Tag: income-expenditure account

Questions Related to income-expenditure account

State True or False.
In barter transactions, goods or services are purchased for other goods or services. 

commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

  1. True

  2. False

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Correct Option: A
Explanation:

The above statement is true as barter system is a system of exchange where goods or services are directly exchanged for other goods or services without using a medium of exchange such as money. 

State True or False.
In credit transaction, goods or services are purchased for cash only.

commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

  1. True

  2. False

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Correct Option: B
Explanation:

In credit transaction goods or services are purchased but the payment is settle in a later date and in cash transactions payment is settled immediately. 

Narration is written just above an entry. 

commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

  1. True

  2. False

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Correct Option: B
Explanation:

A brief about the journal entry is written after every journal entry to give the transaction details about the journal entry. 


This can be shown as:

Sanjay & Co.                                   Dr.
           To Sales A/c
(Being goods sold on credit through sales Invoice No. 07/18-19 to Sanjay & Co.)

Gopal Sons starts a business by investing Rs. 15 lakh and purchases goods worth Rs.12.5 lakh. At the end of the year he is left with a profit of Rs.1,50,000. The surplus profit of Rs.1,50,000 is a /an_________.

commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

  1. event

  2. transaction

  3. dealing

  4. operations

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Correct Option: A
Explanation:

Every economic activity is performed through transactions and events. An event is the happening, consequence or result of the transaction. Hence in our example the surplus profit is an event which is result of transaction.

________ is used to mean a happening as a consequence of transaction(s).

commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

  1. Event

  2. Transaction

  3. Dealing

  4. Operations

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Correct Option: A
Explanation:

Every economic activity is performed through transactions and events. A transaction may be a business, performance of an act or an agreement. Event is used to mean a happening as a consequence of transaction(s).

An accountant records a transaction if ________ .

commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

  1. it is substantiated by a documentary evidence

  2. it has tax implication

  3. it is so required by the Management

  4. it is mandatory as per Statutory requirement

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Correct Option: A
Explanation:

Any business transaction which occur during the course of business must have the documentary evidence. Since the accounts of the business need to be audited in future, all evidence must be available for records.

______ describes a record of the transaction.

commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

  1. Income statement

  2. Journal

  3. General ledger

  4. Charter of accounts

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Correct Option: B
Explanation:

The transactions are recorded first of all in the journal and then they are posted to the ledger. Thus the journal is the book of first or original entry while the ledger is the book of second entry. Journal records transactions in a chronological order. Journal is more reliable then ledger. The process of recording transactions is termed as journalising.

_______ is the first phase of accounting cycle.

commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

  1. Identifying an event or transaction

  2. Taking rational decision

  3. Designing Accounting system

  4. Preparing charter of accounts

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Correct Option: A
Explanation:

Accounting cycle starts only when there is an event or transaction of monetary value. If a transaction is completed, its considered an event to record the same in business books. Non economic transaction should not be considered as an event. Hence, no recording is done.

_______ is used to an economic event in accounting.

commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

  1. Event

  2. Transaction

  3. Dealing

  4. Operations

Show answer
Correct Option: B
Explanation:

Every economic activity is performed through transactions and events. A transaction may be a business, performance of an act or an agreement. Transaction is used to an economic event in accounting.

Choose the wrong statement.

commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

  1. Accounting is the language of business.

  2. Transactions are recorded in qualitative terms only.

  3. Accounting is the art of recording, classifying and summarizing.

  4. Transactions and events of financial character are subject-matter of accounting.

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Correct Option: B
Explanation:

Accounting is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. transactions and events of financial information. It revels profit or loss for a given period, and the value and nature of firm's assets, liabilities and owner;s  equity. It is the language of business.