Accountancy Quiz MCQ: Exam!

The Accounting Convention of Matching states that expenses incurred during a specific period should be matched against the revenue generated during the same period. This means that the costs associated with generating the revenue should be recognized in the same period as the revenue is recognized. This ensures that the financial statements accurately reflect the expenses and revenues that were incurred to generate the reported results. By matching expenses with revenue, the convention helps to provide a more realistic picture of the financial performance and profitability of a company.

Liabilities refer to the obligations or debts that an enterprise has to pay or fulfill in the future. These obligations can include loans, accounts payable, salaries payable, and other financial obligations. Liabilities are separate from the owner's funds or capital, which represent the owner's investment in the enterprise. Therefore, liabilities are the correct answer as they represent the obligations of the enterprise other than the owner's fund.

Consistency concept in accounting means that similar items in a set of accounts should be given similar accounting treatment and it should be applied for one period after another. This means that once an accounting method or principle is chosen for a particular type of transaction or event, it should be consistently applied in the same way for all similar transactions or events in the future. This ensures that financial statements are comparable over time and allows users to make meaningful comparisons and analysis.

The principle that is violated in this scenario is the Entity Concept. The Entity Concept states that the financial transactions of a business should be kept separate from the personal transactions of its owner. By including his personal medical expenses in the company's income statement, the owner is not adhering to this principle and is mixing personal and business expenses together.

The total sales can be calculated by adding the opening stock, purchases, and closing stock, and then subtracting the cost of sales. The cost of sales can be calculated by multiplying the purchases by the profit margin percentage (30%).

Opening stock + Purchases + Closing stock - Cost of sales = Total sales

In this case, the purchases are Rs. 110000, and the profit margin is 30% of the cost of sales. So, the cost of sales would be 30% of Rs. 110000, which is Rs. 33000.

Therefore, the total sales would be Rs. 10000 + Rs. 110000 + Rs. 20000 - Rs. 33000 = Rs. 130000.

The given equation, Rs. 700000 = Rs. 550000 + Rs. 150000, is true because it represents the basic accounting equation Assets = Capital + Liabilities. In this case, the assets of Rs. 700000 are equal to the capital invested by Suparshwa (Rs. 550000) plus the liabilities in the form of goods purchased on credit from Neminath (Rs. 150000). This equation shows that the total value of assets is equal to the total value of capital and liabilities, which is the fundamental principle of accounting.

Liabilities in the accounting equation represent the claims of external creditors against the assets of the business. This means that external creditors have a legal right to the assets of the business in order to satisfy the business's obligations. Liabilities do not represent claims against the profit, revenue, or goodwill of the business, but rather against the specific assets owned by the business.

The omission of paise and showing round figures in financial statements is based on the materiality concept. This concept states that financial information should only be included in the statements if it is significant enough to influence the decisions of the users. In the case of paise, which are the smallest unit of currency in India, their omission and rounding off to the nearest rupee is done because the amount is not considered material and does not have a significant impact on the overall financial position of the company.

The sales account is not a real account because it is a nominal account. Real accounts are those that represent tangible assets, such as machinery, equipment, and goodwill, which are all included in the given options. Nominal accounts, on the other hand, represent revenues, expenses, and gains or losses. Therefore, the sales account does not fall under the category of real accounts.

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If the going concern concept is no longer valid for a company, it means that the company is not expected to continue its operations in the foreseeable future. In this case, land held as an investment would be valued at its net realizable value. This means that the land would be valued based on the amount of cash that could be obtained from selling it in the current market conditions, rather than its historical cost or any potential future value. This is because the company is no longer expected to use the land for its intended purpose or generate any future economic benefits from it.

The charge for bad and doubtful debts in the income statement for the year ended 31 December 2009 is £16,800. This is calculated by taking the receivables totaling £12,200 that the company considers will not be paid, and adding it to the planned doubtful debt provision of 10% of the net receivables on 31 December 2009 (£198,200 x 10% = £19,820). Therefore, the total charge for bad and doubtful debts is £12,200 + £19,820 = £32,020. However, since the company already had a doubtful debt provision of £14,000 on 31 December 2008, the net charge for bad and doubtful debts is £32,020 - £14,000 = £16,800.

The profit of Rs. 57,000 earned by Mr. Yagna at the end of the financial year is considered an event. An event refers to a specific occurrence or happening that has significance or impact. In this case, the profit earned by Mr. Yagna is a significant occurrence that has implications for his business and financial situation. It is not classified as a transaction because a transaction typically involves the exchange of goods, services, or money between two parties. In this scenario, there is no specific exchange involved, making it solely an event.

The correct amount of profit to be reported in the books is Rs. 151000. This is because the given profit of Rs. 147000 needs to be adjusted for the following items:
i) The cost of an asset of Rs. 23000 has been taken as an expense, so it needs to be added back to the profit.
ii) The partner anticipated a profit of Rs. 12000 on the future sale of a car shown as an asset in his books, so it needs to be added back to the profit.
iii) Salary of Rs. 7000 payable in the financial year has not been taken into account, so it needs to be deducted from the profit.
iv) An asset of Rs. 85000 was purchased for Rs. 75000 and was recorded in the books as Rs. 85000, so the extra Rs. 10000 needs to be deducted from the profit.
After adjusting for these items, the correct profit amount is Rs. 151000.

The total profit for the year 2019-2020 can be calculated by subtracting the cost of goods sold and other business expenses from the total sales revenue. The cost of goods sold can be determined by subtracting the closing stock from the goods sold during the year, which is Rs. 60000 - Rs. 10000 = Rs. 50000. The other business expenses after adjusting for the outstanding amount are Rs. 20000 - Rs. 5000 = Rs. 15000. Therefore, the total profit is Rs. 120000 - Rs. 50000 - Rs. 15000 = Rs. 55000. Since the profit as per the accrual concept is Rs. 40000, the correct answer is Rs. 40000.