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

The company paid Rs.15,000 as one of the installment of an outstanding bill. What effect this transaction have on the financial position of the company?

  1. No change in assets, liability decreases by Rs. 15,000

  2. Both cash and liability decrease by Rs.15,000

  3. Assets decrease by Rs.15,000, on change in liability

  4. Assets increase by Rs. 15,000, liability increase by Rs.15,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Paying an outstanding bill reduces the company's cash (an asset) and reduces the outstanding liability (accounts payable). Both decrease by the amount paid.

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

Salary outstanding A/c appearing in the trial balance is _____________.

  1. shown on the liability side of balance sheet

  2. shown on the assets side of the balance sheet

  3. shown on debit side of profit and loss A/c

  4. credited to profit and loss A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

If an account appears in the trial balance, it has already been adjusted. Salary outstanding is a liability, so it is reported on the liability side of the balance sheet.

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

Under statement of closing work-in progress in the period will _______________.

  1. Understate cost of goods manufactured in that period

  2. Overstate current assets

  3. Overstate gross profit from sales in that period

  4. Understate net income in that period.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Understating closing inventory increases the Cost of Goods Sold (COGS = Opening + Purchases - Closing). Since Net Income = Revenue - COGS, an increase in COGS leads to a decrease in Net Income.

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

Provision for the outstanding liability/ expenses is _________.

  1. appropriation of profit

  2. siphoning of income

  3. charge to profit

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

A provision for outstanding expenses is an expense that must be recognized in the period it was incurred to match revenues, making it a charge against profit rather than an appropriation of profit (which is a distribution of earned profit).

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

For which of the following adjustments would a reversing entry facilitate book-keeping procedures?

  1. Adjustment for depreciation expense

  2. Adjustment to allocate prepaid insurance to the current period

  3. Adjustment made as a result of inventory of supplies

  4. Adjustment for drawing in goods.
Reveal answer Fill a bubble to check yourself
B Correct answer
Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

If beginning and ending goods inventories are Rs. 400 and Rs. 700, respectively, and cost of goods sold is Rs. 3,400, net purchases are ______________.

  1. Rs. 3,700

  2. Rs. 3,400

  3. Rs. 3,100

  4. Cannot be determined
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

COGS = Opening Inventory + Net Purchases - Closing Inventory. 3,400 = 400 + Net Purchases - 700. 3,400 = Net Purchases - 300. Net Purchases = 3,700.

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

In a general, the accounts in the income statement are known as ___________.

  1. permanent accounts

  2. temporary accounts

  3. unearned revenue accounts

  4. contra-asset accounts
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Income statement accounts (revenue and expenses) are temporary accounts because their balances are closed to the capital account at the end of each period, resetting them to zero for the next period.

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

The recording of wages earned but not yet paid is an example of an adjustment that ________________.

  1. apportions revenues between two or more periods

  2. recognises an accrued expense

  3. recognise an unrecorded reveue

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

Accrued expenses are expenses that have occurred, but are not yet recorded in the company's general ledger. This means these expenses will not appear in the financial statements unless an adjusting entry is passed prior to issuing the financial statements.

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

In a Trading and Profit and Loss Account the excess of net sales over the cost of goods sold is called _________________.

  1. Operating income

  2. Income from operations

  3. Gross profit

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

Gross profit is defined as the difference between net sales and 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

Which of the following accounts would be closed by transfer to the trading and Profit and Loss account at the end of a period?

  1. Sales

  2. Salary expenses

  3. Both sales and salary expense

  4. Neither sales nor salary expense
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Both revenue accounts (like Sales) and expense accounts (like Salary) are temporary accounts that must be closed to the Trading and Profit and Loss account at the end of the period.