Tag: book keeping and accountancy

Questions Related to book keeping and accountancy

Which of the following external influences will not affect the directors in the preparation of the financial statements?

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Legislation

  2. Regulatory requirements

  3. Political environment

  4. Accounting requirements

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Correct Option: C

When a company's financial statements have been audited, an audit report will prepared. If this is unqualified the auditors will report that the financial statements__________________.

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Are certified correct

  2. Contain no material errors

  3. Comply with the Companies Act

  4. Present a true and fair view and comply with the Companies Act

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Correct Option: D

Which of the following best describes the reason why an independent auditor reports on financial statements?

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. A management fraud may exist and is more likely to be detected by independent auditors

  2. Different interests may exists between the company preparing the statements and the persons using the statements

  3. A misstatement of account balances may exist and is generally corrected as the result of the independent auditor's work

  4. Poorly designed internal control may exist

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Correct Option: B

_________is useful for the purpose of cost control, cost reduction and proper utilization of scarce resources.

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Financial Audit

  2. Cost Audit

  3. Secretarial Audit

  4. Tax Audit

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Correct Option: A

Procedure for preparation of 'Projected Financial Statements' should start from ______________.

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Projection of Fixed Assets

  2. Projection of Capital

  3. Projection of Sales

  4. Projection of Profit

Show answer
Correct Option: C
Explanation:

Projected financial statements take into account past financial trends, market conditions, possible changes and management expectations to arrive at a future financial picture.

It begins with Projection of Sales.

Which of the following best describes the reason why an independent auditor reports on financial statements?

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. A management fraud may exist and is more likely to be detected by independent auditors

  2. Different interests may exist between the company preparing the statements arid the persons using the statements

  3. A misstatement of account balances may exist and [s generally corrected as the result of the independent auditor's work

  4. Poorly designed internal control may exist

Show answer
Correct Option: B

Final accounts include preparation of ____________.

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Trading A/c

  2. Profit and Loss A/c

  3. Balance Sheet

  4. All of the above

Show answer
Correct Option: D
Explanation:

Final Account is the final process of accounting. Final Account is prepared to show the final results of the company in a specified period. Final Account is also known as Financial statement. Final accounts include the preparation of Trading account, Profit and Loss account and Balance Sheet. Trading Account and Profit and Loss account shows the profitability achieved during the year. Balance Sheet shows the financial position of the business at the end of accounting period. 

The statements prepared by the summarizing process is known as ______ which will show the profit or loss made by the business over a period of time and the total capital employed in the business. 

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Financial statements

  2. Budgeted statements

  3. Standard cost statements

  4. All of the above

Show answer
Correct Option: A
Explanation:

Financial statements are summary reports. Summary report shows how a firm has used the funds entrusted to it by its stakeholders and lenders and what is its current financial position. The three basic financial statements are 1. Balance Sheet  2. income statements 3. Cash Flow statement. 
Balance sheet shows firm's assets, liabilities and net worth on a stated date. 
Income Statement shows how the net income has arrived over a certain period. 
Cash flow statement shows the inflows and outflows of cash caused by the firm's activities over a stated period. 

Financial statements only consider _________________.

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. Assets expressed in monetary terms

  2. Liabilities expressed in monetary terms.

  3. Assets expressed in non-monetary terms.

  4. Assets and liabilities expressed in monetary terms

Show answer
Correct Option: D
Explanation:

'Financial Statements' comprises of Statement of Profit/Loss, Balance Sheet (including Notes to Accounts), Cash flow statement and statement of changes in Equity. 

Financial statements is a record of all the monetary items which includes assets and liabilities. In addition to the assets and liabilities, capital, profits and losses of the entity will also form a part of the financial statements.

What is the correct sequence of the following in the preparation of periodical financial statements?
I. Preparation of Balance sheet
II. Preparation of Funds flow statement
III. Preparation of Trial balance
IV. Preparation of Profit/Loss statement
Select the correct answer from the codes given and mark your answer sheet accordingly.

book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

  1. IV, II, I, III

  2. III, IV, I, II

  3. II, IV, III, I

  4. I, III, II, IV

Show answer
Correct Option: B
Explanation:

Once all the transactions are recorded in the books of account then only process of preparing the financial statements starts. The sequence of preparation of financial statement is as under:


III - Preparation of Trial Balance
IV- Preparation of Profit & Loss Account
I - Preparation of Balance Sheet
II - Preparation of Funds Flow Statement