59. If you start with
cash book favorable
balance in Bank Reconciliation Statement, which item will
be
added?
(a)
Cheque deposited but not credited by the
bank
(b)
Cheques
omitted to
be
deposited into
bank
(c)
Any amount
directly collected by bank on behalf of customer but
not recorded in cash book
(d) Debit side of cash book was
overcast
60. The amount
of Owners' equity in
a business is not affected by
(a)
The percentage of Total
Assets held in cash
(b) Investments made in the business
by the owner
(c) The profitability of the business
(d)
The amount
of dividends paid to Stock holders
[Hints: (a)
Owners' equity in a business is the amount of funds belonging to the owners. The
composition of
assets does not affect
the owners' equity. Hence, the percentage
of total assets held in cash does not affect the owners' equity. On the other
hand it indi cates the liquidity position of the business. Owners' equity
represents investments made in the business by the
owners (b), the profits of the business (c) and the owners' equity is affected by a change in any of these items. The
amount
of dividends paid to stockholders (d) affects the owners' equity in the
business with
a corresponding
decrease in the equity. Hence, transaction in
alternative (d) adversely affects the owners' equity
in a
business. Thus, correct answer is (a)
which does not affect the owners' equity.]
61. When a Fixed
Asset is obtained as a gift, the account
to be credited is
(a)
Goodwill
A/c
(b)
Capital Reserve A/c
(c) Donor's A/c
(d)
General Reserve A/c
[Hints: (b) Fixed assets received as a gift implies the asset account should be debited
and
the corresponding credit is given to Capital Reserve Account, since it is a
capital
asset.]
62. Which of the following is/are
fixed asset(s)?
(a)
Closing inventory
(b) Fixed Deposits
in a bank
(c) Patents
(d) Prepaid expenses
[Hints: (c) Fixed assets are for use over relatively long period and they are meant
for resales.
category
of Fixed
not
Patents (c) satisfy the characteristics
of fixed assets and are shown
are
current assets.
under the assets. Closing
inventory
(a) Fixed
deposits in bank (b)
and
Prepaid expenses
(d) Thus (c ) is the correct answer.
63. Bank Overdraft
is shown
as a
(a)
Current
Liability
(b)
Contingent Liability
(c) Unsecured Loan
(d) Provision
64. Which of the following is NOT a
characteristic of Cash Book?
(a) It has two identical sides—left hand side, the debit side and right hand side, the
credit side
(b) It verifies the arithmetic accuracy of posting of entries from the Journal to the
Ledger
(c)
The difference between the total
of two sides of cash book shows
cash in hand
(d) It always
shows debit balance.
It can never show credit balance
65. If Machinery
Account is debited with the amount of repairs
incurred on the
machine, this is
an example of
(a)
Compensating
error
(b) Error of principle
(c) Error of commission
(d) Error of omission
[Hints: (b) Error
of
principle denotes
wrong classification
of expenditure
or
revenue. If a
company pays for repairs
on a machine,
it should be debited to Repairs Account. If it is charged to machinery account, it is an error
of principle.
Compensating error
(a)
is the one where
one error
is compensated by another
error
or series of errors and the
debit to
Machinery Account
on account of repairs is
neither compensated
by another error
or
by series
of
errors
and hence it is incorrect. Error of
commission (c) is incorrect because this is an error made
in recording the amount involved in a transaction while journalizing
or posting to
ledger accounts. Error of omission (d) may be partial or complete. Under
completed omission, the recording of an entry is completely omitted and error of partial omission is result of omission one
aspect of a transaction and it is incorrect answer. Thus,
(b) is the correct
answer.]
66. Which of the following is true?
(a) Bank Account is a Personal Account
(b)
Stock of stationery Account
is a Nominal Account
(c) Returns
Inward Account
is a Personal Account
(d)
Outstanding
rent
Account is a Nominal Account
[Hints: (a) Bank Account
is a
Personal Account is a correct statement.
Alternative
(b) is incorrect because, Stock
of stationery Account is a Real
Account, which indicates the
value of stationery in stock. Returns Inward Account
(c) is a Nominal Account which
indicates
the
sales
returns and to be reflected
in
the Trading
Account of a business. Outstanding Rent account (d) is a representative Personal Account and
not Nominal Account.
Thus (a) is the correct
answer.]
67. Which of the following is a liability of
a firm?
(a) Debit balance of analytical Petty Cash Book
(b)
Credit
balance of Bank Pass
book
(c) Debit balance of Bank column of Cash Book
(d)
Credit
balance of Bank column of Cash
Book
[Hints: (d) Bank balances and cash balances represent Real Accounts and the debit
balances in bank column and cash column represent
assets and the credit balances represent liabilities to a firm. But credit balance in cash column is only
hypothetical
and
it never happens in practical life. The credit balance
in bank column of cash
book
represents
overdraft and it is a
liability of a
business.]
68. Which of the following errors
is an error of principle?
(a)
Total sales figure was taken as ' 19,373 instead of '
19,733
(b)
A discount of ' 30 allowed to Mr. A was not recorded in the discount allowed
account
(c) Legal charges for acquisition of building for ' 500 was entered in the Legal
Expenses Account
(d)
' 1,000 received from Mr.
X was posted to
the credit of Mr. M
[Hints: (c) An error of principle involves an incorrect allocation of expenditure or receipt between capital and revenue.]
