Tag: accounting equations and transactions

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Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Which one of the following statements is correct?

  1. Gross profit on trading is entered on the right side of the trading account and carried down to the left side of the profit and loss account

  2. Gross profit on trading is entered on the left side of the trading account and carried down to the right side of the profit and loss account.

  3. Net profit on trading is entered on the right side of the trading account and carried down to the right side of the profit and loss account.

  4. Net profit on trading is entered on the left side of the trading account and carried down to the left side of the profit and loss account.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Gross profit is calculated on the debit (left) side of the Trading Account (as a balancing figure) and then transferred to the credit (right) side of the Profit and Loss Account.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Adjusting entries are essential to _______________.

  1. Matching rule

  2. Accrual accounting

  3. A proper determination of net income

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

Adjusting entries are necessary to apply the matching principle, implement accrual accounting, and ensure that net income is accurately determined for a specific period.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Outstanding salaries are shown as ________________.

  1. An asset in the balance sheet

  2. A liabilty

  3. By adjusting it in the P&L A/c

  4. Both (a) and (b)

  5. Both (b) and (c)
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Outstanding salaries are a liability (shown on the balance sheet) and are also an expense that must be added to the salary expense in the P&L account to correctly reflect the period's costs.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Mr. A had a beginning credit balance of Rs. 21,000 in his capital account. At the close of the period his drawing account had a debit balance of Rs. 2,200. On the end -of -period balance sheet, his capital balance is Rs. 32,000. If the contributed an additional Rs. 2,000 to the firm during the period, the period's net income is  _____________.

  1. Rs. 12,400

  2. Rs. 11,200

  3. Rs. 9,000

  4. Rs. 10,800
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Ending Capital = Beginning Capital + Net Income - Drawings + Additional Capital. 32,000 = 21,000 + Net Income - 2,200 + 2,000. 32,000 = 20,800 + Net Income. Net Income = 11,200.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Closing stock in the Trial Balance implies that.

  1. It is already adjusted in the opening stock

  2. It is adjusted in the Purchase A/c

  3. It is adjusted in the Cost of Sale A/c

  4. It is adjusted in the Profit & Loss A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When closing stock appears in the Trial Balance, it means it has already been adjusted against the opening stock and purchases during the year. Therefore, it is treated as an asset and appears only in the Balance Sheet.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

____________ are those entries which are passed at the end of each accounting period for the purpose of adjusting various nominal and other accounts so that true net profit or loss is indicated in profit and loss account and the balance sheet represents a true and fair view of the financial position of an enterprise.

  1. Opening entries

  2. Adjustment entries

  3. Closing entries

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

Adjustment entries are made at the end of an accounting period to ensure that revenues and expenses are matched correctly, reflecting the true profit or loss and the accurate financial position.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

In case of final accounts of manufacturing concerns closing stock of finished goods appears in __________ & ____________.

  1. Manufacturing Account, Balance Sheet

  2. Trading Account, Balance Sheet

  3. Profit & Loss Account, Balance Sheet

  4. Manufacturing Account, Trading Account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Closing stock of finished goods is an asset at the end of the period, so it appears in the Balance Sheet. It is also credited to the Trading Account to determine the cost of goods sold.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

While preparing final account, to record closing stock which of the following adjustment entry will be passed?

Purchases A/cTo Stock A/c Dr.
Trading A/cTo Stock A/c Dr.
Stock A/cTo Trading A/c Dr.
Stock A/cTo Capital A/c Dr.

  1. A

  2. B

  3. C

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

To record closing stock, the stock account is debited (as an asset) and the Trading Account is credited (to reduce the cost of goods sold).

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

In the case of continuing business we are required to pass an entry in the journal to brought forward all assets and liabilities as appearing in the books on the last day of the previous year. This entry is known as.

  1. Opening entries

  2. Adjustment entries

  3. Closing entries

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

Opening entries are passed at the beginning of a new financial year to bring forward the balances of assets and liabilities from the previous year's closing balance sheet.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

If goods are sold to customers on approval basis and consent is not received during the accounting periods which of the following adjustment entries are passed?

Debtors A/c Dr.To Sales A/c & Trading A/c Dr.To Stock A/c
Sales A/c Dr.To Debtors A/c & Stock A/c Dr.To Trading A/c
Sales A/c Dr.To Stock A/c & Debtors A/c Dr.To Stock A/c
Debtors A/c Dr.To Trading A/c & Trading A/c Dr.To Stock A/c

  1. A

  2. B

  3. C

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

When goods are sent on approval and not yet accepted, the sale must be reversed (Sales Dr. to Debtors) and the goods must be included in closing stock (Stock Dr. to Trading).