ABK Questions with solutions MCQs

1. All of the following are functions of Accounting except?

A

Decision making

B

Measurement

C

Forecasting

D

Ledger Posting

ABK NONE
Correct Answer : D
Explanation :

Ledger posting is a book-keeping exercise whereas the others are purely accounting in nature, which are done in accordance with various accounting standards, policies, etc.

Correct Answered :

Wrong Answered :

2. Financial position of the business is ascertained on the basis of

A

Records prepared uder book keeping process

B

Trial Balance

C

Balance Sheet

D

None of the above

ABK NONE
Correct Answer : C
Explanation :

Balance sheet is a known as the positional statement as it shows the financial position of the business. Balance sheet is prepared at the particular date usually at the end of financial year. Balance shows the lists of all assets and liabilities of the business.

Correct Answered :

Wrong Answered :

3. Financial statements do not consider

A

Assets expressd in monetary terms

B

Liabilities expressed in monetary terms

C

Only assetts expressed in non monetary terms

D

Assets and liabilities expressed in non mometary terms

ABK NONE
Correct Answer : D
Explanation :

Assets and liabilities expressed in non mometary terms

Correct Answered :

Wrong Answered :

4. Accounting standards in india are issued by

A

Central Govt

B

State Govt

C

Institute of chartere accountants of india

D

Rerved bank of india

ABK NONE
Correct Answer : C
Explanation :

Institute of chartere accountants of india

Correct Answered :

Wrong Answered :

5. How many accounting standards have been issued by ICAI?

A

25

B

20

C

32

D

2

ABK NONE
Correct Answer : C
Explanation :

32

Correct Answered :

Wrong Answered :

6. It is essential to standardize the accounting principles and policies in order to ensure

A

Transparency

B

Consistency

C

Comparability

D

All of the above

ABK NONE
Correct Answer : D
Explanation :

All of the above

Correct Answered :

Wrong Answered :

7. In case of debit becoming bad, the amount should be credited to

A

Debtor account

B

Bad debts account

C

Cast account

D

Sales account

ABK NONE
Correct Answer : A
Explanation :

In the normal course of business, there are certain customer who does not pay the amount to the business despite regular follow ups. The unrecoverable amount is considered as bad debts. Bad debts is a loss to the organization and should be debited to profit & loss account by crediting the customer account.
Accounting entry will be as under:
Bad Debts A/c Dr.
To Customer (Debtor) A/c

Correct Answered :

Wrong Answered :

8. Which financial statement represents the accounting equation Asset = Liabilities + Owner`s equity

A

Income statement

B

Statement of cash flows

C

Balance sheet

D

None of the above

ABK NONE
Correct Answer : C
Explanation :

Balance sheet

Correct Answered :

Wrong Answered :

9. Which account is the odd one out?

A

Office furniture and equipment

B

Freehold land and buildings

C

Stock of raw materials

D

Plant and machinery

ABK NONE
Correct Answer : C
Explanation :

Stock of raw materials

Correct Answered :

Wrong Answered :

10. In double entry system of book keeping every business transaction affects

A

Two accounts

B

Two sides of the same account

C

The account on two different dates

D

All of the above

ABK NONE
Correct Answer : A
Explanation :

Two accounts

Correct Answered :

Wrong Answered :

11. Which of the following items is an asset?

A

Salary paid to manager

B

Accounts payable

C

Sales

D

Debtors

ABK NONE
Correct Answer : D
Explanation :

Debtors

Correct Answered :

Wrong Answered :

12. Payment of personal expenses of the owners of the business need to be recorded as

A

Drawings

B

Liabilities

C

Expenses

D

None of the above

ABK NONE
Correct Answer : A
Explanation :

Drawings

Correct Answered :

Wrong Answered :

13. The petty cashier generally work on _____ system

A

Accural

B

Balancing

C

Imprest

D

None of the three

ABK NONE
Correct Answer : C
Explanation :

Imprest

Correct Answered :

Wrong Answered :

14. Credit balance in the cash book means

A

Overdraft as per passbook

B

Favourable balance as per passbook

C

Both A and B

D

None of the above

ABK NONE
Correct Answer : A
Explanation :

A credit balance in cash book is a overdraft as per pass book. The bank maintains the customer account which is further printed in the passbook. The passbook is made from the view point of the bank hence customer depositing money is a liability to the bank and is credited. Therefore when the balance is unfavourable it shows a debit balance because they will receive money from the customer. The debits and credit of pass book and cash book are opposite.

Correct Answered :

Wrong Answered :

15. Goodwill is ____

A

Current asset

B

Fictitious asset

C

Tangible asset

D

Intangible asset

ABK NONE
Correct Answer : D
Explanation :

Intangible asset

Correct Answered :

Wrong Answered :

16. Loss leads to reduction in

A

Liability

B

Capital

C

Income

D

None of the above

ABK NONE
Correct Answer : B
Explanation :

Capital

Correct Answered :

Wrong Answered :

17. The expired portion of capital expenditure is shown as

A

as an income

B

as an expense

C

as an asset

D

as a liability

ABK NONE
Correct Answer : B
Explanation :

An expired cost is a cost that has been recognised as an expense. This happens when a business entity fully consumes or receives benefit from a cost . An expired cost may also be construed as the total loss in value of an asset.

Correct Answered :

Wrong Answered :

18. Income includes

A

Income received

B

Income receivable

C

Both A and B

D

None of the above

ABK NONE
Correct Answer : C
Explanation :

Both A and B

Correct Answered :

Wrong Answered :

19. Income tax in case of a sole trader is treated as ___

A

Business expense

B

Personal expenses

C

Debtors expenses

D

None of the three

ABK NONE
Correct Answer : B
Explanation :

Personal expenses

Correct Answered :

Wrong Answered :

20. Which of the following is correct

A

Capital is equal to assets minus liabilities

B

Capital is equal to assets plus liabilities

C

Assets are equal to liabilities minus capital

D

Liabilities is equal to capital plus assets

ABK NONE
Correct Answer : A
Explanation :

Capital is equal to assets minus liabilities

Correct Answered :

Wrong Answered :

21. Which financial statement represents the accounting equation, Assets = Liabilities + Owners

A

Income statement

B

Balance sheet

C

Statement of cash flow

D

None of the above

ABK NONE
Correct Answer : B
Explanation :

Balance sheet

Correct Answered :

Wrong Answered :

22. Cash column in cash book has always

A

Dr. balance

B

Cr. balance

C

Overdraft

D

Both Dr. and Cr. balance

ABK NONE
Correct Answer : A
Explanation :

Dr. balance

Correct Answered :

Wrong Answered :

23. ____ reserve is not shown in balance sheet

A

General

B

Capital

C

Secret

D

None of the above

ABK NONE
Correct Answer : C
Explanation :

Secret

Correct Answered :

Wrong Answered :

24. Preliminary expenses are treated as

A

Miscellaneous expenditure

B

Intangible asset

C

Current asset

D

A liability

ABK NONE
Correct Answer : A
Explanation :

Miscellaneous expenditure

Correct Answered :

Wrong Answered :

25. The balance of the petty cash book is

A

An expense

B

An income

C

An asset

D

A liability

ABK NONE
Correct Answer : C
Explanation :

Petty cash book is used to record the day to day small value transactions. Balance lying in petty cash book is as good as cash balance. Cash is an asset for the business.

Correct Answered :

Wrong Answered :

26. Interest on drawing is ____ for the business

A

Expenditure

B

Expense

C

Gain

D

None of the above

ABK NONE VERIFIED
Correct Answer : C
Explanation :

Interest on drawing is a gain for the firm. It is calculated at the agreed rate. The amount of interest on drawings will be credited to Profit and Loss Appropriation Account and will be debited to partner`s capital account/current account (individually).

Correct Answered :

Wrong Answered :

27. Preliminary expenses in connection with floatation of a new company is

A

Fixed asset

B

Current asset

C

Fictitious asset

D

None of the above

ABK NONE
Correct Answer : C
Explanation :

Fictitious asset

Correct Answered :

Wrong Answered :

28. Which of the following is not a current asset

A

Bills receivable

B

Cash and Cash equivalents

C

Debtors

D

Furniture and Fittings

ABK NONE
Correct Answer : D
Explanation :

Furniture and Fittings

Correct Answered :

Wrong Answered :

29. Income earned but not received is shown in

A

Asset side of the balance sheet

B

Liability of the balance sheet

C

Profit and loss account (Dr. balance)

D

None of the above

ABK NONE
Correct Answer : A
Explanation :

Asset side of the balance sheet

Correct Answered :

Wrong Answered :

30. When goods are returned to a supplier

A

A debit note is sent to him

B

An account sale is sent to him

C

A receipt is sent to him

D

Either of B or C

ABK NONE
Correct Answer : A
Explanation :

A debit note is sent to him

Correct Answered :

Wrong Answered :

31. Trade discount allowed at the time of sale of goods is

A

Recorded in Journal

B

Not recorded on book of accounts

C

Record in cash book

D

Recorded in sales book

ABK NONE
Correct Answer : B
Explanation :

Not recorded on book of accounts

Correct Answered :

Wrong Answered :

32. Which of the following is long term liability

A

Outstanding expenses

B

Share capital

C

Debenture

D

All of the above

ABK NONE
Correct Answer : C
Explanation :

Debenture

Correct Answered :

Wrong Answered :

33. Drawing a type of

A

Expenses

B

Withdrawal of capital

C

Income

D

None of the above

ABK NONE
Correct Answer : B
Explanation :

Withdrawal of capital

Correct Answered :

Wrong Answered :

34. Which of the following is not an intangible asset

A

Land

B

Goodwil

C

Copyright

D

Patent rights

ABK NONE
Correct Answer : A
Explanation :

An intangible asset or resource is an asset that isn`t physical in nature. Patent rights, goodwill, brand acknowledgment, and protected innovation, like licenses, brand names, and copyrights, are largely a part of intangible resources. Tangible resources incorporate land, vehicles, hardware, and stock.

Correct Answered :

Wrong Answered :

35. Profit is a part of

A

Income

B

Owner`s capital

C

Assets

D

All of the above

ABK NONE
Correct Answer : B
Explanation :

Owner`s capital

Correct Answered :

Wrong Answered :

36. Which reserve is not shown in balance sheet

A

Secret reserve

B

Capital reserve

C

General reserve

D

All of the above

ABK NONE
Correct Answer : A
Explanation :

Secret reserve

Correct Answered :

Wrong Answered :

37. Which of the following is a non cash expense

A

Depreciation

B

Salary paid

C

Rent paid

D

Carriage

ABK NONE
Correct Answer : A
Explanation :

Depreciation

Correct Answered :

Wrong Answered :

38. Which of the following is a fixed asset

A

Cash

B

Building

C

Stock

D

Debtors

ABK NONE
Correct Answer : B
Explanation :

Buidling

Correct Answered :

Wrong Answered :

39. Which of the following is a current asset

A

Plant & machinery

B

Land & building

C

Debtors

D

Furniture

ABK NONE
Correct Answer : C
Explanation :

Debtors

Correct Answered :

Wrong Answered :

40. Purchase of goods on credit

A

Increased liability

B

Decrease assets

C

Decrease in total assets

D

No effect of total of assets

ABK NONE
Correct Answer : A
Explanation :

Assets - Increase
Liabilities - Increase
Capital - No effect
When goods are purchased on credit, stock increases which is an asset and creditors increase, which is a liability.

Correct Answered :

Wrong Answered :

41. Purchase of office equipment on credit will lead to

A

Decrease in Capital

B

Decrease in liability

C

Increase in assets

D

All of the above

ABK NONE
Correct Answer : C
Explanation :

Increase in assets

Correct Answered :

Wrong Answered :

42. Purchase of building from bank

A

Decrease in total liabilities

B

Increase in total assets

C

Decrease in total assets

D

No effect of total asets

ABK NONE
Correct Answer : D
Explanation :

No effect of total assets

Correct Answered :

Wrong Answered :

43. Journal is a book of

A

Original entry

B

All cash transactions

C

Secondary Entry

D

All non cash transaction

ABK NONE
Correct Answer : A
Explanation :

Original entry

Correct Answered :

Wrong Answered :

44. If two or more transactions of the same nature are journalized together having wither the debit of the credit account common is known as

A

Compound journal entry

B

Separate journal entry

C

Posting

D

None of the above

ABK NONE
Correct Answer : A
Explanation :

Compound journal entry

Correct Answered :

Wrong Answered :

45. In journal there are

A

4 columns

B

5 columns

C

6 columns

D

7 columns

ABK NONE
Correct Answer : B
Explanation :

5 columns

Correct Answered :

Wrong Answered :

46. Income tax paid by the sole proprietor from business bank account is debited to

A

Income tax account

B

Bank Account

C

Capital Account

D

Not to be shown in the business books

ABK NONE VERIFIED
Correct Answer : A
Explanation :

The entries to be passed after payment of income tax are
Income Tax A/c Dr.
To Bank A/c 
Therefore, income tax paid, is debited to Income Tax Account.

Correct Answered :

Wrong Answered :

47. Recording of a transaction in a journal is called

A

Posting

B

Entry

C

Transfer

D

Ruler

ABK NONE
Correct Answer : B
Explanation :

Entry

Correct Answered :

Wrong Answered :

48. Narrations are given at the end of

A

Final accounts

B

Trial balance

C

Each Ledger account

D

Each journal entry

ABK NONE
Correct Answer : D
Explanation :

Each journal entry

Correct Answered :

Wrong Answered :

49. Sunset Tours has a Rs. 3500 account receivable from Mohan On January 20, the alter makes a partial payment of Rs 2100 to Sunset Tours. The journal entry made on January 20 by Sunset Tours to record this transaction includes

A

A credit to the cash received account of Rs 2100

B

A credit to the accounts receivable amount of Rs 2100

C

A debit to the cash account of Rs 1400

D

A debit to the accounts receivable account of Rs 1400

ABK NONE
Correct Answer : B
Explanation :

A credit to the accounts receivable amount of Rs 2100

Correct Answered :

Wrong Answered :

50. Journal entry for Rs 6000 stolen from the sale of the firm will be

A

Dr. P & L a/c and Cr. Cash embezzlement a/c Rs 6000

B

Dr. Cash embezzlement a/c and cr. cash a/c Rs 6000

C

Dr. cash a/c and Cr. P & L a/c rs 6000

D

None of the above

ABK NONE
Correct Answer : B
Explanation :

Dr. Cash embezzlement a/c and cr. cash a/c Rs 6000

Correct Answered :

Wrong Answered :

51. Income tax liability of the proprietor Rs 1200 was paid out of petty cash. Journal entry will be

A

Dr drawings and Cr. cash a/c Rs 1200

B

Dr. drawings and Cr. petty cash a/c Rs 1200

C

Dr income tax and Cr cash a/c Rs 1200

D

None of the above

ABK NONE
Correct Answer : B
Explanation :

Dr. drawings and Cr. petty cash a/c Rs 1200

Correct Answered :

Wrong Answered :

52. Journal entry for wages paid Rs 3000 for installation of plant will be

A

Dr. plant repairs a/c and Cr. cash a/c rs 3000

B

Dr wages a/c and Cr. cash a/c 3000

C

Dr. plant a/c and Cr. cash a/c 3000

D

None of the above

ABK NONE
Correct Answer : C
Explanation :

Dr. plant a/c and Cr. cash a/c 3000

Correct Answered :

Wrong Answered :

53. Interest earned but not received, adjustment entry will be

A

Accured interest Dr. to customer

B

Accrued interest A/C dr To interest A/C.

C

Cash a/c Dr. to interest

D

None of the these

ABK NONE
Correct Answer : B
Explanation :

Accrued interest A/C dr To interest A/C.

Correct Answered :

Wrong Answered :

54. Carriage charges paid for a new plant purchased if debited to carriage account would effect

A

Plant Account

B

Carriage Account

C

Plant and Carriage Accounts

D

None of the above

ABK NONE
Correct Answer : A
Explanation :

Plant Account

Correct Answered :

Wrong Answered :

55. The debts written off as bad, if recovered subsequently are

A

Credited to bad debts recovered account

B

Credited to debtors account

C

Debited to profit and loss account

D

None of the above

ABK NONE
Correct Answer : A
Explanation :

While journalizing for bad debts debtor`s personal account is credited and bad debts account is debited because bad debts written off are treated as a loss to the business and now when they are recovered it is seen as a fresh gain.

Correct Answered :

Wrong Answered :

56. Which of the following types of information are found in subsidiary ledgers, but not in the general ledger?

A

Total cost of goods sold for the period.

B

The quantity of a particular product sold during the period.

C

The amount owed to a particular creditor.

D

The portion of total current assets that consist of cash

ABK None
Correct Answer : B
Explanation :

The quantity of a particular sold during the period.

Correct Answered :

Wrong Answered :

57. Cash book is a form of

A

Trial balance

B

Journal

C

Ledger

D

Both B and C

ABK NONE
Correct Answer : D
Explanation :

All cash transactions are primarily recorded in it as soon as they take place; so it is a journal (a book of original entry). On the other hand, the cash aspect of all cash transactions is finally recorded in the Cash Book (no posting in Ledger); so a Cash Book is also a Ledger (a book of final entry).

Correct Answered :

Wrong Answered :

58. Journal proper records

A

Bills receivables

B

Bills payable

C

Cash payments

D

Opening entry

ABK NONE
Correct Answer : D
Explanation :

Opening entry

Correct Answered :

Wrong Answered :

59. Sales return book records ____

A

Credit sales return

B

Cash sales return

C

Both A and B

D

Purchase return

ABK NONE
Correct Answer : A
Explanation :

Goods sold on credit when returned by the customer is recorded in returned inward book or sales return book. Sales return book shows a debit balance as it is reverse to the sales, which has credit balance. When the goods are returned by the customer one note is prepared which is called as "Credit note". The returned outward book is used to record return of goods purchased on credit.

Correct Answered :

Wrong Answered :

60. Bad debts entry is passed in

A

Sales Book

B

Cash Book

C

Journal Book

D

None of the above

ABK NONE
Correct Answer : C
Explanation :

Journal book

Correct Answered :

Wrong Answered :

61. Three column cash book records

A

Only cash transaction

B

All transactions

C

Cash, Bank and Discount transactions

D

Cash purchases and cash sales transactions

ABK NONE
Correct Answer : C
Explanation :

Cash, Bank and Discount transactions

Correct Answered :

Wrong Answered :

62. What explains the financial position of the reporting entity at the end of accounting period?

A

Balance Sheet

B

Income Statement

C

Ledger

D

Notes and Schedules

ABK Finance Inspector 2024
Correct Answer : A
Explanation :

The financial position of a reporting entity at the end of an accounting period is typically explained by the **balance sheet**. The balance sheet provides a snapshot of the entity`s assets, liabilities, and equity at a specific point in time, usually at the end of the financial year.

Correct Answered :

Wrong Answered :

63. What is written evidence in support of a business transaction?

A

Ledger

B

Voucher

C

Journal

D

None of the above

ABK Finance Inspector 2024
Correct Answer : B
Explanation :

The written evidence in support of a business transaction is a **voucher**. Vouchers are documents that provide proof of the occurrence of a transaction, such as invoices, receipts, bills, or any other document supporting a financial transaction.

Correct Answered :

Wrong Answered :

64. Trademarks, Copyrights and Patents are classified under _____ assets.

A

Intangible

B

Fixed

C

Current

D

Tangible

ABK Finance Inspector 2024
Correct Answer : A
Explanation :

Trademarks, copyrights, and patents are classified under **intangible assets**. Intangible assets are non-physical assets that provide a company with long-term value, often through legal protections or intellectual property rights.

Correct Answered :

Wrong Answered :

65. Current assets minus current liabilities is equal to ______

A

Losing Capital

B

Gaining Capital

C

Fixed Capital

D

Working Capital

ABK Finance Inspector 2024
Correct Answer : D
Explanation :

Current assets minus current liabilities equals **working capital**. Working capital represents the liquidity available to a business after deducting its short-term liabilities from its short-term assets.

Correct Answered :

Wrong Answered :

66. Which of the following comes under nominal account?

A

Bank Account

B

Commission Account

C

Furniture Account

D

Interest Received Account

ABK Finance Inspector 2024
Correct Answer : B
Explanation :

Among the options listed, the **commission account** comes under nominal accounts. Nominal accounts are accounts that relate to revenues, expenses, gains, or losses, such as income and expense accounts used in businesses for tracking transactions.

Correct Answered :

Wrong Answered :

67. What is the name of the statement sent along with the purchase return?

A

Credit Note

B

Bills Payable Book

C

Debit Note

D

Purchase Return Book

ABK Finance Inspector 2024
Correct Answer : C
Explanation :

The statement sent along with the purchase return is typically called a **debit note**. A debit note is a document issued by a buyer to a seller as a formal request for a credit note, usually when goods are returned or when there is an overcharge. It serves as a record of the return and the adjustment needed in the seller`s accounts.

Correct Answered :

Wrong Answered :

68. Which fo the following is not an inventory?

A

Raw Material

B

Finished Products

C

Both A & B

D

Machines

ABK Finance Inspector 2024
Correct Answer : B
Explanation :

Among the options provided, **raw material** is not considered inventory in the traditional sense because it refers to materials and components that are yet to be used in production or are in the process of being used. Finished goods, on the other hand, are completed products ready for sale or distribution and are typically considered inventory.

Correct Answered :

Wrong Answered :

69. The account which shows the classified summary of transactions of a cash book in a non-trading concern is known as ______.

A

Trading A/C

B

Profit and Loss Appropriatioin A/C

C

Receipt Payment A/C

D

Trading and P/L A/C

ABK Finance Inspector 2024
Correct Answer : C
Explanation :

The account which shows the classified summary of transactions of a cash book in a non-trading concern is known as the **receipts and payments account**. This account summarizes all cash receipts and payments made by a non-trading organization (such as clubs, charities, or societies) during a specific period, similar to how a cash flow statement operates in a trading concern.

Correct Answered :

Wrong Answered :

70. Which of the following does not have the features of foreign bills?

A

A bill drawn in India on a person resident outside India and made payable outside India

B

A bill drawn outside India and made payable outside India

C

A bill drawn outside India and made payable in India

D

A bill drawn in India and made payable in India

ABK Finance Inspector 2024
Correct Answer : D
Explanation :

The option that does not have the features of foreign bills is:

- **A bill drawn in India and made payable in India**

Foreign bills typically involve transactions where the drawee and the place of payment are located in different countries or involve foreign currencies. Therefore, a bill drawn and made payable entirely within India does not fall under the category of foreign bills.

Correct Answered :

Wrong Answered :

71. Banking sector comes under which of the following sectors?

A

Manufactering Sector

B

Industrial Sector

C

Service Sector

D

None of these

ABK Fianance Inspector 2024
Correct Answer : C
Explanation :

The banking sector comes under the **service sector**. The service sector includes industries that provide services rather than producing tangible goods. Banking and financial services are a significant part of the service sector, which also includes areas such as healthcare, education, hospitality, and information technology services.

Correct Answered :

Wrong Answered :

72. Which of the following is used for checking the arithmetical accuracy of the account books?

A

Ledger

B

Trial Balance

C

Journal

D

All of these

ABK Finance Inspector 2024
Correct Answer : B
Explanation :

The **Trial Balance** is used for checking the arithmetical accuracy of the account books. It lists the balances of all ledger accounts and helps ensure that total debits equal total credits, indicating that the books are mathematically accurate.

Correct Answered :

Wrong Answered :

73. When assets are subtracted from liabilities it will be equal to ?

A

Capital

B

Net Income

C

Working Capital

D

Goodwill

ABK Finance Inspector 2024
Correct Answer : A
Explanation :

When assets are subtracted from liabilities, it will be equal to **capital** (also referred to as equity or owner`s equity). This represents the residual interest in the assets of the entity after deducting liabilities.

Correct Answered :

Wrong Answered :

74. A current asset that can be transferred into cash within three months is known as :

A

Cash equivalent

B

Intangible asset

C

Operating asset

D

Cash asset

ABK Finance Inspector 2024
Correct Answer : A
Explanation :

A current asset that can be converted into cash within three months is known as a **cash equivalent**. Cash equivalents are highly liquid assets that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Examples include treasury bills, commercial paper, and money market funds.

Correct Answered :

Wrong Answered :

75. The amount of Subscription received from members by a Non-Profit organisation is shown in which of the following?

A

Debit side of Income and Expenditure Account

B

Credit side of Income and Expenditure Account

C

Liability Side of Balance Sheet

D

Assets side of Balance Sheet

ABK Finance Inspector 2024
Correct Answer : B
Explanation :

The amount of subscription received from members by a Non-Profit organization is typically shown on the Credit side of the Income and Expenditure Account. In the context of non-profit organizations, the Income and Expenditure Account functions similarly to an Income Statement in a for-profit organization, where income (such as subscriptions) is listed on the credit side as revenue.

Correct Answered :

Wrong Answered :

76. What are three additional days known as that a drawer gives to the drawee for payment?

A

Conditional days

B

Additional days

C

Days of grace

D

Days of rebate

ABK Finance Inspector
Correct Answer : C
Explanation :

Three additional days given by a drawer to the drawee for payment are known as "days of grace." These days are typically added to the due date of a bill of exchange or promissory note, allowing the drawee additional time to make payment without incurring penalties or default.

Correct Answered :

Wrong Answered :

77. Amount spent on increasing the seating capacity in a cinema hall is a 

A

Capital expenditure

B

Revenue expenditure

C

Deferred revenue expenditure

D

None of the above

ABK Finance Inspector 2024
Correct Answer : A
Explanation :

The amount spent on increasing the seating capacity in a cinema hall would generally be considered a **capital expenditure**.

Here`s why:

Capital expenditures are expenses incurred to acquire, improve, or extend the life of an asset. Increasing the seating capacity in a cinema hall involves significant construction or renovation work, which typically enhances the cinema hall as a long-term asset of the business. These expenditures are not consumed immediately but are expected to provide benefits over multiple accounting periods. Therefore, they are treated as capital expenditures.

In contrast, revenue expenditures are generally incurred for the day-to-day operations of the business to maintain current operations and are expensed in the period they are incurred. Examples of revenue expenditures in the context of a cinema hall might include routine maintenance costs, cleaning expenses, or advertising costs for current showings.

To summarize, the amount spent on increasing the seating capacity in a cinema hall is classified as a **capital expenditure** because it involves improving a long-term asset (the cinema hall) rather than being a day-to-day operating expense.

Correct Answered :

Wrong Answered :

78. Total amount of depreciation of an asset cannot exceed its

A

Depreciable value

B

Scrap value

C

Market value

D

None of these

ABK Finance Inspector 2024
Correct Answer : A
Explanation :

The total amount of depreciation of an asset cannot exceed its depreciable value

Correct Answered :

Wrong Answered :

79. The overriding purpose of financial accounting is to summarize financial activity in business in the ____

A

Profit and loss statement

B

Balance Sheet

C

Cash Flow Statement

D

All of the Above

ABK Finance Inspector 2024
Correct Answer : D
Explanation :

The overriding purpose of financial accounting is to summarize financial activity in business in the **financial statements**.

Financial statements typically include:

1. **Income Statement (Profit and Loss Statement):** Summarizes revenue, expenses, and profits over a specific period.
2. **Balance Sheet:** Provides a snapshot of a company`s assets, liabilities, and shareholders equity at a specific point in time.
3. **Cash Flow Statement:** Shows the inflows and outflows of cash over a period.
4. **Statement of Changes in Equity:** Details changes in the company`s equity over a period.

These statements are used by various stakeholders, including investors, creditors, management, and regulators, to assess the financial health and performance of the business.

Correct Answered :

Wrong Answered :

80. Discounts received are

A

Buyer of goods granted discount by seller

B

Deduction when we receive cash

C

Given by us when we sell goods on credit

D

None of these

ABK Finance Inspector 2024
Correct Answer : A
Explanation :

Discounts received are:

**Buyer of goods granted discount by seller**

This means that the buyer of goods receives a reduction in the purchase price from the seller, often for reasons such as early payment or bulk purchasing. This discount is recorded in the buyer`s financial records as a reduction in the cost of purchases or expenses.

Correct Answered :

Wrong Answered :

81. What is an operating cycle?

A

A metric that expresses the time (measured in days) it takes for a company to convert its investments in inventory and other resources into cash flows from sales

B

The time it takes a company to buy goods, sell them and receive cash from the sale of said goods

C

The process of hiring personnel to conduct the daily operations of the business

D

Colective process of identifying, analysing, and recording the accounting events of a company

ABK Finance Inspector 2024
Correct Answer : B
Explanation :

An operating cycle, also known as the cash conversion cycle, refers to the period it takes for a business to purchase inventory, sell the inventory, and collect cash from the sale. It essentially measures the efficiency and effectiveness of a company’s operations and management.

The operating cycle can be broken down into three main components:

1. **Inventory Period:** The time it takes for a company to purchase inventory and then sell it. This includes the duration that the inventory is held before it is sold.

2. **Accounts Receivable Period:** The time it takes for the company to collect cash from customers after the sale of inventory. This period starts when the inventory is sold and ends when the payment is received from customers.

3. **Accounts Payable Period:** The time the company takes to pay its suppliers for the inventory purchased. This period starts when the inventory is purchased and ends when the payment is made to suppliers.

The formula to calculate the operating cycle is:

[ ext{Operating Cycle} = ext{Inventory Period} + ext{Accounts Receivable Period} - ext{Accounts Payable Period} ]

A shorter operating cycle indicates that a company is able to quickly turn its inventory into cash, which is generally a sign of efficiency and good management. Conversely, a longer operating cycle may indicate inefficiencies or potential liquidity issues.

Correct Answered :

Wrong Answered :

82. According to the going concern concept, a business entity should assumed to have

A

A very short life

B

An indefinite life

C

A long life

D

None of the above

ABK Finance Inspector 2024
Correct Answer : B
Explanation :

According to the going concern concept, a business entity is assumed to have an indefinite or continuous life. This accounting principle implies that the business will continue to operate for the foreseeable future and has no intention or need to liquidate or significantly curtail its operations.

Correct Answered :

Wrong Answered :

83. Which of these item will appear on the credit side in the ledger account?

A

Rent expenses

B

Cash received

C

Received a Discount

D

Purchases

ABK Finance Inspector 2024
Correct Answer : C
Explanation :

In a ledger account, the following item will appear on the credit side:

Received a Discount

Correct Answered :

Wrong Answered :

84. Stolen merchandise should be debited to :

A

Sales account

B

Purchases account

C

Loss by theft account

D

No entry

ABK Finance Inspector 2024
Correct Answer : C
Explanation :

Stolen merchandise should be debited to:

Loss by theft account

When merchandise is stolen, it represents a loss to the business. According to accounting principles, losses such as theft are typically recorded in a specific account called "Loss by theft" or "Loss on theft of merchandise." This allows the business to track and report such losses separately from other types of expenses or revenues.

Correct Answered :

Wrong Answered :

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