Tag: bases of accounting

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Questions Related to bases of accounting

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Which of the following is/are the essential features of accrual basis of accounting?
(I) Revenue is recognized only when cash is received.
(II) Costs are matched against revenues on the basis of relevant time period to determine periodic income.
(III) Costs which are not charged to income are carried forward and are kept under continuous review.
(IV) Receipts or incomes are recorded as and when cash is received or becomes due on the other hand payments are recorded only when cash is actually paid.
The correct answer is _________________.

  1. (I) & (IV) only

  2. (I), (III) & (IV) only

  3. (III) & (IV) only

  4. (II) & (III) only
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accrual accounting matches costs against revenues in the relevant period (II) and treats uncharged costs as assets to be carried forward (III). Statements (I) and (IV) describe cash-based accounting practices.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

According to which of the following concepts, revenue is recognised when it is earned rather than when it is collected and recognises when assets or benefits are used rather than they are paid for?

  1. Accrual concept

  2. Realisation concept

  3. Cost concept

  4. Money measurement concept
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The accrual concept dictates that revenue is recognized when earned and expenses are recognized when incurred, matching them to the period they relate to.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Purpose of ac an accounting system include all the following except _______________________.

  1. Interpret and record the effects of business transaction

  2. Classify the effects of transactions to facilitate the preparation of reports

  3. Summarize and communicate information to decision makers

  4. Dictate the specific types of business enterprise transactions that the enterprises may engage in.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accounting systems are designed to record, classify, and summarize financial data to provide useful information. They do not have the authority to dictate or restrict the types of business transactions an enterprise chooses to engage in.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

______ is incompatible with the matching principle of income determination.

  1. Accrual system of accounting.

  2. Cash basis of accounting

  3. Hybrid system of accounting

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

The matching principle requires that expenses be recognized in the same period as the revenues they help generate. The cash basis violates this because it records expenses only when paid, which may be in a different period than the associated revenue.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Who among the following defined management as "The accomplishment of results through the efforts of other people"?

  1. George Terry

  2. Lawrance Appley

  3. L.D. White

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

L.D. White is the management theorist who defined management as the accomplishment of results through the efforts of other people.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

The characteristic feature of imprest system is ___________________.

  1. Fixed amount of cash is allocated to petty cash fund

  2. Cash distributed from petty cash fund is documented with receipts

  3. Both a&b

  4. Petty cash disbursement receipts are everyday replenishments of the petty cash fund
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The imprest system involves maintaining a fixed float (A) and requiring documentation/receipts for all disbursements (B) to justify the replenishment of the fund.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Global depository receipts (GDRs) are issued by successful corporations with a view to attract ___________________.

  1. Overseas loan funds

  2. Remittances from NRIs

  3. Foreign equity capital

  4. Foreign direct investment
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

GDRs are financial instruments used by companies to raise capital from international markets, specifically by issuing shares to foreign investors.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Accrued income refers to that income which has been _______________.

  1. received but not earned during the current accounting period

  2. earned but not received during the current accounting period

  3. earned but not earned during the previous accounting period

  4. received and earned during the current accounting period
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accrued income is income that has been earned by providing goods or services during the period, but for which payment has not yet been received.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Materiality in accounting is decided __________________.

  1. By the size of an item

  2. By the knowledge as to whether an individual item is having a significant influence on financial statement

  3. Solely by the discretion of the accountant

  4. By the physical volume of the transaction
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Materiality is a qualitative characteristic; an item is material if its omission or misstatement could influence the economic decisions of users of the financial statements.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Whenever a company wants to alter its Memorandum of Association for changing the place of registered office from one state to another, it has to pass _________________.

  1. Ordinary resolution

  2. Special resolution

  3. Resolution requiring special notice

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

Changing the registered office of a company from one state to another involves altering the Memorandum of Association, which requires a special resolution under the Companies Act.