Tag: elements of accounts

Questions Related to elements of accounts

Transactions that a business doesn't record in any specialized journal are recorded in which journal or book?

elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

  1. Cash payments journal

  2. Cash receipts journal

  3. Purchases return journal

  4. General journal

Show answer
Correct Option: D

Journal is a book of __________.

elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

  1. original entry

  2. all cash transactions

  3. secondary entry

  4. all non-cash transactions

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Correct Option: A

The process of recording a transaction in the journal is called __________.

elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

  1. Posting

  2. Journalising

  3. Tallying

  4. Casting

  5. Balancing

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Correct Option: B

XYZ company purchase an asset that turns out to be defective and was required to be sold as a worn out item. The entry will be made in _______________.

elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

  1. Worn out journal

  2. Cash journal

  3. General journal

  4. None of the above

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Correct Option: C

What will be journal entry when cash is withdrawn from bank for personal use?

elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

  1. Drawings A/c debit, bank A/c credit

  2. Cash A/c debit, drawings A/c credit

  3. Bank A/c debit, drawings A/c credit

  4. Bank A/c debit, capital A/c credit

Show answer
Correct Option: A
Explanation:

Drawings are the amounts taken by the owner of a business for his personal use in anticipation of profit. Drawings are usually made in the form of cash, but there could be other assets or goods withdrawn by the owner for his personal use.

Journal Entry will be:-
Drawing A/c Dr. 
   To Bank A/c.

A higher accounts receivable turnover ratio means _______________.

elements of accounts ratio analysis activity (or turnover) ratios accounting ratio's accounting ratios

  1. Lower debt collection period

  2. Higher debt collection period

  3. Lower sales

  4. Higher sales

Show answer
Correct Option: B
Explanation:

Accounts receivable turnover is the number of times per year that a business collects its average accounts receivables.

A high turnover ratio indicates a combination of a conservative credit policy and an aggressive collections department, as well as a number of high-quality customers.

Inventory turnover ratio $=$ Cost of __________ during the period $\div$ Cost of average inventory held during the period.

elements of accounts ratio analysis activity (or turnover) ratios accounting ratio's accounting ratios

  1. Inventory consumed

  2. Minimum inventory

  3. Maximum inventory

  4. None of these

Show answer
Correct Option: A
Explanation:

Inventory turnover ratio determines the number of times stock is turned into sales during the accounting period under consideration. It expresses the relationship between the cost of goods sold and stock of goods. The formula for its calculation is as follows:


Stock Turnover Ratio = Cost of Goods Sold/Average Stock


Where average stock refers to arithmetic average of opening and closing stock, and the cost of goods sold means sales less gross profit
It studies the frequency of conversion of stock of finished goods into sales. It is also a measure of liquidity. It determines how many times stock is purchased and replaced during a year. Low turnover of stock may be due to bad buying, obsolete stock, etc. and is a danger signal. High turnover is goods but is must be carefully interpreted as it may be due to buying into small lots or selling quickly at low margin to realize cash. Thus, it throws light on utilization of stock of goods.

Inventory turnover measures the relationship of inventory with _______.

elements of accounts ratio analysis activity (or turnover) ratios accounting ratio's accounting ratios

  1. Average sales

  2. Cost of goods sold

  3. Total purchases

  4. Total assets

Show answer
Correct Option: B
Explanation:

Inventory turnover ratio shows how many times a company's inventory is sold and replaced over a period of time. It is an efficiency ratio. The equation for inventory turnover equals the cost of goods sold divided by the average inventory.

If the closing balance of receivables is less than the opening balance for a month then which one is true out of __________________.

elements of accounts ratio analysis activity (or turnover) ratios accounting ratio's accounting ratios

  1. Collections > Current Purchases

  2. Collections > Current Sales

  3. Collections < Current Purchases

  4. Collections < Current Sales

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Correct Option: B
Explanation:

Collection is more than the current sales, In such situation closing balance of receivables will be less than the opening balance. As credit is more than the debit.

80% of sales of  10,00,000 of a firm are on credit. It has a receivable turnover of 8. What is the average collection period (360 days a year) and average debtors of the firm?

elements of accounts ratio analysis activity (or turnover) ratios accounting ratio's accounting ratios

  1. 45 days and 1,00,000

  2. 360 days and 1,00,000

  3. 45 days and 8,00,000

  4. 360 days and 1,25,000

Show answer
Correct Option: A
Explanation:

Debtors turnover ratios is an activity ratio measuring how efficiently a firm uses it assets. This can be calculated as:

Debtors Turnover Ratio=Credit sales/Average accounts receivables

In the given information:
Total Sales      Rs.1000000
Credit Sales    Rs.800000 (80% of sales)
Debtors T/O ratio- 8
Therefore
8=800000/Average receivables
Average Receivables are Rs.100000

Average Collection period=No of days in a year/debtors turnover ratio
=360/8
Average collection period is 45 days.