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

The system of recording of transactions based on dual aspect is called _________ .

  1. Single entry

  2. Cash entry

  3. Double entry system

  4. Double account system
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Dual aspect is the foundation or basic principle of accounting. It provides the very basis for recording business transactions into the book of accounts. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places. In other words, at least two accounts will be involved in recording a transaction.

The double-entry system also requires that for all transactions, the amounts entered as debits must be equal to the amounts entered as credits.

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

Total sales during the financial year amounted to Rs. 25 lakh out of which Rs. 20 lakh accounted for in the same financial year and remaining in next financial year when the debtors were realized. The firm is following ______ system of Accounting.

  1. Mercantile

  2. Cash

  3. Hybrid

  4. Ad-hoc system
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Cash accounting is an accounting method in which payment receipts are recorded during the period they are received, and expenses are recorded in the period in which they are actually paid.

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

Select the correct statement.

  1. Accural basis of Accounting recognizes revenue only when cash is actually received

  2. As per Companies Act, Cash basis or Hybrid system of Accounting is allowed

  3. In cash basis of accounting, actual receipt of cash or disbursement of cash is the point of recognizing income and expenditure

  4. Cash basis of Accounting recognizes revenue only when the goods are delivered
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Under the cash basis, entries in the book of accounts are made when cash is received or paid and not when the receipt or payment become due. The cash basis is a method of recording accounting transactions for revenue and expenses only when the corresponding cash is received or payments are made.

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

The double entry system is based on "dual aspect"  concept. 

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Dual aspect is the foundation or basic principle of accounting. It provides the very basis for recording business transactions into the book of accounts. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places. In other words, at least two accounts will be involved in recording a transaction.

The double-entry system also requires that for all transactions, the amounts entered as debits must be equal to the amounts entered as credits.

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

A cash receipt may cause ___________.

  1. Increase in liability

  2. Decrease in other asset

  3. Reduction in one asset and increase in other asset

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

An amount of money received by a company for goods or services, is called as cash receipts. 

Following are the results of cash receipts:-
Increase in liability, reduction in one asset and increase in other asset, decrease in other asset etc.

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

Purposes of an accounting system are________________________.

  1. Intrepret

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

  3. Summarize and communicate information to decision makers

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

The purpose of an accounting system are interpret, classify the effects of transaction to facilitate the preparation of reports and to summarize and communicate information to decision makers.

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

No accounting is made for Abnormal Loss in Joint Venture Account.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In a joint venture, abnormal losses are typically not recorded in the Joint Venture Account because the venture is temporary and the loss is usually borne by the venturers directly or handled outside the venture's operating account.

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

Cash basis considers the revenue as realised when ____________.

  1. Sale is completed

  2. Amount is ultimately collected from sales

  3. Order is received

  4. All of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Under the cash basis of accounting, revenue is recognized only when the cash is actually received from the customer, regardless of when the sale occurred.

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

The basis of revenue recognition often used in accounting for hire-purchase transaction is _______________.

  1. Cash basis

  2. Sales basis

  3. Production basis

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

In hire-purchase transactions, the interest and principal are collected over time. The cash basis is often used to recognize revenue as installments are received.