The entry to record the collection of cash from Sundry Debtors would involve a
(i)    Debit to Sundry Debtors
(ii)   Debit to Cash Account
(iii)  Credit to Sundry Debtors
(iv)  Credit to Cash Account
(a)  Only (i) above
(b)  Only (iii) above
(c Both (ii) and (iii) above
(d Both (i) and (iv) above
[Hints: (c) The entry to record the collection of cash from sundry debtors will be
Cash A/c..............................Dr.
To Sundry Debtors A/c
The entry is stated in the alternative (c) which is the combination of statement (ii) and  (iii).  The  other  alternatives  (a)  and  (b)  involves  only  one  aspect  of  the transaction and not the correct answers. The alternative (d) the combination of two incorrect treatments is not the correct answer. Thus, (c) is the correct answer.]





53.    ABC Ltd. makes payments to its Sundry Creditors through cheques and the Cash
Discount received on these payments is recorded in the Triple-columnar Cash Book.
In the event of dishonour of any such cheques, the discount so received should be written back through
(i)    A debit to discount column of the Cash Book (ii)   A credit to discount column of the Cash Book (iii)  A credit to bank column of the Cash Book
(iv)  A debit to Discount Account through Journal Proper
(v A credit to Creditor's Account through Journal Proper
(a)  Only (i) above
(b)  Only (ii) above
(c Both (i) and (iii) above
(d Both (iv) and (v) above
[Hints: (d) The amount of cash discount received on the payments made to Sundry Creditors through cheques by the business will be recorded in the Cash Book, and if the previously issued cheque is dishonoured, the discount should be written back through (iv) A debit to Discount Account through Journal Proper and (v) A credit to Creditor's Account through Journal Proper (d) the combinations of these two statements is the correct answer. Discount Received and Discount Allowed Accounts separately maintained are not netted as such the discount received which got to be written back because of return of previously issued cheque cannot be debited to discount column of the Cash Book (a) is the incorrect answer. Since it is reversal of already credited discount account again a credit to discount column of the cash book cannot be given and (b) is the incorrect answer. The combination of the incorrect statements in (i) and (iii) i.e., (c) is not the correct answer. Thus, (d) is the correct answer.]

54.    R Ltd. makes purchases on credit. If the purchases are not as per the specifications, the company returns them to the suppliers. The book, that is used to record such returns is
(a Returns Inward Book
(b Returns Outward Book
(c Cash Book
(d)  Journal Proper [Hints: (b) The book, that is used to record the goods purchased on cash that are sent back to the suppliers on account of non-confirmation to the specifications, is the Returns Outward Book also known as Purchases Returns Book (b)  is  the  correct  answer.  Returns  inwarbook  (a)  is  not  the  correct  answer because; the sales returns are recorded in the Returns Inward Book. Cash book (c) is not the correct answer because, the transactions involving either the receipt or payment of cash is recorded in the cash book. Journal Proper (d) is not the correct answer because the Journal Proper is meant to record the transactions which do not find place in any other subsidiary book. Thus, (b) is the correct answer.]

55.    If Office Equipment is purchased for cash, what effect will this transaction have on the financial position of the company?
(a)  There is no change in the Assets, Liabilities and Owners' Equity




(b)  There is a decrease in Assets, increase in Liabilities and no change in Owners' Equity
(c)  There is a decrease in Assets, no change in Liabilities and a decrease in Owners' Equity
(d)  There is an increase in Assets, decrease in Liabilities and no change in Owners' Equity
[Hints: (a) When Office Equipment is purchased for cash, there is no change in the assets, liabilities and owner's equity. Thus, the alternative (a) is the correct answer. The cash on hand is used for purchase of furniture and it is only a change in the
composition of the assets. The other alternatives
(b)     , (c) and (d), which indicate a change either an increase or a decrease in assets/
liabilities/owners  equity  are  not  the  correct  answers.  Hence  (a)  is  the  correct answer.]

56.    The periodical total of discount column on receipts side of a Triple Column Cash
Book is recorded to the
(a)  Credit side of Discount Account
(b)  Credit side of provision for Discount Account
(c Debit side of Discount Account
(d)  Credit side of Debtor's Account
[Hints: (c) The periodical total of discount column on receipts side of a Triple Column Cash Book is recorded to the debit side of Discount Account. Receipts side of a Triple Column Cash Book indicates the debit side and the debit in case of a Nominal Account is an expenditure and the discount entered on the receipt side of Triple Column Cash Book indicates the discount allowed and posted to the debit side of the Discount Account in the ledger. Thus, (c) is the correct answer. Since it is not an income it is not credited to Discount Account and alternative (a) is not the correct  answer.  It  is  not  the  discount  to  be credited  to  provision  for  Discount Account on debtors (b) and it is not the correct answer. The periodical total is not credited to Debtor's Account as only the individual amount of discount is credited to respective Debtor's Account and not the periodical total is credited to Debtor's Account and alternative (d) is not the correct answer. Thus, alternative
(c) is the correct answer.]

57.    Which of the following statements is false?
(a)  Credit side total of Discount column of Cash Book is an income
(b)  Credit balance of Bank Pass Book is an overdraft
(c Debit balance of Bank column of Cash Book is an Asset
(d Debit balance of Cash column of Cash Book is an Asset
[Hints: (b) Credit balance of Bank Pass book is an overdraft (b) is a false statement because credit balance as per Pass book indicates the favourable balance and it is an asset. Credit balance of discount column of Cash Book is an income (a) is true. Debit balance of bank column of Cash Book is an asset (c). Debit balance of cash column of Cash Book is an asset (d) is the true statement and the alternatives are not the correct answers. Thus, (b) is the correct answer.]





58.    Purchase of Fixed Assets on credit is originally recorded in
(a Purchases Book
(b Ledger
(c Cash Book
                  (d)  Journal 

[Hints: (d) Purchase of fixed assets on credit is entered in journal proper and subsequently posted into the ledger. It is not recorded in Purchases Book as only purchase of goods will be recorded in Purchases Book. In Cash Book, only cash transactions will be recorded. As the fixed assets were purchased on credit, this transaction will not be recorded in the Cash Book.]

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