Tag: book keeping and accountancy

Quizzes (126) Questions (1524)

Questions Related to book keeping and accountancy

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Which accounting principle is followed in adopting policy of making provision for doubtful debts @5% on debtors ?

  1. Prudence

  2. Substance over from

  3. Materiality

  4. All of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The prudence principle is followed in adopting policy of making provision for doubtful debts @5% on debtors. Prudence principle or conservatism principle means all the expenses or possible losses should be recorded in advance, but incomes should not be recorded in advance. 

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Provision is ________________.

  1. An appropriation out of profits

  2. A charge against the profits

  3. A reserve

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

A provision is an account which records a present liability of an entity. The recording of the liability in the entity's balance sheet is matched to an appropriate expense account in the entity's income statement.

As against the common belief that provisions are a charge against profit, they can as well be an appropriation out of profits as in the case of proposed dividends. Once a provision is made, the relevant loss or expenditure has to be debited to the provision account.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

If the amount of any known liability cannot be determined with substantial accuracy ___________________.

  1. A definite liability should be created.

  2. A provision should be created.

  3. A reserve should be created.

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

If any amount of any known liability cannot be determined with substantial accuracy. Provision is a known liability but its amount and due date and indeterminate. 

It is basically setting an amount aside for a probable liability. Its a contingent loss that's recognized as a liability.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Price of the computer = Rs 50,000
Residual value = Rs 10,000
Hours worked for the year = 6000 hrs
Estimated life of computer = 20,000 hrs
Calculate the amount of depreciation.

  1. Rs. 15,000

  2. Rs. 12,000

  3. Rs. 20,000

  4. Rs. 24,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Depreciation = Cost of the asset - salvage value 
                        ----------------------------------------------------   x no. of hours worked 
                                total estimated hours  
                      = 50,000 - 10,000 
                        -------------------------- x 6,000
                                    20,000
                     = RS-12,000.
Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Which of the following is not true about claiming refund of service tax under section 142?

  1. Service tax is deposited under earlier law

  2. Provision of service is complete under earlier law

  3. Refund of service tax would be in cash

  4. Refund claim should be within the time limit under section 11B(2) of the Central Excise Act, 1944
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Under section 142 of the CGST Act, the provision of service must be completed under the new law for certain transitional provisions, or the claim relates to tax paid under the earlier law. Option B is incorrect as a condition for claiming a refund under the specific transitional context.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Which of the following is not a provision?

  1. Provision for Depreciation

  2. Provision for Discount on debtors

  3. Provision for Tax

  4. Provision for out standing income
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Provision is a charge against profit, all future expenses and losses which are more probable are provided. As per accrual concept we can make provisions for expenses likely to be incurred but can only record income only after its earned.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

___________ is a charge against profit.

  1. Liability

  2. Bad debts

  3. Provision

  4. Reserve
Reveal answer Fill a bubble to check yourself
C,D Correct answer
Explanation

Depreciation fund is a reserve, but is a charge against profit since it is created for replacement of an asset. 

Hence, both reserves and provisions can arise as a charge against profits or as an appropriation out of profit, depending upon the nature of provision or reserve.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Give journal entries:
Depreciation debited to profit and loss account

  1. Machine A/c Dr.

    To Bank A/c

  2. Profit and Loss A/c Dr.

    To Depreciation A/c

  3. Depreciation A/c Dr.

    To Profit and Loss A/c

  4. Depreciation A/c Dr

    To Machine A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

As per the golden rules of accounting for nominal account all expenses and losses are debited and all income and gains are credited and for rael account, what comes in debit and what goes out is credit.

In the light of above rule, journal entry for providing depreciation and charging it to profit and losss A/c is -
1. Depreciation A/c     Dr.
        To Asset A/c 
(Being depreciation chargedd to asset)
2. Profit and loss A/c  Dr.
         To Depreciation A/c 
(Being depreciation expense transferred to P&L A/c)

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Under which depreciation method :
Asset account continues to appear at its original cost year after year over its entire life.

  1. Straight line

  2. Weighted average

  3. Provision for depreciation

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

There are two method of recording depreciation -

1. By charging to asset account - Under this method of recording depreciation, depreciation is directly credited to respective asset account result of which is that respective asset account appears at its book value less depreciation till date.
2. By creating Provision for depreciation/ Accumulated depreciation Account - Under this method of recording depreciation, depreciation is credited to the provision for depreciation account and as result respective asset account appears at its original cost.