Tag: develop the skill of preparing trial balance by balance method

Questions Related to develop the skill of preparing trial balance by balance method

A lease which is generally not cancellable and covers full economic life of the asset is known as:

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Sale and Leaseback

  2. Operating Lease

  3. Finance Lease

  4. Economic Lease

Show answer
Correct Option: C
Explanation:

Capital lease is a lease agreement in which the lessor agrees to transfer the ownership rights to the lessee after the completion of the lease period. Capital or finance leases are long term and non cancellable in nature.

Lease which includes a third party (a lender) is known as:

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Sale and Leaseback

  2. Direct Lease

  3. Inverse Lease

  4. Leveraged Lease

Show answer
Correct Option: D
Explanation:

A leveraged lease is a lease agreement that is financed through the lessor with help from a third-party financial institution. In a leveraged lease, an asset is rented with borrowed funds.

Under the provisions of AS-19 'Leases', a leased asset is shown in the balance sheet of:

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Manufacturer

  2. Lessor

  3. Lessee

  4. Financing bank

Show answer
Correct Option: C
Explanation:

The liability component is reported in the liabilities section of the balance sheet as a "capital lease" line item. The amount is equal to the discounted present value of the lease payments over the lease term plus any interest accrued between the previous lease payment and the balance sheet date.

Most widely used method in preparation of trial balance is __________.

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Balances method

  2. Totals method

  3. Totals-cum-balances method

  4. All of the above

Show answer
Correct Option: A
Explanation:

Trial balance can be prepared in three ways:


1) Total cum balance method- In this method, total and balances both are captured in tabular form. 
2) Total Method- In this method, total of debit and credit are incorporated in the tabular form.
3) Balance method- In this method, only balances are taken in the trial balance.  This method is most widely used for preparation of trial balance.

Risk-Return trade off implies:

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Minimization of Risk

  2. Maximization of Risk

  3. Ignorance of Risk

  4. Optimization of Risk

Show answer
Correct Option: D
Explanation:

The risk-return tradeoff states that the potential return rises with an increase in risk. Using this principle, individuals associate low levels of uncertainty with low potential returns, and high levels of uncertainty or risk with high potential returns.

Name the methods in which trial balance can be prepared.

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Totals-cum-balances Method.

  2. Totals Method.

  3. Balances Method.

  4. All of the above.

Show answer
Correct Option: D
Explanation:

Trial balance can be prepared in three ways:


1) Total cum balance method- In this method, total and balances both are captured in tabular form. 
2) Total Method- In this method, total of debit and credit are incorporated in the tabular form.
3) Balance method- In this method, only balances are taken in the trial balance. 

Which of the following is not true for a Lease decision for the lessee?

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Helps in project selection

  2. Helps in project financing

  3. Helps in project location

  4. All of the above

Show answer
Correct Option: B

Totals method does not help in assuming _________of balances of various accounts.

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Total of each side in the ledger

  2. Application of double entry system

  3. Accuracy

  4. None of the above

Show answer
Correct Option: C
Explanation:

Totals method is not in use widely as it does not determines the accurate balances of the accounts and thus, also does not help in the preparation of the Financial statements or final accounts.

Basic objective of diversification is:

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Increasing Return

  2. Maximising Return

  3. Decreasing Risk

  4. Maximizing Risk

Show answer
Correct Option: C
Explanation:

Diversification aims to maximize returns by investing in different areas that would each react differently to the same event. Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk.

Goodwill account appears on _____________ side of Trial Balance.

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. debit

  2. credit

  3. both sides

  4. none of these

Show answer
Correct Option: A
Explanation:

Fixed assets are classified as tangible and intangible assets. All the assets will always show a debit balance.
Goodwill is a type of an intangible fixed asset which is shown in the balance sheet under the fixed assets. Such an item will always show a debit balance as it is an asset for the business entity.