Tag: accounting equation and business transactions

Questions Related to accounting equation and business transactions

Primary responsibility for the adequacy of financial statement disclosures rest with the____________.

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. auditor

  2. management

  3. auditor's staff

  4. central Government

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Correct Option: B
Explanation:

The primary responsibility for the adequacy of disclosure in the financial statements of a company rests with the management. Management is the one who communicates with the outside world. It acts as a link between business and outside world. So primary responsibility lies with the management.  

Which is a part of financial statements?

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Balance sheet

  2. Book keeping

  3. Debit & Credit

  4. All of the above

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Correct Option: B
Explanation:

There are four main financial statements. They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders' equity. Balance sheets show what a company owns and what it owes at a fixed point in time.

Which of the following external influences will not affect the directors in the preparation of the financial statements?

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Legislation

  2. Regulatory requirements

  3. Political environment

  4. Accounting requirements

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Correct Option: C

When a company's financial statements have been audited, an audit report will prepared. If this is unqualified the auditors will report that the financial statements__________________.

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Are certified correct

  2. Contain no material errors

  3. Comply with the Companies Act

  4. Present a true and fair view and comply with the Companies Act

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Correct Option: D

Which of the following best describes the reason why an independent auditor reports on financial statements?

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. A management fraud may exist and is more likely to be detected by independent auditors

  2. Different interests may exists between the company preparing the statements and the persons using the statements

  3. A misstatement of account balances may exist and is generally corrected as the result of the independent auditor's work

  4. Poorly designed internal control may exist

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Correct Option: B

_________is useful for the purpose of cost control, cost reduction and proper utilization of scarce resources.

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Financial Audit

  2. Cost Audit

  3. Secretarial Audit

  4. Tax Audit

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Correct Option: A

Procedure for preparation of 'Projected Financial Statements' should start from ______________.

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Projection of Fixed Assets

  2. Projection of Capital

  3. Projection of Sales

  4. Projection of Profit

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Correct Option: C
Explanation:

Projected financial statements take into account past financial trends, market conditions, possible changes and management expectations to arrive at a future financial picture.

It begins with Projection of Sales.

Which of the following best describes the reason why an independent auditor reports on financial statements?

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. A management fraud may exist and is more likely to be detected by independent auditors

  2. Different interests may exist between the company preparing the statements arid the persons using the statements

  3. A misstatement of account balances may exist and [s generally corrected as the result of the independent auditor's work

  4. Poorly designed internal control may exist

Show answer
Correct Option: B

Final accounts include preparation of ____________.

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Trading A/c

  2. Profit and Loss A/c

  3. Balance Sheet

  4. All of the above

Show answer
Correct Option: D
Explanation:

Final Account is the final process of accounting. Final Account is prepared to show the final results of the company in a specified period. Final Account is also known as Financial statement. Final accounts include the preparation of Trading account, Profit and Loss account and Balance Sheet. Trading Account and Profit and Loss account shows the profitability achieved during the year. Balance Sheet shows the financial position of the business at the end of accounting period. 

The statements prepared by the summarizing process is known as ______ which will show the profit or loss made by the business over a period of time and the total capital employed in the business. 

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Financial statements

  2. Budgeted statements

  3. Standard cost statements

  4. All of the above

Show answer
Correct Option: A
Explanation:

Financial statements are summary reports. Summary report shows how a firm has used the funds entrusted to it by its stakeholders and lenders and what is its current financial position. The three basic financial statements are 1. Balance Sheet  2. income statements 3. Cash Flow statement. 
Balance sheet shows firm's assets, liabilities and net worth on a stated date. 
Income Statement shows how the net income has arrived over a certain period. 
Cash flow statement shows the inflows and outflows of cash caused by the firm's activities over a stated period.