Tag: elements of book keeping and accountancy

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Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

X Ltd., purchased goods for Rs.5,00,000 and sold 9/$10^{th}$ of the value of goods for Rs. 6,00,000. Net expenses during the year were Rs. 25,000. The company reported its net profit as Rs. 75,000. Which of the following concept is violated by the company?

  1. Realization

  2. Conservation

  3. Matching

  4. Accrual
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The matching principle requires that expenses incurred to earn revenue must be recognized in the same period as the revenue. By only accounting for 9/10 of the costs against the revenue from 9/10 of the goods, the company failed to match the full cost of goods sold.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A businessman purchased goods for Rs.25,00,000 and sold 80% of such goods during the accounting year ended $31^{st}$ March, 2019. the market value of the remaining goods was Rs.4,00,000. He valued the closing stock at cost. He violated the concept of _________________.

  1. Periodicity

  2. Conservatism

  3. Money measurement

  4. Cost
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The principle of conservatism (prudence) dictates that inventory should be valued at the lower of cost or net realizable value. Valuing at cost when market value is lower violates this principle.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A debit note for Rs $20,000$ issued to Mr. Z for goods returned by us is to be accounted for in _______________.

  1. Bills Receivable Book

  2. General Journal

  3. Purchases Return Book

  4. Purchase Book
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A debit note issued to a supplier for goods returned is recorded in the Purchases Return Book (also known as the Returns Outward Book).

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Mohan purchased a machinery amounting Rs.10,000 on 1.4.2010.
On 31.3.2019, similar machinery could be purchased for Rs.20,000 but the realizable value of the machinery (purchased on 1.4.2010) was estimated at Rs.15,000. The present discounted value of the future net cash inflows that the machinery was expected to generate in the normal course of business, was calculated as Rs 12,000.
The present value of machinery is ______________.

  1. Rs 10,000

  2. Rs 20,000

  3. Rs 15,000

  4. Rs 12,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

According to the historical cost concept, fixed assets are recorded at their original cost, and the present value is not adjusted for market fluctuations unless there is an impairment or specific accounting standard requirement.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

_______ is used to record the details of bills receivable by the business organization. 

  1. Purchases Book

  2. Bills Payable Book

  3. Bills Receivable Book

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

The Bills Receivable Book is a subsidiary book specifically designed to record the details of all bills of exchange received from debtors.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A purchase of goods from Nathan amounting to Rs. 3,000 has been wrongly entered in the Sales Book. However Nathan Account has been correctly credited. Which of the following rectification entry is correct? 

  1. Sales A/c Dr. 3,000

    To Nathan A/c 3,000

  2. Purchases A/c Dr. 3,000

    To Sales A/c 3,000

  3. Sales A/c Dr. 3,000

    Purchases A/c Dr. 3,000

    To Suspense A/c 6,000

  4. Sales A/c Dr. 3,000

    Purchases A/c Dr. 3,000

    To Nathan A/c 6,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

_______is used to record the particulars of all the bills payable accepted by the business organization for the purpose of paying amounts due to its creditors.

  1. Journal proper

  2. Bills Payable Book

  3. Bills Receivable Book

  4. Sales Book
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Bills Payable Book is the specialized journal used to record the details of all bills of exchange accepted by a business to pay its creditors.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A contractor's bill for extension of premises amounting to Rs. 27,500 has been debited to Building Repairs Account. Which of the following rectification entry is correct?

  1. Budding A/c Dr. 27,500

    To Building Repairs A/c 27.500

  2. Building A/c Dr. 27,500

    To Suspense A/c 27,500

  3. Building Repairs A/c Dr. 27,500

    To Suspense A/c 27,500

  4. Building Repairs A/c Dr. 27,500

    To Building A/c 27,500
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capital expenditure (extension of premises) was wrongly debited to a revenue account (Building Repairs). To rectify, we must debit the asset account (Building) and credit the incorrectly debited expense account (Building Repairs).

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A cheque for Rs. 7,330 was received from Rao after allowing him a discount of Rs. 70. It was endorsed in favour of Sen in full settlement of Rs. 7,500. The cheque was dishonoured, but no entry for dishonour was passed in the books. If this error located after preparation of final account then which of the following rectification entry is correct? 

  1. Rao A/c Dr. 7,400

    Profit & Loss Adj. A/c Dr. 100

    To Sen A/c 7,500

  2. Rao A/c Dr. 7,400

    Profit & Loss Adj. A/c Dr. 100

    To Suspense A/c 7,500

  3. Rao A/c Dr. 100

    Profit & Loss Adj. A/c Dr. 7,400

    To Sen A/c 7,500

  4. Rao A/c Dr. 100

    Profit & Loss Adj A/c Dr. 7,400

    To Suspense A/c 7,500
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When an endorsed cheque is dishonoured, the debtor (Rao) must be debited for the full amount (7,330 + 70 = 7,400) and the creditor (Sen) must be credited for the full settlement amount (7,500). The difference (100) represents the lost discount, which is adjusted through the Profit & Loss Adjustment account.