MGT101 : Test Your Financial Accounting Knowledge! Trivia Questions Quiz

A manufacturing concern is an organization that converts raw materials into finished goods. This involves various processes such as sourcing raw materials, transforming them through production processes, and adding value to create the final product. Unlike trading concerns, which primarily involve buying and selling goods without any transformation, manufacturing concerns are involved in the production and creation of tangible goods. Merchandising concerns focus on buying and selling finished goods, while service concerns offer intangible services rather than physical products.

If the assets are $10,000 and the equity is also $10,000, it means that all the assets are financed by the owner's equity and there are no liabilities. This is because the accounting equation states that assets are equal to liabilities plus equity. Since there are no liabilities, the answer is 0.

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A budget is a plan that outlines the expected income, expenses, and other financial operations for a future period. It helps individuals or organizations to manage their finances effectively by setting limits and priorities for spending. A budget allows for better control over expenses, helps in identifying areas where savings can be made, and enables individuals or organizations to achieve their financial goals.

The correct answer is "Assets - liability = equity." This equation represents the fundamental accounting principle known as the accounting equation, which states that a company's assets are equal to its liabilities plus equity. By subtracting the liabilities from the assets, we are left with the equity, which represents the owner's claim on the company's assets. This equation is used to ensure that the company's financial statements are balanced and that all transactions are properly recorded.

The correct answer is double entry system. Double entry system is a method of bookkeeping where every transaction is recorded in at least two accounts - a debit and a credit. This system ensures that the accounting equation (assets = liabilities + owner's equity) is always in balance. It provides a more accurate and complete picture of a company's financial transactions and helps in detecting errors or fraud. This system is widely used in commercial accounting as it provides a systematic and reliable way to track and analyze financial information.

Finished goods refer to products that have completed the manufacturing process and are ready to be sold to customers. These goods have undergone all the necessary production stages and are in their final form, meeting the quality standards and specifications set by the company. Finished goods are typically stored in inventory until they are purchased by customers.

When a business pays rent in advance for 12 months, it is considered a prepaid expense. This means that the business has made the payment in advance but has not yet received the benefit of the expense. Prepaid expenses are recorded as assets on the balance sheet and are gradually expensed over the period in which the benefit is received. Therefore, the correct answer is "Prepaid expenses of business."

Cost identifies an expenditure. Cost refers to the amount of money or resources that are required to produce or acquire a product or service. It represents the expenses incurred in the production or acquisition process. Therefore, cost and expenditure are closely related as they both involve the outflow of funds or resources.

Barter is the correct answer because it refers to a system of exchange where participants directly trade goods or services without involving money. In a barter system, individuals exchange items they possess for items they need, without the need for a medium of exchange like currency. This form of trade was prevalent in early human societies before the invention of money and continues to be practiced in certain communities or situations today.

A piece of wood for the production of a chair is an example of direct materials cost because it is a tangible item that is directly used in the production process. Direct materials costs are expenses that can be easily traced back to a specific product or service. In this case, the wood is an essential component of the chair and is directly used in its manufacturing.

An increase in expense is recorded as a debit because expenses are considered to have a normal debit balance. Debit entries increase the balance of expense accounts, reflecting an increase in the amount of money spent or resources used. The use of the term "debit" in the answer suggests that an increase in expense is recorded on the debit side of the accounting equation.

In this context, a cash transaction refers to a situation where cash is exchanged directly for the purchase of an item. This means that the buyer pays for the item with physical currency, such as coins or banknotes, at the time of the transaction. It does not involve any form of credit or debit, where payment is delayed or made electronically. Therefore, the correct answer is "Cash."

If the debit side of the balance increases rather than the credit side, it indicates that more expenses, assets, or losses have been recorded compared to revenues, liabilities, or gains. This results in a debit balance, which means that the total debits exceed the total credits in the account. A debit balance is typically found in asset accounts and expense accounts.

The next step of journalizing is posting. Once the transactions are recorded in the journal, they need to be transferred or posted to the respective ledger accounts. This involves taking the information from the journal entries and entering it into the appropriate accounts in the general ledger. Posting ensures that the transactions are properly classified and organized, making it easier to analyze and prepare financial statements.

The correct answer is a list of three numbers: 1271000, 520000, and 652500.

The normal balance of Account Receivable is an asset. This is because Account Receivable represents the amount of money that a company is owed by its customers for goods or services that have been delivered but not yet paid for. As an asset, Account Receivable is recorded on the balance sheet and represents a future economic benefit to the company. It is an amount that the company expects to receive in the future, and hence, it is classified as an asset.

The correct answer is income because income refers to the total amount of money received from sales or other sources of revenue. It represents the total revenue generated by a company before deducting any expenses or costs. Gross profit, net income, and operating profit are all related to income but represent different calculations or deductions made from the total revenue.

The journal is the original book of entry where all financial transactions are recorded in chronological order. It serves as a primary record of business transactions before they are posted to the ledger. The journal provides a detailed account of each transaction, including the date, description, and amounts involved. This information is later used to prepare the ledger, trial balance, and ultimately the balance sheet.

A transaction refers to any instance where someone gives something in order to receive something in return. It can involve the exchange of goods, services, or money. This term is commonly used in business and finance to describe any commercial activity that involves the transfer of assets or obligations between parties.

The equation Net Profit + Expenses = Income is a basic accounting equation that represents the calculation of income. Net profit is the amount left after deducting expenses from the total revenue generated. Therefore, adding the expenses to the net profit will give us the total income earned.

Bookkeeping is the process of recording financial transactions in a systematic and organized manner. It involves maintaining accurate and up-to-date records of all financial activities such as sales, purchases, expenses, and payments. These records are essential for tracking the financial health of a business, preparing financial statements, and making informed business decisions. Bookkeeping ensures that transactions are properly recorded in the books of accounts, providing a clear and transparent picture of the company's financial position.

The cash book is a part of the ledger. The ledger is a book or a computerized record that contains all the accounts and their respective transactions. It is used to maintain a systematic record of financial transactions and helps in preparing financial statements. The cash book specifically records all cash and bank transactions, including receipts and payments. Therefore, the cash book is a component of the ledger, which is a comprehensive record of all accounts and transactions in a business.

When machinery is purchased on credit, it means that the company has acquired machinery without making an immediate payment. As a result, the Machinery Account will be debited to record the increase in machinery assets, and the Account Payable will be credited to indicate the liability owed to the supplier. This transaction does not involve the Sale account or Cash account, as no sale or cash payment has occurred.

A bank book is a record of all the transactions related to a bank account. It includes details of deposits, withdrawals, and other banking activities. A ledger, on the other hand, is a book or a computerized record that contains all the accounts of a business. It is used to record and summarize financial transactions. Since a bank book is a record of a specific account, it can be considered as a part of the larger ledger, which includes all the accounts of a business.

When a business sells goods on credit, it means that the customer will pay for the goods at a later date. In this scenario, the account that will be credited is the Sales account. This is because the business has made a sale and generated revenue by selling goods. The Sales account tracks the income earned from the sale of goods or services. The Cash account would only be credited if the business received immediate payment in cash. The Revenue account is a general term that encompasses all types of income generated by the business. The Capital account represents the owner's investment in the business and is not directly related to the sale of goods.

Accrued expenses are expenses that have been incurred but not yet paid. They represent a liability for the company because the company owes payment for these expenses in the future. Therefore, the correct answer is "Liability".

When money or resources from one's own pocket are invested in a business, it is referred to as capital. Capital represents the owner's contribution to the business and is used to finance its operations and growth. It can include cash, equipment, inventory, or any other assets that the owner brings into the business. Capital is different from profit, which is the financial gain that a business generates after deducting expenses from revenue. It is also different from owner equity, which represents the owner's residual interest in the assets of the business after deducting liabilities.

Income refers to the money that an individual or business receives in exchange for providing a good or service or through investing capital. It is the revenue earned by an individual or business from their activities and is a key factor in determining their financial well-being. Income can come from various sources such as wages, salaries, profits, dividends, interest, and rent. It is an essential component for individuals to meet their expenses and for businesses to sustain and grow.

The correct answer is "These are consist of all debts, payable after 12 months." This statement is not true because current liabilities include debts that are expected to be settled within a year, not after 12 months.

The equation for calculating profit is determined by subtracting the total cash payments from the total cash sales, and then adding the difference between credit sales and credit expenses. This equation takes into account both cash transactions and credit transactions, allowing for a comprehensive calculation of profit.

The correct answer is "decrease in asset and decrease in liability." When a partial payment of a loan is made to the bank, it results in a decrease in the asset (cash or bank balance) because money is being paid out. Additionally, it leads to a decrease in liability because a portion of the loan amount is being repaid. Both of these changes result in a decrease in asset and liability.

When the group account "Income" is decreased, it means that there is a decrease in the income earned by the company. This decrease in income is usually recorded as a debit entry in the Income account. On the other hand, when the group account "Liability" is decreased, it means that there is a decrease in the company's obligations or debts. This decrease in liabilities is recorded as a debit entry in the Liability account. Therefore, when both Income and Liability accounts are decreased, they are both recorded as debit entries.

In the double entry system of accounting, an account that obtains benefit is recorded as a debit. Debit refers to an increase in assets or a decrease in liabilities or equity. When an account receives a benefit, it means that there is an increase in its value or a decrease in the amount owed. Therefore, it is appropriate to record this as a debit entry to reflect the positive impact on the account.

The given answer, D.W.T. Stafford, is the correct answer because the Linford D.W.T. Stafford Act, 1932, defines and explains the concept of sole proprietorship. According to this act, a sole proprietorship is a type of business organization that is owned and controlled by a single individual. This means that the individual has complete authority and responsibility over the business, including all profits and losses. Therefore, the correct answer is D.W.T. Stafford.

Sole proprietorship does not have a separate legal entity. This means that the business and the owner are considered the same entity in the eyes of the law. The owner is personally liable for all the debts and obligations of the business, and there is no legal distinction between the owner's personal assets and the business's assets. This is in contrast to other forms of business entities, such as corporations, where the business is considered a separate legal entity from its owners.

GAAP is necessary because financial statements need to be standardized in order to ensure consistency and comparability across different companies. Standardization helps users of financial statements to easily understand and analyze the financial information. Additionally, standardized financial statements also enable investors, creditors, and other stakeholders to make informed decisions based on the financial performance and position of a company. Therefore, the correct answer is that financial statements should be standardized.

A wrong entry in the debit side of the cash book causes an increase in cash. This is because the debit side of the cash book records all the cash inflows or increases in cash. So, if there is a wrong entry on the debit side, it means that an amount has been incorrectly recorded as an increase in cash, leading to an increase in the cash balance.

Bookkeeping refers to the process of recording and organizing financial transactions of a business or individual. It involves keeping track of all the financial activities such as sales, purchases, receipts, and payments. By maintaining accurate and detailed records, bookkeeping helps in monitoring the financial health of an entity, preparing financial statements, and facilitating the analysis of financial data. It is an essential practice for businesses to ensure transparency, accountability, and compliance with legal and regulatory requirements.

Liabilities are obligations or debts that a company owes to external parties. They represent the amounts that the company owes and are typically shown on the right-hand side (credit side) of the balance sheet. However, when preparing a trial balance, all the accounts are listed in a specific order, with assets on the debit side and liabilities on the credit side. Since the question asks for the account balance that will be shown on the debit side of the trial balance, the correct answer is Liability.