Tag: cash and mercantile system

Questions Related to cash and mercantile system

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

Show answer
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. 

The double entry system is based on "dual aspect"  concept. 

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

  1. True

  2. False

Show answer
Correct Option: A
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.

A cash receipt may cause ___________.

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

  1. Increase in liability

  2. Decrease in other asset

  3. Reduction in one asset and increase in other asset

  4. All of the above

Show answer
Correct Option: D
Explanation:

An amount of money received by a company for goods or services, is called as cash receipts. 

Following are the results of cash receipts:-
Increase in liability, reduction in one asset and increase in other asset, decrease in other asset etc.

Purposes of an accounting system are________________________.

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

  1. Intrepret

  2. Classify the effects of transaction to facilitate the preparation of reports

  3. Summarize and communicate information to decision makers

  4. All of the above

Show answer
Correct Option: D
Explanation:

The purpose of an accounting system are interpret, classify the effects of transaction to facilitate the preparation of reports and to summarize and communicate information to decision makers.

No accounting is made for Abnormal Loss in Joint Venture Account.

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

  1. True

  2. False

Show answer
Correct Option: A

Cash basis considers the revenue as realised when ____________.

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

  1. Sale is completed

  2. Amount is ultimately collected from sales

  3. Order is received

  4. All of these

Show answer
Correct Option: B

The basis of revenue recognition often used in accounting for hire-purchase transaction is _______________.

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

  1. Cash basis

  2. Sales basis

  3. Production basis

  4. None of these

Show answer
Correct Option: A