Chapter 10-Financial Statements-2
Important MCQ questions for Class 11 Accountancy Chapter 10-Financial Statements-2
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MCQ Questions for Chapter 10-Financial Statements-2 class 11 Accountancy (Questions set-1)
Accounting - MCQ on Financial Statement - Trading Account, Profit And Loss Account And Balance Sheet
Class XI
Q.1 The statements which are prepared from the Trial Balance drawn taking the ledger balances and Cash Book balances is known as
a. bank reconciliation statement.
b.cash statements.
c. financial statements.
d.trial balance.
Answer:
(b) Financial statements
Explanation- The Trial Balance tests the arithmetical accuracy of the entries affected. On being satisfied by this, the owner of the business likes to know the ultimate results of operating the business.
Q.2 The account which is prepared by business to ascertain whether it has earned profit or loss is
a. profit and loss a/c.
b.balance sheet.
c. trading a/c.
d.trial balance.
Answer:
(b) Profit and Loss Account
Explanation- A business prepares a Profit and Loss Account to ascertain whether it has earned profit or incurred loss and the Balance Sheet to know the financial position at the end of a period.
Q.3 The amount spent by an enterprise on purchase of fixed assets that are used in the business to earn income is known as
a. revenue expenditure.
b.capital expenditure.
c. capital receipts.
d.revenue receipts.
Answer:
(b) Capital expenditure
Explanation- Capital expenditure is the amount spent by an enterprise on purchase of fixed assets that are used in the business to earn income and are not intended for resale.
Q.4 Expenditure for the extension or improvement in fixed assets is an example of
a. revenue expenditure.
b.capital receipts.
c. revenue receipts.
d.capital expenditure.
Answer:
(d) Capital expenditure
Explanation- If because of any expenditure the profit-earning capacity increases, through lowering costs or increasing output, the expenditure will be a capital expenditure.
Q.5 Installation Cost of Machinery, Inspection Charges paid to Engineer and Architect fee for supervising construction of building are the examples of
a. capital expenditure.
b.revenue receipts.
c. capital receipts.
d.revenue expenditure.
Answer:
(b) Capital Expenditure
Explanation- Installation Cost of Machinery, Inspection Charges paid to Engineer at the time of purchasing new machinery and Architects fee for supervising construction of building are the examples of Capital Expenditure.
Q.6 The amount spent on day to day running of a business is known as
a. capital receipts.
b.revenue receipts.
c. capital expenditure.
d.revenue expenditure.
Answer:
(d) Revenue expenditure
Explanation- Revenue expenditure is the amount spent on running a business.
Q.7 An expenditure which is not capital is known as
a. capital expenditure.
b.revenue expenditure.
c. revenue receipts.
d.capital receipts.
Answer:
(b) Revenue expenditure
Explanation- An expenditure which is not capital can be considered as revenue expenditure. The benefit of revenue expenditure is exhausted in the accounting period in which it is incurred.
Q.8 Expenses incurred to acquire the right to carry on business is an example of
a. capital expenditure.
b.revenue receipts.
c. capital receipts.
d.revenue expenditure.
Answer:
(b) Capital expenditure
Explanation- The expenses necessary for either establishing the business like preliminary expenses for floating a company or obtaining licence are capital expenditure.
Q.9 Salaries, wages, power, fuel etc. are the examples of
a. capital expenditure.
b.revenue receipts.
c. revenue expenditure.
d.capital receipts.
Answer:
(c) Revenue expenditure
Explanation- Expenses incurred in the day-to-day running of the business such as rent, salaries, wages, power, fuel etc. are the examples of Revenue Expenditure.
Q.10 Expenditure in connection with the purchase, receipt or installation of a fixed asset is an example of
a. revenue expenditure.
b.capital receipts.
c. revenue receipts.
d.capital expenditure.
Answer:
(d) Capital expenditure
Explanation-All expenses in addition to the purchase price incurred for making the asset ready for use are added to the cost of the asset and thus are capital expenditure.
Q.11 The expenditure which is a part of Trading or Profit and Loss Account is known as
a. revenue expenditure.
b.capital receipts.
c. capital expenditure.
d.revenue receipts.
Answer:
(b) Revenue expenditure
Explanation- Revenue expenditures are shown in Trading and Profit and Loss Account.
Q.12 Expenditure incurred to acquire a tangible asset is a type of
a. revenue expenditure.
b.capital receipts.
c. capital expenditure.
d.revenue receipts.
Answer:
(c) Capital expenditure
Explanation- Even if the asset does not prove to be profitable, the expenditure on it is a capital expenditure.
Q.13 Expenses incurred for upkeep of fixed assets are type of
a. revenue receipts.
b.revenue expenditure.
c. capital expenditure.
d.capital receipts.
Answer:
(b) Revenue expenditure
Explanation- Expenses incurred for upkeep of fixed asset come under Revenue Expenditure.
Q.14 If the debit side total is greater, it is called a
a. debit balance.
b.credit balance.
c. zero balance.
d.negative balance.
Answer:
(b) Debit Balance
Explanation- If the debit side total is greater, it is called a Debit Balance.
Q.15 The expenditure which is shown in the Balance Sheet is known as
a. revenue expenditure.
b.capital receipts.
c. revenue receipts.
d.capital expenditure.
Answer:
(d) Capital expenditure
Explanation- Capital expenditure is debited to a fixed account which appears in the Balance Sheet.
Q.16 Legal charges incurred is a type of
a. revenue expenditure.
b.capital expenditure.
c. revenue receipts.
d.capital receipts.
Answer:
(b) Capital expenditure
Explanation- Legal expenses incurred in connection with acquiring or defending suits for protecting fixed assets, rights etc. are also capital expenditure.
Q.17 Depreciation is an example of
a. capital expenditure.
b.capital receipts.
c. revenue expenditure.
d.revenue receipts.
Answer:
(c) Revenue expenditure
Explanation- Depreciation or the expired cost of fixed assets is an example of Revenue Expenditure.
Q.18 Cost of Plant and Machinery and Cost of Land and Building are the examples of
a. capital expenditure.
b.revenue receipts.
c. revenue receipts.
d.capital receipts.
Answer:
(a) Capital expenditure
Explanation- The examples of Capital Expenditure may be:
(a) Cost of Plant and Machinery
(b) Cost of Land and Building
(c) Cost of Furniture and Fixtures.
Q.19 Expenses incurred on purchase of stock materials is a type of
a. capital receipts.
b.revenue receipts.
c. revenue expenditure.
d.capital expenditure.
Answer:
(c) Revenue expenditure
Explanation- Expenses incurred on purchase of stock of materials and goods to the extent that these are used up during the year, the remaining amount will be an asset.
Q.20 The item which is debited to an expense account is
a. capital expenditure.
b.revenue receipts.
c. capital receipts.
d.revenue expenditure.
Answer:
(d) Revenue expenditure
Explanation- Revenue expenditure is debited to an expense account.
Q.21 For conduct of business we incur
a. capital receipts.
b.revenue expenditure.
c. capital expenditure.
d.revenue receipts.
Answer:
(b) Revenue Expenditure
Explanation- Revenue expenditure is incurred for conduct of business.
Q.22 For acquisition of fixed assets we incur
a.capital expenditure.
b.revenue receipts.
c. revenue expenditure.
d.capital receipts.
Answer:
(b) Capital expenditure
Explanation- It is incurred for acquisition of fixed assets for use in business.
Q.23 The class of revenue expenditure which is incurred during an accounting period but the benefit arising out of it extends beyond that accounting period is known as
a. deferred revenue expenditure.
b.capital receipts.
c. revenue receipts.
d.deferred capital expenditure.
Answer:
(b) Deferred Revenue Expenditure
Explanation- It is that class of revenue expenditure which is incurred during an accounting period but the benefit arising out of it extends beyond that accounting period. Such expenditure is unusually larger than the normal expenditure under the head.
Q.24 Cost of heavy advertising of a new product is an example of
a. revenue receipts.
b.capital expenditure.
c. capital receipts.
d.deferred revenue expenditure.
Answer:
(d) Deferred Revenue Expenditure
Explanation- The expenditure so incurred will certainly give benefit in the periods beyond the accounting period in which the expenditure is incurred.
Q.25 The item which increases the earning capacity of the business is known as
a. revenue receipts.
b.capital expenditure.
c. capital receipts.
d.revenue expenditure.
Answer:
(b) Capital Expenditure
Explanation- It increases the earning capacity of the business. On the other hand, Revenue Expenditure is incurred for earning profits.
Q.26 The item which is debited to an asset account is known as
a. capital expenditure.
b.revenue receipts.
c. capital receipts.
d.revenue receipts.
Answer:
(b) Capital Expenditure
Explanation- It is a real account and is debited to an asset account.
Q.27 The amounts received in the form of additional capital introduced in the business, loans received and sale proceeds of the fixed assets are known as
a. revenue receipts.
b.capital expenditure.
c. capital receipts.
d.revenue expenditure.
Answer:
(c) Capital receipts
Explanation- Capital receipts are the amounts received in the form of additional capital introduced in the business. You may observe that when a loan is received, it increases the business liability. Hence, it cannot be treated as revenue.
Q.28 Capital receipts are shown in the
a. trial balance.
b.balance sheet.
c. profit and loss account.
d.trading account.
Answer:
(b) Balance Sheet
Explanation- Capital Receipts do not affect the profit or loss of the business. They either increase the liabilities or reduce the assets. Hence, these are shown in the Balance Sheet only.
Q.29 The amounts received in the normal and regular course of the business are known as
a. revenue receipts.
b.capital expenditure.
c. revenue expenditure.
d.capital receipts.
Answer:
(b) Revenue receipts
Explanation- These are the amounts received in the normal and regular course of the business mainly through goods and services.
Q.30 The amount received does not need to be returned to any one is an important feature of
a. capital expenditure.
b.revenue expenditure.
c. capital receipts.
d.revenue receipts.
Answer:
(d) Revenue receipts
Explanation- An important feature of revenue receipts is that the amount received does not need to be returned to anyone.
Q.31 Revenue receipts are shown on the
a. balance sheet.
b.trial balance.
c. trading a/c.
d.profit and loss a/c.
Answer:
(d) Profit and Loss A/c
Explanation- Revenue Receipts are treated as incomes. Hence, these are shown on the credit side of the Profit and Loss Account.
Q.32 The Income Statement and the Balance Sheet together are termed as
a. balance sheet.
b.trading account.
c. final accounts.
d.profit and loss account.
Answer:
(c) Final Accounts
Explanation- The two statements together (the Income Statement and the Balance Sheet) are termed as the Final Accounts.
Q.33 A summary of accounts which affects the profit or loss of an enterprise is known as
a. balance sheet.
b.income statement.
c. trial balance.
d.salary account.
Answer:
(b) Income Statement
Explanation- The Income Statement is a summary of accounts that affects the profit or loss of an enterprise.
Q.34 How many parts are there in an Income Statement?
a. two.
b.five.
c. eight.
d.seven.
Answer:
(b) Two
Explanation- An Income Statement has two parts, namely,
1. Trading Account
2. Profit and Loss Account.
Q.35 The account which determines the gross profit or gross loss is called
a. trial balance.
b.trading account.
c. balance sheet.
d.profit and loss account.
Answer:
(b) Trading Account
Explanation- A Trading Account is a part of the financial statement which determines the gross profit or gross loss during an accounting year.
Q.36 Sales and services rendered are the components of
a. trial balance.
b.profit and loss account.
c. balance sheet.
d.trading account.
Answer:
(d) Trading Account
Explanation- Its main components are sales, services rendered and cost of such sales or services rendered.
Q.37 Net sales and cost of goods sold are recorded in
a. profit and loss account.
b.trial balance.
c. trading account.
d.balance sheet.
Answer:
(b) Trading Account
Explanation- It records only net sales and direct cost of goods sold. It is one of the features of Trading Account.
Q.38 The closing stock of the previous year which has been entered in the opening stock account through an opening entry is called as
a. purchase.
b.closing stock.
c. sales.
d.opening stock.
Answer:
(d) Opening Stock
Explanation- Opening Stock refers to the closing stock of the previous year which has been entered in the opening stock account through an opening entry. Therefore, it will be found in the Trial balance.
Q.39 The Opening Stock is usually put as the first item on the debit side of
a. balance sheet.
b.trading account.
c. profit and loss account.
d.trial balance.
Answer:
(b) Trading Account
Explanation- This item is usually put as the first item on the debit side of the Trading Account.
Q.40 The first stage in the preparation of final accounts of a trading concern is
a. balance sheet.
b.profit and loss account.
c. trading account.
d.trial balance.
Answer:
(c) Trading Account
Explanation- It is the first stage in the preparation of final accounts of a trading concern.
MCQ Questions for Chapter 10-Financial Statements-2 class 11 Accountancy (Questions set-2)
Q.41 The balance of Trading Account is transferred to the
a. balance sheet.
b.trial balance.
c. income statement.
d.profit and loss account.
Answer:
(d) Profit and Loss Account
Explanation- The balance of Trading Account is transferred to the Profit and Loss Account.
Q.42 Drawings of material made by the owner are recorded in the books by crediting the
a. sales account.
b.purchases account.
c. drawings account.
d.cash account.
Answer:
(b) Purchases Account
Explanation- Drawings of material made by the owner are recorded in the books by debiting the Drawings account and crediting the Purchases Account.
Q.43 If goods purchased are in transit, it is necessary to record them too. This amount is debited to
a. Purchases a/c.
b.Goods-in-Transit Account.
c. Sales A/c.
d.Bank A/c.
Answer:
(b) Goods-in-Transit Account
Explanation- The amount is debited to ‘Goods-in-Transit Account’ and credited to Seller’s Account.
Q.44 When the opening stock is adjusted the account which is credited is
a. cash account.
b.sales account.
c. purchases a/c.
d.opening stock account.
Answer:
(d) Opening Stock Account
Explanation- For adjustment of Opening Stock-
Purchases A/c ...Dr.
To Opening Stock A/c
Q.45 For adjustment of Closing Stock the account which is credited is known as
a. opening stock a/c.
b.sales a/c.
c. purchases a/c.
d.closing stock a/c.
Answer:
(c) Purchases Account
Explanation- For adjustment of Closing Stock:
Closing Stock A/c .......Dr.
To Purchases A/c
Q.46 The amount in the ‘Adjusted Purchases Account’ is shown on the debit side of the
a. trial balance.
b.balance sheet.
c. trading a/c.
d.profit and loss a/c.
Answer:
(c) Trading Account
Explanation- The amount in the ‘Adjusted Purchases Account’ is shown on the debit side of the Trading Account.
Q.47 Formula for calculating liability is
a. Assets + Liabilities.
b.Assets - Liabilities.
c. Assets + Capital.
d.Assets - Capital.
Answer:
(d) Assets - Capital
Explanation- Liabilities are debts, they are amounts owed to creditors. Thus, the claims who are not owners are called ‘‘Liabilities.’’
Q.48 The amount of closing stock is shown on the
a. trial balance.
b.trading account.
c. profit and loss a/c.
d.balance sheet.
Answer:
(d) Balance Sheet
Explanation- The amount of closing stock is shown on the assets side of teh balance Sheet.
Q.49 Formula for calculating capital is
a. Assets + Liabilities.
b.Assets - Liabilities.
c. Assets - Capital.
d.Assets + Capital.
Answer:
(b) Assets - Liabilities
Explanation- Capital is also known as Owner’s Equity, proprietorship and net worth. Owner’s Equity means owner’s claim against the assets of the business. It will always be equal to assets less liabilities.
Q.50 Liabilities plus Capital is equal to
a. Liabilities.
b.Drawings.
c. Assets.
d.Capital.
Answer:
(c) Assets
Explanation- The equation says that the assets of a business are always equal to the claims of owners and the outsiders.
Q.51 Net Purchases plus Opening Stock minus Closing Stock equals to
a. sales.
b.adjusted sales.
c. purchases.
d.adjusted purchases.
Answer:
(d) Adjusted purchases
Explanation- The equation will be-
Adjusted Purchases = Net Purchases + Opening Stock – Closing Stock. It is shown in the Trading a/c.
Q.52 The expenses which are incurred on the goods purchased till they are brought to the place of business for sale are known as
a. revenue expenses.
b.indirect expenses.
c. capital expenses.
d.direct expenses.
Answer:
(d) Direct Expenses
Explanation- Direct expenses are those expenses which are incurred on the goods purchased till they are brought to the place of business for sale.
Q.53 Clearing charges, octroi duty and cartage etc. are the examples of
a. capital expenditure.
b.incomes.
c. direct expenses.
d.indirect expenses.
Answer:
(c) Direct expenses
Explanation- Examples of such expenses are freight inward, insurance, customs (import) duty, clearing charges, octroi duty and cartage etc. These are direct expenses in the production of goods and services.
Q.54 The total of both the sides of account equal and to write the difference in the side whose total is short is known as
a. totalling of accounts.
b.balancing of accounts.
c. cash accounting.
d.capital accounting.
Answer:
(b) Balancing of account
Explanation- For example, if total of credit side is more than the debit side of any account the difference of amount will be recorded as Balance c/d on debit side and vice versa on the credit side.
Q.55 Balance b/d is known as
a. balance carried down.
b.balance bring down.
c. balance carry down.
d.balance brought down.
Answer:
(d) Balance brought down
Explanation- Assets will show a debit balance. Such accounts will be opened and the relevant amounts written on the debit side as ‘‘To Balance brought down.’’
Q.56 Balance c/d is known as
a. balance carried down.
b.balance bring down.
c. balance carry down.
d.balance brought down.
Answer:
(b) Balance carried down
Explanation- It is normally treated as a closing entry.
Q.57 The stock of unsold goods at the end of the current accounting period is known as
a. opening stock.
b.closing stock.
c. unsold stock.
d.stock.
Answer:
(b) Closing stock
Explanation- Closing stock refers to the stock of unsold goods at the end of the current accounting period.
Q.58 When the closing stock is incorporated the account which is credited is
a. opening stock a/c.
b.trading a/c.
c. cash a/c.
d.closing stock a/c.
Answer:
(b) Trading A/c
Explanation- The following entry is recorded to incorporate the closing stock in the books:
Closing Stock A/c ......Dr.
To Trading A/c
Q.59 Examples of assets other than fixed assets are
a. machinery and plant.
b.creditors and short-term loans.
c. long term loans and public deposits.
d.stock and prepaid expenses .
Answer:
(d) Stock and prepaid expenses
Explanation- Current assets are those assets which can be converted into cash within a period of one year.
Q.60 Closing stock appears on the credit side of the
a. trial balance.
b.profit and loss account.
c. cash a/c.
d.trading a/c.
Answer:
(d) Trading Account
Explanation- The closing stock appears both on the credit side of the Trading Account and on the asset side of the Balance Sheet.
Q.61 If the total of the credit side is more than that of the debit side in the Trading Account, the excess is
a. Gross Loss.
b.Gross Profit.
c. Net Profit.
d.Net Loss.
Answer:
(b) Gross Profit
Explanation- If the total of the credit side is more than that of debit side, the excess is Gross Profit.
Q.62 If the total of the debit side is more than that of the credit side in Trading Account, the excess is
a. Gross Loss.
b.Net Profit.
c. Net Loss.
d.Gross Profit.
Answer:
(b) Gross Loss
Explanation- If the total of the debit side is more than that of the credit side, the excess is Gross Loss.
Q.63 Gross Profit is transferred to the credit side of the
a. trial balance.
b.trading account.
c. balance sheet.
d.profit and loss account.
Answer:
(d) Profit and Loss Account
Explanation- Gross Profit is transferred to the credit side of the Profit and Loss Account.
Q.64 Name the situation when the instrument is not paid.
a. negotiation.
b.endorsement.
c. discounting.
d.dishonour.
Answer:
(d) Dishonour
Explanation- Dishonour means a situation when the instrument is not paid.
Q.65 Gross Loss is transferred to the debit side of the
a. trading account.
b.profit and loss account.
c. trial balance.
d.balance sheet.
Answer:
(b) Profit and Loss Account
Explanation- Gross Loss is transferred to the debit side of the Profit and Loss Account.
Q.66 Trading account shows Gross Profit or
a.Net Loss.
b.Profit.
c. Gross Loss.
d.Net Profit.
Answer:
(c) Gross Loss
Explanation- Trading Account shows Gross Profit or Gross Loss.
Q.67 Transfer of the instrument in the name of another person by which the new person becomes entitled for payment is known as
a. endorsement.
b.negotiation.
c. discounting.
d.retirement of bill.
Answer:
(b) Negotiation
Explanation- Negotiation means transfer of the instrument in the name of another person by which the new person becomes entitled for payment.
Q.68 Net Sales minus Cost of Goods Sold is equal to
a. Gross Profit.
b.Gross Loss.
c. Net Loss.
d.Net Profit.
Answer:
(b) Gross Profit
Explanation- Gross Profit can be presented in the form of an equation as follows:
Gross Profit = Net Sales – Cost of Goods Sold
Q.69 Total Sales minus Sales Return gives
a. Gross profit.
b.Net Sales.
c. Net Loss.
d.Gross Loss.
Answer:
(b) Net Sales
Explanation- The equation will be-
Net Sales = Total Sales – Sales Return
Q.70 If an amount is payable in the future and the amount is certain, it is a
a. asset.
b.provision.
c. depreciation.
d.liability.
Answer:
(d) Liability
Explanation- For example, December’s wages totalling Rs. 20,000 are payable on 31st December. The enterprise will debit Wages Account and credit Wages Outstanding Account as it is a defined liability.
MCQ Questions for Chapter 10-Financial Statements-2 class 11 Accountancy (Questions set-3)
Q.71 If the amount due from debtor is not realised, it is known as
a. bad debts.
b.debtor.
c. overdraft.
d.creditor.
Answer:
(b) Bad debts
Explanation- When a debtor becomes bankrupt, i.e. unable to pay one’s debts, the entire amount due from him is not realised. The unrealised amount is a loss to business, the same is called Bad Debts.
Q.72 Sometime insolvent debtor whose account had been earlier written off as ‘Bad Debts’ pays some amount. This amount so received is known as
a. bad debts.
b.cash withdrawn.
c. bad debts recovered.
d.debtors.
Answer:
(d) Debtors
Explanation- Sometime insolvent debtor whose account had been earlier written off as ‘Bad Debts’ pays some amount.The amount so received is a gain to the business and is known as Bad Debts Recovered.
Q.73 Bills are drawn by
a. debtor.
b.endorsee.
c. payee.
d.creditor.
Answer:
(d) Creditor
Explanation- Bills are drawn by Creditor.
Q.74 A Promissory Note is given to a creditor by a
a. creditor.
b.debtor.
c. endorsee.
d.banker.
Answer:
(b) Debtor
Explanation- A Promissory Note is given by a debtor to a creditor.
Q.75 When a bill is dishonoured it becomes-
a. invalid.
b.valid.
c. due.
d.paid bill.
Answer:
(b) Invalid
Explanation- A bill becomes invalid when it is dishonoured.
Q.76 The debtors who pay to the trader in the stipulated period or shall be recovered for sure are known as
a. debtors.
b.bad debts.
c. old debts.
d.good debts.
Answer:
(d) Good debts
Explanation- Good debtors are those who pay to the trader in the stipulated period or shall be recovered for sure.
Q.77 Gross Profit is usually ascertained by preparing
a. profit and loss account.
b.trial balance.
c. trading account.
d.balance sheet.
Answer:
(c) Trading Account
Explanation- Only Trading Account shows Gross Profit or Gross Loss.
Q.78 Return Inwards are deducted from
a. purchases.
b.sales.
c. cash.
d.gross profit.
Answer:
(b) Sales
Explanation- Return Inwards are deducted from sales whereas Return Outwards from the purchases in the Trading Account.
Q.79 Opening Stock plus Net Purchases plus Direct Expenses minus Closing Stock is equal to
a. net sales.
b.net purchases.
c. gross profit.
d.cost of goods sold.
Answer:
(d) Cost of Goods Sold
Explanation- The equation will be-
Cost of Goods Sold= Opening Stock + Net Purchases + Direct Expenses – Closing Stock
Q.80 Total Purchases minus Purchase Returns is equal to
a. net purchases.
b.cost of goods sold.
c. net sales.
d.gross profit.
Answer:
(b) Net Purchases
Explanation- The equation will be-
Net Purchases = Total Purchases – Purchases Return
Q.81 To calculate the net profit or net loss if the business we prepare-
a. trial balance.
b.trading account.
c. profit and loss account.
d.balance sheet.
Answer:
(c) Profit and Loss Account
Explanation- A Profit and Loss Account is prepared to calculate the net profit or net loss of the business for a given accounting period.
Q.82 Name the second stage in the preparation of the final accounts.
a. trading account.
b.trial balance.
c. balance sheet.
d.profit and loss account.
Answer:
(d) Profit and Loss Account
Explanation- Profit and Loss Account is the second stage in the preparation of the final accounts.
Q.83 Loss on sale of fixed assets, loss by theft, cash defalcation are the examples of
a. financial expenses.
b.abnormal losses.
c. selling and distribution expenses.
d.administrative expenses.
Answer:
(b) Abnormal Losses
Explanation- Abnormal loss such as stock loss by fire not covered by insurance, loss on sale of fixed assets, loss by theft, cash defalcation etc. may occur during the accounting period.
Q.84 If income tax appears in the Trial Balance of a sole proprietorship concern, it is treated as
a. drawings.
b.capital.
c. cash.
d.outstanding salary.
Answer:
(b) Drawings
Explanation- If income tax appears in the Trial Balance of a sole proprietorship concern it is treated as drawings and deducted from capital.
Q.85 If the credit side is more than the debit side in Profit and Loss Account, it shows
a. net loss.
b.net profit.
c. gross profit.
d.gross loss.
Answer:
(b) Net Profit
Explanation- If the credit side is more than the debit side, it shows net profit.
Q.86 If the debit side is more than the credit side in Profit and Loss Account, it shows
a. gross loss.
b.net profit.
c. net loss.
d.gross profit.
Answer:
(c) Gross Loss
Explanation- If the debit side is more than the credit side, it shows net loss.
Q.87 The balance of the Profit and Loss Account is transferred to the
a. trading account.
b.income statement.
c. trial balance.
d.capital account.
Answer:
(d) Capital Account
Explanation- The balance of the Profit and Loss Account is transferred to the Capital Account of the proprietor in the balance sheet.
Q.88 Decrease in the value of an asset leads to
a. appreciation.
b.depreciation.
c. provision.
d.outstanding.
Answer:
(b) Depreciation
Explanation- Depreciation is a decrease in the value of an asset due to wear and tear and use. It is treated as business expense and is charged to the Profit and Loss Account.
Q.89 In how many parts, a profit may be divided?
a. five.
b.eight.
c. two.
d.seven.
Answer:
(c) Two
Explanation- Profit may be divided into two:
(i) Operating Profit
(ii) Net Profit.
Q.90 When a person is unable to meet his liabilities he is known as
a. insolvent.
b.incapable.
c. debtor.
d.creditor.
Answer:
(b) Insolvent
Explanation- Insolvency of a person means that he is unable to meet his liabilities. This means that the bill accepted by him will be dishonoured.
Q.91 The excess of gross profit over operating expenses is known as
a. Net Profit.
b.Gross Loss.
c. Net Loss.
d.Operating Profit.
Answer:
(d) Operating Profit
Explanation- Operating Profit is the excess of gross profit over operating expenses. Non-operating expenses and incomes are ignored.
Q.92 Net Sales minus Operating Cost is equal to
a. Operating profit.
b.Gross Loss.
c. Net Loss.
d.Net Profit.
Answer:
(b) Operating Profit
Explanation- The equation will be-
Operating Profit= Net Sales – Operating Cost
Q.93 The excess of revenue over expenses and losses gives
a. Net Loss.
b.Gross Profit.
c. Net Profit.
d.Operating Profit.
Answer:
(c) Net Profit
Explanation- Net Profit means the excess of revenue (whether operating or non-operating) over expenses and losses.
Q.94 Net Profit plus Non-Operating Expenses minus Non-Operating Income is equal to
a. Net Profit.
b.Operating Profit.
c. Gross Loss.
d.Net Loss.
Answer:
(b) Operating Profit
Explanation- The equation will be-
Operating Profit = Net profit + Non-Operating Expenses – Non-Operating Income
Q.95 A balance sheet is prepared from
a. three accounts.
b.two accounts.
c. four accounts.
d.only one account.
Answer:
(b) Two Accounts
Explanation- A Balance Sheet is prepared from the Real Accounts and Personal Accounts.
Q.96 Financial position of a business is told by
a. balance sheet.
b.profit and loss account.
c. trading account.
d.trial balance.
Answer:
(b) Balance Sheet
Explanation- According to Francis R. Stead, ‘‘A Balance Sheet is a screen picture of the financial position of a going business at a certain moment.’’
Q.97 The balance sheet is prepared after the preparation of the
a. trading account.
b.trial balance.
c. cash account.
d.profit and loss account.
Answer:
(d) Profit and Loss Account
Explanation- The balance sheet is prepared after the preparation of the Profit and Loss Account; this is the reason why the Profit and Loss Account and the Balance Sheet are together called the ‘Final Accounts.’
Q.98 A balance sheet has
a. three sides.
b.one side.
c. two sides.
d.four sides.
Answer:
(c) Two sides
Explanation- A Balance Sheet has two sides- Assets and the Liabilities.
Q.99 A Trial balance has
a. three columns.
b.two columns
c. four columns.
d.five columns.
Answer:
(b) Two columns
Explanation- The two columns are headed as debit and credit.
Q.100 Name the item whose purpose is to establish the arithmetical accuracy of the books of account.
a. Trial Balance.
b.Trading Account.
c. Balance Sheet.
d.Profit and Loss Account.
Answer:
(b) Trial balance
Explanation- The purpose is to establish the arithmetical accuracy of the books of account.
Q.101 When assets and liabilities are arranged in a particular order. This is called
a. grouping.
b.ordering.
c. marshalling.
d.organising.
Answer:
(c) Marshalling
Explanation- The arrangement of assets and liabilities in a particular order in the Balance Sheet is called ‘Marshalling.’
Q.102 When assets and liabilities are arranged in a particular group. This is called
a. grouping.
b.arranging.
c. marshalling.
d.organising.
Answer:
(b) Grouping
Explanation- Grouping means items of a similar nature under a common heading.
Q.103 Name the facility with which the assets may be converted into cash
a. conversion.
b.grouping.
c. marshalling.
d.liquidity.
Answer:
(d) Liquidity
Explanation- Liquidity means the facility with which the assets may be converted into cash, those assets which are most difficult to convert into cash are written last.
Q.104 The assets which are acquired for continued use and are not meant for resale are known as
a. current assets.
b.stock.
c. fixed assets.
d.prepaid expenses.
Answer:
(c) Fixed Assets
Explanation- Fixed assets are those assets that are acquired for continued use and are not meant for resale, though it may be decided later to sell a particular asset.
Q.105 Fixed Assets may be of
a. three types.
b.two types
c. four types.
d.five types
Answer:
(b) Two types
Explanation- Fixed Assets may be:
1. Tangible
2. Intangible
Q.106 Fixed Assets which can be seen and touched are known as
a. tangible assets.
b.current assets.
c. intangible assets.
d.cash.
Answer:
(b) Tangible Assets
Explanation- Tangible Fixed Assets refers to those fixed assets which can be seen and touched.
Q.107 Assets having no physical existence are known as
a. tangible assets.
b.intangible assets.
c. current assets.
d.stock.
Answer:
(b) Intangible Assets
Explanation- Intangible Assets are fixed assets having no physical existence.
Q.108 Land and Building and Plant and Machinery are the examples of
a. Intangible Assets.
b.Current Liabilities.
c. Current Assets.
d.Tangible Assets.
Answer:
(d) Tangible Assets
Explanation- Tangible assets are generally defined as assets having a physical existence. Example- Land and Building and Plant and Machinery etc.
Q.109 Goodwill, patents and trademarks are the examples of
a. Tangible Assets.
b.Current Liabilities.
c. Intangible Assets.
d.Current Assets.
Answer:
(c) Intangible Assets
Explanation- Intangible Assets are fixed assets having no physical existence. Example: Goodwill, Patents, Trademarks etc.
Q.110 The assets of the business which are kept temporarily for resale or for converting into cash are known as
a. current assets.
b.fictitious assets.
c. fixed assets.
d.intangible assets.
Answer:
(b) Current Assets
Explanation- These are those assets of the business which are kept temporarily for resale or for converting into cash. These are assets which are likely to be realised within a period of one year.
Q.111 Current liabilities are such obligations which are to be satisfied
a. within three years.
b.within one year.
c. within five years.
d.within two years.
Answer:
(b) Within one year
Explanation- Current liabilities are to be paid off within a period of one year. Other liabilities are long term liabilities.
Q.112 Computers of a firm should be classified as
a. fixed assets.
b.liquid assets.
c. current assets.
d.intangible assets.
Answer:
(b) fixed assets.
Explanation- Computers are fixed assets as they serve the business for longer period of time.
Q.113 Goodwill is a
a. fictitious asset.
b.tangible asset.
c. fixed asset.
d.intangible asset.
Answer:
(d) Intangible Asset
Explanation- Intangible assets are those assets which do not have physical existence.
Q.114 Return Inward appearing in the Trial Balance are deducted from
a. purchase.
b.sales
c. returns outward.
d.wages
Answer:
(b) Sales
Explanation- Return Inward which appears in the Trial Balance is deducted from Sales.
Q.115 Balance Sheet can be presented in-
a. two forms.
b.five forms.
c. three forms.
d.one form.
Answer:
(b) Two forms
Explanation- The Balance Sheet can be presented either in the Horizontal Form or Vertical Form.
Related Links
- Chapter 1-Introduction to Accounting
- Chapter 2-Theory Base of Accounting
- Chapter 3-Recording of Transactions-1
- Chapter 4-Recording of Transaction-2
- Chapter 5-Bank Reconciliation statement
- Chapter 6-Trial Balance and Rectification of Errors
- Chapter 7-Depreciation, Provisions and Reserves
- Chapter 8-Bills of Exchange
- Chapter 9-Financial Statements-1
- Chapter 10-Financial Statements-2
- Chapter 11-Accounts of Incomplete Records
- Chapter 12-Applications of Computers in Accounting
- Chapter 13-Computerised Accounting System
- Chapter 14-Structuring Database for Accounting
- Chapter 15-Accounting System Using Database Management System