Accounting Professional Test Quiz! Trivia
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A professional accountant is expected to set up books of accounts using transactions undertaken by the business daily. The accounts should reflect a true view of the financial position of the company. Do take up this quiz and see if you have a good understanding of the accounting processes and books of entry when it comes to different processes. All the best!
Questions and Answers
- 1.
The Income Statement Accounts are referred to as:
- A.
Real
- B.
Permanent
- C.
Temporary
- D.
None of the Above
Correct Answer
C. TemporaryExplanation
The Income Statement Accounts are referred to as temporary because they only reflect the financial performance of a company over a specific period of time, usually a fiscal year. These accounts are used to track revenues, expenses, gains, and losses, which are all related to the company's operations during that period. At the end of the fiscal year, the balances of these accounts are closed and transferred to the Retained Earnings account, while the Income Statement accounts are reset to zero for the next fiscal year. Therefore, they are considered temporary in nature and are not carried forward from one fiscal year to another.Rate this question:
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- 2.
Dividends paid to ordinary shareholders shall be presented:
- A.
In the statement of other comprehensive income as a decrease in equity.
- B.
In the statement of profit or loss as a financial expense.
- C.
In the statement of profit or loss as other operating expense.
- D.
In the statement of other comprehensive income as an increase in equity.
Correct Answer
A. In the statement of other comprehensive income as a decrease in equity.Explanation
Dividends paid to ordinary shareholders are considered as a distribution of profits and are therefore presented as a decrease in equity in the statement of other comprehensive income. This is because dividends reduce the retained earnings, which is a component of equity. By presenting dividends as a decrease in equity, it reflects the impact on the overall financial position of the company.Rate this question:
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- 3.
On 29 Aug, 20x2 ABC Company paid 10,000 USD as rent for the month of Sep, 20x2 thus, the adjustment entry will be
- A.
Dr. Prepaid rent Expense & Cr. Rent Expense
- B.
Dr. Rent Expense & Cr. Prepaid Rent
- C.
Dr. Prepaid rent Expense & Cr. Bank
- D.
Dr. Rent Expenses & Cr. Bank
Correct Answer
B. Dr. Rent Expense & Cr. Prepaid RentExplanation
The correct answer is Dr. Rent Expense & Cr. Prepaid Rent. This adjustment entry is made to record the payment of rent in advance for the month of September. Rent Expense is debited to increase the expense account, and Prepaid Rent is credited to decrease the asset account as the rent has now been paid in advance.Rate this question:
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- 4.
What is the basic principle for measuring inventories?
- A.
Inventories shall be measured at the lower of cost and net realizable value.
- B.
Inventories shall be measured at the lower of cost and value in use.
- C.
Inventories shall be measured at the lower of fair value and net realizable value.
- D.
Inventories shall be measured at the lower of fair value and value in use.
Correct Answer
A. Inventories shall be measured at the lower of cost and net realizable value.Explanation
The basic principle for measuring inventories is that they should be valued at the lower of cost and net realizable value. This means that inventories should be recorded at their cost or the amount they can be sold for, whichever is lower. This principle ensures that inventories are not overstated on the financial statements and reflects the conservative approach to valuing assets.Rate this question:
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- 5.
The increase in trade receivables during 20X1 represents USD 14,280. It includes the unrealized foreign exchange gain amounting to USD 1,460 as at 31 December 20X1. What amount shall be presented as an adjustment for a non-cash items in the operating part?
- A.
0
- B.
1460
- C.
12820
- D.
-1460
Correct Answer
D. -1460Explanation
The adjustment for a non-cash item in the operating part would be -1460. This is because the unrealized foreign exchange gain of USD 1,460 is a non-cash item, meaning it does not involve an actual cash inflow or outflow. Therefore, it needs to be adjusted in the operating part of the financial statement to accurately reflect the company's financial position.Rate this question:
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- 6.
Which of the following financial statements provides information about economic resources and claims on those resources?
- A.
Cash Flow
- B.
Income Statements
- C.
Balance Sheet
- D.
All of the Above
- E.
None of the Above
Correct Answer
C. Balance SheetExplanation
The balance sheet provides information about economic resources and claims on those resources. It presents a snapshot of a company's financial position at a specific point in time, showing its assets (economic resources) and liabilities (claims on those resources). The balance sheet helps stakeholders understand the company's financial health and its ability to meet its obligations. Cash Flow and Income Statements provide information about a company's cash inflows and outflows and its revenue and expenses, respectively, but they do not specifically focus on economic resources and claims.Rate this question:
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- 7.
ABC company hired CFO on 7 Feb, 2016 for 5,750 USD / month. Assume the Feb month has 29 days, the salary expense will be debited for 4,362.70
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The given statement is false. The salary expense for the month of February should be calculated based on the number of days the CFO worked in that month. Since the CFO was hired on 7th February, the salary expense for February should be calculated for 23 days (from 7th to 29th). Therefore, the correct salary expense for February would be (23/29) * 5,750 USD, which is equal to 4,570.69 USD.Rate this question:
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- 8.
All of the Financial statements preparing over accrual basis
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because not all financial statements are prepared over an accrual basis. While the income statement and balance sheet are typically prepared using accrual accounting, the cash flow statement can be prepared using either the accrual or cash basis. Additionally, some smaller businesses may choose to use the cash basis for all of their financial statements. Therefore, it is not accurate to say that all financial statements are prepared over an accrual basis.Rate this question:
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- 9.
A manufacturing company recognized a valuation provision for inventories due to their obsolescence. Can the manufacturing offset inventory valuation provision against inventory balance in the statement of financial position?
- A.
No, because the assets and liabilities shall not be offset.
- B.
No, because its not permit to offsetting of assets and liabilities unless is it allowed by another standard.
- C.
Yes, because in this case, offsetting leads to better understanding of the financial statements by their users.
- D.
Yes, because this situation is not offsetting.
Correct Answer
D. Yes, because this situation is not offsetting.Explanation
The correct answer is "Yes, because this situation is not offsetting." This means that the manufacturing company can offset the inventory valuation provision against the inventory balance in the statement of financial position. Offset is allowed in this case because it does not involve offsetting assets and liabilities, which is generally not permitted. This offsetting helps to provide a better understanding of the financial statements for users.Rate this question:
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- 10.
Dividends paid for the year would appear in which of the following sections of the cash flow statement?
- A.
Financing section.
- B.
Operating section.
- C.
Investing section.
- D.
It would not appear on the statement.
Correct Answer
A. Financing section.Explanation
Dividends paid for the year would appear in the financing section of the cash flow statement because dividends are considered cash outflows to the shareholders and are therefore classified as financing activities. This section reports the cash flows related to the company's financing activities, such as issuing or repurchasing shares, paying dividends, and obtaining or repaying loans. Dividends paid are not considered operating activities because they do not directly relate to the company's core operations, and they are not considered investing activities because they do not involve the acquisition or disposal of long-term assets.Rate this question:
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- 11.
ABC Company failed to record the purchase of inventory on account at the end of 2008. In which of the following ways is the Balance Sheet misstated?
- A.
Assets, liabilities, and shareholders' equity are all correctly stated.
- B.
Assets and liabilities are both understated.
- C.
Assets are understated and liabilities are overstated
- D.
Assets and shareholders' equity are both understated.
Correct Answer
B. Assets and liabilities are both understated.Explanation
The balance sheet is misstated because the purchase of inventory on account was not recorded. This means that the company's assets, specifically the inventory, are understated because the inventory value is not included. Additionally, the liabilities are also understated because the company has an outstanding balance on the account payable for the inventory purchase that is not reflected. Therefore, the correct answer is that both assets and liabilities are understated.Rate this question:
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- 12.
The primary financial statements that are forecast:
- A.
Balance sheet and trial balance.
- B.
Retained earnings and cash flow.
- C.
Income statement, balance sheet, and cash flow.
- D.
Income statement only.
Correct Answer
C. Income statement, balance sheet, and cash flow.Explanation
The primary financial statements that are forecasted include the income statement, balance sheet, and cash flow. These statements provide a comprehensive overview of a company's financial performance and position. The income statement shows the company's revenues, expenses, and net income over a specific period. The balance sheet presents the company's assets, liabilities, and shareholders' equity at a specific point in time. The cash flow statement highlights the company's cash inflows and outflows from operating, investing, and financing activities. Forecasting these statements helps in evaluating the financial health of the company and making informed business decisions.Rate this question:
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- 13.
Why does a Balance Sheet balance (assets = liabilities + equity)?
- A.
It is required by law.
- B.
Accounting is a double-entry system of equal debits and credits.
- C.
Auditors make adjustments to make it balance.
- D.
Companies force it to balance.
Correct Answer
B. Accounting is a double-entry system of equal debits and credits.Explanation
The balance sheet balances because accounting follows a double-entry system where every transaction has an equal debit and credit entry. This ensures that for every asset recorded, there is a corresponding liability or equity entry. This system helps maintain the fundamental accounting equation that assets must always equal liabilities plus equity. Auditors may make adjustments to ensure accuracy, but the balance sheet's balance is primarily achieved through the application of the double-entry system.Rate this question:
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- 14.
Which of the following is NOT an example of a period expense?
- A.
Selling Costs.
- B.
Administrative costs.
- C.
Accounting Costs.
- D.
Inventory Costs.
Correct Answer
D. Inventory Costs.Explanation
Inventory costs are not an example of a period expense because they are considered as a part of the cost of goods sold (COGS) and are matched with revenues when the inventory is sold. Period expenses, on the other hand, are expenses that are incurred during a specific accounting period and are not directly related to the production or sale of goods or services. Selling costs, administrative costs, and accounting costs are all examples of period expenses as they are incurred to support the overall operations of a business during a specific period.Rate this question:
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- 15.
Which intangible asset can be recognized in the financial statements?
- A.
Internally generated publishing title.
- B.
Internally generated software.
- C.
Research cost and feasibility study.
- D.
Internally generated goodwill.
Correct Answer
B. Internally generated software.Explanation
Internally generated software can be recognized as an intangible asset in the financial statements. This is because software is a valuable asset that is developed internally by a company and has the potential to generate future economic benefits. It meets the criteria of being identifiable, controlled by the entity, and is expected to provide economic benefits. Therefore, it can be recognized and reported in the financial statements as an intangible asset.Rate this question:
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- 16.
Which of the following can be considered as a nominal account?
- A.
Prepaid expenses, Retained earning & Leave provision.
- B.
Taxes, Audit fees & Accrued Revenue.
- C.
Establishment fees, Revenue & COGS.
- D.
Differed expenses, Administration expenses & Sales penalties
Correct Answer
C. Establishment fees, Revenue & COGS.Explanation
Establishment fees, Revenue, and COGS can be considered as nominal accounts. Nominal accounts are accounts that are used to record revenues, expenses, gains, and losses. Establishment fees, Revenue, and COGS all fall under these categories. Prepaid expenses, Retained earning, Leave provision, Taxes, Audit fees, Accrued Revenue, Differed expenses, Administration expenses, and Sales penalties are not considered nominal accounts as they do not directly relate to revenues, expenses, gains, or losses.Rate this question:
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- 17.
Which of the following assets is a monetary asset?
- A.
Land.
- B.
Inventory.
- C.
Account Receivable.
- D.
Patent.
Correct Answer
C. Account Receivable.Explanation
Account Receivable is considered a monetary asset because it represents the amount of money owed to a company by its customers for goods or services already provided. Unlike Land, Inventory, and Patent, which are non-monetary assets, Account Receivable can be easily converted into cash in the short term, making it a monetary asset.Rate this question:
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- 18.
A company sold machines for USD 4,000. The machine's carrying amount was USD 1,500 and before the sale, the company incurred a cost of USD 200 to clean the machine. How will this transaction be recognized in the company's financial statements?
- A.
Operating revenue of USD 4,000 and other operating expenses of USD 200. Machine’s carrying amount is included in the annual depreciation charge.
- B.
Gain on machine’s disposal of USD 2,300.
- C.
Net operating revenue of USD 3,800. Machine’s carrying amount is included in the annual depreciation charge.
- D.
Gain on machine’s disposal of 2,500 and other operating expenses of USD 200.
Correct Answer
B. Gain on machine’s disposal of USD 2,300.Explanation
The correct answer is "Gain on machine’s disposal of USD 2,300." This is because the company sold the machine for USD 4,000, which is higher than its carrying amount of USD 1,500. The gain on disposal is calculated by subtracting the carrying amount from the selling price, resulting in a gain of USD 2,500. Additionally, the cost of cleaning the machine is considered an operating expense of USD 200.Rate this question:
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- 19.
The Income statement will be considered as a Period of Time.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The income statement is indeed considered as a period of time. It is a financial statement that summarizes a company's revenues, expenses, and net income over a specific period, usually a quarter or a year. It provides a snapshot of a company's financial performance during that period and helps stakeholders evaluate its profitability and operating efficiency. By analyzing the income statement, investors, creditors, and management can make informed decisions about the company's financial health and future prospects.Rate this question:
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- 20.
Which financial statement will be prepared first?
- A.
Cash Flow
- B.
Income Statement
- C.
Change on owner equity
- D.
Balance Sheet
Correct Answer
B. Income StatementExplanation
The income statement is typically prepared first because it shows the company's revenues, expenses, and net income or loss for a specific period of time. This statement provides a summary of the company's financial performance and helps in assessing its profitability. It is an important tool for management, investors, and creditors to evaluate the company's financial health. The cash flow statement, change in owner's equity statement, and balance sheet are prepared after the income statement to provide additional information about the company's cash flows, changes in equity, and financial position respectively.Rate this question:
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- 21.
The Balance Sheets accounts are referred to as:
- A.
Permanent
- B.
Temporary
- C.
Real
- D.
Non of the above
Correct Answer
A. PermanentExplanation
The Balance Sheets accounts are referred to as permanent because they represent long-term assets, liabilities, and equity. These accounts are not closed at the end of each accounting period and their balances are carried forward to the next period. They include assets such as property, plant, and equipment, as well as long-term liabilities like bonds payable. These accounts provide a snapshot of a company's financial position and are crucial for assessing its long-term stability and solvency. Temporary accounts, on the other hand, are used to record revenues, expenses, and dividends, and are closed at the end of each period.Rate this question:
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- 22.
Which one of the following is not an assets account?
- A.
GoodWill
- B.
Prepaid Expenses
- C.
Unearned Revenue
- D.
Cash
Correct Answer
C. Unearned RevenueExplanation
Unearned Revenue is not an assets account because it represents money received in advance for goods or services that have not yet been provided. It is considered a liability because the company has an obligation to deliver the goods or services in the future. Assets accounts, on the other hand, represent resources owned by the company that have future economic value. Goodwill, Prepaid Expenses, and Cash are all examples of assets accounts.Rate this question:
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- 23.
Normally the Accrued Revenue is coming as Debit:
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Accrued revenue refers to the revenue that has been earned but not yet received. In accounting, it is recorded as a debit entry because it increases the company's assets. When revenue is recognized, it is important to record it even if the payment has not been received yet. This allows for accurate financial reporting and ensures that the revenue is properly accounted for. Therefore, the statement that accrued revenue is normally recorded as a debit is true.Rate this question:
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- 24.
How shall an impairment loss be recognized in the financial statements?
- A.
In profit or loss on the straight-line basis over the asset’s remaining useful life.
- B.
Immediately in profit or loss.
- C.
Immediately in other comprehensive income.
- D.
Immediately in profit or loss unless the asset is carried at revalued amount.
Correct Answer
D. Immediately in profit or loss unless the asset is carried at revalued amount.Explanation
An impairment loss is recognized immediately in profit or loss unless the asset is carried at a revalued amount. This means that if the asset has been revalued, any impairment loss will be recognized in other comprehensive income instead of profit or loss. However, if the asset is not carried at a revalued amount, the impairment loss will be recognized immediately in profit or loss.Rate this question:
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- 25.
The software will classified as:
- A.
Fixed Assets
- B.
Intangible Assets
- C.
Current Assets
- D.
Direct Expense
Correct Answer
B. Intangible AssetsExplanation
The software will be classified as intangible assets because it is a non-physical asset that has no physical substance but holds value for the company. Intangible assets are long-term assets that are not easily converted into cash and include items such as patents, copyrights, trademarks, and software. Since software is a non-physical product that provides value to the company, it falls under the category of intangible assets.Rate this question:
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- 26.
We can consider the Retained Earning as a finance resource for the company.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Retained earnings refer to the portion of a company's net income that is reinvested back into the business rather than distributed to shareholders as dividends. These earnings are accumulated over time and can be used for various purposes such as funding expansion projects, paying off debt, or investing in research and development. Therefore, it is accurate to consider retained earnings as a finance resource for the company.Rate this question:
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- 27.
Losses from inventory due to theft, evaporation, and waste are called:
- A.
Average cost.
- B.
Shrinkage
- C.
Costing.
- D.
Realization.
Correct Answer
A. Average cost.Explanation
Losses from inventory due to theft, evaporation, and waste are commonly referred to as shrinkage. Shrinkage represents the reduction in inventory quantity and value due to various factors such as theft, spoilage, damage, or other forms of loss. Average cost, on the other hand, is a method used to calculate the cost of inventory by averaging the cost of all units in stock. While average cost may be affected by shrinkage, it is not directly related to the concept of losses from theft, evaporation, and waste. Therefore, the correct answer for this question is shrinkage.Rate this question:
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- 28.
The balance sheet heading will specify a
- A.
Period of Time
- B.
Point In Time
Correct Answer
B. Point In TimeExplanation
The balance sheet heading specifies a "Point In Time" because it represents the financial position of a company at a specific moment, usually the end of a reporting period. It provides a snapshot of the company's assets, liabilities, and equity at that particular point in time. Unlike an income statement or cash flow statement, which cover a period of time, the balance sheet focuses on a specific date, allowing stakeholders to evaluate the company's financial health and make informed decisions.Rate this question:
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- 29.
The precise definition of bank reconciliation is to find the discrepancies between the bank's balance and Company's balance due to timing.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Bank reconciliation is the process of comparing and matching the bank's balance with the company's balance to identify any discrepancies. It involves checking for timing differences, as well as other factors such as outstanding checks, deposits in transit, and bank fees. Therefore, the given statement is incorrect as it inaccurately defines bank reconciliation as solely related to timing discrepancies.Rate this question:
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- 30.
Which of the following assets cannot be qualifying assets?
- A.
Major research and feasibility study performed in order to assess planned development of intangible asset – software.
- B.
Self-constructed building.
- C.
Inventories that necessarily take a substantial period of time to get ready for its intended use or sale, for example, whiskey.
- D.
Development of software intended for future resale.
Correct Answer
A. Major research and feasibility study performed in order to assess planned development of intangible asset – software.Explanation
The major research and feasibility study performed in order to assess planned development of an intangible asset (software) cannot be considered a qualifying asset because it is not a tangible asset. Qualifying assets are assets that are eligible for capitalization and include tangible assets like self-constructed buildings and inventories, as well as intangible assets like software intended for future resale. However, the research and feasibility study itself is not an asset but rather a process or activity conducted to assess the development of an intangible asset. Therefore, it cannot be considered a qualifying asset.Rate this question:
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- 31.
Accumulated Depreciation will be listed on:
- A.
Balance Sheet
- B.
Income Statement
- C.
None of the above
- D.
Balance Sheet + Income Statement
Correct Answer
A. Balance SheetExplanation
Accumulated Depreciation is the total amount of depreciation expense that has been recorded over the years for a company's fixed assets. It represents the decrease in value of these assets over time. Since the Balance Sheet provides a snapshot of a company's financial position at a specific point in time, it includes the accumulated depreciation as a contra-asset account under the fixed assets section. This allows investors and stakeholders to see the total depreciation expense incurred by the company and the net value of its fixed assets. Therefore, the correct answer is Balance Sheet.Rate this question:
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- 32.
If the Co. received a check from a customer for USD 1,000 on 31 Dec, 20x1 but not deposited until the next day, the amount will be considered on 31 Dec, 20x1 as an account receivable.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because if the check is received on 31 Dec, 20x1 but not deposited until the next day, it will not be considered as an account receivable on 31 Dec, 20x1. Instead, it will be considered as cash on hand until it is deposited. Account receivable is a term used to describe money owed to a company by its customers for goods or services provided on credit. Since the check has not been deposited yet, it does not fall under the category of accounts receivable.Rate this question:
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- 33.
Debt securities that a company intends to hold to maturity should be reported on the Balance Sheet
- A.
At amortized acquisition cost.
- B.
At market value.
- C.
At acquisition cost.
- D.
None of the above
Correct Answer
C. At acquisition cost.Explanation
Debt securities that a company intends to hold to maturity should be reported on the Balance Sheet at acquisition cost. This means that the securities are initially recorded at the cost at which they were acquired. The market value of the securities may fluctuate over time, but for reporting purposes, they are not adjusted to reflect these changes. Instead, they are carried at their original acquisition cost until they mature or are sold. This method of reporting allows for consistency and avoids the need for frequent revaluation of the securities.Rate this question:
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- 34.
Which of the following items would you classify as cash or cash equivalents?
- A.
Petty cash, bank account balance, term deposit, debentures convertible within 6 months.
- B.
Petty cash, bank account balance, short-term investments readily convertible to cash which are subject to insignificant risk of changes in value.
- C.
Petty cash, bank account balance, term deposit due in 5 months.
- D.
Petty cash, bank account balance, term deposit due in 5 months, short-term investments readily convertible to cash which are subject to insignificant risk of changes in value.
Correct Answer
B. Petty cash, bank account balance, short-term investments readily convertible to cash which are subject to insignificant risk of changes in value.Explanation
The correct answer includes items that can be classified as cash or cash equivalents. Petty cash and bank account balance are considered cash because they are readily available for use in transactions. Short-term investments that can be easily converted to cash with minimal risk of value changes are also considered cash equivalents. This means that they can be quickly converted into cash if needed, making them similar to cash in terms of liquidity and low risk.Rate this question:
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- 35.
A company acquired a vehicle for a total cost of USD 20,000 and plans to depreciate it over 4 years. The company assumes that after 4 years, the vehicle will be sold for USD 1,000. Calculate the depreciation expense for the third year on a sum of years digit (SYD) basis.
- A.
2375
- B.
3800
- C.
5700
- D.
6000
Correct Answer
B. 3800Explanation
The depreciation expense for the third year on a sum of years digit (SYD) basis can be calculated by first finding the total depreciation over the 4-year period. The formula for SYD depreciation is (n - x + 1) / (n * (n + 1) / 2) * (cost - salvage value), where n is the number of years and x is the current year. In this case, n = 4 and x = 3. Plugging these values into the formula gives (4 - 3 + 1) / (4 * (4 + 1) / 2) * (20,000 - 1,000) = 1 / 10 * 19,000 = 1,900. Therefore, the depreciation expense for the third year is $1,900.Rate this question:
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- 36.
A company sold machinery for a total amount of USD 1,000,000 with the following payment terms: USD 500,000 will be paid at the contract date, and the remaining USD 500,000 will be paid after 1 year. What revenue should this company recognize in its financial statements at the date of entering into the contract? Assume a discount rate of 10% (discount factor at 10% for 1 year is 0.909)
- A.
909,000 USD.
- B.
500,000 USD.
- C.
1,000,000 USD.
- D.
954,500 USD.
Correct Answer
D. 954,500 USD.Explanation
The revenue that the company should recognize in its financial statements at the date of entering into the contract is 954,500 USD. This is because the company should recognize the present value of the future cash flow, which is the remaining 500,000 USD discounted at a rate of 10% for 1 year. The discount factor of 0.909 is multiplied by the remaining cash flow to calculate the present value, resulting in 454,500 USD. Adding this to the initial payment of 500,000 USD gives a total revenue of 954,500 USD.Rate this question:
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- 37.
Pre-paying a one-year insurance policy will cause cash to:
- A.
Increase.
- B.
Show no change.
- C.
The effect on cash cannot be determined based on given information.
- D.
Decrease.
Correct Answer
D. Decrease.Explanation
Pre-paying a one-year insurance policy will cause cash to decrease because the payment for the insurance policy is made upfront, resulting in a decrease in the amount of cash available.Rate this question:
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- 38.
The journal entry for selling items on account will be:
- A.
Dr. Bank & Cr. Revenue
- B.
Dr. Bank & Cr. Account Receivable
- C.
Dr. Cash & Cr. Sales
- D.
Dr. Account Receivable & Cr. Revenue
Correct Answer
D. Dr. Account Receivable & Cr. RevenueExplanation
The journal entry for selling items on account is Dr. Account Receivable & Cr. Revenue. This entry reflects the increase in the accounts receivable (an asset account) as a result of the sale, and the increase in revenue (an income account) from the sale. This entry does not involve the bank or cash accounts, as the transaction does not involve immediate payment.Rate this question:
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- 39.
When a Company pays a bill by writing a cheque, the cash account will be
- A.
Debited
- B.
It Depends for which purpose.
- C.
Credited
Correct Answer
C. CreditedExplanation
When a company pays a bill by writing a cheque, the cash account will be credited. This is because the act of writing a cheque signifies a decrease in the company's cash balance. By crediting the cash account, it reflects that the company's cash has been reduced.Rate this question:
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- 40.
Which of the following statements is true?
- A.
When certain accounting policy is applied retrospectively, an entity shall present 2 statements of the financial position: as at the end of the current reporting period and as at the end of the previous reporting period.
- B.
Assets and liabilities shall never be offset and presented on the net basis.Financial statements shall be prepared on an accrual basis except for the statement of cash flows.
- C.
Comparative information for the previous period needs to be presented unless the cost of obtaining such information is unjustifiable.
- D.
All Above
Correct Answer
B. Assets and liabilities shall never be offset and presented on the net basis.Financial statements shall be prepared on an accrual basis except for the statement of cash flows.Explanation
When certain accounting policy is applied retrospectively, an entity shall present 2 statements of the financial position: as at the end of the current reporting period and as at the end of the previous reporting period. Comparative information for the previous period needs to be presented unless the cost of obtaining such information is unjustifiable. Therefore, the statement "Assets and liabilities shall never be offset and presented on the net basis" is false, as offsetting of assets and liabilities can be allowed under certain circumstances. Additionally, the statement "Financial statements shall be prepared on an accrual basis except for the statement of cash flows" is true, as the statement of cash flows is prepared on a cash basis.Rate this question:
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- 41.
A manufacturing car giving a warranty for its spare parts for 11 months once any customer buys a new car, the manufacturing should book a provision for this action.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement is true because when a manufacturing company gives a warranty for its spare parts for 11 months, it is essentially making a commitment to provide free replacement or repair of any faulty parts within that time period. This commitment represents a future obligation for the company, and according to accounting principles, it should be recorded as a provision in the company's financial statements. By booking a provision, the company acknowledges the potential cost associated with honoring the warranty and ensures that it is accounted for properly in its financial records.Rate this question:
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- 42.
In Cash Flow statement we add back the depreciation because of:
- A.
Its an expense
- B.
It reduced the profit
- C.
Non of the above
- D.
Its non cash item
Correct Answer
B. It reduced the profitExplanation
The correct answer is "It reduced the profit". In the cash flow statement, depreciation is added back because it is a non-cash expense that reduces the reported profit on the income statement. By adding it back, the cash flow statement adjusts for this non-cash item and provides a more accurate representation of the actual cash flows of the business.Rate this question:
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- 43.
The unusual revenue is the revenue that has been generated from activity not related to the natural activity of the company like selling assets.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The explanation for the given answer, False, is that the statement is incorrect. Unusual revenue refers to the revenue generated from activities that are not part of the company's regular operations. This could include one-time events, such as the sale of assets, or non-recurring sources of income. Therefore, the correct answer would be True, as the statement accurately describes what unusual revenue means.Rate this question:
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- 44.
The Revenue will be considered a Temporary Account.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Revenue is considered a temporary account because it represents income earned by a company during a specific period, such as sales revenue or service fees. Temporary accounts are used to track income and expenses for a particular accounting period and are closed at the end of that period. Revenue is closed by transferring the balance to the retained earnings or owner's equity account. This ensures that the revenue is properly recorded and accounted for in the financial statements.Rate this question:
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Management Financial And Cost Accounting MCQs With Answers
Management Financial And Cost Accounting MCQs With Answers
SAP S/4HANA for Financial Accounting Associates - Mini
SAP S/4HANA for Financial Accounting Associates - Mini
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