Tag: basis of accounting system

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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 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. (I) & (III) only
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

At the end of the accounting year, ______are to be passed for outstanding/prepaid expenses, accrued income/income received in advance etc. 

  1. Transfer Entries

  2. Adjustment Entries

  3. Closing Entries

  4. Opening Entries
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Adjustment entries are made at the end of the accounting period to ensure that revenues and expenses are recorded in the correct period, including items like outstanding expenses and accrued income.

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?

  1. Revenue is recognized when cash is received

  2. Costs are matched against revenues on the basis of relevant time period to determine periodic income.

  3. Costs which are not charged to income are carried forward and are kept under continuous review.

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

Accrual accounting involves matching costs against revenues for the relevant period and carrying forward uncharged costs, as stated in options B and C.

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

Non-monetary events like, death, dispute, sentiments, efficiency etc. are _______ in the books, even though these may have a great effect. 

  1. Not recorded

  2. Recorded

  3. Recorded if suggested by external auditors

  4. Recorded if suggested by internal auditors
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounting only records events that can be expressed in monetary terms. Non-monetary events, despite their impact, are not recorded in the books.

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

In accrual system of accounting ______________________.

  1. Revenues are taken care of irrespective whether cash is received or not

  2. Cost incurred during the period is taken care of

  3. Both a & b

  4. Cost of last financial period is only taken care of
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accrual accounting recognizes revenues when earned and costs when incurred, regardless of the timing of cash payments or receipts.

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

The total amount column of the purchases return book is _______________.

  1. Credited to purchases returns account

  2. Debited to sales return account

  3. Credited to sales return account

  4. Debited to purchases returns account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The total of the purchases return book represents goods returned to suppliers. Since purchases have a debit balance, returns have a credit balance.