MGT101 Financial Accounting Exam Quiz!

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  • 1/41 Questions

     Particulars Rs. Opening stock of raw material 100,000 Closing stock of raw material 85,000 Purchases of raw material during the period 200, 000 Cost of Material Consumed ?

    • Rs. 205,000
    • Rs. 215,000
    • Rs. 220,000
    • Rs. 225,000
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About This Quiz

MGT101 Financial Accounting Exam Quiz tests knowledge on asset management, accounting equations, and bank reconciliation, essential for understanding corporate financial operations and compliance with accounting standards.

MGT101 Financial Accounting Exam Quiz! - Quiz

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  • 2. 

    Which of the following account will be credited, when the goods are purchased on cash?

    • Stock account

    • Cash account

    • Supplier account

    • Work in process account

    Correct Answer
    A. Cash account
    Explanation
    When goods are purchased on cash, the amount paid will be credited to the Cash account. This is because the Cash account represents the company's cash balance, and when cash is paid out, the balance in the Cash account decreases. Therefore, the Cash account will be credited to reflect the decrease in cash due to the purchase of goods.

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  • 3. 

    Double entry accounting system includes:

    • Accrual accounting only

    • Cash accounting only

    • Both cash and accrual accounting

    • None of the given options

    Correct Answer
    A. Both cash and accrual accounting
    Explanation
    The double entry accounting system includes both cash and accrual accounting. Cash accounting records transactions when cash is received or paid, while accrual accounting records transactions when they occur, regardless of cash flow. By using both methods, the double entry system provides a more comprehensive and accurate representation of a company's financial transactions and performance.

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  • 4. 

    Recording of all financial transactions undertaken by an individual or organization is known as:

    • Summarizing

    • Book-keeping

    • Classification

    • Interpreting

    Correct Answer
    A. Book-keeping
    Explanation
    Book-keeping is the correct answer because it refers to the process of recording all financial transactions undertaken by an individual or organization. It involves keeping track of income, expenses, assets, and liabilities, and is essential for maintaining accurate financial records. Book-keeping helps in monitoring financial health, preparing financial statements, and making informed decisions based on the recorded transactions. It is a crucial aspect of financial management and ensures transparency and accountability in financial matters.

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  • 5. 

     Particulars Rs. Opening written down value of machine 1,00,000 Cost of new machine purchased during the year 50,000 Depreciation during the year  21,000 Closing written down value (WDV) ?

    • Rs. 1, 29,000

    • Rs. 1, 50,000

    • Rs. 1, 21,000

    • Rs. 71,000

    Correct Answer
    A. Rs. 1, 29,000
    Explanation
    The closing written down value (WDV) can be calculated by subtracting the depreciation during the year from the opening written down value and adding the cost of the new machine. In this case, the opening WDV is Rs. 1,00,000, the cost of the new machine is Rs. 50,000, and the depreciation during the year is Rs. 21,000. Therefore, the closing WDV would be Rs. 1,00,000 + Rs. 50,000 - Rs. 21,000 = Rs. 1,29,000.

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  • 6. 

    The cost of sales is Rs. 60,000, sales are Rs. 95,000 and operating expenses are Rs.20,000 during the year. What would be the Net Profit?

    • Rs.15,000

    • Rs. 35,000

    • Rs. 55,000

    • Rs. 60,000

    Correct Answer
    A. Rs.15,000
    Explanation
    The net profit can be calculated by subtracting the cost of sales and operating expenses from the sales. In this case, the cost of sales is Rs. 60,000 and the operating expenses are Rs. 20,000. Therefore, the net profit would be Rs. 95,000 (sales) - Rs. 60,000 (cost of sales) - Rs. 20,000 (operating expenses) = Rs. 15,000.

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  • 7. 

    Which of the following is NOT an example of Current Asset?

    • Bank Overdraft

    • Accounts Receivable

    • Notes Receivable

    • Prepaid Expenses

    Correct Answer
    A. Bank Overdraft
    Explanation
    A bank overdraft is not an example of a current asset because it represents a liability rather than an asset. A bank overdraft occurs when a company withdraws more money from its bank account than it currently has available, resulting in a negative balance. This negative balance represents a debt owed by the company to the bank, making it a liability. In contrast, accounts receivable, notes receivable, and prepaid expenses are all examples of current assets that represent the company's right to receive cash or other assets within a year.

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  • 8. 

    Mr.” A” sold goods for Rs. 3, 00,000 to Mr. “B”,   Rs. 3, 00,000 will be treated as _____________ for business.

    • Revenue

    • Net profit

    • Gross profit

    • Operating profit

    Correct Answer
    A. Revenue
    Explanation
    The amount of Rs. 3,00,000 will be treated as revenue for the business because revenue refers to the total income generated from the sale of goods or services. In this case, Mr. A sold goods to Mr. B for Rs. 3,00,000, which constitutes the revenue earned by the business.

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  • 9. 

    Record maintained which is measurable in the form of money, this concept of accounting is known as:

    • Matching concept

    • Consistency concept

    • Money measurement concept

    • Materiality concept

    Correct Answer
    A. Money measurement concept
    Explanation
    The money measurement concept in accounting states that only transactions that can be expressed in monetary terms are recorded in the financial statements. This means that any event or item that cannot be measured in money, such as employee satisfaction or customer loyalty, will not be recorded. The concept ensures that financial information is objective and comparable, as it focuses on quantifiable data that can be easily understood and analyzed.

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  • 10. 

    Which one of the following is NOT prepared by Non profit organizations?

    • Profit & Loss account

    • Income & Expenditure account

    • Receipts & Payments account

    • Balance Sheet

    Correct Answer
    A. Profit & Loss account
    Explanation
    Nonprofit organizations, by definition, do not aim to generate profits. They focus on fulfilling a social or charitable mission rather than making money. Therefore, they do not prepare Profit & Loss accounts, which are used to measure the profitability of a business or organization. Instead, nonprofits typically prepare an Income & Expenditure account to track their revenue and expenses, a Receipts & Payments account to record their cash inflows and outflows, and a Balance Sheet to provide a snapshot of their financial position.

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  • 11. 

    Which of the following account will be credited, if business bought goods on credit from Mr. Ali?

    • Purchases account

    • Mr. Ali account

    • Cash account

    • Sales account

    Correct Answer
    A. Mr. Ali account
    Explanation
    When a business buys goods on credit from Mr. Ali, it means that the business owes money to Mr. Ali for the goods purchased. In accounting terms, this is recorded as a liability. The account that will be credited in this transaction is Mr. Ali account, as it represents the amount owed to him.

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  • 12. 

    What will be the effect on accounting equation, when payment is made to the creditor of the business?

    • Decrease in an asset, decrease in a liability

    • Increase in an asset, increase in a liability

    • Decrease in an asset, decrease in owner's equity

    • Increase in an asset, increase in owner's equity

    Correct Answer
    A. Decrease in an asset, decrease in a liability
    Explanation
    When a payment is made to the creditor of the business, it means that the business is using its assets (cash) to decrease its liabilities (creditor's payable). As a result, there is a decrease in an asset (cash) and a decrease in a liability (creditor's payable), which is reflected in the accounting equation (Assets = Liabilities + Owner's Equity).

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  • 13. 

    Commercial Accounting is based on:

    • Single entry book keeping

    • Double entry book keeping

    • Both single and double entry book keeping

    • Cash basis of book keeping

    Correct Answer
    A. Double entry book keeping
    Explanation
    Double entry bookkeeping is the correct answer because it is the foundation of commercial accounting. This method involves recording every financial transaction in at least two accounts, with one account debited and another credited. This ensures that the accounting equation (assets = liabilities + equity) remains in balance. Double entry bookkeeping provides a comprehensive and accurate record of a business's financial transactions, allowing for the preparation of financial statements and analysis of the company's performance. It is widely used in commercial accounting to maintain accurate and reliable financial records.

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  • 14. 

    Bank Reconciliation Statement is:

    • A memorandum statement

    • A ledger account

    • A part of cash book

    • A part of journal

    Correct Answer
    A. A memorandum statement
    Explanation
    A Bank Reconciliation Statement is a memorandum statement that helps in reconciling the difference between the bank balance as per the cash book and the bank balance as per the bank statement. It lists all the transactions that have not yet been recorded in the cash book, such as outstanding checks, deposits in transit, bank charges, and interest earned. By comparing the two balances and making necessary adjustments, the Bank Reconciliation Statement ensures that the cash book and bank statement are in agreement.

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  • 15. 

    Bank Reconciliation Statement is prepared by:

    • Bankers

    • Accountant of the business

    • Statutory auditor

    • Manger

    Correct Answer
    A. Accountant of the business
    Explanation
    The Bank Reconciliation Statement is prepared by the Accountant of the business. This statement is used to reconcile the bank balance as per the company's records with the bank statement. The accountant is responsible for comparing the transactions recorded in the company's books with the transactions reflected in the bank statement, identifying any discrepancies, and making necessary adjustments. This ensures that the bank balance is accurate and any differences are accounted for. Bankers, statutory auditors, and managers may have access to the statement, but it is the accountant's role to prepare and reconcile it.

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  • 16. 

    The amount of salary paid to Mr. Sohail should be debited to:

    • Mr. Sohail account

    • Salaries account

    • Cash account

    • Drawings account

    Correct Answer
    A. Salaries account
    Explanation
    The amount of salary paid to Mr. Sohail should be debited to the Salaries account. This is because the Salaries account is used to record all the salaries paid to employees. By debiting the Salaries account, it will accurately reflect the amount of money paid out for salaries in the financial records.

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  • 17. 

    An informal accounting statement that lists the ledger account balances at a point in time and compares the total of debit balances with the total of credit balances is known as:

    • Income Statement

    • Balance Sheet

    • Trial Balance

    • Cash Book

    Correct Answer
    A. Trial Balance
    Explanation
    A trial balance is an informal accounting statement that lists the ledger account balances at a specific point in time and compares the total of debit balances with the total of credit balances. It helps in identifying any errors or discrepancies in the recording of transactions. By comparing the total debits and credits, it ensures that the accounting equation (Assets = Liabilities + Equity) is in balance. Therefore, the correct answer is Trial Balance.

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  • 18. 

    When a Liability is reduced or decreased, it is recorded on the:

    • Right or debit side of the account

    • Left or debit side of the account

    • Left or credit side of the account

    • Right or credit side of the account

    Correct Answer
    A. Left or debit side of the account
    Explanation
    When a liability is reduced or decreased, it is recorded on the left or debit side of the account. This is because liabilities have a normal credit balance, meaning they increase on the credit side and decrease on the debit side. By recording the reduction on the debit side, it helps maintain the balance of the account and accurately reflects the decrease in the liability.

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  • 19. 

    The cost of sales is Rs. 60,000, sales are Rs. 95,000 and operating expenses are Rs. 20,000 during the year, what would be the value of Gross Profit?

    • Rs. 15,000

    • Rs. 35,000

    • Rs. 55,000

    • Rs. 60,000

    Correct Answer
    A. Rs. 35,000
    Explanation
    The value of Gross Profit can be calculated by subtracting the cost of sales from the sales. In this case, the cost of sales is Rs. 60,000 and the sales are Rs. 95,000. Therefore, the Gross Profit would be Rs. 35,000 (Rs. 95,000 - Rs. 60,000).

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  • 20. 

    Summarized record of transactions related to individuals or things is called a/an  ___________.

    • Account

    • Voucher

    • Journal

    • Trial balance

    Correct Answer
    A. Account
    Explanation
    A summarized record of transactions related to individuals or things is called an account. This record provides a detailed overview of all the financial activities and transactions associated with a specific entity or item. It includes information such as debits, credits, balances, and any relevant details pertaining to the transactions. Accounts are essential for tracking and managing financial information accurately and efficiently.

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  • 21. 

    The Policy for charging depreciation is selected by:

    • Manufacturer

    • Trader

    • Management

    • Accountant

    Correct Answer
    A. Management
    Explanation
    The policy for charging depreciation is selected by management. This is because management is responsible for making decisions regarding the overall financial strategy and operations of the company. They have the authority to determine the appropriate depreciation policy based on factors such as the company's financial goals, industry standards, and regulatory requirements. The management's decision on the depreciation policy will impact the financial statements and the calculation of the company's net income and asset values.

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  • 22. 

    Cost incurred for the maintenance of shop is considered as _________.

    • Deferred expense

    • Capital expense

    • Revenue expense

    • Preliminary expense

    Correct Answer
    A. Revenue expense
    Explanation
    The cost incurred for the maintenance of a shop is considered a revenue expense. Revenue expenses are the costs that a business incurs in its day-to-day operations to generate revenue. These expenses are deducted from the revenue earned in the same accounting period and are not expected to provide long-term benefits. Maintenance costs, such as repairs, cleaning, and regular upkeep of the shop, are necessary expenses to keep the business running smoothly and generate revenue in the short term. Therefore, they fall under the category of revenue expenses.

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  • 23. 

    The records that are kept for the individual asset, liability, equity, revenue, expense, and dividend components are known as:

    • Accounts

    • Vouchers

    • Journals

    • Statements

    Correct Answer
    A. Accounts
    Explanation
    The correct answer is "Accounts". Accounts refer to the records that are maintained for individual asset, liability, equity, revenue, expense, and dividend components. These records provide a detailed overview of the financial transactions and balances associated with each component. By keeping track of accounts, organizations can effectively manage their financial resources and make informed decisions.

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  • 24. 

     Cost of asset Rs. 1,00,000 Life of asset 5 years Depreciation for the each year Rs. 5,000 Sale price after 5 years Rs.15,000 Written Down Value of Asset on 5th year Rs. 75,000 Profit or loss on disposal of fixed asset ?

    • Rs. 60,000 loss

    • Rs. 75,000 profit

    • Rs. 25,000 loss

    • Rs. 1, 00,000 profit

    Correct Answer
    A. Rs. 60,000 loss
    Explanation
    The profit or loss on the disposal of the fixed asset can be calculated by subtracting the sale price from the written down value of the asset. In this case, the written down value of the asset after 5 years is Rs. 75,000 and the sale price is Rs. 15,000. Therefore, the loss on the disposal of the fixed asset is Rs. 60,000.

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  • 25. 

    Documentary evidence, in a specific format used to record the details of a transaction is known as:

    • Account

    • Voucher

    • Journal

    • Ledger

    Correct Answer
    A. Voucher
    Explanation
    A voucher is a documentary evidence used to record the details of a transaction. It is a specific format that provides information about the transaction such as the date, amount, description, and parties involved. Vouchers are important for maintaining accurate financial records and can be used as proof of the transaction. They serve as a supporting document for the entries made in the accounting system and help in ensuring transparency and accountability in financial transactions.

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  • 26. 

    The unfavorable balance of Profit and Loss account should be:

    • Added in liabilities

    • Subtracted from current assets

    • Subtracted from liabilities

    • Subtracted from capital

    Correct Answer
    A. Subtracted from capital
    Explanation
    The unfavorable balance of the Profit and Loss account represents a loss incurred by the business. Since losses reduce the capital of the business, the unfavorable balance should be subtracted from the capital. This adjustment reflects the decrease in the owner's equity due to the loss.

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  • 27. 

    The cost of goods and services used up in the process of obtaining revenue is known as:

    • Revenue

    • Expense

    • Liability

    • Expenditure

    Correct Answer
    A. Expense
    Explanation
    Expense refers to the cost of goods and services that are used up in the process of generating revenue. It represents the outflow of resources from a company to generate income. Expenses include various costs such as salaries, rent, utilities, and raw materials. By deducting expenses from revenue, a company can determine its net income or profit. Therefore, expense is the correct answer in this context as it accurately describes the cost of goods and services used up in obtaining revenue.

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  • 28. 

    Any cheque drawn to creditor but not paid by bank will effect as follows:

    • Cash book will show less balance & bank book will show more

    • Cash book will show more balance & bank book will show less

    • Cash book will show double balance

    • Bank book will show double balance

    Correct Answer
    A. Cash book will show less balance & bank book will show more
    Explanation
    When a cheque drawn to a creditor is not paid by the bank, it means that the payment is not deducted from the bank account. As a result, the cash book will show a higher balance because the payment is still recorded as an outgoing transaction. On the other hand, the bank book will show a lower balance because the payment was not processed by the bank. Therefore, the correct answer is that the cash book will show less balance and the bank book will show more.

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  • 29. 

    Revenue should be recognized or recorded when the goods are sold or services are rendered to the customer, this concept is known as:

    • Consistency concept

    • Realization Concept

    • Materiality concept

    • Matching concept

    Correct Answer
    A. Realization Concept
    Explanation
    The realization concept states that revenue should be recognized or recorded when the goods are sold or services are rendered to the customer. This means that revenue should be recognized when it is earned, regardless of when the payment is received. This concept ensures that revenue is accurately reported in the period in which it is earned, providing a more accurate representation of the company's financial performance.

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  • 30. 

    Which one of the following statement is wrong about Current liabilities?

    • These are due within one year

    • These are short-term loans

    • A vague term for loans to be repaid by an enterprise after twelve months

    • In working capital, these are deducted from assets

    Correct Answer
    A. A vague term for loans to be repaid by an enterprise after twelve months
    Explanation
    The statement "A vague term for loans to be repaid by an enterprise after twelve months" is incorrect because current liabilities are obligations that are due within one year, not after twelve months. Current liabilities include short-term loans and other obligations that need to be settled within a year. In working capital calculations, current liabilities are deducted from assets to determine the net working capital of a company.

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  • 31. 

    Expenditures incurred annually on renewal of patent are known as:

    • Revenue Expenditures

    • Capital Expenditures

    • Financial Expenditures

    • Operating Expenditures

    Correct Answer
    A. Revenue Expenditures
    Explanation
    Expenditures incurred annually on renewal of patent are known as revenue expenditures because they are recurring expenses that are necessary to maintain the patent rights and are deducted from the company's revenue in the same accounting period. These expenditures do not result in the acquisition of any new assets or increase the company's earning capacity, but rather help in maintaining the existing patents.

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  • 32. 

    Which of the following account balance will be shown on debit side of Trial Balance? (It is assumed that all account balances are shown on normal balance).

    • Capital account

    • Sundry creditors account

    • Accounts payable account

    • Cash account

    Correct Answer
    A. Cash account
    Explanation
    The cash account will be shown on the debit side of the trial balance because it represents an asset. In accounting, assets are typically recorded on the debit side, while liabilities and equity are recorded on the credit side. Therefore, the cash account, which represents an asset, will be shown on the debit side of the trial balance.

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  • 33. 

    The estimated value at which an asset is expected to be sold after the end of its useful life is called:

    • Residual value

    • Salvage Value

    • Scrap Value

    • All of the given options

    Correct Answer
    A. All of the given options
    Explanation
    The correct answer is "All of the given options." This is because all three terms - residual value, salvage value, and scrap value - refer to the estimated value at which an asset is expected to be sold after the end of its useful life. These terms are often used interchangeably in accounting and finance to represent the same concept.

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  • 34. 

    The company sold Rs. 400,000 of merchandise for cash and Rs.120,000 of merchandise to credit customers who will pay for the merchandise in a later time period. How much revenue should be reported on the income statement of the current time period under Cash Basis of Accounting?

    • Rs. 280,000

    • Rs. 520,000

    • Rs. 400,000

    • Rs. 120,000

    Correct Answer
    A. Rs. 400,000
    Explanation
    The revenue that should be reported on the income statement of the current time period under the Cash Basis of Accounting is Rs. 400,000. This is because the Cash Basis of Accounting recognizes revenue when cash is received, regardless of whether it is from cash sales or credit sales. In this case, the company sold Rs. 400,000 of merchandise for cash, so this amount should be reported as revenue on the income statement. The Rs. 120,000 of merchandise sold to credit customers will be recognized as revenue in the later time period when the customers actually pay for the merchandise.

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  • 35. 

    Which of the following is an accounting system in which events are recorded as and when they occur?

    • Cash Accounting

    • Accrual Accounting

    • Both Accrual Accounting and Cash Accounting

    • None of the above

    Correct Answer
    A. Accrual Accounting
    Explanation
    Accrual accounting is an accounting system in which events are recorded as and when they occur. This means that transactions are recorded when they are incurred, regardless of when the cash is received or paid. It provides a more accurate picture of a company's financial position and performance by recognizing revenues and expenses in the period they are earned or incurred, rather than when the cash is exchanged. This method is widely used by businesses to comply with generally accepted accounting principles (GAAP). Cash accounting, on the other hand, records transactions only when cash is received or paid, making it less accurate and less commonly used.

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  • 36. 

    The beginning balance of the Owner’s Equity was Rs.7,500. The dividends paid to stockholders were Rs.1,500. The ending balance of the Owner’s Equity is Rs.5,000. What was the Net Income or Net Loss for the accounting period?

    • Net Loss of Rs. 1,000

    • Net Income of Rs. 1,000

    • Net Loss of Rs. 3,000

    • Net Income of Rs. 3,000

    Correct Answer
    A. Net Income of Rs. 1,000
    Explanation
    The beginning balance of Owner's Equity was Rs.7,500. Dividends paid to stockholders were Rs.1,500. The ending balance of Owner's Equity is Rs.5,000. To find the Net Income or Net Loss, we need to calculate the change in Owner's Equity. The change in Owner's Equity can be calculated by subtracting the dividends paid from the beginning balance and adding the ending balance. Therefore, the change in Owner's Equity is (7500 - 1500) + 5000 = 11,000. Since the ending balance is lower than the beginning balance, there is a Net Loss. The Net Loss is the difference between the change in Owner's Equity and the dividends paid, which is 11,000 - 1,500 = Rs.1,000. Therefore, the correct answer is Net Income of Rs. 1,000.

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  • 37. 

    If no distribution is made between capital and revenue expenditure then:

    • The figure of debtors and creditors will be incorrect

    • Cash or bank figure will be incorrect

    • Net profit will be incorrect

    • Balance sheet will not balance

    Correct Answer
    A. Net profit will be incorrect
    Explanation
    If no distribution is made between capital and revenue expenditure, it means that expenses are not classified correctly. Net profit is calculated by deducting all expenses from the revenue. If the expenses are not properly classified, the net profit figure will be incorrect.

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  • 38. 

    Which of the following financial statement shows the financial health of an Organization at a stated period of time?

    • Balance sheet

    • Trading and Profit & Loss account

    • Cash Flow statement

    • Statement of retained earnings

    Correct Answer
    A. Trading and Profit & Loss account
    Explanation
    The Trading and Profit & Loss account shows the financial health of an organization at a stated period of time. This statement summarizes the revenues, expenses, and profits or losses of a company during a specific accounting period. It provides information on the company's ability to generate profits and manage expenses, giving insights into its financial performance and overall health. The balance sheet, cash flow statement, and statement of retained earnings provide different types of financial information but do not specifically show the financial health of the organization at a stated period of time.

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  • 39. 

    Find out the missing value of an Accounting Equation with the help of given data:   Owner’s equity Rs. 22,500 Total Liabilities Rs. 80, 385 Cash in hand Rs. 1,000 Cash at bank Rs. 2,000 Debtors Rs. 500

    • Rs. 1, 02,885 other assets

    • Rs. 1, 02,885 other liabilities

    • Rs. 99,885 current liabilities

    • Rs. 99,385 other assets

    Correct Answer
    A. Rs. 1, 02,885 other assets
    Explanation
    The missing value of the Accounting Equation can be calculated by subtracting the sum of Owner's equity, Total Liabilities, Cash in hand, Cash at bank, and Debtors from the given value of Rs. 1, 02,885 for other assets.

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  • 40. 

    Mr. “A” borrowed money from bank; this transaction involves which one of the following accounts:

    • Cash & Mr. A

    • Bank & Mr. A

    • Drawing & Mr. A

    • Cash & Bank

    Correct Answer
    A. Cash & Bank
    Explanation
    The correct answer is Cash & Bank. When Mr. A borrows money from the bank, it implies that cash is received by Mr. A and the bank's liability towards Mr. A increases. Therefore, the transaction involves both the Cash account (as it increases) and the Bank account (as it decreases).

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  • 41. 

    Calculate depreciation of the asset for five years by using written down value method. Also show accumulated depreciation.   Cost of the asset Rs. 1,20,000 Depreciation Rate 10% Expected Life 5 years

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  • Mar 22, 2023
    Quiz Edited by
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  • Dec 02, 2009
    Quiz Created by
    Yasirnadeem
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