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Accounting

Description: Accounting test. Complete the test in time and rate it accordingly.
Number of Questions: 28
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Tags: Accounting Meaning and Scope of Accounting Banking Transactions and Bank Reconciliation Statement Depreciation Accounting Financial Accounting Basic Accounting Procedures-Journal Cost of Capital Accounting Principles and Accounting Equation Financial Statements Journalistic Transactions Indian Accounting Standards & International Accounting Standards Committee
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What is full form of CRJ and CPJ?

  1. Capital Reserve Journal and Capital Properties Journal

  2. Credit Reserve Journal and Credit payment journal

  3. Current Revenue Journal and Current Payment Journal

  4. Cash Receipt Journal and Cash Payment Journal

  5. None of these

Show answer
Correct Option: D
Explanation:

CRJ means cash receipt journal. In CRJ, we record only cash receipts. There are lots of sources of receiving cash, so we can make different columns in this journal. CPJ means cash payment journal. In CPJ, we record only cash payments. These payments are done for creditors, repayment of loans and other expenses. For knowing how much payment has been done, we show the different columns.

Which of the following is correct in relation to buy back of shares?

  1. Buy back of shares is permitted out of capital profits only.

  2. Buy back of shares can be done through open market as an indirect route.

  3. Buy back of shares through open market is a resort when the number of shares to be purchased are relatively large.

  4. Buy back of shares requires to file declaration about all debts and loans in prescribed form by the company before Reserve Bank of India.

  5. Buy back of shares requires necessarily to maintain a register of the shares so bought back.

Show answer
Correct Option: E
Explanation:

Correct  ref sec 77A , the co is required to maintain  a register of shares so broght back with mention of necessary details about each and every transaction of buy back.

The original cost of a machinery is Rs. 4,15,000. The estimated life of asset is 20 years and net scrap value is estimated to be Rs. 65,000. What will be the amount of depreciation to be charged every year? Use straight line method to calculate the answer.

  1. Rs. 20,750

  2. Rs. 24,000

  3. Rs. 17,500

  4. Rs. 3,250

  5. Rs. 128

Show answer
Correct Option: C
Explanation:

Depreciation =cost of machinery - net scrap value / estimated life 415000 - 65000 = 3500035000/20= 17500 It is the correct answer.

What is holding period?

  1. Holding period is the period in which creditor will take the right on the assets of debtor.

  2. Holding period is the period in which customer will keep default stock before returning it to its supplier.

  3. Holding period is the period in which banker will keep the fund of customer before withdrawing by him.

  4. Holding period is the period in which investor will keep his investment.

  5. All the above

Show answer
Correct Option: D
Explanation:

Holding period is the period in which investor will keep his investment. Investment may be in stock, debentures or any other assets. Investor can invest his money for short period or long period. So, holding period may also be short period or long period. In a long position, holding period refers to the time between an asset's purchase and its sale. In a short sale, the holding period is the time between when a short seller initially borrows an asset from a brokerage and when he or she sells it back - in other words, the length of time for which the short position is held.

What are Interim Financial Statements?

  1. Financial statements which are made and presented for an accounting period of more than one year.

  2. Financial statements, which are made and presented for an accounting period of less than one year.

  3. Financial statements, which are made and presented for an a day.

  4. Financial statements, which are made and presented for an accounting period of one year.

  5. None of the above is correct

Show answer
Correct Option: B
Explanation:

Interim financial statements refer to profit and loss account and balance sheet, which are made and presented for an accounting period of less than one year, such as quarterly or monthly. Interim financial statements are normally prepared after every three months. For accurate interim financial statements, accountant should evaluate inventory correctly and also reconcile the bank balance with company's record.

Which of the following is meaning of fund based accounting?

  1. Process of producing information for external use usually in the form of financial statements.

  2. Produces information primarily for internal use by the company's management.

  3. An accounting system emphasizing accountability rather than profitability, used by non-profit organizations and governments.

  4. Refers to the type of accounting information system used in the public sector.

  5. Accounting for the tax related matters.

Show answer
Correct Option: C
Explanation:

Fund accounting is a system of accounting widely used in non-business entities, such as nonprofits, government agencies, churches, hospitals and colleges and universities. Fund accounting differs from traditional business accounting, which focuses on identifying how successful an entity has been at creating profits. Since nonprofits and governments are not designed to generate profits, an alternative accounting method gives them a more fitting approach to tracking and reporting their finances.

An alternative name for control account is ____________.

  1. total accounts

  2. adjustment account

  3. holding account

  4. suspense account

  5. none of these

Show answer
Correct Option: A
Explanation:

It is  a General ledger account whose balance reflects the total of balances of related subsidiary ledger accounts. Accounts receivable and accounts payable are the most commonly used control accounts, and their balances serve as a crosscheck (control) of the accuracy of the associated subsidiary records.

Which is not a part of Cost Classification?

  1. Cost of purchasing machinery

  2. Cost of purchasing raw material

  3. Cost of using labors in production

  4. Overheads

  5. All of these are part of cost classification

Show answer
Correct Option: A
Explanation:

Cost of purchasing of machinery is not part of cost classification.

How to reduce the risk of Death Spiral in Accounting?

  1. By increasing price

  2. By decreasing price

  3. By using of activity based costing

  4. By keeping the stock dead for sometime

  5. None of these

Show answer
Correct Option: C
Explanation:

Death spiral term is taken from cost accounting. It is bad situation of company when company's sale decreases rapidly.  The cost of each of these activities will be assigned only to the products that demanded the activities.

Which will be the entry if drawee dishonours the bill on due date?

  1. Drawee account Dr. To B/R account

  2. B/R account Dr.To Drawee account

  3. Drawee account Dr.To cash account

  4. Bank account Dr.To Drawee account

  5. None of these

Show answer
Correct Option: A
Explanation:

Journal Entries in the books of Drawer when Drawee dishonours the bill on due date.

What is high low method?

  1. High Low Method is the method which is used to divide total cost into average cost and marginal cost.

  2. High Low Method is the method, which is used to divide total fixed cost into average fixed cost and marginal fixed cost.

  3. High Low Method is the method, which is used to divide total variable cost into average variable cost and marginal variable cost.

  4. High Low Method is the method which is used to divide total cost into variable cost and fixed cost.

  5. None of these

Show answer
Correct Option: D
Explanation:

High Low Method is the method which is used to divide total cost into variable cost and fixed cost. We know that fixed cost will be paid whether there will be production or not. Variable cost will be paid only for production. So, with high-low method, we compare total cost in highest level of production activity and in lowest level of production activity. 

Statements of Standard Accounting Practice and Financial Reporting Standards should be complied when preparing the final accounts of a limited company because ____________.

  1. the Companies Act 1985 demands that they are used

  2. the auditors will insist they are followed

  3. the directors are under a legal obligation to ensure they are followed

  4. they ensure that the accounts present a ‘true and fair view’

  5. all of these

Show answer
Correct Option: D
Explanation:

Directors must prepare accounts,  which give a true and fair view; it is accepted that compliance with accounting standards is necessary to assist in this objective.

In case of dishonour of bills receivable what effect will it have on current ratio?

  1. Decrease in current asset and increase in current liability with same amount.

  2. Nil effect.

  3. Increase in current assets and increase in current liability with same amount.

  4. Decrease in current assets and decrease in current liability.

  5. None of these

Show answer
Correct Option: B
Explanation:

There will be no effect on current assets and current liabilities. So the effect will be nil. 

Net profit is for Profit and Loss Account, while Surplus is for _________.

  1. receipt and payments account

  2. receipts and expenditure account

  3. income and expenditure account

  4. trading account

  5. revenue and expense account

Show answer
Correct Option: C
Explanation:

Surplus is for income and expenditure account.

A departmental store sold gift certificates that can be redeemable in merchandise. The gift certificates lapse after one year from the issued date. How would the deferred revenue account be affected by each of the following?

  1. Redemption of Certificate - Decrease Lapse of certificates - Decrease

  2. Redemption of Certificate - Decrease Lapse of certificates - No effect

  3. Redemption of Certificate - No effect Lapse of certificates - Decrease

  4. Redemption of Certificate - No effect Lapse of certificates - No effect

  5. None of these

Show answer
Correct Option: A
Explanation:

Deferred revenue represents future income collected in advance. When the gift certificates are sold, deferred revenue is increased. When the certificates are redeemed, the revenue is earned and shown in the income statement. Deferred revenue is decreased. When the certificates lapse, the company has no further liability and revenue is earned. Deferred revenue is decreased.

What does Aging of Accounts means?

  1. It is to classify the transactions

  2. It is to classify the accounts on the basis of nature of company.

  3. It is to classify the accounts on the basis of different ledgers.

  4. It is to classify the accounts on the basis of billing or due date.

  5. None of these

Show answer
Correct Option: D
Explanation:

AGING OF ACCOUNTS is the classification of accounts by the time elapsed after the date of billing or the due date. The longer a customers account remains uncollected or the longer inventory is held, the greater is its realization risk. Aging of accounts is the technique to classify accounts according to billing or due date. In this classification, we get the idea to whom, we have to get first and to whom, we have to pay first.

Which of the following entries come under journal proper?

  1. Opening Entries

  2. Closing Entries

  3. Transfer Entries

  4. Adjustment Entries

  5. All of these

Show answer
Correct Option: E
Explanation:

All the above entries are entered in journal proper.

Which of the following means 'Super Profit'?

  1. Where the cost of goods sold exceeds the sales revenue.

  2. Where the sales revenue exceeds the cost of goods sold.

  3. Net profit less the opportunity costs of alternative earnings and alternative returns on capital invested that have been foregone.

  4. Where the cost of goods sold plus expenses is greater than the revenue.

  5. Where sales revenue plus other income, such as rent received, exceeds the sum of cost of goods sold plus other expenses.

Show answer
Correct Option: C
Explanation:

Super Profit

Seigniorage is concerned with which of the following?

  1. Taking debt from public.

  2. Increase in revenue by increasing the tax rates.

  3. Earning profit by government by issuing currency.

  4. Controlling non-developmental expenses.

  5. None of these

Show answer
Correct Option: C
Explanation:

Yes, Seigniorage is the profit earned by the government by issuing currency. It is the profit earned on the difference between face value of currency and its production cost. For instance, if the cost of production of a ten rupee coin is 50 paisa and its face value is Rs 10, then a profit of Rs 9.50 is earned on it.

Excess value of net assets over purchase consideration at the time of purchase of business is credited to?

  1. General Reserve

  2. Capital Reserve

  3. Vendor's account

  4. Goodwill

  5. None of these

Show answer
Correct Option: B
Explanation:

Excess value of net assets over purchase consideration at the time of purchase of business is credited to capital reserve account.

When Provision for Depreciation Account is maintained, the annual charge for depreciation shall be ____________.

  1. debited to Provision for Depreciation Account and credited to profit and loss acount

  2. debited to Asset Account and credited to profit and loss appropriation account

  3. credited to profit and loss account and debited to asset account

  4. debited to Profit and loss Account and credited to Provision for Depreciation Account

  5. debited to profit and loss account and credited to asset account

Show answer
Correct Option: D
Explanation:

To record annual charges of depriciation profit and loss account will be debited and provision for depreciation account will be credit because we are maintaining it and is just like liability of business. Like other liabilities, this liability account will be credit.

What do you mean by “Trust Deed” in context of debenture?

  1. A legal document signed while debentures are bought.

  2. A legal document to appoint trustees to protect the interest of debenture holders before they are offered for public subscription.

  3. A legal document when debentures are transferred.

  4. A legal document made when debentures are sold.

  5. None of these

Show answer
Correct Option: B
Explanation:

Debenture Trust dead. It is a formal legal document/contract that outlines the terms of the debenture issue between issuer and holders. States concerns to maturity date, interest rate, interest payment , protective provisions and any other terms and conditions between issuer and holders.

The accounting measurement that is not consistent with the Going Concern concept is __________.

  1. historical cost

  2. realization

  3. the transaction approach

  4. liquidation value

  5. none of these

Show answer
Correct Option: D
Explanation:

Liquidation value is the value of the business when the business is wound up and is under liquidation whereas the going concern concept assumes that the business will continue over a long time and therefore the accounting measurement “Liquidation Value” is inconsistent with going concern concept.

When two or more companies liquidate to form a new company, this is called?

  1. Venturing a new business.

  2. Collaboration

  3. Reconstruction

  4. Amalgamation

  5. Absorption

Show answer
Correct Option: D
Explanation:

Amalgamation is the term used when two or more companies liquidate to form a new company. 

Which of the following is NOT an example of accruals basis of accounting?

  1. Depreciation

  2. Cash Flow Statement

  3. Prepaid Expense

  4. Provision for Warranty Claims

  5. None of these

Show answer
Correct Option: B
Explanation:

Cash flow statements aim to present the cash flow effects of transactions that occur during an accounting period and are therefore not based on the accruals principle.

The inventory in the starting of current year is overstated by Rs. 5,000 and closing inventory is overstated by Rs. 12,000. The net income for current year will be ___________.

  1. Rs. 12,000 (understated)

  2. Rs. 17,000 (overstated)

  3. Rs. 7,000 (overstated)

  4. Rs. 7,000 (understated)

  5. None of these

Show answer
Correct Option: C
Explanation:

Overstatement of closing stock results in overstatement of profit and overstatement of opening stock results in understatement of profit. In the instant case, there will be overstatement of profit by Rs 12,000 - Rs 5,000= Rs 7,000.

Payment received from Debtor _________________.

  1. decreases the Total Assets

  2. increases the Total Assets

  3. results in no change in the Total Assets

  4. increases the Total Liabilities

  5. none of these

Show answer
Correct Option: C
Explanation:

Payments received from debtors results in decrease of debtors and increase in cash. It does not result in any change in the total assets as decrease in one asset is compensated by increase in the other asset.

According to which concept are shareholders treated as creditors, for the amount they paid on shares, of which they are subscribed to?

  1. Cost concept

  2. Duality concept

  3. Business Entity concept

  4. Going Concern Concept

  5. Since shareholders are owner of the business they cannot be treated as creditors of the business

Show answer
Correct Option: C
Explanation:

Under Business Entity concept shareholders are treated as creditors of the business. It is also known as separate entity concept.

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