Fundamental Of Accounting Quizlet - 1

1. Rs. 75,870 paid as rent for office premises is

Event

Transaction

Both

None

The given statement "Rs. 75,870 paid as rent for office premises" indicates a financial transaction where a payment of Rs. 75,870 has been made for renting office premises. This payment represents a specific event in which money is exchanged for a service, making it a transaction. Therefore, the correct answer is "Transaction".

Explanation

The given statement "Rs. 75,870 paid as rent for office premises" indicates a financial transaction where a payment of Rs. 75,870 has been made for renting office premises. This payment represents a specific event in which money is exchanged for a service, making it a transaction. Therefore, the correct answer is "Transaction".

2. Financial Statements do not consider

Assets expressed in monetary terms.

Liabilities expressed in monetary terms.

Only assets expressed in non-monetary terms.

Assets and liabilities expressed in non-monetary terms.

Financial statements do not consider assets and liabilities expressed in non-monetary terms. This means that assets and liabilities that cannot be easily measured or valued in terms of money, such as goodwill or brand reputation, are not included in financial statements. Financial statements focus on presenting information about the financial position and performance of a company, and therefore only include assets and liabilities that can be expressed in monetary terms.

Explanation

Financial statements do not consider assets and liabilities expressed in non-monetary terms. This means that assets and liabilities that cannot be easily measured or valued in terms of money, such as goodwill or brand reputation, are not included in financial statements. Financial statements focus on presenting information about the financial position and performance of a company, and therefore only include assets and liabilities that can be expressed in monetary terms.

3. On 31st of December, ABC Ltd. purchased a machine from XYZ Ltd. This is an

Transaction

Event

Both Transaction and Event

None of these

The given question asks whether the purchase of a machine by ABC Ltd. from XYZ Ltd. is a transaction, an event, both a transaction and an event, or none of these. The correct answer is "Transaction" because the purchase of a machine involves a transfer of ownership and a financial exchange, which are characteristics of a transaction. An event refers to a specific occurrence or incident, but the purchase of a machine is better classified as a transaction rather than an event.

Explanation

The given question asks whether the purchase of a machine by ABC Ltd. from XYZ Ltd. is a transaction, an event, both a transaction and an event, or none of these. The correct answer is "Transaction" because the purchase of a machine involves a transfer of ownership and a financial exchange, which are characteristics of a transaction. An event refers to a specific occurrence or incident, but the purchase of a machine is better classified as a transaction rather than an event.

4. The Fundamental Accounting Equation is

Assets - Liabilities = Equity

Equity - Liabilities = Assets

Assets + Capital = Liabilities

None

The correct answer is "Assets - Liabilities = Equity" because the fundamental accounting equation states that the total assets of a company are equal to the sum of its liabilities and equity. This equation represents the basic principle of double-entry bookkeeping, where every transaction affects both sides of the equation. Assets are the resources owned by the company, liabilities are the company's debts or obligations, and equity represents the owner's interest in the company. By subtracting liabilities from assets, we can determine the equity or net worth of the company.

Explanation

The correct answer is "Assets - Liabilities = Equity" because the fundamental accounting equation states that the total assets of a company are equal to the sum of its liabilities and equity. This equation represents the basic principle of double-entry bookkeeping, where every transaction affects both sides of the equation. Assets are the resources owned by the company, liabilities are the company's debts or obligations, and equity represents the owner's interest in the company. By subtracting liabilities from assets, we can determine the equity or net worth of the company.

5. On 31st of March, after the sale of goods worth Rs. 150,000, you are left with a closing stock of Rs. 8,000. Closing stock is an

Event

Transaction

Both Event and Transaction

Neither Event nor Transaction

The closing stock of Rs. 8,000 is considered an event because it represents the inventory remaining at the end of the accounting period. This event is significant as it affects the financial statements and is recorded in the books of accounts. However, it is not considered a transaction because it does not involve any exchange of goods or services with an external party. Transactions typically involve a transfer of ownership or an exchange of value, whereas the closing stock represents the value of goods held by the business at a specific point in time.

Explanation

The closing stock of Rs. 8,000 is considered an event because it represents the inventory remaining at the end of the accounting period. This event is significant as it affects the financial statements and is recorded in the books of accounts. However, it is not considered a transaction because it does not involve any exchange of goods or services with an external party. Transactions typically involve a transfer of ownership or an exchange of value, whereas the closing stock represents the value of goods held by the business at a specific point in time.