Tag: commercial applications

Questions Related to commercial applications

Expenses/Income are recorded when it is earned irrespective of cash being received/paid as per _____________.

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

  1. Cash basis

  2. Accrual basis

  3. Both of the above

  4. None of the above

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Correct Option: B
Explanation:

Under accrual basis of accounting, expenses are matched with the related revenues and/ or are reported when the expense occurs, not when the cash is paid. The result of accrual accounting is an income statement that better measures the profitability of a company during a specific time period.

______ is the Accounting method that recognizes the impact of transactions on the financial statements in the time periods when revenue and expenses occurs.

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

  1. Cash basis

  2. Hybrid basis

  3. Accrual basis

  4. Double entry basis

Show answer
Correct Option: C
Explanation:

There are two methods of accounting on the basis of business transactions are recorded i.e. cash system and accrual system.

If the transactions are recorded in books of account when cash is physically received is known as cash system of accounting irrespective of the period of revenue or expense. 
On the other side, if revenue and expense are recorded in the books of account based on the period of occurrence, its called accrual system of accounting irrespective of cash actually paid or not. 

Transactions affecting cash balance only are recorded in the books of accounts.

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

  1. True

  2. False

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Correct Option: B
Explanation:

False. In the books of accounts, transactions whether cash or on credit both are recorded in the books of accounts. Accrual basis of accounting records transactions by recognizing economic events regardless whether cash is received or not. 

The accounting system that affects at least two accounts is called __________ .

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

  1. Single entry system

  2. Double entry system

  3. Double account system

  4. Duplicate system of accounting

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Correct Option: B
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.

In a mercantile system of accounting adjustment is required for _______.

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

  1. Prepaid expenses

  2. Outstanding expenses

  3. Accrued income/income received in advance

  4. All the three

Show answer
Correct Option: D
Explanation:

Accrual accounting is the base of present accounting. It is also known as the mercantile system of accounting wherein the transactions are recognized as and when they take place. 

Under this method, the revenue is recorded when it is earned, and the expenses are reported when they are incurred. 
Hence, in this question accounting adjustment is required for prepaid expenses, outstanding expenses, accrued income/income received in advance.

______ is the Accounting method that recognizes the impact of transactions on the financial statements in the time periods when cash is disbursed or received.

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

  1. Cash basis

  2. Hybrid basis

  3. Accrual basis

  4. Double entry basis

Show answer
Correct Option: A
Explanation:

There are two methods of accounting on the basis of business transactions are recorded i.e. cash system and accrual system.

If revenue and expense are recorded in the books of account based on the period of occurrence, its called accrual system of accounting irrespective of cash actually paid or not.
If the transactions are recorded in books of account when cash is physically received is known as cash system of accounting irrespective of the period of revenue or expense.  

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

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

  1. Single entry

  2. Cash entry

  3. Double entry system

  4. Double account system

Show answer
Correct Option: C
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.

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.

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

  1. Mercantile

  2. Cash

  3. Hybrid

  4. Ad-hoc system

Show answer
Correct Option: B
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.

Select the correct statement.

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

  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

Show answer
Correct Option: C
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.

In cash transactions goods or services are purchased for certain value to be paid in future. 

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

  1. True

  2. False

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Correct Option: B
Explanation:

The above statement is fully false as cash transactions are those transaction where there is an immediate payment of cash for the purchase of an asset.