Tag: book keeping and accountancy

Questions Related to book keeping and accountancy

When shares are forfeited, the share capital account is debited by ________________.

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. Paid-up amount

  2. Called-up amount

  3. Nominal value of the shares

  4. Market value of the shares

Show answer
Correct Option: B

Financial Statements usually consists 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 Account

  2. Profit & loss Account

  3. Balance Sheet

  4. All of the above

Show answer
Correct Option: D
Explanation:

Financial statements are prepared at the end of the financial year to know the overall financial performance and financial position of the business. 


Following are the financial statements:
Trading Account is prepared to know the gross profit earned by the business. 
Profit & Loss Account is prepared to find out the net profit after deducting the indirect expenses from the gross profit. 
Balance sheet is prepared to know the financial position of the  business on a particular date including the position of assets and liabilities.  

Which of the following are the basic objectives of preparing 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. To view financial performance.

  2. To view financial Position.

  3. Both (A) & (B).

  4. None of the above.

Show answer
Correct Option: C
Explanation:

To know the financial position of the business, financial statements are prepared. Normally the financial statements are prepared at the end of the financial year. 


Financial statements includes the following:

Trading, Profit & Loss A/c - To know the profitability of the business.
Balance Sheet- To know the position of assets and liabilities of the firm.
Fund Flow Analysis- To know the movement of fund during the year.

Which of the following statement is not correct?

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 do adjust themselves for price level changes

  2. Only business transactions are within the ambit of financial records

  3. Financial statements have evidential value in the court of law

  4. Accounting principles have no universal acceptability

Show answer
Correct Option: A

Which of the following statement(s) is / are true regarding Net Benefit Cost Ratio (NBCR)?

book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

  1. It does not take time value of money into consideration

  2. This criterion cannot be used when the investment outlay is spread over more than one period

  3. IF NBCR = 0.75 the project cannot be accepted

  4. All of the above

  5. Both (B) and (C) above

Show answer
Correct Option: B
Explanation:

Net benefit cost ratio takes into consideration the time value of money.
Net benefit cost ratio  = NPV /
Investment = BCR-1
When NBCR>1 (BCR>1), the project is accepted. Therefore, a project with NBCR = 0.75 will be accepted. This criterion cannot be used when investment outlay is spread over more than one period.

Returns outward book makes a record of__________.

book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

  1. Goods returned to the supplier

  2. Goods returned to customer

  3. Goods returned to proprietor

  4. Goods returned to neighbour

Show answer
Correct Option: A
Explanation:

The credit note received from supplier shows the goods returned and the amounts involved. The purchase returns book also known as returns outward book and is used to record the debit notes. Goods returned to supplier denotes purchase return to supplier hence it is recorded in return outward account.

Which of the following would be considered a risk-free investment?

book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

  1. Gold

  2. Equity in a house

  3. High-grade corporate bonds

  4. Treasury bills

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Correct Option: D
Explanation:

T-bills are considered the safest possible investment and provide what is referred to as a "risk-free rate of return," based on the credit worthiness of the United States of America. This risk-free rate of return is used as somewhat of a benchmark for rates on municipal bonds, corporate bonds and bank interest.

A draws a bill on B for Rs. $30,000$. A wants to endorse it to C in settlement of Rs. $35,000$ at $2\%$ discount with the help of B's acceptance and balance in cash. How much cash A will pay to B?

book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

  1. $4,300$

  2. $4,000$

  3. $4,100$

  4. $5,000$

Show answer
Correct Option: A

Is rent paid to a partner appropriation of profits ?

book keeping and accountancy dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities meaning of dissolution of partnership firm

  1. It is appropriation of profit

  2. It is not appropriation of profit

  3. If partner's contribution as capital is maximum

  4. If partner is working partner.

Show answer
Correct Option: B
Explanation:

Rent is paid for the use of asset of partner in business. Rent paid is an expense for business not as distribution of profit to partners. It is charged to profit and loss account not from profit and loss appropriation account. Rent paid to a partner is charged to profit not appropriation of profit. 

In which of the following case the need for the valuation of goodwill in a firm may arise?
(I) Admission of new partner
(II) While changing profit sharing ratio
(III) Retirement of partner
(IV) Death of partner
Select the correct answer from the options given below-

book keeping and accountancy dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities meaning of dissolution of partnership firm

  1. (I) & (III) only

  2. (I), (III) & (IV)

  3. (I), (II) & (III) only

  4. All (I) to (IV)

Show answer
Correct Option: D
Explanation:

In all these cases one partner sacrifice and the other partner gain. Gaining partner must compensate the sacrificing partner by paying the proportionate amount of goodwill. Gaining partner should pay the sacrificing partner that share of goodwill which is equal to the share gained by him. Valuation is done to calculate that share.