Tag: elements of book keeping and accountancy

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Questions Related to elements of book keeping and accountancy

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

State with reasons whether the following statement is true or false:
Damaged inventory should be valued at cost or market price; whichever is lower.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Damaged or obsolete inventory must be written down to its net realizable value if that value is lower than its cost, following the prudence principle.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Goods costing Rs.10,000 destroyed by fire should be credited to 

  1. Purchase Account

  2. Sales Account

  3. Cash Account

  4. Goods Lost by Fire A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
 Particular  L.F.  Dr.  Cr.
 Lost by fire A/c             Dr.            To Purchase A/c                (Being goods destroyed by fire)    10000  10000

Goods costing Rs.10000 destroyed by fire will be credited to purchase A/c.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Goods distributed as free samples is an example of _________.

  1. No change in Owner's Equity

  2. Increase in Asset & Owner's Equity

  3. Decrease in Liability & Owner's Equity

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

When goods are distributed as free samples, the cost of the goods is treated as an advertising expense. This reduces owner's equity and reduces inventory (an asset), resulting in no net change to the accounting equation (Assets = Liabilities + Equity).

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Good worth $Rs.500$ taken by the proprietor for personal use should be debited to ______________.

  1. Debtors Accounts

  2. Drawing Account

  3. Installation Expenses account

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

When a proprietor takes goods for personal use, it is considered a drawing. The drawing account is debited to record the reduction in the proprietor's capital.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

A withdrawal of goods from business by the proprietor should be credited to _______________.

  1. Drawing A/c

  2. Capital A/c

  3. Purchases A/c

  4. Sales A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The withdrawal of goods by the owner for personal use is placed on a temporary drawings account and reduces the owners equity. It is not an expense of the business. Goods are withdrawn from the business and taken by the owner, which reduces the inventory of the business.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Employees took stock costing Rs 1000 (sale price Rs 1200) in this case _____________________.

  1. Salaries A/c to be debited with Rs. 1200

  2. Sales A/c to be credited with Rs. 1200

  3. Purchases A/c to be credited with Rs 1000

  4. Sales A/c to be credited with Rs 1000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When goods are taken by employees, the cost of the goods is removed from inventory. Since the goods were originally recorded in the purchases account, we credit the purchases account at cost (Rs 1000) to reduce it.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Goods costing Rs 1000 (Sale Price Rs 1200) distributed as free samples should be credited to ________.

  1. Sales Account with Rs 1200

  2. Sales Account with Rs 1000

  3. Purchases Account with Rs 1000

  4. Loss by Theft A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Free samples are an expense. To record this, we credit the purchases account at cost to remove the goods from inventory and debit the advertising/samples account.