Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy. Depreciation represents how much of an asset`s value has been used up.
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3. The Public Financial Management System (PFMS) was earlier known as
The Public Financial Management System (PFMS),earlier known as Central Plan Schemes Monitoring System (CPSMS), is a web-based online software application developed and implemented by the Office of Controller General of Accounts (CGA). PFMS was initially started during 2009 as a Central Sector Scheme of Planning Commission with the objective of tracking funds released under all Plan schemes of GoI, and real time reporting of expenditure at all levels of Programme implementation. Subsequently in the year 2013, the scope was enlarged to cover direct payment to beneficiaries under both Plan and non-Plan Schemes. The latest enhancement in the functionalities of PFMS commenced in late 2014, wherein it has been envisaged that digitization of accounts shall be achieved through PFMS and the additional functionalities would be built into PFMS in different stages. Beginning with Pay & Accounts Offices payments, the O/o CGA did further value addition by proposing to bring in more financial activities of the Government of India in the ambit of the project. The primary objective of PFMS is to facilitate sound Public Financial Management System for Government of India (GoI) by establishing an efficient fund flow system as well as a payment cum accounting network. PFMS provides various stakeholders with a real time, reliable and meaningful management information system and an effective decision support system, as part of the Digital India initiative of GoI
Drawings is the money that is withdrawn by the owner for personal use and is an asset for the company. Capital is money brought by the owner in the business and is liability for the company. Drawings are deducted from the capital to reduce the liability of the company and not shown on the assets side.
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5. Wages paid for installation of a new machinery should be
It is the amount incurred for buying and installing the machine. The machinery account is debited since the machine has to be put to use. The expenses are done to start the working of machinery. Hence it will be added to the cost of machinery. Therefore the wages for the installation of machinery are added to the cost of machinery since without spending the amount for the installation, the machine will not be operational.
A receipt voucher is a manually written receipt for services or goods sold. This is typically used in place of a printable receipt. These receipts are typical for taxicabs, construction material, equipment rentals, and labor services. Vouchers are considered an adequate record of expenses for auditing purposes.
Drawings account is a personal account. Personal accounts are classified as :- 1) Natural person, 2) Artificial person 3) Representative personal accounts. A representative personal account represents a person/persons. Drawings account is a representative personal account. Some examples of representative personal accounts are capital, outstanding wages, prepaid salaries.
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8. What does a Nominal Account having debit balance represent?
Passbook is a copy of the account of the customer as it appears in the bank`s book. In other words, passbook is a record of banking transaction of a customer with bank. Entries which are made by a customer in the bank column of his cashbook must be entered by the bank in the passbook. Hence, the balances as per bank column of the cashbook must agree with the balance as per passbook.
Nominal Accounts are accounts related and associated with losses, expenses, income, or gains. Examples include a purchase account, sales account, salary A/C, commission A/C, etc. The outcome of a nominal account is either profit or loss, which is then ultimately transferred to the capital account.
Purchases will be credited if goods are given as charity. When accounting for goods given as charity, purchases are reduced with the exact cost of goods contributed. The amount is reduced from purchases in the trading account. It is shown as an expense on the debit side of the income statement.
In its oldest form, accounting aided the stewards to discharge their stewardship function. The wealthy men employed steward to manage their property; the steward in return rendered an account periodically of their stewardship. Thus Stewardship Accounting was the root of financial accounting system.
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13. The biggest strength of PFMS is its integration with the
The biggest strength of PFMS is its integration with the Core banking system in the Country. As a result, PFMS has the unique capability to push online payments to almost every beneficiary/vendor.
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14. Which account is generally used in single entry and incomplete records to obtain the amount of credit sales made during an accounting period?
in order to prepare the financial statements for a particular period all the incomplete records should be completed by preparing various accounts. Since the credit sales are recorded in the debtors account, preparation of debtors account is very essential to determine the amount of total credit sales.
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15. Income tax paid on business income by a sole proprietor is
A
Debited to trading account
B
Debited to profit and loss account
C
Deducted from capital account in the balance sheet
In sole proprietorship, all profits are transferred to the owner. Income tax is a personal tax which need to be paid by the individual in case of proprietorship. This will be considered as personal expense or drawings and should be deducted from the capital a/c.
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16. The balance remaining after deducting gross profit from sales is called
The balance remaining after deducting Cost of Goods Sold (COGS) from business revenue is called Gross Profit. Cost of Goods Sold is comprised of expenses directly related to the production of income.
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17. A cheque is received from customer and the same is deposited in bank for collection. If it is finally returned dishonored then it will result into
In case if cheque gets dishonored bank immediately debits our A/c which is maintained in bank`s A/c book which results in less balance as per passbook than cashbook balance as the same is not recorded in the cash book.
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18. Which concept suggest the exclusion of human resource in Balance Sheet?
The value of human resources is generally not shown in the balance sheet as per money measurement concept. Money measurement concept means only those transactions will be recorded in the books of accounts which can be measured in monetary terms
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19. The liability of at least one partner is unlimited whereas the liability of other partners is limited. What type of partnership is represented here?
Statement of financial position produced from incomplete accounting record is commonly known as statement of affairs. Basically, this statement of affairs comprise of assets and liabilities. This gives the net book value as well as the amount that is expected to realize during the insolvency of the business.
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21. A firm has omitted to record provision for bad and doubtful debts. How will it impact the financial statement?
Provision for Doubtful Debts means the expense reported on the income statement or profit and loss A/c. . If a provision for doubtful debts would decrease then debit balance of profit and loss A/c would decrease and ultimately net profit would increase.
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22. Which of the following is excluded from the cost of stock?
24. How do we adjust direct deposits by the customers to ascertain the balance as per pass book, if the starting point of BRS is Balance as per Cash book?
Understandability qualitative characteristics of accounting information is reflected when accounting information is clearly presented. As understandibility means that the information provided through the financial statements be presented in a manner that the users are able to understand it in the manner it should be.
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27. We can say that the business is in profit, when
Balance sheet financial statements shows the financial position of a business at a specific date. The balance sheet, sometimes called the statement of financial position, lists the company`s assets, liabilities, and stockholders equity (including dollar amounts) as of a specific moment in time.
Luca Pacioli was a monk, magician and lover of numbers. He discovered this special bookkeeping in Venice and was intrigued by it. In 1494, he wrote a huge math encyclopedia and included an instructional section on double-entry bookkeeping
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30. A concept that a business enterprise will not be sold or liquidated in the near future is known as:
The concept of going concern assumes that a business firm would continue to carry out its operations indefinitely, i.e. for a fairly long period of time and would not be liquidated in the foreseeable future.
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33. According to this concept, business and owner both have separate identity
The concept of business entity assumes that business has a distinct and separate entity from its owners. It means that for the purposes of accounting, the business and its owners are to be treated as two separate entities. Keeping this in view, when a person brings in some money as capital into his business, in accounting records, it is treated as liability of the business to the owner. Here, one separate entity (owner) is assumed to be giving money to another distinct entity (business unit). Similarly, when the owner withdraws any money from the business for his personal expenses(drawings), it is treated as reduction of the owner’s capital and consequently a reduction in the liabilities of the business.
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34. The amount brought in by owner of the business should be credited to?
As we know that owner is considered as a creditor to the business in the book of accounts. So, owner contributed the amount to start a business and it`s a liability. Therefore, the amount brought into the business by the proprietor or the owner should be credited to capital account
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35. Every business transaction affects at least ____ accounts
Every transaction affects at least two accounts in opposite directions. There can be no transactions in a business that affect only one account or have only one aspect because the double-entry system of accounting is followed while recording the transactions in the books of accounts.
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36. When a Liability is reduced or decreased, it is recorded on the
Balance sheet financial statements shows the financial position of a business at a specific date. The balance sheet, sometimes called the statement of financial position, lists the company`s assets, liabilities,and stockholders equity (including dollar amounts) as of a specific moment in time.
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39. Which of the following account will be credited when a Computer is sold that has been used in the office?
Commercial accounting is based on Double entry book keeping. Commercial accounting is something about providing right informatin to right people on right time. In commercial accounting, the system is maintained by the business organizations.
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41. An Asset that is NOT physical in nature is called
An intangible asset is an asset that is not physical in nature. Goodwill, brand recognition and intellectual property, such as patents, trademarks, and copyrights, are all intangible assets. Intangible assets exist in opposition to tangible assets, which include land, vehicles, equipment, and inventory.
Rule for nominal account describe that all expense and losses should be debited and all incomes and gains should be credited. Payment of rent to landlord is an expense which need to be debited to rent account by crediting cash account.
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43. Any written evidence in support of a business transaction is called
The account that records expenses, gains and losses is Nominal account. A nominal account is an account in which accounting transactions are stored for one fiscal year.
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45. Credit note is issued by an entity at the time of
Credit notes are typically used when there has been an error in an already-issued invoice, such as an incorrect amount, or when a customer wishes to change their original order. In short, credit notes can be used in any circumstances that would require the invoice to be changed and re-issued.
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46. Debit note is issued by an entity at the time of
A debit note is a document used by a vendor to inform the buyer of current debt obligations, or a document created by a buyer when returning goods received on credit. The debit note can provide information regarding an upcoming invoice or serve as a reminder for funds currently due.
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47. Transferring information from journal to ledger is known as
The process of recording transactions in a journal is called journalizing while the process of transferring the entries from the journal to the ledger is known as posting.
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48. Collection or group of all accounts of a business enterprise is known as
A debit balance is normal and expected for the following accounts: Asset accounts such as Cash, Accounts Receivable, Inventory, Prepaid Expenses, Buildings, Equipment, etc. For example, a debit balance in the Cash account indicates a positive amount of cash
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50. The process of finding out the balance of a ledger account is known as
The process of transferring the entries from journal to respective ledger accounts is called ledger posting. Balancing of ledgers is carried to find out differences at the end of the year. ... This process is called the balancing of the ledger accounts.
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51. A company issues cheque to pay account payable. The effect of the transaction is to?
When an account payable is paid, Accounts Payable will be debited and Cash will be credited. ... The same date is used to record the debit entry to an expense or asset account as appropriate.
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52. The transaction will be treated as a contra entry when?
A contra entry is recorded when the debit and credit affect the same parent account and resulting in a net zero effect to the account. These are transactions that are recorded between cash and bank accounts.
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53. When a cheque is received from a customer and it is deposited into the bank for collection but ultimately returned dishonoured, the customer account will be?
A trial balance is a bookkeeping worksheet in which the balance of all ledgers are compiled into debit and credit account column totals that are equal. ... The general purpose of producing a trial balance is to ensure the entries in a company`s bookkeeping system are mathematically correct.
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55. A trial balance prepared after taking into account the effect of adjusting entries is known as:
Trial balance can be prepared in three ways: 1) Total cum balance method- In this method, total and balances both are captured in tabular form. 2) Total Method- In this method, total of debit and credit are incorporated in the tabular form. 3) Balance method- In this method, only balances are taken in the trial balance. This method is most widely used for preparation of trial balance.
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57. Under balance method, which one of the following is used for preparing trial balance at the end of an accounting period?
A
Beginning balances of ledger accounts
B
Ending balances of ledger accounts
C
Total of beginning and ending balances of ledger accounts
D
Difference of beginning and ending balances of ledger accounts
The following errors will not be disclosed by the trial balance: Errors of complete omission (transaction is not recorded) Errors of commission (transaction credited to wrong account, but correct amount and correct side) ... Recording wrong amount in subsidiary book (wrong amount on both the debit and credit sides
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59. When closing stock is given in trial balance, then it will affect:
A
Trading and Profit & Loss account only
B
Balance sheet only
C
Owner`s equity only
D
D) Trading and Profit & Loss account and Balance sheet
If closing stock appeared in Trial balance it means the purchases has been reduced to the extent of stock amount at the end of the period. The accounting treatment will be closing stock to be shown in Balance sheet under current assets and it should not be credited to Trading a/c.
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60. Prepayment of insurance premium will appear in the Balance Sheet and in the Insurance Account respectively as
Interest on loan paid by business is an example of Revenue expense. A revenue expenditure is a cost that is charged to expense as soon as the cost is incurred
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62. The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the asset, is termed as
The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the as set, is termed as Depreciation. Depreciation is any method of allocating such net cost to those periods in which the organization is expected to benefit from use of the asset.
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63. Which accounting concept specifies the practice of crediting closing stock to the trading account?
Matching is the accounting concept that specifies the practice of crediting closing stock to the trading account. Explanation: Matching concept in accounting states that revenue and the expenses made to earn the revenue should be matched
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64. Account which shows Gross Profit or Gross Loss of the business is called
A P&L statement, often referred to as the income statement, is a financial statement that summarizes the revenues, costs, and expenses incurred during a specific period of time, usually a fiscal year or quarter.
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66. Which of the following shows summary of a company`s financial position at a specific date?
Balance sheet financial statements shows the financial position of a business at a specific date. The balance sheet, sometimes called the statement of financial position, lists the company`s assets, liabilities, and stockholders equity (including dollar amounts) as of a specific moment in time.
In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization
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68. Which of the following is a category or element of the balance sheet?
Some examples of asset accounts include Cash, Accounts Receivable, Inventory, Prepaid Expenses, Investments, Buildings, Equipment, Vehicles, Goodwill, and many more
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70. The main purpose of preparing a bank reconciliation statement is?
A
To know the bank balance
B
To know the balance of bank statement
C
To correct the cash book
D
To identify causes of difference between cash book and bank statement
Bank reconciliation statements ensure payments have been processed and cash collections have been deposited into the bank. The reconciliation statement helps identify differences between the bank balance and book balance, in order to process necessary adjustments or corrections.
A bank reconciliation statement is a summary of banking and business activity that reconciles an entity`s bank account with its financial records. The statement outlines the deposits, withdrawals, and other activities affecting a bank account for a specific period
What are uncleared or uncollected or uncredited cheques/checks. All those cheques which have been deposited by the customer, but the amount of which has not been collected or credited by the bank in customer`s, account, till the date on which Bank Statement is issued are called uncleared cheques/checks.
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73. A bank reconciliation statement is prepared by?
The debit balance as per the cash book means the balance of deposits held at the bank. ... It indicates the favourable balance as per cash book or favourable balance as per the passbook. On the other hand, the credit balance as per the cash book indicates bank overdraft.
A bank statement is a document (also known as an account statement) that is typically sent by the bank to the account holder every month, summarizing all the transactions of an account during the month.
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76. When the balance as per Cash Book is the starting point, direct deposits by customers are:
The amount of balance shown in the passbook or the bank statement must tally with the balances shown in the cash book. ... It indicates the favorable balance as per cash book or favorable balance as per the passbook. Hence, credit balance in the pass book means bank balance.
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78. To start a partnership business, what should be the minimum number of partners?
Minimum two persons are required to start a partnership firm as partnership can only be done when two or more people are involved while in banking business, minimum 10 persons are required to join hands to establish a partnership firm.
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79. What type of agreement is used to form a partnership business?
A partnership deed is an agreement between two or more individuals who sign a contract to start a profitable business together. They agree to be the co-owners, distribute responsibilities, income or losses for running a business.
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80. What is the partnership written agreement known as:
The written agreement of partnership is called a partnership deed. It is a contract between two or more individuals who decide to manage and operate a business together for profit-making.
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81. No partnership agreement, what will be the percentage of profit-sharing ratio between them?
If there is no partnership agreement the profits will be share equally. ... The profit must be share equally in the case of a partnership firm ... Profit sharing Ratio : Profits and losses would be shared equally among partners.
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82. Which of the following would not be found in a profit & loss appropriation account?
Salary/commission to manager is an item of Profit and loss account. Only items relating to partners will be entered in Profit and loss Appropriation like interest on capital, profit, interest on drawings, salary/commission to partners.
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83. Current accounts of the partners should be opened when the capitals are:
Current account of the partners should be opened when capitals are Fixed that means when capital accounts of partners shows fixed amount of balance every year.
Interest on Drawings will be debited to capital account. Interest on drawing is an income for the firm and is payable by the partners to the firm hence, is deducted/debited. Interest is charge on the money/goods taken by the partners for their personal use during the year.
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85. The main account for dealing with partnership dissolution would be:
Dissolution of partnership firm means that the firm closes down its business and comes to an end. A realization account is opened for disposing off all the assets of the firm and making payment of all the liabilities. It is a nominal account.
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86. Which is not a feature of a partnership business?
Salary/commission to manager is an item of Profit and loss account. Only items relating to partners will be entered in Profit and loss Appropriation like interest on capital, profit, interest on drawings, salary/commission to partners.
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88. 224. Statement of financial position produced from incomplete accounting record is commonly known as
Statement of financial position produced from incomplete accounting record is commonly known as statement of affairs. Basically, this statement of affairs comprise of assets and liabilities. This gives the net book value as well as the amount that is expected to realize during the insolvency of the business.
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89. Statements of assets & liabilities prepared under single entry system is called
International Financial Reporting Standards (IFRS) set common rules so that financial statements can be consistent, transparent, and comparable around the world. IFRS are issued by the International Accounting Standards Board (IASB).
93. A company sold goods worth Rs 5,000 on 5 June and Rs 10,000 on 28 June. The company received the first payment on 25 June and second on 7 July. The company prepared the financial statement on 30 June. What would be the total sale on the financial statement?
A current asset is an asset that a company holds and can be easily sold or consumed and further lead to the conversion of liquid cash.Types of Current Assets: Cash and cash equivalent Inventory Ongoing projects Pre-paid expenses Account receivable Marketable securities
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96. What from the following is NOT a non-current asset?
A non-current asset is an asset that the company acquires or invests, but the value of that investment does not recur within an accounting year.List of Non-Current Assets: Property, plant and equipment:
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97. What from the following is/are NOT tangible asset(s)? I)Patent rights II)Good Will III)Land
Every business requires assets to run its operations and such assets that help a business in maintaining its daily operations are called tangible assets.Tangible assets can be seen and felt and are also capable of being damaged by fire, natural disaster or any accident. The tangible assets have a clearly defined purchase value or acquisition cost.
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98. A machine price was Rs 1,000 and was carried through a truck. The truck’s fares were Rs 500. The engineers charged Rs 500 for the installation. The cost of the machine is?
The process of allocating the cost of intangible assets to expense is called amortization, and companies almost always use the straight‐line method to amortize intangible assets.
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101. The process of recording consumption of natural resources (or wasting assets) is called
Capital expenditures (CapEx) are funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. CapEx is often used to undertake new projects or investments by a company.
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104. Which of the following is not a business transaction:
A business transaction is an economic event with a third party that is recorded in an organizations accounting system. Such a transaction must be measurable in money.