Theory Base of Accounting, Accounting Standards and Indian Accounting Standards (Ind-AS)

Question by CA (Dr.) G.S.GREWAL – Series 1

True / False

  1. Transactions and events that cannot be measured in money terms are not recorded in the books of accounts. It is due to Money Measurement Concept.

Fill in the Blank

  1. The system of recording transactions based on Dual Aspect Concept is known as ________________.

Multiple Choice Question

  1. The proprietor is treated as a creditor to the extent of his capital according to:

(a)     Cost Concept

(b)     Business Entity Concept

(c)     Going Concern Concept

(d)     Materiality Concept

Answer – Question by CA (Dr.) G.S.GREWAL – Series 1

  1. True

Reason Money Measurement Concept holds that only those transactions and events be recorded in the books of accounts which can be measured in money terms.

Correct Statement: Transactions and events that can be measured in money terms are recorded in the books of accounts. It is due to Money Measurement Concept.

  1. Double Entry System
  2. (b)

Reason: Business Entity Concept requires that business be considered as separate and distinct from its owner. Thus, the proprietor is considered to be a creditor to the extent of his capital.

Accounting Procedures – Rule of Debit and Credit

Question by CA (Dr.) G.S.GREWAL – Series 2

True / False

  1. The rule “Debit all expenses and losses and credit all gains and incomes” is applicable to Personal Account

Fill in the Blank

  1. The debit balance of a personal account shows ______________.

Multiple Choice Question

  1. What is the type of Drawings Account?

(a)     Personal

(b)     Real

(c)     Nominal

(d)     Expense

Answer – Question by CA (Dr.) G.S.GREWAL – Series 2

  1. False

Reason Nominal Accounts are the accounts relating to expenses, losses, incomes and gains .Expenses and Losses are debited while incomes and gains are credited.

Correct Statement: The rule “Debit all expenses and losses and credit all incomes and gains” applies to Nominal Account.

  1. amount receivable
  2. (a)

Reason: Drawings is a personal account being the amount withdrawn or goods taken for personal use. It is deducted from Capital Account at the end of the year.

Basic Accounting Terms              

Question by CA (Dr.) G.S.GREWAL – Series 3

True / False

  1. Ledger is known as Book of Original Entry.

Fill in the Blank

  1. Cash Account can have either ______________________ or _________________ balance.

Multiple Choice Question

  1. In Accounting, Goods is defined as:

(a)     Items which purchased for own consumption.

(b)     Items which are purchased for charity.

(c)     Items which are purchased for resale.

(d)     Items without any defect.

Answer – Question by CA (Dr.) G.S.GREWAL – Series 3

  1. False

Reason All entries primarily are first recorded in the Journal thereafter the recorded transactions are posted into Ledger Accounts. Therefore, Journal is termed as Book of Original Entry.

  1. debit balance or nil
  2. (c)

Reason: Goods are physical items of trade. It is a term that makes up the sale and

Accounting Procedures – Rule of Debit and Credit    

Question by CA (Dr.) G.S.GREWAL – Series 4

True / False

  1. Personal Accounts are related to Individuals, Banks, Companies, etc.

Fill in the Blank

  1. Nominal Accounts are related to ___________________________.

Multiple Choice Question

  1. The rule ‘Debit what comes in Credit what goes out’ is applicable to:-

(a)     Personal Account

(b)     Real Account

(c)     Nominal Account

(d)     Liability Account

Answer – Question by CA (Dr.) G.S.GREWAL – Series 4

  1. True

Reason According to the classification of accounts, Accounts are of three categories i.e., Real Accounts (Represent tangible and intangible assets), personal accounts (representing individuals, artificial person’s accounts and representative accounts such as Prepaid Insurance, Outstanding Rent)  and Nominal Accounts representing expenses, losses, incomes and gains. Thus, Individuals, Banks, Companies etc. are personal accounts.

  1. Expenses, Losses and Incomes
  2. (b)

Reason: Real Accounts are tangible and intangible fixed assets of the business. Tangible Assets are those Assets which have physical form and can be seen and touched. Intangible fixed assets are those assets which do not have physical form and cannot be seen or touched. The assets account has debit balance representing assets owned by the business. An increase or purchase of fixed assets mean asset has come in and thus, is debited. On the other hand, sale or disposal of fixed asset means asset has gone out (sold, discarded) and thus, is credited.

Financial Statements of Sole Proprietorship

Question by CA (Dr.) G.S.GREWAL – Series 5

True / False

  1. Capital and Revenue Expenditure is differentiated following the Materiality Concept.

Fill in the Blank

  1. An Expenditure is Revenue in nature when it benefits the _______________ period only.

Multiple Choice Question

  1. Revenue Expenditure is transferred to:

(a)     Balance Sheet.

(b)     Profit and Loss Account.

(c)     Partly to Balance Sheet and Partly to Profit and Loss Account.

(d)     Trading Account.

Answer – Question by CA (Dr.) G.S.GREWAL – Series 5

  1. False

Reason Expenses are recognised in the Profit and Loss Account applying the Matching Concept which requires that expenses be set out in the Profit and Loss Account incurred to earn the revenue. An expense is capitalised only if they are traced directly to definable stream of future benefits. Thus, expense is differentiated between revenue and capital due to Going Concern Concept.

  1. Current
  2. (b)

Reason: Profit earned or loss incurred during an accounting period is ascertained by comparing the revenue incomes and revenue expenditure. They are transferred to Profit and Loss Account to ascertain it.

Theory Base of Accounting, Accounting Standards and Indian Accounting Standards (Ind-AS)  

Question by CA (Dr.) G.S.GREWAL – Series  6

True / False

  1. Accounting principles and policies once adopted should be followed year after year unless there is a change in law or accounting standards. It is based on Materiality Concept.

Fill in the Blank

  1. An accountant has not posted few certain cash transactions in the ledger account. As a result trial balance does not agree in this case _________________ Concept is not followed.

Multiple Choice Question

  1. Ajay, a customer had placed an order for purchase of furniture of ₹ 50,000 against which he advances ₹ 5,000. The businessman wants to record it as sale. By doing so, which of the following accounting concepts will be violate?

(a)     Money Measurement Concept

(b)     Accounting Period Concept

(c)     Going Concern Concept

(d)     Matching Concept

Answer – Question by CA (Dr.) G.S.GREWAL – Series 6

  1. False

Reason Consistency Concept is the fundamental accounting concept which requires the entity to follow the same accounting principles and policies year after year.

  1. Dual Aspect
  2. (b)

Reason: Matching Concept holds that if revenue is recognised its corresponding cost should also be recognised. In the present situation, the business has not incurred any cost to earn the revenue, it is only an order that has been received and is yet to be executed. If he recognises it as revenue not matched with corresponding cost, Matching Concept will be violated.

Cash Book                         

Question by CA (Dr.) G.S.GREWAL – Series 7

True / False

  1. Cash column in the Cash Book cannot have credit balance whereas Bank column may have credit balance.

Fill in the Blank

  1. Cash Balance appearing in Trail Balance is transferred to ___________________ side of the Balance Sheet.

Multiple Choice Question

  1. The closing balance of the Petty Cash Book is

(a)     Expense/Expenditure

(b)     Profit/Gain

(c)     Asset

(d)     Liability

Answer – Question by CA (Dr.) G.S.GREWAL – Series 7

  1. True

Reason: Cash Column in the Cash Book cannot have debit balance because credit balance means amount spent is more than the Cash Balance. Whereas, Bank Column of the Cash Book may have credit balance(Overdraft balance) meaning bank is overdrawn.

  1. Assets
  2. (c)

Reason: The closing balance of the Petty Cash Book is  an asset because it is Cash in hand.

Accounting Equation    

Question by CA (Dr.) G.S.GREWAL – Series 8

True / False

  1. Purchase of an asset for cash would cause Total Liabilities to decrease.

Fill in the Blank

  1. Amount owed to an outsider is a _________.

Multiple Choice Question

  1. If total Assets of a business are ₹ 1,80,000 and net worth is ₹ 50,000, then outside liability will be:-

(a)     ₹ 1,30,000

(b)     ₹ 2,30,000

(c)     ₹ 1,80,000

(d)     ₹ 50,000

Answer – Question by CA (Dr.) G.S.GREWAL – Series 8

  1. False

Reason Purchase of assets for cash would cause Cash in hand to decrease on asset being  purchase for cash as it means cash in hand is reduced.

  1. liability
  2. (a)

Reason: Total Assets = Total Liabilities + Net Worth

₹ 1,80,000 = Total Liabilities + ₹ 50,000

Total Liabilities = ₹ 1,30,000

Accounting Equation                                       

Question by CA (Dr.) G.S.GREWAL – Series – 9

True / False

  1. Difference between Total Asset and External Liabilities is Net Worth.

Fill in the Blank

  1. If total assets of a business are ₹ 3,80,000 and Outside Liabilities is ₹ 1,00,000. Then Net Worth will be ___________________.

Multiple Choice Question

  1. If the Owner’s Equity is ₹ 80,000 and external liability is ₹ 40,000, The total assets of the firm will be:

(a)     ₹ 1,00,000

(b)     ₹ 1,20,000

(c)     ₹ 80,000

(d)     ₹ 1,40,000

Answer – Question by CA (Dr.) G.S.GREWAL – Series 9

  1. True

Reason Net worth is the difference between Total Assets and External liabilities.

  1. ₹ 2,30,000
  2. (b)

Reason: Assets = Liabilities + Capital

                       = ₹ 40,000 + ₹ 80,000

                      = ₹ 1,20,000

Capital and Revenue Expenditure

Question by CA (Dr.) G.S.GREWAL – Series 10

True / False

  1. Wages paid to Anil for installation of machinery should be debited to Wages Account.

Fill in the Blank

  1. An example of deferred Revenue Expenditure is _______________.

Multiple Choice Question

  1. Capital Expenses and Receipts are transferred to

(a)     Trading Account

(b)     Profit and Loss Account

(c)     Trial Balance

(d)     Balance Sheet

Answer – Question by CA (Dr.) G.S.GREWAL – Series 10

  1. False

Reason Wages paid to Anil for installation of machinery. It is a principal that expenses incurred on acquiring and making the asset ready for use is a capital expenditure and is debited to that particular asset account. Therefore, Wages paid to Anil for installing the machinery will be debited to Machinery Account.

  1. Deferred Revenue Expenditure
  2. (d)

Reason: Capital expenses are the expenses which result enduring benefit. Capital Receipts are receipts arising from introduction of Capital, Receipt of loans and proceeds from sale of assets etc. They result in increase in liability or decrease in assets. Thus, They are shown in the Balance Sheet.

Bill of Exchange

Question by CA (Dr.) G.S.GREWAL – Series 11

True / False

  1. A person who endorse a bill is called Endorser.

Fill in the Blank

2.Bill of exchange signs by  ________________.

Multiple Choice Question

  1. Bill of exchange is drawn for 4 months on 2nd February, 2019. The due date of bill of exchange will be:-

(a)     2nd June, 2019

(b)     3rd June, 2019

(c)     5th June, 2019

(d)     6th June, 2010

Answer – Question by CA (Dr.) G.S.GREWAL – Series 11

  1. True

Reason Bill of Exchange can be passed on to another person by endorsement. The primary liability on a bill of exchange is that of the acceptor. If he does not pay, a holder can recover the amount from any of the previous endorsers or the drawee.

  1. Drawee
  2. (c)

Reason: The due date of each bill is calculated as follows:

The period of 4 months expires on 2nd June, 2019. Add to it 3 Grace Days. Thus, the due date is 5th June, 2019.

Classification of Accounts

Question by CA (Dr.) G.S.GREWAL – Series 12

True / False

  1. Cash Book is an example of General Journal.

Fill in the Blank

  1. Trade Mark is an ___________________________-.

Multiple Choice Question

  1. Rent paid is a

(a)     Personal Account

(b)     Real Account

(c)     Nominal Account

(d)     Liability Account

Answer – Question by CA (Dr.) G.S.GREWAL – Series 12

  1. False

Reason  Cash Book is a special journal as it is maintained to record cash and banlk transactions only.

  1. intangible asset
  2. (c)

Reason:  Accounts which relate to expenses, losses, gains, revenue, etc., are Nominal Accounts. These are Salary Account, Purchases Account, Sales Account, Rent paid Account. The net result of all the Nominal Accounts is profit or loss which is transferred to the Capital Account.

Financial Statements of Sole Proprietorship

Question by CA (Dr.) G.S.GREWAL – Series 13

True / False

  1. Bank overdraft is shown as a Current Asset.

Fill in the Blank

  1. A trader bought goods of ₹ 50,000. He sold the goods for ₹ 80,000 incurring expenses of ₹ 12,000 (including carriage outwards of ₹ 1,000). His gross profit is ___________________.

Multiple Choice Question

  1. Opening Stock ₹ 1,00,000; Closing Stock ₹ 60,000; Purchases ₹ 50,000 and Gross Profit is 10% of sales. The gross profit is:

(a)     ₹ 10,000

(b)     ₹ 12,000

(c)     ₹ 20,000

(d)     ₹ 15,000

Answer – Question by CA (Dr.) G.S.GREWAL – Series 13

  1. False

Reason  Bank overdraft means amount overdrawn from the bank and thus, payable to it. It is a current liability of the enterprise as it is payable within a period of twelve months.

  1. ₹ 19,000
  2. (a)

Reason:  Cost of goods sold is ₹ 90,000 (₹ 1,00,000 (Opening Stock) + ₹ 50,000 (Purchases) – ₹ 60,000 (Closing Stock), which is 90% of Sales (Gross Profit being 10% of Sales).

Therefore, Sales is ₹ 90,000 X 100/90 = ₹ 1,00,000

Gross Profit = Sales – Cost of Goods Sold i.e., Rs, 1,00,000 – ₹ 90,000 = ₹ 10,000.

Depreciation

Question by CA (Dr.) G.S.GREWAL – Series 14

True / False

  1. Depreciation is the process of allocation of cost of the assets over its estimated useful life.

Fill in the Blank

  1. The amount of depreciation declines every year under __________________.

Multiple Choice Question

  1. Out of these, on which of the following depreciation is charged?

a) Fixed Assets

b) Current Assets

c) Liquid Assets

d) Fictitious Assets

Answer – Question by CA (Dr.) G.S.GREWAL – Series 14

  1. True

Reason: Assets are recorded at historical cost and are depreciated over its useful life. A prime reason for depreciation is wear and tear due to its use in the business. Thus, depreciation is a process of allocation of cost of assets over its life.

  1. Written-down value method
  2. (a)

Reason:  Depreciation is charged on the fixed assets alone as current assets and liquid are reflected at lower of cost or realisable value. Fictitious Assets are amortised over their period it is expected to be useful.

Rectification of Errors

Question by CA (Dr.) G.S.GREWAL – Series 15

True / False

  1. ₹ 5,000 spent on repairing of second hand machinery purchased is transferred to repairs A/c. It is an error of Commission.

Fill in the Blank

  1. Preparation of a trial balance helps in locating ____________________.

Multiple Choice Question

  1. Errors which affect one account are:

(a)     Errors of omission

(b)     Errors of principle

(c)     Error of posting

(d)     Error of commission

Answer – Question by CA (Dr.) G.S.GREWAL – Series 15

  1. False

Reason: Expense incurred to make the asset ready for use is a capital expenditure. Expenditure incurred on repair of second hand machinery to make it ready for use should be debited to Machinery Account and not to Repairs account. It is thus, an error of principle.

  1. errors
  2. (d)

Reason:  Error of commission means error arising due to writing of wrong amount, wrong posting, wrong casting, wrong amount being posted and wrong balancing of account etc., in brief, it arises due to incorrect recording of transactions either wholly or partially. One side errors are those errors in which one aspect is correctly recorded but the other side is incorrectly recorded. Thus, it can be categorized as Error of Commission.

Accounting Equation                                                                                                            

Question by CA (Dr.) G.S.GREWAL – Series 16

True / False

  1. Money which the firm has borrowed and has not yet repaid is a liability of a firm.

Fill in the Blank

  1. In accounting, the term ‘purchases’ means goods purchased for _____________.

Multiple Choice Question

  1. Which of the following equations is correct?

(a)     Assets + Capital = Liabilities

(b)     Liabilities – Capital = Assets

(c)     Capital = Assets + Liabilities

(d)     Capital = Assets – Liabilities

Answer – Question by CA (Dr.) G.S.GREWAL – Series 16

  1. True

Reason: Liabilities are obligations to pay amount of money.

  1. resale
  2. (d)

Reason:  Basic Accounting Equation is:-

Assets = Liabilities + Capital

Capital = Assets – Liabilities

Subsidiary Books and Ledger Books 

Question by CA (Dr.) G.S.GREWAL – Series 17

True / False

  1. A Journal is also known as Book of Original Entry.

Fill in the Blank

  1. Purchases Day Book records only credit purchases of _____________.

Multiple Choice Question

  1. A debtor who returned goods and is sent a note by the Seller. The note is called:-

(a)     Debit Note

(b)     Credit Note

(c)     Refund Note

(d)     Return Note

Answer – Question by CA (Dr.) G.S.GREWAL – Series 17

  1. True

Reason: A Journal is also known as Book of Original Entry as Journal is a book of primary entry or a book of original entry in which transactions are first recorded in a chronological order i.e., in the order or sequence they are entered.

  1. goods
  2. (b)

Reason:  Credit Note is made out evidencing that credit has been granted to a debtor e.g., if a customer returns goods previously invoiced, or the customer is allowed further discount, a credit not is issued.

Adjustment in Financial Statements 

Question by CA (Dr.) G.S.GREWAL – Series 18

True / False

  1. Carriage on goods sold is shown in Balance Sheet.

Fill in the Blank

  1. Income tax paid for the owner is debited to _______________ .

Multiple Choice Question

  1. Commission received in Advance existing in the Trial Balance is shown on the:-

(a)     Assets side of the Balance Sheet

(b)     Liability side of the Balance Sheet

(c)     Debit side of the Profit and Loss A/c

(d)     Credit Side of the Profit and Loss A/c

Answer – Question by CA (Dr.) G.S.GREWAL – Series 18

  1. False

Reason: Carriage on Goods Sold is treated as indirect expenses are therefore shown in the Profit and Loss A/c. Carriage on Goods sold is an expense related to sales. It is thus, an indirect expense shown in the Profit and Loss Account.

  1. Capital A/c
  2. (b)

Reason:  As the commission received in advance is liability, till it becomes due, as soon as it will become due it will be treated as income. Commission received in advance is in the nature of amount received against which service is yet to be rendered. Once the service has been rendered, it will become an income. Till that time it is liability and is shown on the liabilities side of the Balance Sheet

Classification of Accounts 

Question by CA (Dr.) G.S.GREWAL – Series 19

True / False

  1. Salary is classified as Capital Expenditure.

Fill in the Blank

  1. Income tax paid for the owner is shown as debited to _______________ A/c.

Multiple Choice Question

  1. Commission received in Advance existing in the Trial Balance is shown on the:-

(a)     Assets side of the Balance Sheet

(b)     Liability side of the Balance Sheet

(c)     Debit side of the Profit and Loss A/c

(d)     Credit Side of the Profit and Loss A/c

Answer – Question by CA (Dr.) G.S.GREWAL – Series 19

  1. False

Reason: Carriage on Goods sold is an indirect expense related to sales and therefore, is  shown in the Profit and Loss Account.

  1. Capital A/c
  2. (b)

Reason:  Commission received in advance is unearned income. It will be accounted when it is earned. Commission received in advance has a credit balance. Hence, it will be shown in the liabilities side of the Balance Sheet.

Basic of Accounting 

Question by CA (Dr.) G.S.GREWAL – Series 20

True / False

  1. Current Liabilities means liabilities that are payable after 12 months from the date of Balance Sheet.

Fill in the Blank

  1. If the Owner’s Equity is ₹ 2,40,000 and other Liabilities are ₹ 1,20,000, Cash in Hand is ₹ 60,000, total assets of the firm will be _________________.

Multiple Choice Question

  1. Accounting policies once applied should be consistently followed from one period to another period because of:

(a)     Full Disclosure Concept

(b)     Conservatism Concept

(c)     Matching Concept

(d)     Consistency Concept

Answer – Question by CA (Dr.) G.S.GREWAL – Series 20

  1. False

Reason: Current liabilities are those liabilities which are payable in the near future i.e., within a period of 12 months from the date of Balance Sheet.. Examples of Current Liabilities are: Creditors, Bills Payable, Expenses Payables etc.

  1. ₹ 3,60,000
  2. (d)

Reason:  Accounting policies once applied should be consistently followed from one period to another because of consistency concept or prescribes that once an accounting policy adopted, it should be followed consistently year after year, unless the change is required by law, accounting standard or it will result in better presentation of accounts.

Financial Statement of Sole Proprietor 

Question by CA (Dr.) G.S.GREWAL – Series 21

True / False

  1. Trading Account is prepared to determine the financial position of the business.

Fill in the Blank

  1. Profit and Loss Account shows the ____________ or ____________ by the business during the accounting period..

Multiple Choice Question

  1. Balance Sheet gives information regarding:-

(a)     financial position during a particular period.

(b)     profit earning capacity for a particular period.

(c)     financial position as on a particular date.

(d)     operating efficiency of the firm

Answer – Question by CA (Dr.) G.S.GREWAL – Series 21

  1. False

Reason: Trading Account is the account that shows the net result of buying, direct expenses and selling of goods and /or services. The net result of the account is either gross profit or gross loss.

  1. profit earned, loss incurred
  2. (c)

Reason:  Balance Sheet is a statement that shows the financial position of the enterprise. Financial position is always true at a particular point of time because with every transaction and event the financial position changes.

Accounting Concepts, Principles and Convention 

Question by CA (Dr.) G.S.GREWAL – Series 22

True / False

  1. Business Entity Concept is not a fundamental accounting concept.

Fill in the Blank

  1. The concept of conservatism when applied to the balance sheet may results in _______________ of assets.

Multiple Choice Question

  1. Decrease in the amount of creditors means

(a)     Increase in cash

(b)     Decrease in cash

(c)     Increase in assets

(d)     No change in assets

Answer – Question by CA (Dr.) G.S.GREWAL – Series 22

  1. True

Reason: Because there are three fundamental accounting assumption in the financial statements they are

–        Going Concern

–        Consistency

–        Accrual

Three fundamental accounting concepts recognised by the accounting bodies are:

–        Consistency Concept

–        Going Concern Concept and

–        Accrual Concept

  1. understatement
  2. (b)

Reason:  Decrease in creditors means they have been paid. If they have been paid it will result in decrease in cash.

Rectification of Errors 

Question by CA (Dr.) G.S.GREWAL – Series 23

True / False

  1. ₹ 5,000 spent on repairing of second hand machinery purchased is recorded as Repairs. It is an error of Commission.

Fill in the Blank

  1. Errors which affect one account can be ________________________.

Multiple Choice Question

  1. An amount of ₹ 5,000 paid to Yogesh against an acceptance was debited to Ranjan’s Account. The rectification of error will:

(a)     increase in Net Profit

(b)     reduce the Net Profit

(c)     have no effect on the Net Profit

(d)     increase the Assets

Answer – Question by CA (Dr.) G.S.GREWAL – Series 23

  1. False

Reason: Expense incurred to make the asset ready for use is a capital expenditure. Expenditure incurred on repair of second hand machinery to make it ready for use and therefore should be debited to Machinery Account and not to Repairs Account. It is thus, an Error of Principle.

  1. Errors of Omission
  2. (c)

Reason: The rectification will have no effect on the net profit as it is a case of wrong debit to personal accounts.

Theoretical Framework

Question by CA (Dr.) G.S.GREWAL – Series 24

True / False

  1. Profit and Loss Account shows the financial position of the business.

Fill in the Blank

  1. Balance Sheet should show true and fair view of assets and liabilities amongst others. Liability provided in excess results in creation of _________________ Reserve.

Multiple Choice Question

3.Out of the following which approach is an application of a caution so that expenses and liabilities are not understated and income and assets are not overstated:

(a)     Conservatism Concept

(b)     Disclosure Principle

(c)     Materiality Concept

(d)     Consistency Concept

Answer – Question by CA (Dr.) G.S.GREWAL – Series 24

  1. False

Reason: Balance Sheet shows the financial position of the business as it is the statement of assets and liabilities of the enterprise. Profit and Loss Account shows the financial performance i.e., profit earned or loss incurred.

  1. Secret
  2. (a)

Reason: According to Conservatism Concept anticipated expense and losses should be recorded i.e., neither expenses nor liabilities should be understated. Whereas anticipated incomes should not be recorded i.e., income and assets should not be overstated.

Depreciation

Question by CA (Dr.) G.S.GREWAL – Series 25

True / False

  1. Depreciation arises because of fall in the value of the asset.

Fill in the Blank

  1. An asset was purchased for ₹10,000 on which depreciation was provided @ 5% on Straight Line Method, the W.D.V. of the asset at the end of two years will be ______________.

Multiple Choice Question

  1. The objective of providing depreciation is to

(a)     Show correct profit for the year

(b)     Show the true financial position in the balance sheet

(c)     Reduce tax burden

(d)     Comply with legal requirements

Answer – Question by CA (Dr.) G.S.GREWAL – Series 25

  1. False,

Reason: Depreciation arises because of wear and tear, obsolescence, passage of time etc.

  1. ₹ 9,000
  2. (a)

Reason: Depreciation is fall in the book value of assets due to wear and tear or obsolescence. It is written off in a systematic manner over its estimated useful life. If depreciation is not written off every year, profit will be overstated.

Question by CA. (Dr.) G. S. GREWAL – Series 26

Journal

True / False

  1. On inter-state (i.e., outside the state) purchase of goods, SGST and IGST is levied.

Fill in the Blank

  1. A Journal is known as a book of ________________entry.

Multiple Choice Question

  1. For GST paid on inter-state of goods, which of the following account is credited:

(a)     Output CGST A/c

(b)     Output IGST A/c

(c)     Input IGST A/c

(d)     Output SGST A/c

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 26

  1. False

Reason: On intra-state (i.e., within the state) purchase of goods, CGST and SGST is levied.

  1. original
  2. (b)

Reason: GST collected by the seller of goods and/or services is Output GST in case of inter-state it will be Output IGST.

Question by CA. (Dr.) G. S. GREWAL – Series 27

Basic Accounting Term

True / False

  1. The amount invested by the proprietor in a business is called Cash.

Fill in the Blank

  1. Goods taken by the owner for personal use are called _________________.

Multiple Choice Question

  1. A liability arises because of

(a)     Cash transactions

(b)     Credit transactions

(c)     Cash as well as Credit transactions

(d)     None of the above

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 27

  1. False

Reason: The amount invested by the proprietor in a business is called Capital.

  1. drawings
  2. (b)

Reason: Only because of credit transaction liability arises.

Question by CA. (Dr.) G. S. GREWAL – Series 28

Introduction to Accounting

True / False

  1. Accounting is the language of business.

Fill in the Blank

  1. Identified and measured economic events should be recorded in _________________ order.

Multiple Choice Question

  1. Which is the last step of accounting as a process of information?

(a)     Recording economic events in the books of account.

(b)     Preparation of financial statements.

(c)     Communication of information.

(d)     Analysis and interpretation of information.

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 28

  1. True

Reason: Accounting is primarily concerned with recording of financial transactions and events in the books of account, summarising them and communicating the financial information to the users, i.e., proprietors (shareholders in the case of companies), lenders, creditors, debtors, investors, government, banks, employees, etc., Accounting being a medium of communication is known as Language of Business.

  1. Chronological
  2. (c)

The last step in the process of Accounting Cycle is to communicate the result to its various users.

Question by CA. (Dr.) G. S. GREWAL – Series 29

Ledger

True / False

  1. Balancing of Ledger is necessary.

Fill in the Blank

  1. Every account has ______________ sides.

Multiple Choice Question

  1. Ledger Account is prepared from

(a)     Events

(b)     Transactions

(c)     Journal

(d)     Capital

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 29

  1. True

Reason: After posting the transactions, accounts are balanced every year or after a certain period. Balancing an account means that the two sides of an account are totalled and the difference in total of the two sides is written on the side whose total is similar.

  1. two
  2. (c)

Reason: Transactions are fired recorded in the Journal, After recording the transactions, they are posted to the relevant account in the Ledger. All the accounts put together make a Ledger. In other words, Ledger is a book in which various accounts (Personal, Real and Nominal Accounts) are opened and transactions posted from the Journal Book.

Question by CA. (Dr.) G. S. GREWAL – Series 30

Accounting for Bills of Exchange 

True / False

  1. Ram draws a bill on Shyam which is ‘Bill at Sight’ on 28th March, 2019. The bill shall be due for payment on 1st April, 2019.

Fill in the Blank

  1. A Bill was drawn on 21st Aug, 2018 for one month, if Maturity Date is declared national holiday then due date will be _______________.

Multiple Choice Question

  1. Noting charges are paid by

(a)     Drawee

(b)     Drawer

(c)     Holder of bill

(d)     Notary Public

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 30

  1. False

Reason: Bill at sight means the instruments in which no time for payment is mentioned. Also days of grace are not added for computing due date.

  1. 25th September, 2019
  2. (c)

Reason: If the bill is dishonoured, the party that gives the bill has to be debited since it becomes liable to pay the amount including noting charges (if paid). So it is clear that holder of bill has to pay the noting charges first.

Question by CA. (Dr.) G. S. GREWAL – Series 31

True / False

  1. On the basis of nature of errors, all the errors are broadly classified under four categories.

Fill in the Blank

  1. Salary paid was not posted to salary account leads to difference in trial balance on ____________ side.

Multiple Choice Question

  1. Which of the following errors will not affect the Trial Balance?

(a)     Wrong balance of an account.

(b)     Wrong totalling of an account.

(c)     Writing an amount in the wrong account but on the correct side.

(d)     Omission of an account from Trial Balance.

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 31

  1. True

Reason: Errors can be classified into following four categories:

  1. Errors of Omission
  2. Errors of Commission
  3. Errors of Principle
  4. Compensating Errors
  5. debit
  6. (c)

Reason: Writing an amount in the wrong account but on the correct side will not affect Trial Balance. The amount is posted on the correct side but on the wrong account.

Financial Statements of a Sole Proprietor                                                                    

Question by CA. (Dr.) G. S. GREWAL – Series 32

True / False

  1. Loan of ₹ 1,10,000 was taken on 1st November, 2019 at 10%. The amount of interest on Loan to be debited to Profit and Loss Account is ₹ 11,000.

Fill in the Blank

  1. If gross profit is ₹ 20,000, Commission paid is ₹ 2,000, Commission Received is ₹ 3,000. The amount of operating profit will be ₹ _________________.

Multiple Choice Question

  1. Returns Outward in Trial Balance are deducted from

(a)     Sales

(b)     Purchases

(c)     Capital

(d)     Drawings

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 32

  1. True

Reason: Since the word p.a. is not written so interest on loan debited to Profit and Loss Account will be ₹ 11,000.

  1. 21,000
  2. (b)

Reason: Returns Outward means returning the goods purchased. Thus, it is Purchases Return. Purchases are shown at net amount in the Trading Account i.e., Purchases – Purchases Return.

Theoretical Framework    

Question by CA. (Dr.) G. S. GREWAL – Series 33

True / False

  1. Fixed Assets can be tangible fixed assets or intangible fixed assets.

Fill in the Blank

  1. According to Historical Cost Concept of Accounting the value of money does not _____________.

Multiple Choice Question

  1. Accounting equation is based on:

(a)     Going Concern Concept

(b)     Dual Aspect Concept

(c)     Money Measurement Concept

(d)     Accrual Concept

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 33

  1. True

Reason: Fixed Assets enhance the earning capacity of the business. They are tangible fixed assets if they have physical existence like land, building, computers etc. they can be intangible fixed assets if they do not have physical existence like patents, trade marks etc.

  1. change
  2. (b)

Reason: Accounting equation i.e., Assets = Capital + Liabilities is always true. It is based on the Dual Aspect Concept of Accounting which holds that for every debit there is a credit of equal amount and vice versa. Under the concept, debit side will always be equal to the credit side.

Subsidiary Books and Ledger Posting  

Question by CA. (Dr.) G. S. GREWAL – Series 34

True / False

  1. A journal is also known as Cash Account.

Fill in the Blank

  1. Sales will have _____________ balance.

Multiple Choice Question

  1. Cash purchase of raw material is recorded in

(a)     Purchase Day Book

(b)     Cash Book

(c)     Directly in Purchase A/c

(d)     All the above

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 34

  1. False

Reason: A Journal is also known as Book of Original Entry

  1. Credit

Multiple Choice Question

  1. (b)

Reason: Cash Book is a special journal in which all cash and bank transactions are recorded. Since, Cash Purchase is a cash transaction, it will be recorded in cash book.

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