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

Rs. 1,000 being the monthly total of discount allowed to customers was credited to discount account in the ledger. If rectification is done before preparation of trial balance then which of the following is correct? 

  1. Discount A/c      Dr.         2,000
            To Suspense A/c               2,000

  2. Discount A/c      Dr.        1,000
            To Suspense A/c               2,000

  3. Credit the Discount Account with Rs. 2,000 saying "To Rectification of wrong credit of Rs. 1,000 for discount allowed.... Rs. 2,000.

  4. Debit the Discount Account with Rs. 2,000 saying "By Rectification of wrong credit of Rs. 1,000 for discount allowed.... Rs. 2,000.
Reveal answer Fill a bubble to check yourself
D Correct answer
Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

If an amount paid for servicing vehicles has been posted in error to Motor Vehicles account the journal entry necessary to correct this error should require which of the following _________________.

  1. Debit Vehicle Maintenance A/c and credit Motor Vehicles A/c

  2. Debit Cash A/c and credit Motor Vehicles A/c

  3. Debit Motor Vehicles A/c and credit Vehicle Maintenance A/c

  4. Debit Vehicle Maintenance A/c and credit Cash A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Servicing vehicles is a revenue expenditure (maintenance), not a capital expenditure. It should be debited to Vehicle Maintenance A/c. Since it was wrongly debited to Motor Vehicles A/c, we must credit Motor Vehicles A/c to remove the error and debit Vehicle Maintenance A/c to record the expense.

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

If the change in accounting policy has a material effect in current period and the effect of change is ascertainable in part _________________.

  1. The amount of change should be disclosed

  2. The fact of change should be disclosed

  3. The fact of change should not be disclosed

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

When an accounting policy change has a material effect, the entity must disclose the fact of the change to ensure transparency. While the amount of the change is also relevant, the fundamental requirement is to disclose that a change has occurred.

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

Mr.Ashok buys clothing of Rs.50,000 paying cash Rs.20,000. What is the amount of expense as per the accrual concept?

  1. Rs. 30,000

  2. Rs. 20,000

  3. Rs. 50,000

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

The accrual concept requires that expenses be recognized when they are incurred, regardless of when the cash is paid. Since Mr. Ashok bought clothing worth 50,000, the full amount is an expense at the time of purchase.

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

An entry for the goods sold to Madhav for Rs. 1,020 was posted to his account as Rs. 1,200. If rectification is done before preparation of trial balance then which of the following is correct? 

  1. Supense A/C      Dr.        180
           To Madhav A/C                 180

  2. Profit & Losdd Adj. A/c     Dr.     180
            To Madhav A/c                           180

  3. Credit Madhav with Rs. 180 saying "By Excess debit for sales Rs. 180"

  4. Debit Madhav with Rs. 180 saying "To Excess debit for sales Rs. 180"
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The sale was 1,020 but recorded as 1,200, meaning Madhav's account was over-debited by 180. To rectify this before the trial balance, we must credit Madhav's account to reduce the balance, noting the reason for the adjustment.

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

When a change in accounting policy is justified?

  1. To comply with accounting standard

  2. To ensure more appropriate presentation of the financial statement of the enterprise

  3. to comply with law

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

Accounting policies are changed only when required by law, accounting standards, or when the change results in a more appropriate presentation of financial statements. All these options represent valid justifications.

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

All of the following are valuation principles except ___________________.

  1. Historical cost

  2. Current cost

  3. Realizable value

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

Historical cost, current cost, and realizable value are standard valuation principles used in accounting. Future value is a financial calculation concept rather than a primary valuation principle for assets in financial statements.

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

Match List I with List II and select the correct answer using the codes given below the lists.
List I                                                    List II
A. Doctrine of ultra vires                    1. Articles of association
B. Doctrine of indoor management    2. Prospectus
C. Doctrine of golden rule                   3. Memorandum of association

  1. A-1, B-3, C-2

  2. A-3, B-1, C-2

  3. A-2, B-1, C-3

  4. A-3, B-2, C-1
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Doctrine of ultra vires relates to the Memorandum of Association (3), Doctrine of indoor management relates to the Articles of Association (1), and the Doctrine of golden rule relates to the Prospectus (2).