Tag: elements of accounts

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Questions Related to elements of accounts

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

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

  1. Cash payments journal

  2. Cash receipts journal

  3. Purchases return journal

  4. General journal
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Specialized journals are used for repetitive transactions like cash receipts or purchases. Any transaction that does not fit into these specialized journals is recorded in the general journal.

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

Journal is a book of __________.

  1. original entry

  2. all cash transactions

  3. secondary entry

  4. all non-cash transactions
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The journal is known as the book of original entry because it is the first place where financial transactions are recorded chronologically before being posted to the ledger.

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

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

  1. Posting

  2. Journalising

  3. Tallying

  4. Casting

  5. Balancing
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Journalising is the specific accounting term for the act of recording transactions into the journal. Posting refers to moving data from the journal to the ledger.

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

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 _______________.

  1. Worn out journal

  2. Cash journal

  3. General journal

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Since the transaction involves the disposal of a defective asset, it is a non-routine transaction that does not fit into specialized journals like cash or sales journals, thus it is recorded in the general journal.

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

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

  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
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

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

A higher accounts receivable turnover ratio means _______________.

  1. Lower debt collection period

  2. Higher debt collection period

  3. Lower sales

  4. Higher sales
Reveal answer Fill a bubble to check yourself
B Correct answer
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.

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

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

  1. Inventory consumed

  2. Minimum inventory

  3. Maximum inventory

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

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

Inventory turnover measures the relationship of inventory with _______.

  1. Average sales

  2. Cost of goods sold

  3. Total purchases

  4. Total assets
Reveal answer Fill a bubble to check yourself
B Correct answer
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.

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

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

  1. Collections > Current Purchases

  2. Collections > Current Sales

  3. Collections < Current Purchases

  4. Collections < Current Sales
Reveal answer Fill a bubble to check yourself
B Correct answer
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.

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

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?

  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
Reveal answer Fill a bubble to check yourself
A Correct answer
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.