Tag: meaning, importance and specimen of journal

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Multiple choice 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

The basic concepts related to P&L Account are _______________.

  1. Realization concept

  2. Matching concept

  3. Cost concept

  4. Both (a) and (b)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The matching concept is an accounting practice whereby firms recognize revenues and their related expenses in the same accounting period.

The realization principle is the concept that revenue can only be recognized once the underlying goods or services associated with the revenue have been delivered or rendered, respectively. 

Multiple choice 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

In every business transaction, at least _______ parties are involved.

  1. Two

  2. Three

  3. Four

  4. Six
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Any business transaction will involve at least two parties. One can not do the transaction with himself. One party may be receiver and another will be give. 


For example, XYZ Ltd sold goods to ABC Ltd. In this case, XYZ Ltd is the giver who is transferring the goods and ABC Ltd is the receiver who is accepting the goods.

Multiple choice 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

Which of the following business entity will not prepare Trading Account?

  1. Banking companies

  2. Insurance companies

  3. Investment companies

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

Trading accounting is prepared only by those organization where the purchase and sale of goods is done. 

Below are the entities which are not involve in any trading business, hence no trading account is prepared.
Banking Companies- It carries the business of taking deposits and lending money.
Insurance Companies- It carries Insurance business and provide services.
Investment Companies- It involves in advisory services. No trading. 

Multiple choice 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

The manufacturing account is prepared __________________.

  1. To ascertain the profit or loss on the goods produced

  2. To ascertain the cost of the manufactured goods

  3. To show the sale proceeds from the goods produced during the year

  4. Both (B) and (C)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Manufacturing account does not show the profit & loss. Manufacturing account accumulate the cost of manufacturing of material including raw material, labour and production overheads. 

Below is the format of manufacturing account.

                                             Manufacturing Account


 Particulars  Amount  Particulars  Amount
 To Op Stock of Raw Material    By Closing Stock of Raw Material  
 To Opening Stock of WIP    By Closing WIP  
 To Purchases of Raw Material    By Cost of goods transferred to Trading A/c   
 To Carriage Inwards      
 To Direct Labor      
 To Direct Expenses      
 To Factory Rent      
 To Fuel, Power      
 To Manufacturing overheads    
Multiple choice 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

Characteristic feature NOT found in a company is _______.

  1. Legal entity

  2. Common seal

  3. Affected by insolvency of an individual member

  4. Association of individual members
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A company is a separate legal entity with perpetual succession, meaning it is not affected by the death or insolvency of its members. The other options (legal entity, common seal, association of members) are all standard characteristics of a company.

Multiple choice 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

Fixed assets are recorded at _______.

  1. current cost

  2. original cost

  3. depreciated cost

  4. all of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Fixed assets are those which gives the benefits to the organization on a long term basis. Fixed Assets are recorded in the books of account on the original cost irrespective of their market value as per the cost concept in accounting.

Multiple choice 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

On 1.1.2019, CS N. S. Zad paid rent of Rs. 25,000 for Zads Professional Academy. This can be classified as _________.

  1. an event

  2. a transaction

  3. a transaction as well as an event

  4. neither a transaction nor an event
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Monetary concept of accounting defines that only those transactions are recorded in the books of account which are measured in terms of money. 

Rent of Rs.25000 paid is monetary transaction hence to be recorded in books of account. 
Accounting entry will be as under:

Rent A/c                           Dr.
        To Cash/Bank

Multiple choice 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

Which of the following statements is correct?

  1. Accounting profit is the difference between cash receipts and cash paid in a period.

  2. Accounting profit is the total of cash sales in the year less the expenses for the period.

  3. Accounting profit is the difference between revenue income and expenses for the period.

  4. Accounting profit is the difference between revenue income and cash payments for the period.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Profit & Loss account is prepared for a business for a particular period. Profit & Loss account is having two sides i.e. Income and expenses side or debit or credit side. All incomes/revenues are recorded in credit side and expenses are debited. 

Excess of Income over expenditure is treated as profit and excess of expenditure over income is a loss. 

Multiple choice 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

Which of the following statements is correct in relation to a trial balance?

  1. It shows the financial position of a business.

  2. All the balances in the trial balance will be summarized on the business balance sheet.

  3. It is a list of balances and forms the starting point for the preparation of the business accounts.

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

A trial balance is a statement showing the debit and credit balances of all ledger accounts. It is not a financial statement itself, but rather a tool used to check the arithmetic accuracy of the ledger before preparing final accounts.

Multiple choice 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

When a consistency is found between financial statements of one entity from period to period it is _____________.

  1. conventions of conservatism

  2. conventions of materiality

  3. conventions of disclosure

  4. conventions of horizontal consistency
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Consistency is the basic assumption and it is assumed that the various Policies/Methods adopted by the concern while preparing the accounts are consistent from one period to another. This convention plays its role particularly when there are some different methods available. However, consistency does not implies that there is no way for the introduction of new policies. 

If there is a change in the policy which results in inflating or deflating the figures of profits as compared to the previous year, a note to that should be given with the financial statements.