Fundamentals Of Accounts

1.

Interest on loan paid by business is an example of :

Revenue expense

Income

Asset

Return outward

2.

Goodwill is classified as which one of the following assets?

Fixed

Long term

Current

Intangible

3.

Which of the following item will be shown on debit side of debtors account?

Discount received

Return inwards

Discount allowed

Credit sales

4.

Consider the following data pertaining to a firm:
Credit balance as per bank column of cash book Rs.13500 Bank interest on overdraft appeared only in the pass book Rs 2100
Cheques deposited but not collected by the bank Rs 5000
The balance as per pass book is

Rs 20.600 (Dr. balance)

Rs 18.500 (Dr. balance)

Rs 18.500 (Cr. balance)

Rs.15.600 (Dr. balance)

5.

Which of the following lists of accounts all have debit balances?

Land, Equipment, and Paid-in Capital.

Accounts Receivable, Merchandise Inventory, and Salary Expense.

Notes Receivable, Dividends Payable, and Interest Expense.

Accounts Receivable, Accumulated Depreciation, and Buildings.

6.

Under which depreciation method the amount of depreciation expenses remains same throughout the useful life of a fixed asset

Straight line method

Reducing balance method

Number of units produced method

Machine hours method

7.

What is depreciation?

Cost of a fixed asset

Cost of a fixed asset’s repair

The residual value of a fixed asset

Portion of a fixed asset’s cost consumed during the current accounting period

8.

Which of the following is NOT a function of bank reconciliation statement?

To check for errors in balance sheet

To update omitted entries into the cash book

To update omitted entries into the bank statement

To reconcile the difference in bank statement and cash book

9.

Which of the following statements best describes the process of accounting depreciation?

A process that attempts to recognize loss in economic value over a period of time.

A process for setting aside cash so funds will be available to replace the asset.

A process for recognizing the cost of an asset that should be matched against revenue earned as a result of using the asset.

A process for recognizing all of the economic cost associated with using an asset in a revenue generating activity.

10.

Prepaid interest given in the Trial Balance will be treated as a (an):

Asset

Liability

Revenue

Deferred expense

11.

Gains differ from revenues because gains:

do not have to be realized

are reported as income from operating activities.

are normally recognized before cash is received.

are not a result of the entity's ongoing, central operations.

12.

Discount allowed is a kind of deduction from

Account payable

Account receivable

Cash account

Discount account

13.

The purpose of the income statement is to show the:

change in the fair market value of the assets from the prior income statement.

market value per share of stock at the date of the statement.

revenues collected during the period covered by the statement.

net income or net loss for the period covered by the statement

14.

The records that are kept for the individual asset, liability, equity, revenue, expense, and dividend
Components are known as:

Accounts

Vouchers

Journals

Statements

15.

The double entry required to write off a specific bad debt is:

Debit sales, credit trade debtor.

Debit profit and loss, credit trade debtor.

Debit trade debtor, credit profit and loss

Debit profit and loss, credit provision for bad debts.

16.

The purchase of merchandise on account would, in the buyer's records:

Increase assets and increase expenses.

Increase assets and increase liabilities.

Increase liabilities and increase paid-in capital.

Have no effect on total assets.

17.

The process of recording transactions in different journals is called

Posting

Entry making

Adjusting

Journalizing

18.

A business has the following transactions recorded in its sales ledger for 2001:

Debtors at 1 January 2001 25000
Sales in 2001 345000
Receipts from debtors 318000
Credit notes raised in 2001 23000

Which is the correct figure for debtors at 31 December 2001

£ 29000

£ 27000

£ 52000

£ 75000

19.

Accrued expenses are considered as

Asset

Liability

Gain

Income

20.

When Capital is increased by an amount, it is recorded on the:

Left or credit side of the account

Right or debit side of the account

Left or debit side of the account

Right or credit side of the account

21.

The effect of an adjusting entry on the financial statements is usually to:

make the balance sheet balance.

increase net income.

increase the accuracy of both the balance sheet and income statement.

match revenues and assets

22.

Discount for quick repayment of debt is normally referred as

Trade discount

Prompt payment discountWRONG ANSWER

Cash discount

Bulk discount

23.

Cost incurred for the maintenance of shop is considered as

Revenue expense

Deferred expense

Preliminary expense

Capital expense

24.

Documentary evidence, in a specific format used to record the details of a transaction is known as:

Account

Voucher

Journal

Ledger

25.

Which of the following is not an asset?

Debtors

Cash balance

Loan from K Harris

Buildings

26.

Direct expenses are those which can be identified with particular products.
Which of the following items is a direct cost?

The rent of the factory in which products are made.

The wages of the production supervisor.

A royalty paid to the holder of a patent after each item is produced

The cost of the glue used to attach labels to the products.

27.

Which of the following statements is incorrect?

Liabilities + Capital = Assets

Liabilities + Assets = Capital

Assets + Liabilities = Capital

Capital - Assets = Liabilities

28.

Net profit is computed in which of the following?

Balance sheet

Income statement

Cash flow statement

Statement of changes in equity

29.

Noncurrent, intangible assets such as leasehold improvements, patents, and goodwill are all subject to

depreciation

amortization

depletion

recognition

30.

The owners' equity section of a balance sheet contains two major components

Common Stock and Additional Paid-in Capital

Paid-in Capital and Retained Earnings

Common Stock and Retained Earnings

Net Income and Dividends

31.

Working capital includes all of the following accounts except:

Accounts Payable

Cash

Retained Earnings

Merchandise Inventory

32.

The first step in accounting process is

Recording the transaction

Identifying the transaction

Posting the transaction

Preparing the source documents

33.

Which of the following account will be credited, if business bought goods on credit from Mr. Z

Purchases account

Mr.Z account

Cash account

Sales account

34.

The balance sheet is sometimes referred to as the:

Statement of Financial Position.

Statement of Assets and Liabilities.

Statement of Changes in Financial Position.

Statement of Current Affairs

35.

A journal entry in which two or more account is debited or credited is referred as

Journal entry

Multi entry

Additional entry

Compound entry

36.

Exe Ltd sells goods on credit to Wy Ltd for £3000. Which of the following accounting entries correctly records this transaction?

Debit sales, credit Wy Ltd £3000

Debit Wy Ltd, credit sales £3000

Debit cash, credit sales £3000.

Debit Wy Ltd, credit stock £3000

37.

Current assets- Current Liabilities are known as

Working capital

Invested capital

Assets

Cash

38.

When a depreciable asset is sold:

a gain arises if the sales proceeds exceed the net book value.

a loss arises if the sales proceeds exceed the net book value.

any cash received results in a gain.

depreciation expense is adjusted so there is no gain or loss.

39.

Bank reconciliation statement is the comparison of a bank statement (sent by bank) with the _________ (prepared by business)

Cash receipt journal

Cash payment journal

Cash book

Financial statements

40.

Favourable balance of cash book implies that

Credit balance of cash book

Debit balance of cash book

Bank overdraft

Adjusted balance of cash book

41.

Which of the following accounting concepts are being followed when a company operates a provision for bad debts account?

Consistency, prudence, accruals, going concern

Accruals, consistency, going concern

Prudence, consistency, going concern

Prudence, accruals, going concern

42.

Purchases+opening stock-closing stock=?

Amount of sales

Gross profit

Cost of goods sold

Net income

43.

Which one of the following is NOT true about revenue expenditure?

These are the running expenses of the business

They improve the financial position of the business

They reduce the profit of the concern

They do not appear in the balance sheet

44.

1. Which of the following is true when a debtor pays his dues?

The asset side of the balance sheet will decrease

The asset side of the balance sheet will increase

The liability side of the balance sheet will increase

There is no change in total assets or total liabilities

45.

The time frame associated with a balance sheet is:

a point in time in the past.

a one-year past period of time

a single date in the future.

a function of the information included in it.

46.

Every business transaction affects at least ________ accounts

one

two

three

four

47.

The principle of consistency means that:

the accounting methods used by an entity never change.

the same accounting methods are used by all firms in an industry.

the effect of any change in an accounting method will be disclosed in the financial statements or notes thereto.

the balance sheet must always balance

48.

Accounts Receivable & Inventory are the examples of:

Liquid assets

Current assets

Fixed assets

Capital assets

49.

Withdrawal of goods from stock by the owner of the business for personal use should be recorded by debiting

Drawings account and crediting cash account

Drawings account and crediting purchases account

Capital account and crediting drawings account

Purchases account and crediting drawings account Drawings account and crediting purchases account

50.

Double entry accounting system includes:

Accrual accounting only

Cash accounting only

Both cash and accrual accounting

None of the given options